what is a decentralized autonomous organization

What is A Decentralized Autonomous Organization?

A Decentralized Autonomous Organization is like any typical business organisation. Companies such as Uber, Microsoft, and Google for example. The only significant difference is that the DAO is an entirely autonomous organisation. Also, it is based on a blockchain system. With no CEO or boss and even no authority of its creators.

Have you ever heard of a business without a CEO, no Board of Directors, any successful business?


one where the absolute authority is autonomously divided amongst the shareholders or tokens?

The Decentralized Autonomous Organization improves itself automatically. It makes decisions using the votes given by token holders. DAO has replaced the human-centralized management systems with Techno-democratic systems. Where the individual who owns the most token drives, the direction of the decision. 

The Decentralized Autonomous Organization was designed to execute a complete autonomous governing system. However, the idea of decentralized autonomy is still practical and influential in blockchain-related models, mainly in De-Fi (decentralized finance) platforms.

First Decentralized Autonomous Organization built on Ethereum Blockchain | Hacking of DAO 

In the year 2016, the first DAO was released. It had a token sale for just 28 days. In the start, coins were locked. But, after the launch, the DAO had taken over the work. According to the coding of the DAO wallet’s smart contract. 

The hype about DAO & blockchain had helped the first DAO raise $150 million from 11 business investors within just three weeks. It is still one of the fastest-growing. And, most extensive crowd-funded campaigns.

The vulnerabilities were detected by experts in the DAO’s code for the hack. Consequently, in the hacking of $60 million worth of Ethereum.

The Controversial Debate about secure investment in DAO

Since 2013, investors and traders have been sceptical about Bitcoin. Bitcoin has been associated with risk and volatility. The hacking event of DAO sparked many concerns from investors, buyers, and the trading community related to Ethereum blockchain (te 2nd largest cryptocurrency and fastest-growing after Bitcoin). 

Additionally, the hacking of DAO means a financial loss and negative impacts on the growth of Ethereum. Ethereum tech and community had faced a significant threat in just their first-year.

Resolving the Debate on DAO Hack & Security Concerns of Investors And Traders

Vitalin Buterik, the founder of Ethereum, proposed a strategy. To blacklist the hacker and prevent any movement of the stolen investments. The idea was that the soft fork of the Eth network would generate a short snippet to blacklist the attacker. 

Open-letter from Ethereum Hackers

The hackers published an open letter to the Ethereum community.  They had claimed to transfer the hacked investments before the soft fork could be utilized. Legally, and in accordance with all the rules set by a smart contract. The cherry on the top the hackers had warned they would sue anybody seizing the stolen Eth.

The Ethereum Hacker ( An Intermediary on the DAO Slack)

As if all the threats were already not enough to damage Ethereum’s existence as a new cryptocurrency. another new threat came from the attackers. They claimed to be part of the DAO slack. Also, they would defeat soft fork by bribing miners with the reward of 1 million Ethereum and 100 Bitcoins. 

There was a bug in the Eth code. which made it vulnerable to attacks. Another alternative solution,  a hard fork, was introduced.

How Decentralized Autonomous Organization Work?

To understand how a Decentralized Autonomous Organization functions and proceeds with all the processes, we use the simpler example of vending machines based on DAO. 

The vending machine now works autonomously using DAO smart contract-based codes. It means the machine can forward messages to its server whenever it is out of stock. As a result, a robot would restock and collect funds to restart the vending machine. 

Suppose, if any profit is made by the vending machine, the profit would be redistributed to its token holders. The device can now make, learn, and evolve its core codes to survive further.

Benefits of a Decentralized Autonomous Organization 

  • With Decentralized Autonomous Organizations, the users, shareholders, or token holders don’t have to rely on or trust any specific human in a position of authority like the manager, CEO, or supervisor. 
  • The whole DAO keeps working without any hassles. Even if the leader or primary developer stops working on the project. 
  • No agency, authority, or government can force you to shut off or close your DAO Projects. This is only possible if a large number of tokens are earned by a single person. 
  • DAO is an open-source project as they are more reliable. Other developers can overlook your project’s code, as well as detect bugs and suggest solutions.

Final Words to the DAO Token Holders

Decentralized Autonomous Organizations are incredibly new! revolutionary technologies connected to various Cryptocurrency. Keep in mind, they are vulnerable to hacking attacks. Therefore, don’t just jump in without doing your research.  

Frequently Asked Questions 

The developers form smart contracts based on blockchain and launch themselves. The virtually formed DAO company receives investments to achieve goals. They sell some of their tokens as token owners. Also, token owners have the right to vote on future decisions.

The role of a DAO is to enable business investment in an independent company and to empower individuals through crowdfunding and facilitating cryptocurrency transactions.

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