Today was a beautiful day and a milestone for the Airq community. Today the Airq Foundation DAO was constituted.
What is a DAO?
DAO stands for “Decentralized Autonomous Organization”. Each of these words can be interpreted in many ways, spawning different definitions of DAOs with emphasis on one aspect or another. In order to clarify the concept, let’s analyse each term.
The essential feature of DAOs is that their operating rules are programmed, meaning that they are automatically applied and enforced when the conditions specified in the software are met. This differentiates them from traditional organizations, whose rules form guidelines that someone must interpret and apply.
For example, imagine the case of an organization whose members wish to allocate funds to various projects through a commission of experts. In the case of a traditional organization, once the experts have given their opinion, employees must carry out many steps in order to release the funding, from drafting the minutes of the commission to sending the money transfer instructions to the bank.
In the case of a DAO, funds are instantly transferred as a result of the commission’s approval. Nothing can stop it, neither internal stakeholders nor third parties such as banks or even a public authority.
DAO is autonomous in the sense that its rules are self-enforced. No one can stop it nor change it from the outside.
The decentralized aspect can be understood in two different ways which shed a light on the conflicting definitions of a DAO:
- The DAO is decentralized because it runs on a decentralized infrastructure, i.e. a public, permissionless blockchain that cannot be taken over by a State or another party.
- The DAO is decentralized because it’s not organized hierarchically around executives or shareholders, and it does not concentrate the power around them.
The first DAO which claimed itself as such is “The DAO”, created in 2016 to finance projects contributing to Ethereum development. The idea of using a DAO rather than a foundation or venture capital was in keeping with the ethos of decentralization dear to the Ethereum community. Indeed, The DAO was an investment fund whose decisions were directly made by investors, instead of being delegated to specialized managers.
The concept of DAO was introduced earlier by Dan Larimer who, in 2013, coined the term “DAC” — Decentralized Autonomous Corporation. Dan Larimer was comparing Bitcoin to a firm whose shareholders would be the bitcoin holders and whose employees would be the miners.
The same year, Vitalik Buterin generalized the idea by imagining how a company could do without its managers. Business automation is often seen as the process of replacing low-skilled people with robots or computers, keeping more qualified staff at the controls. However, Vitalik suggested the opposite, that is to say, the replacement of management by a software technology capable of recruiting and paying people to perform the tasks that contribute to the company’s mission.
Such software technology could even pay cloud service providers to have computers on which to operate, and thus become independent of any particular infrastructure. Of course, it would be vital to ensure that this technology is protected from theft of its resources or destruction by a third party, hence the rationale for making it autonomous and decentralized.
From Organizations to Organisms
“DAO” clearly designates something broader than the typical definition of “organization” — a social group which brings people together and works toward a common purpose. Vitalik thus defines a DAO as “an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do.”