What is a DAO?

5 min readMar 16, 2020

This is Part 2 of “My Journey in DAOs”.
Read: Part 1 and Part 3
More parts coming soon…

Why should you value my opinion? I have been a top contributor of 3 different DAOs in 2019 only. Which is very different from many other authors on the topic who only “research DAOs”. Let me ask you something simple: how can someone explain any digital tool (i.e. facebook) if that person does not even use it? yes, it’s like your grand mother trying to explain facebook.

In theory, practice & theory are the same.
In practice, they are not.

Why should you care about DAOs? Because governance is a massive issue within and outside of the blockchain space. Blockchain technology is transformative: enabling new use cases and business cases, in the realm of governance too. This means that breakthroughs done within the DAO space may impact how organizations work, whether it is your small group of friends or a population the size of a country.

Yes, the concept of DAO is highly political.

Blockchain is a transformative technology enabling new use cases and business cases, especially in the realm of governance.

Let’s be pragmatic

The term DAO is usually explained using lots of fancy and overwhelming vocabulary. And just like Vitalik Butterin puts it, many get distracted by “thinking in fairy-land what some developers and researchers up in the sky think are important, when we actually have examples of things that are important to users”.

In much the same way, I propose to focus on what DAOs are used for right now and explain it in plain english.

DAOs in their simplest form

Much like money was the simplest application of blockchain technology, with Bitcoin as a result of that, collectively managing money is the simplest use case for a DAO.

And a multisig allows just that: to collectively manage funds. I recommend trying out Gnosis Multisig, it takes 5min if you have metamask setup.

“DAOs are just fancy multisigs” some will tell you.

Multi-signature is a digital signature scheme which allows a group of users to sign a single document. i.e. we can have 4 members in a group and have setup the multisig so that only 2 signatures are required for a document to be fully signed — for a transaction to be signed.

Always, Often, Sometimes, Never

DAOs Always:

1/ stands for Decentralized Autonomous Organizations
2/ a group of humans working together towards a common goal — the “O” for Organization
3/ take some of their decisions via an app that runs on a blockchain — this technology is what makes the “D” for Decentralized and “A” for Autonomous

The only points DAOists agree about on the term “DAO”: a group of humans taking part of its group-decisions via an app that runs on a blockchain

DAOs Often:

4/ have the purpose of collectively manage funds — we talk about co-budgeting here — i.e. all the members able to vote for/against each time someone requests to transfer funds away from the DAO wallet
5/ allocate funds for a given purpose — we talk about grants of all scale here (micro, mini and regular size) — i.e. that helps a blockchain project build faster and decentralize its pool of contributors
6/ are legally in a very grey area
7/ are running on a DAO Platform such as Aragon, Moloch, DAOstack or Colony

DAOs Sometimes:

8/ take decisions on protocol-related decisions; c.f. MakerDAO and Tezos
9/ are legally incorporated; c.f. the work of dOrg (coindesk coverage) and OpenLaw

DAOs Never:

10/ require the use any specific organizational structure; yes, your DAO can use a traditional pyramidal hierarchy structure
11/ solve human challenges such as strong disagreements and high tensions between some members of your organization
12/ remove the need of using other means of communications such as meetings, forums and trello boards

Let us refactor the “DAO” naming convention

Words are extremely important. Correct naming is very important. So much that in my 8 years as a Developer we regularly had very heated discussions about that topic. Team work without good naming convention simply sucks.

I think that “DAO” is a very misleading term

Perception is everything and one should keep in mind that much like the terms “blockchain” and “transparency” have been used to market very questionable projects in the ICO space, the term “DAO” can be leverage to manipulate people. Every organization that takes part of its decision via a blockchain mechanism does not mean its governance is actually decentralised, nor fair.

I believe that a big reason of the delusions we have in the DAO space simply comes from the terms we use.

Much like we started with the term “crypto currency”, once it was obvious there was no limit to what rule could be coded for each coin/token/asset, using wider terms such as “Crypto Assets” and “Digital Assets” felt natural. It belonged to a wider spectrum of financial assets, some said “a brand new asset class”.

Some came up with the term “Magic Internet Money” to define anything that is a crypto-powered asset.

As a sarcastic joke, I once told a friend who was asking explanations about DAOs: “Organizations are made of humans. DAOs are not magical. We are not talking about Magic Internet Organizations here!”. This then triggered this idea of renaming “DAO”, of debating about it at the very least.