Well, first things first, the full form of DAO is Decentralized Autonomous Organization. But what exactly is a DAO?
Well as the name suggests, DAO is an organization that is decentralized, meaning it has no single authorized body to make decisions and runs on its own. Sounds unrealistic?
Let me explain with an example.
Think of any big company, say Apple. Now to get work done, there is a series of actions that the company needs to perform. First, it needs to organize a meeting, vote, and make a decision about whether the aforementioned work is to be done or not (where all the votes are not equal). Then, if it is to be done, the job needs to be properly delegated among the employees and managers. This, followed by some other corporate tasks, and the work is finally done.
But, what if the company was a DAO? The task will arise and be solved on its own without the interference of humans (if not needed). If some important decision is to be taken, then voting will take place with everyone having equal rights.
Hence, with low interference of people, work is done faster, efficiently, and automatically.
Through smart contracts. It is a big concept but to put it simply, these are contracts that execute on their own when proper conditions are met.
So DAO runs on code and smart contracts. And to fascinate you a bit more, a DAO even has its own cryptocurrency which it can use for any purpose!
The code on DAO is open source, which means anyone can read it and provide suggestions to make it better.
Fascinating, right?
Unfortunately, there are some drawbacks. Firstly, the code being open source, anyone can read it and find loopholes. An attacker can quite accurately plan an attack and hack into the system. Secondly, it is quite tough to keep any company secret as a DAO because anyone can read the codes and know exactly what it is up to.
Though robust codes and solid programming can solve the first issue, the second needs some innovation.
Some examples of DAO are A charity; A freelance network; DASH