What is a DAO and what are some famous DAOs?

Updated on 11 July, 2022 12:52 PM
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    Every organization is run by a select group of people who are commonly termed as the 'management' of the organization. Though this model has varied benefits, it leads to a lot of centralization and control of power in a few hands. Developers, seeing the development in the decentralized world around decentralized payment mechanisms realized this early and led to the formation of an organization concept which is popularly called a DAO. 

    DAO essentially stands for Decentralized Autonomous Organization. A DAO is an organization that isn’t governed and managed by a few selected people and instead managed and operated by a community as a whole. The concept of DAO is based on smart contracts. Every DAO is formed for a specific purpose that attracts relevant members. 

    How does a DAO work?

    Essentially, every DAO is based and worked via smart contracts. Decisions are taken collectively by the community members. Every DAO issues its token which represents ownership in the community. Smart contracts set out the rules for governance. Those with ownership and stake get a chance to participate in the voting of a DAO. Every member creates and participates in making proposals and those with then vote for the same. A strong protocol with a well-functioned DAO attracts a lot of users and hence leads to an increase in the value of tokens of the same. DAOs were started to be built over the Ethereum blockchain but now can be built over other chains such as Solana etc. 

    As the rules are made into the code it removes the requirement of a manager/supervisor.  Also, it eliminates any bureaucracy or hierarchy hurdles. Governance in DAOs is community-based, while traditional companies’ governance is mostly based on executives, top management, etc. 

    Advantages of a DAO 

    1. The biggest advantage of a DAO is its decentralization and autonomous nature. Organizations these days have to spend heavy resources on management-related issues and battles. DAO accounts for and solves the problem. 
    2. All the community members, irrespective of the hierarchy followed, have a fair chance to contribute to the community. 
    3. DAOs as organizations are transparent in their operations where every involved member knows of the happenings inside the organization.

    Disadvantages of a DAO 

    1. In a DAO, as every member has a say in the decision-making and proposal process, it creates a barrier to taking quick decisions. 
    2. As a DAO is an open-source project, its code is available to anyone in the space. Hackers can use reverse engineering and can lead to the security compromisation of a DAO. 
    3. As DAOs empower decentralization, sometimes it may happen in the case of voting that users with the most tokens concentrate the respective powers. 

    Some Famous DAOs


    Uniswap is the worlds leading decentralized crypto exchange that facilitates buying and selling of ERC-20 tokens on the Ethereum blockchain. The governance token used for Uniswap is called UNI. This token gives the users the right to vote regarding matters around fees and structure, how tokens should be made available, and general DAO administration.


    Decentraland is a virtual 3D world being built on the Ethereum blockchain. The Decentraland DAO is the governance pool of Decentraland. It is the decision-making tool for MANA, NAMES, and LAND holders. According to the official Decentraland, “Through votes in the DAO, the community can issue grants and make changes to the lists of banned names, POIs, and catalyst nodes. The DAO also controls the LAND and Estate smart contracts”


    MakerDAO is a P2P lending and borrowing organization functioning as a DAO. Dai, which is a stablecoin, is the native token on the platform. A community of MKR token holders governs the Maker Protocol, the smart contracts that power Dai. Currently, over 400 apps and services have integrated Dai, including wallets, Defi platforms, games


    BitDAO is a DAO created to allow users to buy stakes in web3-based companies. According to the official website, BitDAO infuses capital agnostically across industries, chains, and products. Its treasury is supported by contributions from Bybit and the virtuous cycle of value created by its AEs and partner labs. The token used for governance on the platform is called BIT


    As the world is moving towards decentralization, the importance of organizations being decentralized is increasing day by day. These organizations give a fair chance to all members to contribute as per the requirements which makes them responsible and accountable. DAOs have seen a rise in adoption and are being used & adapted by more and more users. The road ahead for these types of organizations is bright. More specific purpose-oriented DAOs can be seen in the coming future. 

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