Blockchains have the potential to allow entirely new types of organizations to operate autonomously without the need for central coordination. Decentralized Autonomous Organization is an interesting example of blockchain use in governance (DAO).
Decentralized Autonomous Dao
A Decentralized Autonomous Organization (DAO) is a company that is run entirely by computer programs and code.
A DAO will work with external data and execute commands based on it using smart contracts, all without the need for human interference. A Decentralized Autonomous Organization (DAO) allows for decentralized ownership of a company.
A DAO's members are not bound by any formal contract. Instead, a shared purpose and network benefits attached to the consensus rules bind them together. A DAO cannot be managed by a single entity once it has been deployed; instead, it is regulated by a group of participants. The DAO platform can be thought of as the final piece of a puzzle that will drive the entire blockchain ecosystem toward maximum autonomy and decentralization.
Why do we need DAO?
One of the most significant advantages of a Decentralized Autonomous Organization is that it effectively removes the need for a mutually agreeable third-party intermediary. When it comes to financial systems, a fully decentralized financial system simplifies the transaction process greatly.
Via trusted timestamping, a DAO uses the blockchain-based distributed ledger to monitor the financial exchange of information across the internet in a secure manner. It will also remove the need to log communications between parties repeatedly through multiple documents, lowering operational and transactional costs. In essence, thanks to a loosely coupled peer-to-peer smart contract partnership, blockchain data could replace public records.
How DAO works
Via the use of smart contracts, a DAO will assist an enterprise in running without the involvement of human managers. Unlike traditional corporations, a DAO is run entirely by its community using open-source software. As a result, smart contracts are essential for an organization's smooth and automated operation.
The idea of a decentralized organization isn't fresh in and of itself. Smart contracts have always had the ability to simplify some, if not all, of the operating processes and functionalities of decentralized organizations, making a decentralized autonomous organization (DAO) an important and exciting idea on paper. It facilitates the operation of a model in which business operations can be completely automated and decentralized.
Potential Issues with DAO
Social
Shareholder social participation in DAOs can be difficult and troublesome.
Legal
A DAO's legal component is less transparent and straightforward than that of traditional organizations.
Security
If a DAO's code is broken, it's difficult to fix, leaving security flaws and vulnerabilities to be exploited.
Final Words
A DAO eliminates the need for human interference, making the system more effective. It also saves money on operations while lowering the risks associated with human activity.
An great advancement in technology, DAO= ownerless business