A decentralized autonomous organization (DAO), sometimes called a decentralized autonomous corporation (DAC), is an organization represented by rules encoded as a computer program that is transparent, controlled by the organization members and not influenced by a central government, in other words they are member-owned communities without centralized leadership. A DAO's financial transaction record and program rules are maintained on a blockchain. The precise legal status of this type of business organization is unclear.
A well-known example, intended for venture capital funding, was The DAO, which amassed $150 million in crowdfunding in May 2016, and was hacked and drained of US$50 million in cryptocurrency weeks later. The hack was reversed in the following weeks, and the money restored, via a hard fork of the Ethereum blockchain. Most Ethereum miners and clients switched to the new fork while the original chain became Ethereum Classic.
DAO-tooling is a rising need. With functions similar to traditional firms, all DAOs have to balance efficiency and decentralization while running a community, marketing arm, treasury and oftentimes a product. As a result, a slew of DAO tooling services have entered the space
Governance & Voting
Thru voting DAOs maintain transparency and visibility of how their decisions are taken. Once approved, those votes automatically translate to on-chain action (recorded on the blockchain) such as transferring funds from the treasury to an external entity.
On-chain governance tools include Tally, Sybil and Boardroom. However, rising gas prices for on-chain execution has led many DAOs to opt-in on basic polling, using off-chain services boards such as Discord, Discourse and Telegram polls. Token-based signal voting tools such as Snapshot are also favored to capture community sentiment.
Treasury management is key for the existence of the DAO.
The Juicebox protocol also acts as a payment terminal and programmable treasury for projects, allowing DAOs to manage treasury actions such as crowdfunding, employee salaries and automated payouts when a project closes.
Contribution & Compensation
Many individuals contribute to the DAO via moderation, code or “Bounties”. On-chain tasks can be verified by tools such as Rabbit Hole, or off-chain tasks using tools such as Gitcoin and Coinvise. Once the task is completed, many DAOs turn to tools such as POAP or MintGate to provide token-gated assets as a reward or badge to represent credibility.