Dao, Dececentralized Autonomous Organization: What is it and How does it work

A decentralized autonomous organization (DAO) is an entity at the heart of which there is no administrator, but which is controlled through a code written upon its creation.

The management of this system is totally entrusted to the internal members who, through a vote, can decide to modify the rules.

The members of the organization who invest in the Dao are generally assigned a governance token with which it is possible to access privileges, one of which - and perhaps the most important - is to be able to vote the decisions to be taken.

In fact, being a system at the center of which there is no leader, each member of the community is equal and, given that the rules are written and regulated through smart contracts, it is not necessary a figure that monitors its progress.

Although explained in this way it may seem perfect, managing a Dao is far from simple.
In particular, one of the possible difficulties that can be encountered is that of the creation and the code that regulates it.

The code cannot be modified at will, it is in fact possible to access and change it only with the support of the majority of the community having the right to vote.

When the code is manipulated it is necessary to bear in mind that this must be approved by the members of the Dao, therefore a certain degree of flexibility is required, otherwise it will be rejected.

Within the Dao it is possible to exchange cryptocurrencies or use them to invest in the space itself and improve it. It is also very useful to creators and sellers of NFT (non-fungible tokens), as it is an ideal secure space for this type of transaction.

What advantages does the Dao offer

Using a technology like the Dao has advantages of a economic nature.

First of all, the Dao democratizes decision-making: since there is no hierarchical system within it, it is possible to have greater equity in rights, which sometimes does not happen in structured organizations.

Another advantage, this time from an economic point of view, is represented by the futility of having, hiring and therefore paying a manager.

In order to be managed, companies are often obliged to hire or choose a manager from within their staff, i.e. someone who takes the final decisions and decides who has to execute them.

Since Dao is a decentralized system, based on smart contracts and therefore on pre-established rules, the figure of the manager becomes superfluous, allowing the organization to save money from investing elsewhere.

Transparency is also central to Dao, in fact, being an open source code, anyone can consult it to find out what rules this space is based on.

This serves to combat the opacity that sometimes arises in organizations where there is no or is not clear a certain code of conduct.

Finally, being a space where transitions in cryptocurrencies can take place, the transparency of the blockchain is fundamental, with this technology it is in fact possible to know exactly where the money starts and where it goes, avoiding opacity and above all not having to engage a person who manages the cash flows.

Original article published on Money.it Italy 2022-08-11 10:52:00. Original title: Dao, Dececentralized Autonomous Organization: cos’è e come funziona