What is a DAO?

Decentralized Autonomous Organization. Sounds like the villain for a sequel of 2001: A Space Odyssey. You might have heard this term floating around in the crypto ether, as the formation of these organizations are creating a ripple effect in the way we perceive ownership of certain assets. A DAO is an organization, company, or entity that uses funds from its investors to democratically decide how and where to coordinate efforts and allocate resources by process of blockchain smart contracts. An unlimited number of people are allowed to invest their cryptocurrency, and in return they are allocated a proportional amount of voting power on decisions of what the DAO  aims to do with its funds.

A DAO is a quintessential model of the democratic voting process. Rather than the few head honchos making decisions of where collective funds should be allocated, a DAO gives each invested member the voting power to have a say in the decision making process. Typically, the power or their vote is directly proportional to how much capital they have invested, giving big investors a big say and smaller investors a smaller say in how the money should be dealt with. This brings up an interesting conversation revolving around the power of each vote.  As democratic as it seems, don't forget, the big bucks have the biggest mouths. However, with the decision making in the hands of blockchain code, rather than those of mysterious humans with ulterior motives, the direction of where the organization heads is exponentially more transparent.

There are many different types of DAOs. Some have a goal of investing their sum of money in other companies and projects, like SPACs do, looking for returns on their investments. Some act as a boiling pot where the main goal is to utilize the capital to buy an agreed upon resource  that can benefit each member of the DAO. For example, most recently the LinksDAO has popped out of thin air, raising over 10 million dollars, aiming to buy a private golf course usable for all of the investors in the DAO. No longer do you need to be in the room, or have a foot in the door, in order to get ahead. DAO’s have made opportunities much more public, allowing anyone from all backgrounds to invest in opportunities that once were only available for those who were of the financial elite. 

You also might have heard of the Constitution DAO, where a collection of thousands of participants bundled their money together to buy the last remaining privately held copies of the US Constitution. They ultimately were unable to win the auction, but the impressive 48.9 million dollars that they accumulated was enough to shout out to the world that this type of democratized investment is possible.

The Krause House DAO, (a reference to the late Chicago Bulls Manager, Jerry Krause), is raising money in an attempt to purchase an NBA franchise. The ultimate goal may be out in the distant future, but it points to the idea that these organizations do have momentum and may one day be the norm in terms of purchasing or investing in large projects from professional teams to music rights, tv series, movies, art, and whatever we can dream up.

DAOs put the money in the hands of the people who support it, but whether that's a good decision or not still remains to be seen, as the war between a smaller number of experts and large majorities has just begun.

Stay Curious!

~NFT Art Source

Article by: Nate Galper