What does blockchain DAO mean? Learn more about the blockchain DAO organization in one article

Essentially speaking, blockchain DAO is a mechanism to change the organizational structure. The main purpose is to reduce transaction costs through coordination and create new organizational forms. Blockchain DAO is very popular among enterprises.

What does blockchain DAO mean?

DAO is sometimes called a distributed autonomous organization (DAC, decentralized autonomous corporation). It is an organizational form managed through rules encoded as computer programs. These rules are transparent, jointly controlled by shareholders or token holders, and are not influenced by centralized institutions. DAO utilizes blockchain technology to ensure verification and transparency of transactions.

Everyone in the DAO can issue proposals and vote to make decisions. Cryptocurrencies are used to represent key values, and the vote with the highest amount at the end of a specified period wins. This is in direct contrast to other forms of voting, where everyone is usually equally weighted. Typically, a proposal is a "yes or no" question, i.e. should Company A develop product When people from country B want to cooperate with entrepreneurs from country B, country C and other countries to start a business, they face complicated processes. Different jurisdictions have their own regulations and requirements, resulting in different timescales for decision-making. For example, assuming that in country A, setting up a business can be completed in just one day, but in country B, it takes up to 3 months to start up. Obviously, people in country B do not have the resources to set up a business as quickly as people in country A.

DAO provides a solution that allows everyone to work in a fair environment by adhering to a common set of rules without having to worry about geographical restrictions. In essence, one of the main purposes of establishing a DAO is to establish a fair framework to promote the establishment and operation of organizations.

2. Organization-wide voting

Many companies set up boards of directors to make important decisions. The problem with this approach, however, is that these bodies typically vote on only a few issues and do not represent the wishes of the entire organization. The emergence of DAO can change this situation because it allows anyone in the organization to vote on issues they care about. For example, employee A may be interested in issue A and issue C, but not very concerned about issue B.

Through DAO, A can vote on the proposal with a corresponding proportion of tokens based on his or her level of concern. Rather than using a system that ignores or does not count input from members of the organization, the DAO ensures that all votes are counted and displayed to everyone. (Blue Fox Notes: DAO ensures that stakeholders within the organization, that is, token holders, have the opportunity to express their opinions)

3. Unable to tamper with the rules

Within any organization, policies and rules determine what can and cannot be done. For example, in a company, employees who do not comply with rules may be punished. If someone is late for work, this may or may not result in a corresponding deduction from wages. This decision can be automated via timestamps, but not all organizations enforce this.

For example, if the boss is late, it may change this rule by setting exceptions. In a DAO, it's code that ensures the rules apply to everyone. An established set of rules within an organization cannot be tampered with unless the voting community agrees to do so.

Meetings are opportunities to formulate and discuss ideas. DAOs can make it easier for remote organizations to assess member interests and move ideas from conception to reality.

Limitations of Blockchain DAO

1. Many decisions rely on human activities rather than automation

Smart contracts have enabled many manual tasks to be automated. For example, a smart contract can decide whether A can send funds to B, based on whether it meets a set of criteria. The problem is that many activities can't be accomplished just by clicking a button.

One of the cases is about allocating work funds. For example, a DAO can use smart contracts to send funds, which a development team uses to build an APP. However, the DAO cannot ensure that the development team completes the development or even determines whether the funds are used correctly. Mechanisms to minimize such problems might include requiring milestones to be used to vote on the completion of large projects.

2. Lack of legal support

Although DAO is considered more efficient in organizing business operations due to its borderless nature, this can also be seen as a flaw. Since official laws governing the operation of DAOs have yet to be enacted, the legal status of such organizations is ambiguous at best. Smart contract code appears to help protect individuals, but courts have not formally recognized this. DAOs currently do not enjoy the same legal protection as other types of organizations

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