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Decentralized Autonomous Organization (DAO) explained

Updated: Jun 30, 2022

At some point in your crypto investing journey, you will have come across the phrase “Decentralized Autonomous Organization”, also known as DAO. As the name suggests, a DAO is a fully autonomous, decentralized, and community-led entity that exists to raise funds to reach a coordinated goal.

Whether you’re interested in becoming a member of a DAO or are a beginner crypto investor, it pays to know how DAO works and its purpose.

What is a DAO?

A DAO is an internet-native organization that seeks to decentralize and automate how projects in the crypto sphere are run. It has no central authority and is fully transparent, as every agreed upon decision on the protocol, and even the code itself, can be publicly audited. Its main purpose is to raise money for a purpose, which could be anything from predicting stock market moves to collecting rare NFTs. The first DAO, also dubbed as the Genesis DAO, was created by the Ethereum community on April 30, 2016.

What makes a DAO different from other organizations is that it has no hierarchical structure. Instead, it’s built on community collaboration where each individual member oversees the protocol to some degree. Members possess tokens that give them voting rights.

But of course, not all DAOs are created equal. Ultimately, it is the DAOs responsibility to create and maintain a healthy, robust protocol and vote on projects that serve the best interest of the protocol.

How does a DAO work?