Understanding DAO: A Basic Explanationby@sergey-baloyan
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Understanding DAO: A Basic Explanation

by Serge BaloyanDecember 10th, 2021
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Decentralized Autonomous Organizations are traced to blockchains technology, where a group of people (or organizations) can self-govern without external influence. The ability to self-persevere arises from the presence of the technology (smart contract) in which the organization was built. For example, the Ethereum blockchain has smart contracts where different crypto investors share the fund.

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Gradually, revolution is taking place to work structures worldwide. Covid-19 was the first disruption that happened to workplace activities. After that, many organizations began to think about how to completely go digital. Now Decentralized Autonomous Organizations are steadily hijacking the scene, which could eventually get the mainstream breakthrough in the nearest future.

I had lots of requests on my Twitter to write a basic explanation and my opinion on DAO. Well, before now, DeFi and NFTs were just ideas in thin air. However, there is no denying that both are famous and are making massive waves in the financial are art world digitally. The recognition gained by DeFi and NFTs is a positive sign that DAOs can change how we do business in the future.

Source: DeepDAO

According to Rossco Paddison, the next generation of work will have every member as a CEO, where no individual can singlehandedly own an organization. Going by this statement, the assumption is that everyone owns and manages a business based on the rules encrypted as smart contracts.

With that being said, let’s delve into what decentralized autonomous organizations imply. This content aims to expound on how it works and the mode of participation.

What are Decentralized Autonomous Organizations (DAOs)?

Decentralized Autonomous Organizations are traced to blockchain technology, where a group of people (or organizations) can self-govern without external influence. The ability to self-persevere arises from the presence of the technology (smart contract) in which the organization was built. For example, the Ethereum blockchain has smart contracts where different crypto investors share the fund.

Alternatively, we could refer to DAO as a scenario where many crypto users control and own a wallet. Execution and activities are based on programmed rules. By these codes of conduct, management of assets and voting are a lot easier, eradicating the need for legal proceedings. Organizations can also own crypto wallets. The underlying factor is that the movements don’t need legal papers but technological tools.

The feasibility of DAO becoming the future of work comes from the perspective that more people are learning about crypto. The figures spoke for themselves when we looked at DAO in 2020.

As of then, no significant mark was made in the financial world. Fast forward to today, organizations leverage DAO to build protocols, as well as manage assets. It’s not a surprise anymore that people use decentralized autonomous organizations to vote on societal matters. The billionaire, Mark Cuban called DAO “The ultimate combination of capitalism and progressivism”.

How do Decentralized Autonomous Organizations work?

In decentralized autonomous organizations, no one is superior, neither are there subordinates. Everyone is equal without preferences to hierarchical structures as we have in traditional organizations.

With DAO being perceived as the future of human organizations, there are on-chain rules in place to manage an organization and a pool of funds owned by every member of the organization.

The developmental and technical strides of Decentralized Autonomous Organizations are beyond what they used to be in the past. It’s stronger than any other blockchain sector, which saw it as the governing body for several DeFi and NFT projects. As of now, by some reports, more than $2 trillion in the crypto niche is governed and managed by DAOs.

DAO allows you to be in a community of anonymous people worldwide, working together based on your established rules. You are part of the body that decides on matters independently with the aid of an encoded program on a Blockchain. There is no central body controlling or influencing anyone in DAOs, eliminating bureaucracy hurdles. We can see everywhere on social media how people create social organizations. It is in its early days, which could grow to take center stage later on.

It’s not news anymore that automated trusted transactions happen on Blockchain daily. As a result, users exchange values with a high confidence level that the transaction is safe. This idea birthed the thought of organizing a more convenient way to work with like-minded people globally.

How to participate in DAOs?

You already know decentralized autonomous organizations are an internet community where each member has a crypto wallet. It can come in different shapes and structures. Creating one begins with a group of people collaborating to pull capital together. This association offers every member the chance to have a say in decision-making based on programmed protocol.

What binds the group together is a crypto account, such as the Ethereum wallet. When creating the DAO, they make rules that guide funding of the group’s mission mutually. There are two categories where most DAO fall into, namely open source management and those in the investment class. DAOs are classifiable as limited liability companies or investment firms.

The group goals and their members determine the details of each DAO, particularly the rules and structures. That is why it is crucial to understand the technology that backs them before operating one. What you need to understand is the majority of them depend on blockchain technology and smart contracts.

Some DAO examples

I will try to give a couple of very simple for understanding examples. DAOs can be much more complicated, so let’s start with the ones that everyone can understand (at least, their main concept).

One of the most recent and simple examples (plus with the interesting idea) - ConstitutionDAO. This DAO raised around $50mln to try to buy one of the original copies of the United States Constitution at the Sotheby’s auction.

Another example of DAO isPleasrDAO, known for its rare collectibles collection and a significant portfolio of assets. They collect the most significant internet memes. One might think of this organization as an investment firm. Still, in a real sense, it is a decentralized autonomous organization, as the name suggests.


The probability of success of DAOs is high. Still, it depends on the ability of crypto to get to the peak. There are records of failures in the past, particularly that of 2016. However, a great stride has occurred since the hack of the first DAO. With the latest development, DAOs is poised to get more people willing to join the community.

The best year of DAO is yet to come, which will definitely arrive soon. When this happens, many people can benefit from joint ownership and being part of the decision-maker. On the other hand, it eradicates serving the interest of a few people in the crypto community. The most significant pointer to the growth of DAOs is that it is spreading into the non-crypto world.

If you want the latest updates and researches about DAO, metaverse, crypto, Play2Earn, and the NFT industry and to participate in different crypto contests and activities Follow me on Twitter.

In the meantime, if you have any questions about crypto or you are a Crypto / GameFi / metaverse / NFT project and want to know more about how to promote your project, you can always contact me via Telegram (@baloyan)

P.S. Check out my previous articles at HackerNoon: