A “Decentralized Autonomous Organization (DAO)” is an autonomous organization run by the community. Smart contracts establish the underlying laws and carry out the chosen course of action. At any time, the public may openly review proposals, votes, and even the code itself.
A DAO is ultimately run exclusively by its individual members, who jointly decide on essential project issues, including technological advancements and treasury allocations.
Community members generally draft recommendations for the protocol’s future operations before gathering to vote on each one. The rules implemented within the smart contract then accept and enforce proposals that reach a certain level of consensus.
Under this framework, the familiar hierarchical systems found in huge corporations give way to community collaboration. Each DAO member has some level of control over the protocol.
The alignment of incentives is a feature of this framework’s beauty. In other words, it is in the person’s best advantage to vote honestly and to only accept suggestions that benefit the protocol as a whole.
