Explore DAO Basics
Learning Objectives
After completing this unit, you’ll be able to:
- Define a decentralized autonomous organization and the types of DAOs.
- Understand how a DAO works.
- Learn the impact of DAOS.
What Is a DAO?
A decentralized autonomous organization (DAO) is a group or collective made up of individuals who have organized around a common purpose, such as a mission, interest, or goal. They’re managed by smart contracts, powered by tokens, and governed by community voting. Many people think of them as the LLCs of Web3.
DAOs seek to do three main things.
- Provide members with a voice through governance.
- Flatten hierarchies, and create more equitable workstreams.
- Allocate resources to support a core mission.
DAOs are important because they provide a safe and effective way to work with people around the world to get things done.
How DAOs Work
DAOs function and exist differently than traditional organizations.
- They’re decentralized and operate primarily through the internet, allowing access to members across the globe.
- In DAOs, the entire community votes on decisions and ideas so everyone has a voice. Community members are also able to submit their own ideas.
- All DAOs have a treasury of money that is collectively owned and managed by members themselves.
Not all members of a DAO have the same amount of votes. When you become a member, you gain governance tokens based on the contributions/investments you make to the DAO.
Types of DAOs
There are eight main types of DAOs. Here are a few of the most common.
| Name |
Purpose |
Examples |
|---|---|---|
|
Protocol DAO |
Govern a protocol |
MakerDAO, Uniswap, Yearn DAO |
|
Grant DAO |
Facilitate nonprofit donations |
Aave Grants Dao, MetaCartel |
|
Philanthropy DAO |
Create impact within Web3 |
Big Green DAO, UkraineDAO |
|
Social DAO |
Bring together like-minded individuals |
Developer DAO, Friends with Benefits |
|
Collector DAO |
Invest in art and collectibles |
FlamingoDAO, ConstitutionDAO |
|
Venture DAO |
Invest in new ventures, support founders and swap product ideas |
Krause House DAO, MetaCartel Ventures, BessemerDAO |
|
Media DAO |
Create community driven content |
Bankless DAO, Decrypt |
|
SubDAO |
Manage specific functions within a DAO |
The Story of the Constitution DAO
A well-known example of a DAO is the Constitution DAO. In November 2021, one of the 13 remaining original copies of the US Constitution was up for sale. The sale was a live auction by Sothebys.
A group of individuals got together to form what is now known as Constitution DAO. They raised over $47 million worth of Ethereum in a week to bid in the auction. The decision as to where the constitution would be located was determined by a vote of the DAO. While the DAO didn’t end up winning the auction, this is a great example of how a DAO works and the power of community working towards a shared goal.
What DAOs Teach Us
The emergence and popularity of DAOs over the past few years have given us some useful insights.
First off, DAOs underscore the power of community. There’s tremendous value in people coming together for a collective cause. DAOs don’t have marketing teams—they have community members who spread the word and contribute to the DAO.
Second, DAOs show that organizations can function without traditional hierarchies. There doesn’t need to be a single owner or central governing body of an organization. Instead, an organization can function based on set rules and group voting.
Now that you understand what DAOs are, go explore some! If you’re feeling inclined, you can even start your own.
