What are DAOs?

Decentralized autonomous organizations (DAOs), is a concept of blockchain and cryptocurrency technologies mainly used for organizations that operate in decentralized governance and smart contacts instead of a traditional hierarchical structure.

How it's different?

For example, in a traditional organization, there are mainly CEOs and a board of directors who mostly have the decision-making powers in the organization. However, in a DAO, this case is not valid. In DAO, every decision is made by token holders associated with a cryptocurrency. They are the primary decision maker of the organization, like changes to the organization's protocols, investment decisions, or other important decisions.

Key features of a DAO

After grasping its basic concept, let's look at the key features of DAO.

Decentralization

Decentralization is a core feature in a DAO, ensuring that no single entity controls the organization. It involves using blockchain technology, a decentralized computer network that collectively maintains a transparent and immutable ledger of transactions.

Tokenized participation

A DAO mainly offers its native token, which reflects its owner membership and rights in the DAO. Significantly these tokens help their owner participate in the DAO's different things according to their rights like vote casting, profits shares, and many more.

Transparency

In a DAO, all the transactions and activities are recorded in blockchain technologies, creating a transparent and auditable record for their members, which builds their member's trust in the organization.

Collective decision-making

In a DAO, all its members' decisions are collectively made. In most cases, vote casting is a method used where organization member cast their votes to share their opinion.

Open participation

DAO offers open participation to its member where anyone can join the organization. By leveraging blockchain technology, there is no entry barrier, such as geographical location or social status.

Now let's understand the benefits and drawbacks of DAOs in the table below.