DAO, or a Decentralized Autonomous Organization, is an organization that intended to function without hierarchical management. This type of organization has become possible with the appearance of blockchain technology that supports the idea of decentralized governance.

Unlike traditional centralized organization, DAO has a strict set of rules which are encoded as a smart contract. This code is open source and the rules are recorded in the Blockchain. Such infrastructure allows to operate autonomously and makes DAO fully transparent and immutable.  

How it works

The user receives voting rights when it invests in DAO. In addition to voting, users who buy a stake can make proposals concerning the development of DAO. Stakeholders have a unique opportunity to influence the way DAOs operate. Decisions pertaining to where and how to spend its funds are made with the help of consensus.

Benefits of DAO

The DAO structure perfectly corresponds to the demands and modern needs of the organization; ti eliminates hierarchy and as a result, gives every stakeholder the chance to promote their ideas.

One more key benefit is transparency and reliable relations between investors via the blockchain approach.

Drawbacks of DAO

One of the main drawbacks is the lack of maturity of certain blockchain technologies, which can lead to serious problems with security. The DAO faced a similar issue.

The DAO project

The project is famous for its incredible crowdsale and devastating bug.

The DAO was deployed in May 2016 and became the most successful crowdfunding campaign ever, raising just over $150 mln.

In June 2016 a hacker found a serious bug in DAO’s code and stole more than 50 mln in Ether.

This hack greatly impacts the reputation of Ethereum The DAO alike. Moreover, after the hack the Ethereum network split in two: Ethereum and Ethereum Classic.

On the other hand, this hack revealed certain vulnerabilities in code and prevented mistakes among future DAO projects.

Projects that develop the DAO market

Aragon

Aragon is a platform on the Ethereum network for creating and managing effective decentralized autonomous organizations and companies.

Companies that use the Aragon platform, even with a minimum level of technical compliance are capable of carrying out their own activities. The modular project system offers a wide range of functions, including the ability to manage the organization, raise funds, maintain payroll and accounting reports, all while the underlying blockchain technology provides a high level of protection and security.

The crowdsale was also very successful, with 275 000 ETH (about 25 mln) raised in 15 minutes.

Ascribe

Ascribe is a platform directed at the digital art community where creators can claim authorship, and notarize their claims via the Bitcoin blockchain.

The platform allows one to register, transfer, loan and consign property for any type of non-financial asset.

Ascribe launched in 2014 and raised 2 mln across all Funding Rounds. It is currently still developing.

Bitnation

Bitnation is the world’s first Decentralized Borderless Voluntary Nation (DBVN).

Launched in 2014, the project released several pathfinders and proofs of concept including the first marriage registered on the blockchain and the first blockchain passport.

Bitnation developed a software called Pangea, which contains a decentralized jurisdiction where citizens can conduct arbitration between peers and create nations with their own laws.