What is a DAO?

It’s a term you’ve probably heard of if you’re interested in the world of cryptocurrencies. But what exactly is a DAO? We have prepared a small guide that details everything there is to know about these decentralized autonomous organizations.

It’s a term you’ve probably heard of if you’re interested in the world of cryptocurrencies. But what exactly is a DAO? We have prepared a small guide that details everything there is to know about these decentralized autonomous organizations.

Definition of a DAO

What does DAO mean? In English, it is the acronym for Decentralized Autonomous Organization. In French, this is translated as Decentralized Autonomous Organization, which could be defined as a self-managed community, without central authority. And who says decentralization says blockchain! What blockchain does a DAO run on? To make a DAO work, you need smart contracts, which will ensure the functioning of the community according to the rules that have been defined. Many DAOs use the Ethereum blockchain, but other blockchains can be used, such as Solana or Celo.

Characteristics of a CAD:

  • Decentralization: A DAO is characterized by its decentralization and its democratic aspect since improvements are submitted to the votes of its members, without any hierarchy. It cannot be closed by an external authority.
  • Accessibility: anyone, from anywhere in the world, can join a DAO by holding the necessary tokens to participate in its governance.
  • Autonomy: the smart contract governs the governance of the project in an immutable way.
  • Transparency: its transparency is total, anyone can see the entire history of the community. It is therefore easily auditable.
  • Community: Joining a DAO means being part of a community, often based on the use of discussion tools such as Discord.

Anyone can create a DAO, in order to gather enthusiasts around a common subject. We will be back soon with a guide detailing how to create a CAD!

The DAO, the genesis of the DAO

The idea was brilliant and the project was a huge success. Indeed, The DAO was launched in April 2016 on the Ethereum blockchain, with the goal of becoming a decentralized investment fund with no central authority. In less than a month, The DAO had raised the equivalent of $150 million in ETH. Its objective was to give creators the opportunity to present their projects to investors, allowing the latter to invest in them, all without having to provide proof of identity.

What ended The DAO adventure was a problem feared throughout the crypto-sphere, whether it was DeFi or not: a vulnerability in the code. A technical flaw in a smart contract allowed a hacker to steal the equivalent of 50 million dollars in ETH. The rest you know: Ethereum decided to make a rollback, thus erasing the theft, in order to return their money to the injured investors. This event is related to the split of the Ethereum community, with the creation of Ethereum Classic, where the rollback never took place.

CAD and security

The moral of this story is that security is paramount in any crypto project. The DAO hack is unfortunately not the only example: DAO Maker, Bagder DAO, and recently QiDAO have been the victims. Before investing, always check the seriousness of the team and the technical audits of the code if there are any! Keep in mind that while decentralization has many advantages, the downside of decentralization at this time is the risk of loss of capital.

The different types of CAD

There is not one DAO but many! First of all, it is important to know that joining a decentralized community can be done in several ways: either by buying the token used in the project, or by acquiring shares.

What is the purpose of a DAO? There are plenty of projects belonging to the Decentralized Autonomous Organization class.

Some examples of CAD types are:

  • Uniswap, Aave, Balancer, Curve Finance, Compound and Maker are DeFi protocols that are based on a CAD protocol.
  • Flamingo, PleasrDAO, BeetsDAO, herstoryDAO and Fingerprints DAO are decentralized communities that revolve around NFTs.
  • Gitcoin, Moloch, Compound Grants, Aave Grants and Uniswap Grants are designed to fund projects in the development phase.
  • BitDAO, The LAO, Stacker Ventures and MetaCartel are investment-oriented DAOs.
  • rekt, BanklessDAO, PubDAO and Forefront are examples of media.
  • Yam Finance, Dada, PartyDAO, MetaFactory or UniWhales offer various services.
  • Aragon, Colony, PrimeDAO and Syndicate are platforms that help those who wish to create their DAO.
  • Endaoment, Big Green DAO and Charity DAO are community-based charitable organizations.

Of course, the small world of decentralized communities does not stop there, since there is an impressive number of sometimes very original initiatives such as Friends with Benefits, a very select social club, or Saint Fame, a project focused on fashion.

YAP DAO is an autonomous and decentralized organization of journalists, communicators, marketers and public relations specialists. This DAO was created in order to offer services related to communication or public relation needs to other DAOs such as AladdinDAO or MoonDAO. The same way as a classic agency, except that the whole structure is decentralized, and each participant works independently.

Web3 and CAD

In opposition to Web 2.0, the term Web3 is in fashion. It refers to a new evolution of the Internet, aiming at the decentralization of Web3: DeFi, DAO, NFT, metaverse… Web3 is still in its infancy and could hold many more surprises!

In summary:

  • A DAO is a Decentralized Autonomous Organization, governed by smart contracts via a blockchain.
  • Joining a DAO is an opportunity to be part of a community of enthusiasts (NFT, metaverse, gaming…) or specialists (investment, marketing…).
  • As always, integrating or creating a DAO must be done with a critical mind, by integrating well the risks potentially linked to it, like the fall of the token, the hazards linked to a hack if the contracts were badly audited…

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