In a world where familiar corporate structures are cracking at the seams, a new model of DAO management is emerging. A decentralized autonomous organization is not just a digital startup without a CEO. It’s a community governed by rules written in code and decisions made collectively. There is no center, no vertical, just blockchain, tokens, and voting.
But how does a DAO work in practice? What can it do? And should we expect that in a couple of years it will replace not only the board of directors, but also the usual way of coordination on the Internet?
How Does the DAO Work?
The DAO is based on a simple, almost radical idea: an organization can be run not by a select few, but by all participants, as long as they have tokens. No presidents, meetings, or office backstage. Instead, smart contracts trigger actions if a proposal gathers the right number of votes.
Each DAO is a set of:
- Rules written in code;
- Tokens that grant voting rights;
- A treasury managed by the community;
- Proposals that are voted on;
- Outcomes that are automatically implemented through the blockchain.
It works like this: someone proposes changing the project’s parameters, such as increasing the number of tokens issued or funding a new partnership. The proposal is published, participants vote, and the smart contract counts the votes. If the votes are in favor, the code executes the decision. There are no meetings, debates, or middlemen.
The Story of One DAO
Perhaps no DAO has become as emblematic as the DAO. Founded in 2016, it raised over $150 million in funding at the time, the largest crowdfunding sale in history. The DAO was positioned as a decentralized venture fund: participants voted to invest in blockchain projects.
But a month after its launch, DAO was hacked. Hackers found a vulnerability and withdrew 3.6 million ETH. This sparked heated controversy and eventually led to the Ethereum hardfork birth of Ethereum Classic. The DAO was shut down, but the idea remained. And continued to live on in new forms.
ConstitutionDAO
In 2021, the world started talking about DAO again, this time because of ConstitutionDAO. A group of anonymous users got together with the goal of buying one of the original copies of the US Constitution. In a matter of days, the project raised about $47 million.
Although they failed to win the auction, the example was contagious. It showed that a decentralized organization can quickly mobilize thousands of people, raise money, and act synchronously even if they do not know each other.
The pros of DAOs
Why are DAOs even necessary? At first glance, managing something via blockchain sounds cumbersome. But there are significant advantages to this model:
- Decentralization: Decisions are made collectively, not behind the scenes. No one can “hijack” power.
- Transparency: All proposals and votes are on the blockchain. No murky statistics and manipulation.
- Participation: Every token gives you a vote. Even one vote makes a difference.
- Self-funding: A DAO can manage its funds without depending on investors or funds.
This structure can be especially useful for decentralized protocols, foundations, NFT communities, DeFi projects, and even digital cooperatives.
The cons of DAOs
But don’t romanticize it. DAO is not a magic pill. Among the problems:
- Slowness: Votes take time. You can’t just “get together and decide”.
- Low engagement threshold: Many participants just hold tokens and don’t participate.
- Technical risks: Smart contracts can contain bugs. One exploit and the DAO treasury is empty.
- Legal grayness: For now, DAOs are in a zone of regulatory uncertainty. Who is liable? How do we enter into contracts?
In addition, voting along the lines of “the more tokens the more power” could lead to centralized governance through the back door.
Alternative to Corporations or an Experiment in Digital Evolution?
The DAO is not a replacement for everything familiar. Rather, it is an alternative form of coordination that has emerged in a world where centralized control is increasingly questioned. DAOs are being created where transparency, equity, distributed ownership and collective decision-making are important.
Some DAOs already manage multi-million dollar treasuries and fund infrastructure solutions for the entire crypto market. For example, Uniswap DAO is the largest community running a decentralized exchange of the same name. Participants vote on protocol improvements, funding for third-party developments, and even partnership initiatives. It is a full-fledged economic mechanism that functions without an office or control center.
Other DAOs focus on culture and digital ownership. Take PleasrDAO, for example, which buys rare NFT assets (like a one-of-a-kind Wu-Tang Clan album) and manages them collectively. Or Friends With Benefits DAO-a community for creative professionals that functions as a hobby club, a platform for collaborations, and an economic system with its own token.
DAOs are even infiltrating the world of gamification. Yield Guild Games DAO invests in gaming NFTs and then shares the revenue from in-game activity with players. It’s not just a guild it’s a decentralized gaming investment fund.
Finally, there are DAOs that seek to make an impact in the real world. For example, UkraineDAO raised millions of dollars in cryptocurrency in support of Ukraine after a full-scale war broke out. This is not only a precedent for political participation via blockchain, but also a signal: a DAO can be a tool for real-world action.
Of course, DAOs are not universal yet. Not every task requires blockchain, votes and tokens. And many DAOs are still more like clubs of like-minded people than sustainable structures. But more importantly, DAOs set a vector. They show that a digital community can organize itself, manage itself, and distribute resources without intermediaries and decision-making centers.
This is an experiment. It is large-scale, ambitious, and raw in places. But if we ask ourselves the question: do we want decisions in the digital space to be made not at the top, but by all participants? DAO sounds not like a trend, but like the next logical step in the evolution of the Internet.
