Beginner’s guide to understanding DAOs

What is a DAO?

Bridget is a final year student in College. One of her major courses is ECO 504, an in-depth study of macroeconomics. This is a course that had a lot of group project submissions. She would have to form a group of 8 colleagues.

During recess period, she reached out to some people and they agreed to join the group and work together. The meeting point was the biology lab in Building 405 every Saturday. The project took about 4 weeks to complete. Presentations were scheduled for the end of the semester.

The presentation day came and the team did well and their work was “outstanding” in the professor’s words. Bridget was happy. An A was so sure in this course as it accounts for 70% of the total assessment.

She’s clearly on her way to graduating with a second-class G.P.

Now you might be thinking how my little story about Bridget correlates with the understanding of DAOs.

It’s a basic representation of what it represents. A group of like-minded individuals coming together to achieve a common goal.

It’s more than just coming together to achieve a common goal. There are systems put in place to help the group/organization function well.

According to “A DAO is a collectively-owned, blockchain-governed organization working towards a shared mission”.

DAOs run via the aid of smart contracts. A smart contract is a digital program stored on a Blockchain. They are executed only when a certain condition has been met. They are used to store the rules of the DAO, treasury and other important components.

Brief Origin of DAOs

The word DAO was first recorded in the 1990s and was described as a nonviolent social movement against common societal issues like political power and environmental principles.

Although what DAOs stands for now is in no way comparable to what they did in the 1900s, it’s connected to the idea of DAC (decentralized autonomous corporation).

The concept was not accepted generally as it was related to a governance model which had restrictions.

The term surfaced again, this time it was by Vitalik Buterin, Co- founder of Ethereum. He talked about DAOs having the power to change how companies and businesses are run.

In May 2016, the first DAO was created. It was by a group of Ethereum developers who operated similarly to traditional venture capital firms. The goal was to give funding to anyone with a good idea and was able to defend and see it to the level of profitability and scalability.

The DAO was able to raise 12.7 million Ether through token sales making it successful in a short period. Everything was going on smoothly until it was attacked on the 17th of June, draining the treasury of 3.6 Million ETH.

The members decided to fork the smart contract code in a bid to refund the money lost. Not everyone was in support of the fork. Amidst that SEC regulations were forming in the background about tokens and digital currency. This eventually led to the two separate blockchains known as Ethereum (ETH) and Etherum classic (ETC).



Since its conception there have been various DAOs created to achieve one purpose or the other, successful and unsuccessful ones.

However, some feel DAOs are a waste of time and resources, comparing it to crowdfunding. I will say DAOs still have a lot of systems and structures to be put in place for it to achieve its true purpose and not be another glorified funding platform.

Overall, it’s a great way to make everyone have a say on whatever platform they find themselves in.

That’s it for today article💫

What is your view about DAOs ? Are they really necessary? Let me know in the comment section.



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