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What is Decentralized Autonomous
Organization (DAO) & How DAO works?
INTRODUCTION
• DAO is the organizations running in the software in a fully democratic way.
• Before we jump into how exactly they work, we need to go through the tradition
organization structure quickly.
• An organization is the group of people working on a common interest.
• This is most of the time is to make money for the shareholders.
• The organization follows certain rules which are governed by the Government of the
place where the organization has been incorporated.
• An organization has the group of shareholders who represent the ownership of the
organization in the percentage format.
• Let’s say a person X own 3000 shares of the organization which has in total 30,000
issued shares then Mr. X will become 10% owner of that organization.
Copyright© BlockchainCouncil 2
• These shares can be transferred to anyone which will, in turn, transfer the ownership
of the organization.
• Share holders appoint a Board of Directors who control the major key decision of the
organization.
• This group of people also known as Board of Directors appoints the CEO who
execute the day-to-day operation by hiring more staff under him.
• The rules & regulation of running the organization are written in Bylaws or
Memorandum of Article, Article of Association.
• DAO is just the digital version of the above arrangement where all rules & regulation
are written in the source code rather than the piece of paper.
Copyright© ToshendraSharma 3
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• They are executed by thousands of people/computers together through some
consensus-based algorithm.
• The platform where the DAO runs is called Blockchain.
• The most common case where the DAO can be written is Ethereum Blockchain.
• In Ethereum, they are written in Solidity Language
Copyright© ToshendraSharma 4
Sign Up Now
How does DAO work?
• In the DAO, each action or vote is represented by some form of transaction in the
Blockchain.
• Here the members are represented by the address (in Ethereum, It’s Ethereum
address).
• These addresses can be owned by a human, a robot, an IOT device, or even another
DAO.
• This makes it ideal for a fully automated system to run the full-fledged organization.
• Each member is given a token which represents the shares of the DAO; these tokens
can also be used to vote in the DAO to take a certain decision.
• The token is nothing but another kind of contract sunning on top of Blockchain.
Copyright© ToshendraSharma 5
Sign Up Now
• The more token an address has, the more control he will have on the DAO.
• Each member will have the rights to submit the proposal to take certain decisions.
These decisions can be:
o Fire the CEO or just Change the CEO
o Hire a vendor to get his/her service
o Hire a lawyer
o Pay certain ethers/USD to someone as a salary or bonus
o Issue the share to someone because that person/address is adding more value.
• In the DAO, since this is nothing but a democracy which is running in the Blockchain
the voting power can be optionally delegated to someone to whom a member trust
more. This is in fact just like voting by proxy in the real organization.
Copyright© ToshendraSharma 6
Sign Up Now
• The DAO can also raise fund through some crowd sourced funding by issuing the
tokens/shares to anyone who is paying the money to the DAO.
• This payment and issuing the shares/token can be done in real time unlike the more
than 60 days process in the real organization.
Copyright© ToshendraSharma 7
Sign Up Now
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What is Decentralized Autonomous Organization (DAO) & How DAO works?

  • 1. What is Decentralized Autonomous Organization (DAO) & How DAO works?
  • 2. INTRODUCTION • DAO is the organizations running in the software in a fully democratic way. • Before we jump into how exactly they work, we need to go through the tradition organization structure quickly. • An organization is the group of people working on a common interest. • This is most of the time is to make money for the shareholders. • The organization follows certain rules which are governed by the Government of the place where the organization has been incorporated. • An organization has the group of shareholders who represent the ownership of the organization in the percentage format. • Let’s say a person X own 3000 shares of the organization which has in total 30,000 issued shares then Mr. X will become 10% owner of that organization. Copyright© BlockchainCouncil 2
  • 3. • These shares can be transferred to anyone which will, in turn, transfer the ownership of the organization. • Share holders appoint a Board of Directors who control the major key decision of the organization. • This group of people also known as Board of Directors appoints the CEO who execute the day-to-day operation by hiring more staff under him. • The rules & regulation of running the organization are written in Bylaws or Memorandum of Article, Article of Association. • DAO is just the digital version of the above arrangement where all rules & regulation are written in the source code rather than the piece of paper. Copyright© ToshendraSharma 3 Sign Up Now
  • 4. • They are executed by thousands of people/computers together through some consensus-based algorithm. • The platform where the DAO runs is called Blockchain. • The most common case where the DAO can be written is Ethereum Blockchain. • In Ethereum, they are written in Solidity Language Copyright© ToshendraSharma 4 Sign Up Now
  • 5. How does DAO work? • In the DAO, each action or vote is represented by some form of transaction in the Blockchain. • Here the members are represented by the address (in Ethereum, It’s Ethereum address). • These addresses can be owned by a human, a robot, an IOT device, or even another DAO. • This makes it ideal for a fully automated system to run the full-fledged organization. • Each member is given a token which represents the shares of the DAO; these tokens can also be used to vote in the DAO to take a certain decision. • The token is nothing but another kind of contract sunning on top of Blockchain. Copyright© ToshendraSharma 5 Sign Up Now
  • 6. • The more token an address has, the more control he will have on the DAO. • Each member will have the rights to submit the proposal to take certain decisions. These decisions can be: o Fire the CEO or just Change the CEO o Hire a vendor to get his/her service o Hire a lawyer o Pay certain ethers/USD to someone as a salary or bonus o Issue the share to someone because that person/address is adding more value. • In the DAO, since this is nothing but a democracy which is running in the Blockchain the voting power can be optionally delegated to someone to whom a member trust more. This is in fact just like voting by proxy in the real organization. Copyright© ToshendraSharma 6 Sign Up Now
  • 7. • The DAO can also raise fund through some crowd sourced funding by issuing the tokens/shares to anyone who is paying the money to the DAO. • This payment and issuing the shares/token can be done in real time unlike the more than 60 days process in the real organization. Copyright© ToshendraSharma 7 Sign Up Now