A decentralized autonomous organization (DAO) is a system developed to distribute decision-making, management, and entity ownership

1. What is a DAO and How
Does it Work?

2. 2
Historically, we have seen new business models emerge every 40-50 years. We are fortunate to be in the midst of
another transition. DAOs (Decentralized Autonomous Organizations) are one business model fundamentally
reshaping how people coordinate and deliver solutions to problems. While many large institutions have forgotten
that we are humans first and that they were incorporated for noble missions, organizations that follow the DAO
business model are the ones who are bringing people and humanity to the forefront of their missions. As of
March 2022, there are around 216 DAOs with a cumulative valuation of nearly USD 10 billion.
Decentralized Autonomous Organizations typically have the following features :
A) DAO has a horizontal structure by design; there is no management hierarchy in the DAO business model.
B) The DAO business model allows everyone from its community to participate in organization-wide decisions
through governance processes and voting.
C) DAOs have decentralized ownership – founders or CTOs share ownership with community members.
D) DAOs are open-sourced and completely transparent.
The DAO business model follows a similar pattern to cooperative societies but is more effective with a
democratic set-up of protocols and tools at their disposal. DAOs need no managers or hierarchy – every member
has a say in decisions that impact the organization through protocols, forum discussions, and voting with tokens.
Minor decisions within workstreams can be taken without getting everyone involved which makes organizations
that follow the DAO business model agile and decentralized at the same time.

3. We had already discussed in brief what is a DAO and how they are decentralized in nature.
Here is where we will understand what is a DAO crypto in blockchain and its role in the DAO
business model in detail. Organizations that follow the DAO business model are spaces in
which decisions are taken from the bottom up; a group of members owns the organization.
There are many ways to engage in a DAO landscape, the most common of which is via smart
contracts and the possession of a token.
A DAO landscape’s rules are defined by a group of community members using smart
contracts. These smart contracts establish the groundwork for how the DAO will function.
They are extremely transparent, verifiable, and publicly auditable, allowing any potential
member to grasp how the protocol will work at each stage fully. Smart contracts are
logically coded agreements that govern judgments that are based on blockchain activity.
They are pieces of code that run automatically when a predetermined set of criteria is met.
These smart contracts establish the regulations of any organization that follow the DAO
business model. Once these regulations have been formally recorded onto the blockchain,
the DAO must determine how to acquire financing and confer governance.
How does a DAO work?

4. Typically, this is accomplished through token issuance, wherein the system sells tokens to
raise money and restock the DAO’s treasury. Those with a stake in a DAO can then vote and
influence how the business functions by voting on or introducing new governance ideas. The
user voting power is distributed depending on the percentage of tokens they own. For
example, a person who owns 50 DAO tokens can have twice the voting power of a user who
owns 25 tokens.
This methodology protects DAOs from being flooded with suggestions by requiring a
proposal to be approved by most stakeholders. The method for determining the majority
varies from DAO to DAO and is described in the smart contracts.
DAOs are self-sufficient and transparent because they are constructed on open-source
blockchains, and their code is accessible to everybody. Because the blockchain documents
all monetary operations, anyone may audit their built-in treasuries.
How does a DAO work?

5. To properly understand what is a DAO, we also need to look at and understand the objective
behind the DAO business model and what exactly makes DAOs so important in today’s
business environment.
DAOs are significant because they can enable people with more liberty to choose initiatives
whose vision and mission statements connect with them, positions that correspond with
their abilities, and colleagues to work with who share their values.
A DAO business model is meant to improve many firms’ existing management structures.
Instead of depending on a single person or a small group to determine the entity’s future, the
DAO business model seeks for every member to have power, a voice, a vote, and the ability
to suggest projects. A DAO also seeks strong administration that is defined by blockchain
code.
Why are DAOs Important?

6. Organizations that follow the DAO business model have significant advantages over
traditional organizations because they are internet-native. The lack of trust required
between two parties is a significant advantage of DAOs. While traditional organizations
require a great deal of faith in the individuals within them, especially on the part of
investors, DAOs just require trust in the code. Since code is public and can be thoroughly
tested before release, it is easier to accomplish. After a DAO landscape is formed, its actions
must be transparent and verifiable as well as accepted by the community.
To sum it all up, the DAO business model is important, especially in the current
environment, as the overall concept is developed around blockchains and decentralized
spaces, both of which are predicted to become a major part of the future with the
introduction of projects like web3. Compared to traditional business models, it prioritizes
the wants and needs of all parties that are involved with the DAO and gives a fair chance to
each member of the community in accordance with the number of tokens that they hold
individually, whereas, in the traditional system, an authority structure is actively followed
where those who are considered to be at the bottom of the chain do not hold much power. a
DAO landscape provides a lot more freedom to its members and introduces a more unified
concept of working.
Why are DAOs Important?