A DAO (Decentralized Autonomous Organization) is a way of carrying out and structuring an organization through the blockchain, in which there is no central authority or hierarchies within it. We can see it as a company that is organized democratically through code and not through a CEO who makes the decisions.
The biggest use case of these organizations is given to organize dapps (decentralized applications) that work on the blockchain, so that the decisions that are made in them are not subject to a single central authority but are taken by the whole of the community seeking to reach a consensus, similar to the voting process in a democracy.
DAOs are programmed on the blockchain through smart contracts that make everything work. Decisions within these organizations are carried out through voting in which the community participates, in a democratic manner. They generally work with their own token that works equivalent to a company share and allows us to vote on what is being discussed in the DAO. The usual thing is that the more tokens a person has, the greater voting power they will have, although there are also DAOs that seek to be even more democratic and that the voting power is not related to the power over the tokens of the person, since this it causes decentralization to be lost and the richest to be the ones with the most power over the organization.
Its disadvantages
Being fully programmed and open source, one of the main disadvantages is through the code, since anyone can read it and find vulnerabilities in it through which to take advantage of the DAO. This was what happened with âThe DAOâ, one of the first decentralized organizations, in which a hacker found a bug that allowed him to get $50 million in Ether until he could be stopped.
Another disadvantage, which is related to the first one, is that all the decisions that are made in a DAO take much longer than in a centralized organization, and this is because they must be voted on by the community and until there is no consensus, they cannot be carried out. This same thing played against the DAO hack, since to change the code and stop the hacker, a vote should have been held, hindering the whole process and giving the hacker more time.
Its advantages
On the other hand, in the advantages we can list the participation that allows anyone who wants to take part and contribute ideas, the transparency and the fact that the community will support changes that benefit the DAO and the end user, since this it will end up giving its token a higher value and therefore, appreciating the capital of its members.
In conclusion, the DAOs are a revolutionary form of organization that arises thanks to the technological advance that the blockchain represents, allowing the users of a product to make decisions within it without being subject to the will of a central authority. But like everything that is related to this technology, it is very new and therefore it has many edges to fail and many points to improve for the future.
