DAOs explained

In short….

A DAO or decentralized autonomous organization is a new way for people with shared goals to organize democratically with the assistance of software.

In long…

In traditional companies, ownership of an organization is usually expressed in terms of shares. Frequently, the shareholders elect a board of directors to oversee the main rules and decisions in that company. The board of directors appoints a CEO, who, with the help of a management team and other employees, takes over the day-to-day business and usually ensures that more money is made for the shareholders. The basic rules and regulations governing the management and organization of a traditional company are laid down in writing in the articles of association, shareholder agreements or similar documents and are usually implemented by top-down decisions.

In a DAO, such rules are created by members of the organisation in a consensus process and then written into a series of contracts that are executed by computer code on a blockchain. This enables automated management of the organisation — accordingly, there is no need for a board of directors, executive director or management team in a DAO.

The code in which the rules of the DAO are written is open source and can be viewed by everyone. In addition, all rules, financial and decision-making transactions are recorded in the blockchain. This makes DAOs completely transparent, unchangeable and incorruptible compared to traditional companies.

In order to become a member of a DAO, in contrast to a company, you do not have to have an interview to participate in the development of the company. It is sufficient to accept the established rules and invest your own capital in the DAO. In return for the investment, the new member is then credited with shares in the organisation in the form of tokens. These tokens serve at the same time as voting rights, in order to be able to participate in the future development of the DAO in a democratic way.

How many tokens are needed to obtain a vote depends on the structure and rules of the respective DAO. In some cases the number of votes increases with the number of tokens owned, in other cases a certain number of tokens must be exceeded to be entitled to vote. A decision can be anything, such as voting on new projects to be financed internally or whether an external service provider should be hired, or decisions on bonus payments to be distributed to members. Every decision can be made by the votes of the token holders. The members at the DAO are mostly distributed worldwide and interact exclusively digitally. All decisions are recorded transparently and unchangeably as transactions on the blockchain.

As the true potential of DAOs are just beginning to be realized, the Wienchain DAO is only a few months away from being born. Next blog post will outline exactly how Wienchain DAO works and how anyone can participate. In the meantime, we welcome you to join our fast-growing community.