What are DAOs?
Think of an 'organization' that is 'decentralized' and 'autonomous' at the same time. That is what a DAO is.
An organization is a very broad term itself, and thus it may not help us identify the core concepts of a DAO. But we will understand it better as we get into more details.
I am doing my research as I write, therefore I may make mistakes, keep that it mind.
A DAO has a purpose, and can be seen as a subreddit in some sense. They are generally allocated to a certain project and this project's community-driven aspects and its overall decision making will be generally directly attached to this decentralized organization.
It is decentralized because it lives on the blockchain, it is an organization because it has people in it making decisions, it is autonomous because they are not tied to a decision-maker or an overall 'owner'.
Here is an example of a DAO to better clarify things; We are a group of C++ programmers that are working on creating a new language for IoT systems. We have an organization, a platform that allows us to communicate, we have a voting mechanism that gives each of us the right to influence the decision-making accordingly to the amount of community tokens we have in our member wallets. We vote on critical decisions and no one can alter the end-result because the system is decentralized and secured. We raise funds and use these funds to pay for our new language's development expenses. We are all happy and not controlled by a centralized authority. We are a DAO.
In a DAO, the voting mechanism runs on the blockchain and it is called "on-chain governance".
Let's look into some DAO types and explain their use-cases;
Philanthropy DAOs are similar to a Grant DAO but focus on social causes, such as education, and anything that is for creating an impact on society in a beneficial way, generally focusing on improving blockchain technology and Web3.
Social DAOs are community-focused and are aimed at bringing people together rather than gathering members to solve a general issue. Like a club in some sense.
Protocol DAOs are for governing a protocol such as a decentralized financial system.
Uniswap is a Protocol DAO.
Grant DAOs are nonprofit organizations that gather donations for a common cause. Just like a regular charity.
Collector DAOs are like the apps you use for buying stock shares. People gather funds, buy something of common financial interest, share this asset between its members depending on their portion of the cake.
These are just a few, but I hope it helps to better understand the core concept of DAOs.
I personally learned a lot during my research for this post and hope you found it helpful too.
Sources:
https://www.nytimes.com/interactive/2022/03/18/technology/what-are-daos.html
June 9, 2023