Pooling assets and investing as a group of strangers into certain projects is not a new concept—there are crowdfunding platforms and P2P lending platforms around the world that do exactly that. However, imagine a world where the same thing can be done without a centralized platform, and there is no team behind the scenes managing operations. Welcome to the world of the Decentralized Autonomous Organization, AKA DAO.
In this series, we will compare different types of DAO with specific examples, examine the difference between DAO and traditional organizations in a deep analysis, clarify some misunderstandings, and explore the future potential of DAO, so be sure to stay tuned.
What is DAO (Decentralized Autonomous Organization)?
To put it simply, DAO is a new and different form of organization. Traditional organizations are usually corporations (e.g., Apple, Google, Toyota); LLC or Limited Liability Company, which is usually used by law firms and family offices; or a partnership, which is usually used by VC funds and PE funds. Just like other organizations, DAOs can pool assets from different individuals and organizations, decide what to do with the asset, and distribute profit to its backers.
The difference lies in that unlike other forms of organizations, a DAO is decentralized and entirely autonomous. In fact, it’s decentralized in a way that with some exceptions, usually, DAOs do not have a team of people, such as the management team and board members, who can make decisions on behalf of the entire organization.
It is autonomous in a way that most of the operation and decision-making processes of DAOs are represented by rules encoded as a transparent computer program, usually a blockchain.