What is a DAO?

Interested in decentralized organizations but find yourself asking, “What is a DAO?”

We’ve got you covered!

Learn the basics of a DAO in our simple, easy-to-follow guide.

By the end, you’ll see exactly why a DAO structure is the future of business, crowdfunding, and so much more.

DAOs explained

what is a dao definition

A DAO, otherwise known as a “Decentralized Autonomous Organization,” is an entity led by its community with no input from a centralized leadership.

As the name suggests, it’s autonomous with a fully transparent structure built on smart contracts.

Smart contracts are used to maintain the organization’s rules, take action on decisions made by the community, and even allow every aspect of the DAO to be audited by the public.

Simply put, a DAO is controlled by its community of members who work together to make decisions about upgrades, treasury allocations, and the roadmap of the project itself.

How does a DAO operate?

what is a dao smart contract

Every DAO takes on a different mission.

Decentralized autonomous organizations can serve a singular purpose or operate as part of a bigger project in a variety of different industries.

Some DAOs are created to pursue personal interests and others are operated like a community-led business.

In most cases, members of a DAO create an operational proposal for the protocol then collectively vote on said proposal.

If a proposal meets the predefined level of consensus set by the community, it’s then accepted and executed by the stipulations of the smart contract associated with it.

Unlike the hierarchy found in traditional corporations, a DAO presents each member of its community with some level of supervision over the protocol.

What are the benefits of a DAO?

One remarkable aspect of a DAO is its ability to incentivize community members.

As an individual, there’s a clear incentive to vote honestly and only for proposals you believe will benefit the protocol – which in turn benefits the DAO and all of its collective members.

There’s a clear connection between the quality of a protocol and its usage rate as well.

The more a protocol improves, the more it’s used.

As the protocol experiences more usage, the value of its tokens is increased.

When the protocol wins, token holders do too.

What was the first DAO?

Simply known as The DAO, the first decentralized autonomous organization was built on Ethereum blockchain technology by developer Slock.it.

Their goal is to connect real-world transactions to blockchain technology through The DAO.

The end result is a streamlined process for selling and sharing property without a third-party.

In 2018, when Slock.it was raising money for the project, founder Christoph Jentzsch created a DAO instead of opting for crowdfunding through GoFundMe or Kickstarts.

Decentralized autonomous organizations allow entrepreneurs like Jentzsch to make spending decisions based on votes from each member of the community.

The DAO eventually grew into a decentralized venture capital fund.

According to reports, The DAO eventually held 14% of all Ethereum cryptocurrency in existence during this time.

Raising more than $150 million of Ether by 2016 made it the largest crowdfunding campaign in history with over 11,000 members.

What does the future look like for DAOs?

what is a dao decentralized finance

DAOs operate with large sums of capital to be spent based on the consensus of its community, making them prime candidates for a number of opportunities in web3 and beyond.

Even today the opportunities presented by DAOs aren’t fully realized.

With some DAOs amassing treasuries of over $10 billion, media companies will seize the chance to collaborate and work with these institutions.

Entities like Blockworks are already planning strategies for selling to a DAO discord channel.

The community-building aspect of DAOs brings together large numbers of members under a single mission.

Many web3 entrepreneurs see the community-building aspect of DAOs as an opportunity to bring together different user groups like buyers, companies, and investors.

Imagine people from these categories participating together towards a common experience, goal, or outcome without the hinderance of a traditional organization.

DAOs on Cardano

Before DAOs can realize this full potential, developers and communities alike need more options when it comes to setting up a DAO infrastructure.

Blockchain applications moved from currency, to decentralized finance, and now to NFTs.

DAOs are next.

That’s why CardanoSHARP is partnering with Gimbalabs to build SharpDAO.

SharpDAO is a DAO tooling interface to create and manage DAOs on Cardano.

Whether it’s a small business or a global community, Cardano DAOs deliver.

But the community lacks the ability to set up DAO infrastructures on Cardano. SharpDAO will provide both technical and non-technical solutions for this issue.

If you’re interested in supporting SharpDAO, please give kudos on our proposal!