A Decentralized Autonomous Organization or DAO is an important entity within the development of the Blockchain technology. Is an organization that defines its governship in a blockchain and has its own mechanisms to finance and organize its operations autonomously. From the end of the pre-sale, we could say that a DAO has “life on its own”. It is controlled by a number of shareholders (who own a percentage of the DAO) and work through Smart Contracts, which can be modified by mutual agreement of the parties. This tokens can be sold or bought by its owners through simple transfers in the Blockchain related to the project.
A DAO is able to have a decentralized network of autonomous agents that work without supervision to make the organization work flawless. This “agents” are usually dApps developed for such purpose. As a decentralized organization, it works on its own without management. The decisions about where the funds go and other matters are made by mutual agreement by the people that participate in the process of presale prior to its end.
To simplify, a DAO is formed by one or several dApps, which have some sort of constitution and manage the DAO’s own tokens. Normally, when anyone want to launch a DAO, a public offering of a part of its tokens comes first. We call it ICO (Initial Coin Offering), a type of smart contract. In said ICO a percentage of the total quantity of tokens foreseen for this DAO are offered for sale. Generally, depending on the fund raising obtained, the number of tokens are divided by the money raised, and according to that the initial price of the token on the market will be set. The owners of said tokens will be able to transfer afterwards the ownership or use them inside the dApp.
It makes perfect sense if it is taken in account that they get capitalization from several investors through a commercial activity, which ultimate objective is make profit through a well explained investment policy. In this case, this investment in start-up projects related to blockchain technology.
A perfect example of a working DAO could be a vending machine that not only takes the money from us and give us the item we have purchased, but also uses that money to autonomously restock the products. This vending machine would be also capable of hiring cleaning services and paying rent on its own. Furthermore, as more people invest money in this machine, all the users will have a saying and a vote about what kind of items will order, and how often it should be cleaned. There is no management here; all this processes were written on a smart contract.
If we apply this concept to a company, time saving and efficiency could be astronomic, since a piece of code doesn’t sleep and works 24/7.