People build organizations to work together and achieve goals to make an impact. As these entities grow, top management becomes the most critical factor in long-term success or failure, as it takes all important decisions.
In modern era, more and more people are working remotely, collaborating with people from different areas and cultures, each with their own unique value system. In such a scenario, DAOs can reduce the principal-agent problem in organizations that occurs when an organization's agent has the power to take decisions on behalf of another person or entity in the organization.
In fact, the essential feature of a Dao is that the basic operating rules are codified in a smart contract, and automatically applied. With DAOs, there is no need to trust anyone and simply believe that the written code will guarantee that the goal will be achieved.
Since smart contracts are open to verification by anyone, there is no possibility of corruption or individual favour. DAOs can incentivize network actors with a native token, disintermediating and reducing management costs.
These organizations can replace the reactive procedural security of the current legal system through automated mechanisms that make a breach of contract costly. DAOs allow these organizations new possibilities for a truly global economy.
Because DAOs vary considerably in their mission, it is very difficult to provide a more focused definition. However, the things you need to remember are:
• A community has the power to make decisions
• DAOs are generally widely accessible by anyone
• Decision-making and implementation rules are engraved and coordinated by the blockchain.
Usually any group with at least 5 ETH and at least 10 members qualifies as a DAO.
Find out in our lessons how DAOs work in detail!