What is Decentralized Autonomous Organization (DAO)?

Tran Cong

During the Industrial Revolution 4.0, Blockchain technology has changed our financial system. However, the properties of blockchain such as decentralization and immutability ... are not only useful in monetary applications like Bitcoin, but also in many other areas including governance. With Blockchain, people can operate a completely automated form of organization without the need for a central operator. That's called a Decentralized Autonomous Organization, or Decentralized Autonomous Organization. This article will explain what it is and give an overview of these organizations.

What is Decentralized Autonomous Organization?

Decentralized Autonomous Organization (abbreviation: DAO) is a "decentralized autonomous organization". To qualify as a DAO, an entity must meet all three requirements: decentralized, autonomous, and organized.

Decentralization means that no single individual or organization can control the organization or can give orders to members of that organization. To function properly, the DAO must have core principles of theoretical contribution that can allow anyone to participate and talk about how the organization is run without the consent of its members. or existing founder. To test this theory in practice, an individual or a group would have to join and control a portion of the DAO in case the founders and key members didn't want that to happen. A DAO is open to participants and active, just join and run.Need to know more about the portfolio: Bitcoin exchange.


Another aspect of the DAO as essential as the element of decentralization is autonomy. The decentralized organization is, in theory, not a closed ecosystem, but will be affected by outside influences in fundraising and other support. This means that external groups will control the decentralized organization through funding or other important functions, thereby making the organization centralized in practice. Therefore, a DAO really needs the self-funding model. For a currency-based DAO, this is simply a portion of the funds devoted to self-financing the group. For other DAOs, this type of self-financing can vary, and may include token sales or group ownership of income-generating assets.


The DAO needs to be organized. An open source project can be decentralized if anyone can use or rely on the project's services, and some decentralized projects may even provide internal financing for those who join together. To qualify as a DAO, however, a project needs to have some organizational structure that allows the whole team to consolidate and make unified decisions about the direction of the network.

Therefore, a DAO must be fully decentralized that is open to anyone who can participate if they meet the principles of unity, must have completely independent support and fundraising, and must be able to participate. combined together as a unified network to make decisions.

How does the DAO work?

Through the use of smart contracts, DAO can work with external information and execute commands based on them automatically, without any human intervention. .

What is Decentralized Autonomous Organization (DAO)?
The rules and transactions in DAO are transparently stored on the blockchain. The rules are usually determined by the parties involved through voting. Usually, the way decisions are made in a DAO is through proposals. If a proposal is voted up for by a majority of stakeholders (or fulfilled some other rule set in network consensus rules), it will be executed.

In a way, a DAO works similarly to a company or country, but the difference is that it operates in a decentralized fashion.

Membership of the DAO is not bound by any formal contract. They are tied together by a common goal and the incentives on the network tied to consensus rules. The rules governing this organization are completely transparent and written in the network's open source software. However, since DAOs operate without borders, they may be subject to different jurisdictions depending on the country.

As the name implies, a DAO is decentralized and operates fully autonomously. It is decentralized because no single entity has authority to make and enforce decisions. And it is automatic because it can operate on its own according to the machine code and the rules available without the need for anyone to control it.

When a DAO is deployed, it cannot be controlled by one party but governed by a community of participants instead. If the administrative rules specified in the protocol are well designed, they will lead to the most beneficial outcome for the network. Simply put, the DAO provides an operating system for open collaboration.

Tran Cong
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