DAO stands for Decentralized Autonomous Organization.
See also DHO or Decentralized Human Organization, a term popularized by Hypha.
DAOs can be defined as a multi-agent system, working towards a clear objective. As computational organizations, DAOs are comprised of humans and technology, thus DAOs are also human-machine systems, where computational components aid coordination. In a blockchain context, permissionless decentralized blockchains provide an infrastructural foundation to facilitate coordination by reducing transaction costs.
According to institutional economists, DAOs are digital organizations.
Made possible by the affordances of decentralized, token-voting-based decision-making, smart, self-executing contracts, fully programmable information transparency, self-sustaining protocols, sovereign identities, cryptography and more.
The phrase “Decentralized Autonomous Organization” was first mentioned in the field of cybernetics by German Computer Scientist Werner Dilger. He understood the concept as a complex, multi-agent information processing system that is autonomous, i.e. self-sustaining and self-referential. In the the cybernetics approach DAPs are symbiotic human-machine ensembles (relation of co-evolution, co-dependence, and augmentation).
The recent history of DAOs is related to the history of decentralized technologies, encryption technology, and public blockchains. DAOs embody early cypherpunk ideologies of political decentralization. In this cultural context autonomy refers to self-governance or independence from external political direction or coercion, and it is pursued via technological means.
Vitalik Buterin, Ethereum co-founder made a post about “Decentralized Autonomous Corporation” (DAC) in Bitcoin Magazine (2013). The term appeared in the Ethereum whitepaper with other related terms like DAOs and DAs.
Started in the domain of finance, as decentralized finance – or defi – lending itself to fully leveraging the “programmable” nature of such a set of new technologies, given the fact that finance is a fully abstract and intangible market.
DAOs are not OVNs - See Sensorica's work in progress about DAOs
DAOs can be designed for any number of organizational functions to serve different objectives. They use various blockchains and blockchain technology and services.
DAO ontology affects DAO design
Composability in and between Organizations
About modularity, the role of teams, crossing organizational borders and more.
Individuals and teams (units, squads, …). Growing importance of the team-based unit of value creation and more modularity in the market
DAO composability is enabled from the composability of smart contracts.
- Composability must be a process design concern
- Teams need to grow the capacity to transcend the need for an overarching organization. Teams must be unbundled from the organizational constraints as much as possible.
Composability at the organizational level leads to composability at the deliverable level. "The need to recognize more continuity between DAOs (and extreme composability between the products that they create) is very strong in the DAO ecosystem ethos"
Trends in the corporate world
"Teams had to change the paradigm, starting to behave like small, self-contained organizations, with clear “actionable” boundaries that could be externalized". New corporate paradigm, units and teams powered by shared services.
- empowering small units with purpose autonomy and giving them full accountability;
- providing scale optimized platform-enabling services so that teams can focus on their core product/service/business model;
- seeing organizations as strategic venture incubators, investing capital, and aiming at churning out self-sustainable positive units;
- encouraging cross-divisional and, even more generally, an inside-outside partnership between units belonging to the organization, and outside players, for the formation of alliances aimed at creating new products and services.
Various token-based schemes to drive liquidity into a new venture. See some info about DAOs in Genesis.
Represents funding primitive that “enables multiple groups or individuals to collaborate on common proposals, inverting the typical Proposal/DAO relationship to facilitate cross-DAO initiatives, such as co-funding shared research.”
In a few words, the proposal inverter provides a way for multiple DAOs to fund a team/squad that commits to certain outcomes. Allowing instead of one DAO to fund many proposals, multiple DAOs to fund a shared one.
“holds the potential to unlock economies of scale by allowing groups of contractors who operate between multiple DAOs to specialize and then cross-support each other as needed […] In other words, these collaborations could support not only shared research foundations, but also shared community processes, infrastructure and contributor base.”
Essential ways to pool and share ownership of entities across DAOs. Example: https://www.prime.xyz/deals
Technology is used to help with decision making and enforce collective decisions. Thus, DAOs provide an institutional infrastructure, to enact “a governance model sanctioned by software”. Usually meritocratic, formalized by its tokenomics.
See also more about onchain quadratic voting.
Legal scholars have defined DAOs as “a blockchain-based system that enables people to coordinate and govern themselves mediated by a set of self-executing rules deployed on a public blockchain, and whose governance is decentralized (i.e., independent from central control)”.
Aaron Wright states that DAOs “aim to be governed by democratic or highly participatory processes or algorithms”. This view focuses role that computation, algorithms play in DAOs to automate procedural elements of organizing, to allow humans to focus on the more substantive elements.
COALA researchers outlined 11 points for DAOs to meet the requirements for legal recognition as an entity, which constitute a legal basis for conceptualizing DAOs
- Deployed on a blockchain,
- Provide a unique public address for others to review its operations,
- Open source software code,
- Get code audited,
- Have at least one interface for laypeople to read critical information on DAO smart contracts and tokens,
- Have by-laws that are comprehensible to laypeople,
- Have governance that is technically decentralized (i.e. not controlled by a single party),
- Have at least one member at any given time,
- Have a specific way for people to contact the DAO,
- Have a binding internal dispute resolution mechanism for participants,
- Have an external dispute resolution mechanism to resolve disputes with third parties(e.g. service providers).
- Informal - no legal representation, only exists on the blockchain (Ex. Bitcoin, Ethereum, Uniswap)
- Wyoming DAO LLC