In the latest issue of Cryptopedia, viewers can get a brief and useful overview of Decentralized Autonomous Organizations, or DAOs. Jackson Dumont of the Cointelegraph believes that DAOs can “completely change the way we organize work and social cooperation.”
What makes this type of organization both decentralized and autonomous? The answer is smart contracts on the blockchain. Essentially, DAO runs on lines of data code written in smart contracts that everyone can interact with in the same way.
Dumont described the three main steps needed to launch a DAO. The first step is to create this smart contract. The second step is to decide how to get financing and implement management, usually by creating a token. Finally, DAO is published on the blockchain.
The most common use case for DAO is crowdfunding. The total funds are combined into a smart contract, which in turn issues tokens to DAO members. Token holders who have shares in DAO can vote on how the money is used and vote on the appointment of delegates.
Regarding the DAO constitution, the participants raised just over 49 million dollars to buy the original copy of the US Constitution, but it was auctioned off. Another example is Blockbuster DAO, which aims to raise enough money to buy a video rental brand from Dish Network and turn it into a movie streaming studio.
DAO intends to reduce the risk of losing leadership through horizontal leadership or flat hierarchies that balance the playing field for power. Access is unlimited, and no matter where the participant is, all follow the same rules in the smart contract. Trust the code, not the people.
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Of course, there are still risks and concerns about legality and safety. A good example of a DAO bug is The DAO, which was hacked for $ 50 million in 2016. A recent report claims that the identity of the alleged hacker has been revealed.