What Is DAO (Decentralized Autonomous Organization)?
Have you ever wondered if there was a car running alone without a driver? Or a vending machine that not only can take money from you but also can order its own food stock? That is more or less an analogy from DAO.
The DAO (Decentralized Autonomous Organization) is a company or organization run by a system found in a computer program, all decisions are controlled by shareholders, not the central government, established by Mike Hearn, the idea behind DAO is to establish a fully functioning organization or company without management hierarchical. Overall, the DAO is no different from companies in general, the fundamental difference is those general company regulations are not digitally enforced.
How Does DAO Work?
Bitcoin is called the first fully functional DAO based because it has all the rules that have been programmed, Bitcoin is autonomous and is also coordinated through a consensus protocol. After that, the use of the smart contract will be activated on the Ethereum platform, which brings the creation of the DAO closer to the public.
But what does DAO really need to work well? First of all, a rule will be programmed based on how the DAO will run. These rules will be converted into smart contracts, which are basically computer programs, which work independently on the internet, but at the same time need people to do tasks that they cannot do on their own.
Once the regulations have been established, the DAO enters the funding stage. This is very important because of two things. First, the DAO must have internal property, a token that will be used by the organization or be a gift for certain activities in it. Second, by investing in DAO, users get voting rights and play a role to make DAO the way they want it to be.
After the funding, the period is completed and the DAO can be carried out, then the DAO will become fully autonomous and independent of the manufacturer. DAO is open source, which means the code can be seen by anyone. In addition, all rules and financial transactions are recorded on the Blockchain. This makes the DAO fully transparent, cannot be corrupted and cannot be deleted.
After the DAO operates, all decisions in where and how to use the funds will be made by making an agreement. Each shareholder in the DAO can make a proposal regarding the future of his company. To prevent overflowing the number of incoming proposals, a money deposit is needed.
Furthermore, shareholders will choose the proposal. To carry out an action in the DAO, the majority must agree with that. The percentage needed to reach the majority can vary based on the DAO and can be specified by the code.
Basically, DAO allows users to exchange funds with anyone in the world. These funds can take the form of investments, donations, fundraising, borrowing funds and others.
To change something in the DAO, it takes approval from the majority. This can be positive and negative. The positive thing that can be seen is the security of the DAO is very high because DAO is not owned by individuals.
The negative impact of DAO is, if the developers find a bug in the DAO program, they will have a little trouble changing it.
Advantages of DAO
The concept of DAO is very interesting to be implemented in the modern world, DAO that is perfectly arranged gives investors the opportunity to form a company according to what they want. In the absence of a hierarchical structure, making every innovative idea can be expressed by anyone in the company and all members of the company can consider it. The voting system and the enactment of the rules agreed upon by the members minimize the occurrence of conflict.
In addition, investors must put some money before making changes or voting, which makes every decision taken has been evaluated in depth and produced an effective solution. Finally, because the DAO system uses blockchain which makes DAO very transparent, each member who participates helps decide how to spend funds and members in tracking how the funds are spent