Decentralized Autonomous Organization (DAO)

A DAO (Decentralized Autonomous Organization) is a blockchain-based system that enables online communities to coordinate and govern themselves mediated by a set of self-executing rules deployed on a public blockchain, and whose governance is decentralized (independent from central control). DAOs make it possible for an online group with members from anywhere in the world to pool capital and hard-code rules (entirely in software) for how that capital will be managed and deployed. Those rules are then enforced by the underlying blockchain.

In the academic literature on DAOs, although some works avoid picking a definition (Norta et al., 2015) or refer to industry definitions (DiRose & Mansouri, 2018), multiple attempts have been made at providing a specific definition of DAOs. Most of these definitions include the following distinctive characteristics:

• DAOs enable people to coordinate and self-govern themselves online. Although no mention is made as to the minimum size of the group, the term “organization” is generally understood to refer to an entity comprising multiple people acting towards a common goal, rather than a legally registered organization.

• A DAO source code is deployed in a blockchain with smart contract capabilities like Ethereum.

• A DAO’s smart contract code specifies the rules for interaction among people although it is unclear to which extent there may be other governance mechanisms that can affect or overrule such code.

• Since these rules are defined using smart contracts, they are self-executed independently of the will of the parties.

• The DAO governance should remain independent from central control.

HASSAN, Samer; DE FILIPPI, Primavera. Decentralized Autonomous Organization. Internet Policy Review, 2021, vol. 10, no 2, p. 1-10.