DAO

Introduction

A DAO is a Decentralized Autonomous Organization . The idea was first introduced by Dan Larimer in 2013 when he described a cryptocurrency as shares in a Decentralized Autonomous Corporation which is an organization whose rules are defined by the source code and decisions are not made by any centrally controlled entity. Bitcoin can be thought of as the first example of a DAO, where there are various stakeholder groups performing work for the network and can get compensated for that work. Governance decisions are made by these varying stakeholder groups to decide how the protocol changes over time. DAO’s can be controversial as they operate without any legal entity, outside the purview of federal governments.

A well-known example was The DAO, which was a decentrally owned venture capital fund which raised over $150 million to invest in projects based on votes from its members. A month after the fundraise, a security vulnerability was found by researchers and later exploited by a hacker leading to 3.6 million ether being stolen. This resulted in the controversial Ethereum hard fork to return the stolen funds.

Suggested Readings

Bootstrapping a Decentralized Autonomous Organization: Part 1, Part 2, Part 3 By Vitalik Buterin

Bitcoin and the Rise of Decentralized Autonomous Organizations written in the Journal of Organization Design

To find more content and up to date information on DAOs check out our board, What is a DAO?

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