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Mighty Encyclopedia

Decentralized Autonomous Organization (DAO)

What is a decentralized autonomous organization (DAO)?

A decentralized autonomous organization (DAO) is an online body with members that lacks the leadership or formal hierarchy of traditional organizations. Instead, the group is owned collectively and governed by a charter of shared rules created and preserved with blockchain.

Preserving the rules of ownership in blockchain allows trust between members, which is especially necessary for financial exchanges that formerly would have required a third party to guarantee. (For example, you probably feel more comfortable buying something on Ebay or Amazon than sending a cash transfer to a seller you met online and waiting for them to ship.)

A DAO replaces traditional business ownership structures like the corporation. After the initial founders create the rules and sell coins or tokens to signify membership, all members own the organization. Usually, holding these coins or tokens comes with voting rights. They can be bought and sometimes resold, and the rights and responsibilities of ownership and reselling can be dictated with a digital contract.

DAOs have a lot of potential applications, but they’re really useful for raising and spending money. For example, investors used to be at the mercy of whoever was managing their investments. But a DEO can be used to raise venture capital, while still giving organization members a say in how the money is invested.

Decentralized autonomous organization examples

  • Planner DAO: PlannerDAO is a decentralized community of financial planners promoting economic freedom, universal fiduciary standards, and permissionless access to financial services.

  • Mammalz Community: Mammalz is creating an IRL live streaming platform that will let creators monetize their storytelling.

Now Read: How to Sell Digital Products