What’s a Decentralized Autonomous Organization?

A 2-minutes explainer

Adrien Book

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Cryptocurrencies and Non-Fungible Tokens (NFTs) are symptoms of a traditional system that failed to deliver on its promises. Proponents of these technologies see them as cultural shifts and have coalesced into online communities embracing transparency and decentralization.

These communities shouldn’t replicate current organizations. That wouldn’t be in line with Web3’s ethos. They must be decentralized and on-chain⛓️ to reflect a crypto-society that seeks to become mainstream. And thus were born Decentralized Autonomous Organizations, or DAOs.

The tech community has a habit of making simple concepts difficult. This needn’t be the case. In short, DAOs are how humans come together as a group🧑‍🤝‍🧑 to make decisions in the digital world🌎. They do so with the help of two key tools…

  • Rules that govern the organization are expressed as “IF/THEN” statements, coded directly into a blockchain (rendering them auditable and permanent).
  • Voting shares are issued to stakeholders in the form of “digital governance tokens” — also recorded on a blockchain

Working this way replaces the legal mumbo-jumbo of today’s organizations (rules are coded) and their hierarchical nature (everyone has a voice). Many work structures can be created as Decentralized Autonomous Organizations. Investment companies💰, consulting companies💭…

BUT DAOs are no big revolution; the numbers prove it. There are under 5K DAOs in existence today. Only 91 have over $1M in treasury💵, and only 128 have over 1K members. This is to be expected, as self-governing organizations tend to collapse under their own weight.

DAOs however offer ways to think differently🤔 about the way we organize ourselves in online spaces. They allow us to re-discuss the meaning of capital, and the spectrums of profit/non-profit and centralization/decentralization.

They also show that, however much technology we cram into our lives, we can only reach our objectives if we work together🤝. DAOs are more social undertakings than technological, and their tokens and smart contracts matter less than the community and what it accomplishes.

It’s a niche. Not only that, it’s a niche with a lot of issues. But it’s new, and it’s cool, and sometimes that’s all that matters.

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Adrien Book

Strategy Consultant | Tech writer | Somewhat French