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What is a DAO – decentralized autonomous organization?

Definition of a DAO

There are multiple definitions that can explain what a DAO is. But if we had to choose only one of them, our choice would be the following definition:

A DAO is a decentralized autonomous organization whose governance rules are automated and immutably and transparently recorded in a blockchain or other type of distributed ledger.

The term DAO stands for Decentralized Autonomous Organizations.

DAOs are like internet-based companies, collectively owned and managed by their members. They have built-in treasuries that no one is allowed to access without group approval. Decisions are governed by motions and votes to ensure that every member of the organization has a voice.

No CEO can authorize spending on the basis of his or her own whims, and there is no chance of a shady CFO manipulating the books. Everything is transparent and the rules for spending are built into the DAO via its code.

The genesis of the DAO

Originally, a DAO was intended to be a funding tool par excellence for projects developed on the Ethereum blockchain. The more famous example to date of such an organization is the project “TheDAO,” which was created in 2016 at the initiative of the team of blockchain startup “The goal of ‘TheDAO’ is to be an experiment first and foremost. It is an atypical type of organization that is not adapted to all situations, but is a concrete application of the situation of “trustlessness”, this environment where trust is no longer necessary, thanks to blockchain” explained Stephan Tual at its creation.

TheDAO’s function was threefold: to evaluate projects submitted to it; to collectively decide with DAO token holders whether to fund those projects; and to distribute the risks and rewards associated with them.

During its “crowd sale” in 2016, TheDAO had become the largest crowdfunding campaign of all time, surpassing $160 million raised in nearly four weeks. But on June 17, 2016, TheDAO was the victim of a large-scale attack (a hacker took advantage of a flaw in the code) that led to its development being halted. TheDAO was thus a (short) experiment that highlighted the challenges that remain for this type of project to thrive.

This hacking led to a new consensus accepted by the majority. The new blockchain was then called Ethereum and the old blockchain was renamed Ethereum Classic.

An interesting comparison

DAOA traditional organization
All activities are transparent and fully publicThe activity is generally private and limited to the public
A vote of the membership is required to implement any changesDepending on the structure, changes may be required from a single party, or a vote may be proposed
Generally horizontal, i.e. without hierarchy and fully democratizedGenerally hierarchical
Votes are counted and the result is applied automatically without a trusted intermediaryIf voting is allowed, votes are counted internally and the result of the vote must be processed manually
Services offered are processed automatically in a decentralized wayRequires human manipulation, or centrally controlled automation, susceptible to manipulation

How do DAOs work?

The main part of a DAO’s infrastructure network operation is its smart contract. The contract defines the rules of the organization and holds the group’s treasury. Once the contract is online on Ethereum (or elsewhere), no one can change them except by vote. If someone tries to do something that is not covered by this and the logic of the code, they will fail. And since the cash flow is defined by the smart contract, this means that no one can spend the money without group approval. This means that DAOs do not need a central authority. Instead, the group makes decisions collectively and payments are authorized automatically when the votes are favorable.

This is possible because smart contracts are unbreakable once they are online on the ETH blockchain. It is impossible to change the code (the rules of the DAOs) without people noticing because everything is public.

Ethereum, the best blockchain for DAOs?

For some investors, it is the best blockchain at the moment to establish DAOs worthy of the name. Here are a few reasons why they believe it is the best.

  • Ethereum’s own consensus is sufficiently distributed and established that organizations trust the network.
  • The code of smart contracts cannot be changed once online, even by its owners. This allows the DAO to operate according to the rules it was programmed with.
  • Smart contracts can send/receive funds. Without this, you would need a trusted intermediary to manage the group’s funds.
  • The ETH community has proven to be more collaborative than competitive, allowing best practices and support systems to emerge quickly.

If many DAOs are being created more and more each year, some of them want to be original in their approach or have at least had a strong impact on this ecosystem due to their popularity and their importance in it. We are going to review some important and interesting projects that have been created in the last few years


In just two years, the DAO Maker platform has become one of the most popular platforms for investors with over 75,000 new users in 2020 alone. Its bet? To offer different methods of interaction between investors and entrepreneurs.

