This article is for understanding the entire DAO concept.

What is a DAO

DAO is an acronym for Decentralized Autonomous Organization. It is like every traditional organization but operates Autonomously, it is operated transparently and independently of any human intervention including by its Creators. It can be defined as a common interest and shared bank account. It is an organization run by a code agreed upon by members. It has no hierarchical order like in our traditional companies that have a CEO, and CTO. It is decentralized and autonomous meaning that smart contracts help run the majority of the processes without human interference. DAOs were popularised in 2016 by Ethereum, at about three weeks down, it was hacked although the problem came from the smart contract. It was later recovered through a concept called hard fork

How does DAO works?

Smart contracts are the bone of DAO. smart contracts are programmed and run when certain conditions are met and stored on a block. The project is governed in a decentralized manner, with no hierarchical order. It simply means that a group of people around a tech project, while the members are the contributors by capital or technology, and their contribution makes it possible. Every decision is made from a consensus of the contributors. All proposals, rules, and policies are implemented using its member's permission. It is built on Ethereum Blockchain The DAO makes things move in productivity and the common good of its members and not personal interests.

What is needed for a DAO:

• The DAO has its mission
• The DAO has a voting process because it is the way people make their contributions and changes.
• The DAO has its governance token as proof to its members that their opinions are valid as owners.
• The DAO has a community, the power of decentralization is in having numbers, where more people are involved it makes power be spread across for governance.
• The DAO has ways of managing funds.

Steps in setting up a DAO:

1. The first involves the documentation of the idea, mission, and vision statements, and the writing of the smart contract. In this initial step, the Creators set up a series of interconnected and automated smart contracts on an open blockchain like Ethereum.

1. This step involves pitching your idea and the process for funding the organization. The community contributes money to the DAO and purchases tokens. A Series of smart contracts will generate invoices and collects payments from members. The tokens are its form of digital currency. This money will be used in running the DAO. Using an analogy of a coke vending machine, this machine will notify the server when low on coke and pay for orders. It may seem a bit more complex but we are coming to that point.

1. Here, the approval and implementation process of an idea takes place. The DAO starts to operate, members can now make contribution proposals to running the DAO by member voting. It involves discussions about governance and related

Examples of DAO

• Running a charity organization.
• A freelance network
• A venture and grants organization
• A social organization

Examples of successful DAOs

• Aave
• Uniswap
• MakerDAO

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