What are DAOs?

What are DAOs?

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DAOs are an effective and safe way to work with like-minded folks around the globe. Think of them like an internet-native business that’s collectively owned and managed by its members. They have built-in treasuries that no one has the authority to access without the approval of the group. Decisions are governed by proposals and voting to ensure everyone in the organization has a voice.
The backbone of a DAO is its smart contract. The contract defines the rules of the organization and holds the group’s treasury. Once the contract is live on Ethereum, no one can change the rules except by a vote. If anyone tries to do something that’s not covered by the rules and logic in the code, it will fail. And because the treasury is defined by the smart contract too that means no one can spend the money without the group’s approval either. This means that DAOs don’t need a central authority. Instead the group makes decisions collectively and payments are authorized automatically when votes pass. This is possible because smart contracts are tamper-proof once they go live on Ethereum. You can’t just edit the code (the DAOs rules) without people noticing because everything is public.

Why do we need DAOs?
Starting an organization with someone that involves funding and money requires a lot of trust in the people you’re working with. But it’s hard to trust someone you’ve only ever interacted with on the internet. With DAOs you don’t need to trust anyone else in the group, just the DAO’s code, which is 100% transparent and verifiable by anyone. This opens up so many new opportunities for global collaboration and coordination.
To help this make more sense, here’s a few examples of how you could use a DAO:
A charity – you can accept membership and donations from anyone in the world and the group can decide how they spend donations.
A freelancer network – you could create a network of contractors who pool their funds for office spaces and software subscriptions.
Ventures and grants – you could create a venture fund that pools investment capital and votes on ventures to back. Repaid money could later be redistributed amongst DAO-members.

Ethereum is the perfect foundation for DAOs for a number of reasons:
Ethereum’s own consensus is distributed and established enough for organizations to trust the network.
Smart contract code can’t be modified once live, even by its owners. This allows the DAO to run by the rules it was programmed with.
Smart contracts can send/receive funds. Without this you’d need a trusted intermediary to manage group funds.
The Ethereum community has proven to be more collaborative than competitive, allowing for best practices and support systems to emerge quickly.