A decentralized autonomous organization (DAO), sometimes labeled a decentralized autonomous corporation (DAC), is an organization that is run through rules encoded as computer programs called “smart contracts”, and whose financial transaction record and program rules are maintained on a blockchain database.
Its goals is to code the rules and decision making apparatus of an organisation, eliminating the need of documents and people for its management, and creating a decentralized, controled structure.
DAOs are basically abstractions used to collaborate, and mechanisms that align economical incentives in the internet through software. DAOs allow humans to collaborate on a large escale for a common objective, and conciliate incentives among individuals that don’t know each other, and without the need for a third trust party.
Internet has allowed to exchange information at zero cost with anyone in the world. The main idea behind DAOs is managing the production and exchange of VALUE: invest, raise money, especulate, trade, insure, lend, borrow, cash in, create joint-ventures, etc. in ways that were not possible till now. But the precise legal status of this type of business organization is unclear.
It is interesting to point out that Bitcoin is the biggest DAO – even if it is a simple one, because it aligns incentives using software, without third parties to make a digital coin with the properties of gold. People contribute hashing, and they get a reward in Bitcoins. With time, we will see this success repeating with other projects, bringing forward DAOs to the level of Uber and Airbnb, and showcasing to the business world that such success scales are possible.
DAOs are so far risky, early adopters, like wild west. But they are the way economy will create value in the future. They are pure mechanism of coordination that distribute risks and rewards. DAOs allow to collaborate to thousands of people who have never seen or known each other.