A DAO (Decentralized Autonomous Organization) 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.
Imagine a company with no CEO. Instead of a board of directors making decisions behind closed doors:
- Proposals: Any member can suggest a change or a new project.
- Voting: Members use “Governance Tokens” to vote on the proposal. Your voting power is usually proportional to the number of tokens you hold.
- Execution: If the vote passes, the smart contract automatically executes the decision (e.g., releasing funds from the treasury). DAOs are currently being used to manage investment funds, social clubs, and even the development of major blockchain protocols.