{"id":59191,"date":"2022-03-10T23:01:05","date_gmt":"2022-03-10T15:01:05","guid":{"rendered":"https:\/\/www.hongkiat.com\/blog\/?p=59191"},"modified":"2023-04-06T19:07:33","modified_gmt":"2023-04-06T11:07:33","slug":"decentralized-autonomous-organization-dao","status":"publish","type":"post","link":"https:\/\/www.hongkiat.com\/blog\/decentralized-autonomous-organization-dao\/","title":{"rendered":"Decentralized Autonomous Organization (DAO) – Explain Like I’m Five"},"content":{"rendered":"

Our bottomless drive for knowledge and improvement is what kept us at the top of the food chain. As technology improves, so does our way of doing things. We live our days and work by cooperating in harmony with everyone, led by officials in the hierarchy.<\/p>\n

However, things are about to change because of the discovery of decentralized autonomous organizations<\/strong>. So bear with me as we dive deep and take a peek into the possible future that awaits us.<\/p>\n

\"DAO\"<\/figure>\n

What is a Decentralized Autonomous Organization?<\/h2>\n

Dao or decentralized autonomous organization<\/strong> is comparable to other large businesses and organizations like Walmart, Google, and Amazon. The only difference is that DAOs are autonomous, meaning DAOs are independent and capable of operating without the need of a manager or any human intervention.<\/strong><\/p>\n

DOA do not have a leader to guide them, but they share similar interests and goals. They would implement rules and instructions on the smart contract that they would follow. And this is what a truly decentralized organization looks like.<\/p>\n

\"DAO?\"<\/figure>\n

Gone are the days when mediators, brokers, and managers dictated the entire system for the benefit of their own. In fact, humans will not influence DAOs, making them trustworthy and transparent.<\/p>\n

However, some critics argue that the unregulated nature of DAO poses unknown risks and may cause more harm than good. It\u2019s difficult to predict and see DAO\u2019s true potential because it\u2019s still in its early stage.<\/p>\n

How does it work?<\/h2>\n

DAO operates by following a series of programs<\/strong> established by the people who designed it. Codes and commands are encoded on smart contracts within an open blockchain like Ethereum, making it a fully automated platform or system that everyone can use.<\/p>\n

For a better understanding, consider a traditional fast-food restaurant such as McDonald\u2019s. McDonald\u2019s is managed and run by its employees. Every detail and process in the restaurant is micromanaged. And they run their business by doing all of the work themselves, such as cooking, cleaning, and serving food to their customers.<\/p>\n

\"how<\/figure>\n

They also handle orders and deliveries, as well as stock and sales for the week. It\u2019s a time-consuming process that necessitates the coordination of manpower just to function.<\/p>\n

In comparison, a DAO works without the need for active managers and employees.<\/strong> So instead of having humans operate it, everything will be fully automated, from cooking to serving piping hot food for its customers.<\/p>\n

When the time comes where it needs to restock its ingredients, pay the bills, and collect the money, it will send a command to its server, and the program will come to do all that work.<\/p>\n

I know this sounds a bit far-fetched in the real world, but that\u2019s the gist of a decentralized autonomous organization.<\/p>\n

Benefits of a DAO<\/h2>\n

DAOs are community-based organizations<\/strong> with the promise of putting their community first rather than profits<\/strong>. Which is an investment in itself as more people will trust them and be willing to become a part of their community. There are many promising benefits a DAO can offer, and below are the highlights:<\/p>\n

\"dao<\/figure>\n

1. No government influence<\/h3>\n

In the United States, organizations are forced to comply with any request that the US government submits. But unlike traditional organizations, the government can\u2019t simply stop a DAO\u2019s operation or command it to release private information<\/strong> about an individual. The only possible way for them to do this is to purchase a large share of the DAO itself, which is highly unlikely.<\/p>\n

2. Adaptability<\/h3>\n

DAOs can be improved and modified<\/strong> to adapt to our society\u2019s constant evolution. And the shareholders, which is also the community that benefits from DAO, can vote on its future development, allowing it to keep up with our fast-paced modern society.<\/p>\n

3. Trustworthy<\/h3>\n

Lastly, and perhaps one of the most important benefits of a DAO is its unique structure that limits unnecessary human intervention<\/strong>, making it secure and less prone to malpractices and corruption<\/strong> from within.<\/p>\n

The downsides of DAO<\/h2>\n

A DAO is open-source which means that it is available to the public and that anyone can access, view, and interact with it. Though this is a good thing because it gives the community transparency and power, it also has some drawbacks.<\/p>\n

1. Prone to Online Attacks<\/h3>\n

DAOs being open-source makes them vulnerable to attacks from hackers. <\/strong>If the hackers are knowledgeable enough to bypass a DAO\u2019s encrypted security program, they can create a code that can tamper with it. And this poses some serious risk for everyone involved with it. At the end of the day, DAOs are only as good as the people who\u2019ve established their codes.<\/strong><\/p>\n

\"downsides<\/figure>\n

2. Leaked Business Secrets<\/h3>\n

Another downside of a DAO being open-source is that business secrets and other advantages they may have against their competitors will no longer be a secret.<\/strong> Since anyone can view how their DAO was set up, the company\u2019s time and effort invested in making innovations for solving problems can just be stolen or taken advantage of by anyone who knows how to read codes and programs.<\/p>\n

Examples of DAO<\/h2>\n

Many decentralized autonomous organizations have been built over the past few years. And according to Deepdao.io<\/a>, there are over 180 DAOs that exist today<\/strong>.<\/p>\n

Back then, DAO was just a jargon for cryptocurrencies until it suddenly boomed and amassed almost $10 billion in treasury. To give you a clear idea of what DAOs can be, below are some examples and quick overviews of DAOs.<\/p>\n

BitDAO<\/a><\/h3>\n

One of the largest DAO that exist today, with over $2.5 billion invested in it. Through BitDAO\u2019s platform, you can invest in a vast range of Defi projects such as AAVE, Convex Finance, Curve, and the likes.<\/p>\n

\"BitDAO\"<\/figure>\n

Decentraland<\/a><\/h3>\n

Decentraland is perhaps one of the best metaverse gaming experiences you can have today. It\u2019s a self-sustaining blockchain game where people can collect and trade NFTs, build businesses, own virtual real estate, socialize with others, and so much more.<\/p>\n

\n\t\t\t\t\tHow to Mine Decentraland (MANA)<\/span><\/a>\n
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