DAO Maker is an organization that aims to redefine venture capital for the masses, providing scalable technology and financial support to tokenized startups. This venture capital fund was first conceptualized in 2017. It has since evolved to create low-interest frameworks, allowing many individual and retail investors to become active in venture capital. By funding through DAO Maker, the risks for both parties – investors and startups – are significantly reduced.

The DAO Pad is a multi-investment platform that allows members of the DAO Maker community to place DAO tokens in the DAO Maker Vault. This allows them to participate in public, private, and seed funding rounds, incentivizing the most loyal and active members.

DAO Maker energizes the community and encourages them to participate in the progress and expansion of projects hosted on the platform through social mining. Social mining allows startups to leverage token holders to become successful decentralized autonomous organizations (DAOs). This improves the economic performance of token holders, reduces free-riding issues, and turns flippers into holders. It also offers different levels of risk to cater to a wide range of risk appetites, greatly expanding the audience.

This one has its cryptocurrency in circulation, under the name of DAO

  • Market capitalization of $143,475,479
  • DAO token price is $2.24 in February 2022
  • A circulating supply of 63,125,121.68 DAO

Note that on August 12, 2021, the DAO Maker protocol suffered a targeted attack resulting in the misappropriation of part of the protocol’s funds. The details of this attack (which only affected a limited part of the whole protocol) can be found in the post mortem published by the project.


It is a decentralized exchange platform based on Ethereum, specializing in stablecoins. This specificity allows it to offer extremely low fees (0.04%), a reduced slippage as well as an almost absence of impermanent loss for the liquidity providers.

Its development started in September 2019, for deployment at the end of December on the ETH mainnet. At launch, the protocol had no tokens of its own, no presales or public funding.

Curve has gained considerable notoriety following its positioning as an AMM designed for stablecoin trading.

The launch of the DAO and CRV tokens has improved profitability, as CRVs are used for governance. They are offered to users based on their liquidity commitment and holding period.

The explosion of DeFi trading has ensured its longevity, with AMMs generating huge amounts of liquidity and profits for the associated users.

It is, therefore, suitable for anyone involved in DeFi activities such as yield farming and cash mining, as well as those looking to maximize their income without the risk of owning non-volatile stablecoin.

Curve earns money by charging a small fee that is paid to the liquidity providers.

Today this one has its crypto in circulation, under the name of CRV

  • A market capitalization of $1,515,283,576
  • The price of the CRV token is $3.43 in February 2022
  • A circulating supply of 442,273,303.25 CRV


My Neighbor Alice is a multiplayer building game, where everyone can buy and own virtual islands, collect and build exciting objects and meet new friends.

Inspired by successful games like Animal Crossing, the game combines the best of both worlds: a fun narrative for regular players who want to enjoy the game experience as well as an ecosystem for players who want to collect and trade non-fungible tokens (NFT).

Today, this one has its crypto in circulation, under the name ALICE

  • A market capitalization of $278,695,219
  • The price of the ALICE token is $8.97 in February 2022
  • A circulating supply of 30,600,000.00 ALICE

ALICE is the native utility token of My Neighbor Alice and is used for several functions, but the one we are interested in is the following:

Governance: Participate in the governance process through a decentralized autonomous organization (DAO), with proposals and voting structures (e.g., project operations and development). Voting incentives will be introduced to encourage voter participation.

In conclusion

Since the creation of crypto-currencies, we have been treated to some incredible new developments on blockchains, BTC, ETH, and many more crypto-currencies. DAOs are one of those great new features.

DAOs are the representation of power on distributed ledgers, one imagines that any crypto project looking to put the community at the center of its project will have its own DAO, so the question arises: will the most power-hungry men (and women) try to take over the most important DAOs in the ecosystem? Probably.