DAO is a Decentralized Autonomous Organization. To simplify, it is a blockchain-based application that provides users with a built-in mechanism for communal code management.
It is essential to understand that traditional companies with boards, committees and executives are not DAOs. Rather, DAOs are looked over by a particular set of rules defined in code and enforced by a network of computers running shared software, rather than by a small number of people.
Users must first join a DAO by purchasing its cryptocurrency to become a member. Having the asset offers the user the ability to vote on proposals and modifications proportionally to the amount they own.

HOW DOES A DAO WORK

In Decentralised Autonomous Organisations, people make decisions from the ground up. A can become a member of DOA in several ways, the most common of which is by obtaining the ownership of a token. Smart contracts, which are bits of code that execute automatically when a set of criteria is met, are used by DAOs.

Smart contracts are now being used on a lot of blockchains, while Ethereum was the first to do so. These smart contracts establish the DAOs’ regulations. Those who own a part in a DAO are given voting rights and have a say in how the company functions by voting on or proposing new governance proposals. This specific methodology protects DAOs from being overwhelmed with suggestions. The method for determining the majority varies from DAO to DAO and is called a smart contract.

One very interesting fact about DAO is that they are completely self-contained and transparent. Anyone may see their code because they exist on an open-source blockchain. Anyone can easily audit their built-in treasuries because the blockchain records all financial transactions.

EXAMPLES OF DAO

Over the previous few years, Decentralised Autonomous Organisations have gained pace and are now completely integrated into many blockchain initiatives. DAOs are also used in the Defi arena to allow fully decentralised applications.

Some examples of the same would be:

BTC (The Bitcoin Network) – Is the earliest example of a DAO. Even though most network users have never met, the network scales through community agreement. It also somehow lacks a consolidated governance framework, requiring miners and nodes to signal their support. According to today’s standards, however, Bitcoin is not considered a DAO.

Dash is the first true DAO by current standards, as the project has a governance mechanism that allows stakeholders to vote on how to use the treasury.

Other, more advanced DAOs take care of establishing cryptocurrency-backed stablecoins, such as decentralised networks built on top of the Ethereum blockchain.

In certain circumstances, the organisations that started these DAOs gradually relinquish control over the initiative, eventually becoming irrelevant. Token holders can participate in governance ideas such as hiring new contributors, adding additional tokens as collateral for their coins, and changing other settings.

STEPS TO LAUNCH A DAO

The first and the foremost step to keep in mind while creating a Decentralised Autonomous Organisation is the MISSION. What is the mission point for your project? What would the goal of your DAO be?

By establishing a goal or a mission, you’ll be creating an outline in which you’d be working. Post the mission, the major planning comes to the table. The steps for which are:

Creating a Smart Contract

In the beginning, a developer or a group must create the DAO’s smart contract. They can only amend the rules specified by these contracts through the governance system after they debut. As a result, they must thoroughly test the contracts to ensure that all-important aspects are taken care of.

The Funding

Following the creation of the smart contracts, the DAO must decide how to receive financing and implement governance. Tokens are frequently sold to people to raise funds; these tokens grant holders voting rights.

Deployment

The DAO must then be launched on the blockchain once everything has been set up. Stakeholders will now make decisions on how the organisation’s going to work. The founders of the organisation — individuals who developed the smart contracts — have no more influence over the project than other stakeholders.