What is a DAO?
Note: Data in this section last updated July 3rd, 2022
A DAO is a blockchain-based organization that may replace the modern corporation.
Unlike a traditional corporation, no single person or group owns or controls a DAO. They do not have CEOs, Boards or managers. Instead, they are owned and operated by members who make decisions democratically (much like a modern-day cooperative).
This allows for many exciting innovations such as user-owned social networks, vendor-owned eCommerce sites, player-owned games and driver-owned ride sharing companies.
DAOs Eschew the Hierarchy of Traditional Corporations
Furthermore, DAOs use blockchain technology to store their own funds and smart contracts to enforce their own laws – meaning that they don’t have to rely on traditional intermediaries such as banks or courts. As such, DAOs largely operate outside of the purview of the existing financial and legal ecosystem, allowing them to eliminate many of the costs, restrictions and regulations imposed on conventional organizations.
The term stands for “decentralized autonomous organization”, as DAOs are sovereign entities with:
No Headquarters: DAOs have no physical location – they are composed of members from all over the world who coordinate through internet chatrooms
No Hierarchy (or Limited Hierarchy): Decisions are made democratically, and each member can propose, discuss and vote on initiatives
No Employment Contracts: Anyone can contribute and get paid and workers are free to come and go as they please
No Governing Law: DAOs aren’t incorporated in any particular location and, as such, operate outside of the purview of the existing legal system
No Banks: DAOs raise their own capital through cryptocurrency or NFT sales and self-custody these funds in a treasury
Proponents assert that DAOs are superior to traditional corporations because they retain all of their benefits while being much more flexible, transparent and democratic (in fact, Mark Cuban called them the “ultimate combination of capitalism and progressivism”). Critics argue that DAOs will be inefficient, prone to crime and represent a legal and regulatory nightmare.
Whatever side of the argument one falls on, the popularity of DAOs is undeniable. There are nearly 5,000 DAOs today representing 3.7 million members (up nearly 300x from January 2021). DAOs have been formed to manage a variety of initiatives including investment funds, charity organizations, entertainment studios, worker collectives, social clubs and operating businesses.
Total assets under management exploded in 2021, growing from $400 million in January 2021 to a peak of $16 billion by December 2021 (40x growth). Even today, during what many are calling a bear market, DAO treasures hold nearly $8 billion in funds (> 20x growth from January 2021).
DAO Treasuries Hold $8 Billion in Funds (up 20x from 2021)
What is driving this popularity? Let’s dig a little deeper 👉
Last updated
