So we have the internet > On the internet we have multiple nodes running > On each of these multiple nodes we have the Ethereum software running. > On this software we hold multiple smart contracts > Using these smart contracts we run Dapps.
In short, A DAO stands for decentralized Autonomous Organisation. it means it's not centralized and peoples vote to make a decision. It's an organization that runs on the smart contract.
A DAO, or Decentralized Autonomous Organization, is a type of organization that operates through rules encoded as computer programs, running on a blockchain, i.e your smart contract. It is designed to be autonomous, meaning that decisions are made through a decentralized governance process, without the need for a central authority or middleman.
In a DAO, the rules are encoded as smart contracts, which are self-executing and can be programmed to enforce specific rules and decisions. The members of the DAO can propose and vote on changes to these rules, which can include everything from how funds are allocated to how decisions are made.
The members of a DAO can be individuals or other entities, and their voting power is often based on the number of tokens they hold in the DAO's native cryptocurrency. This means that the governance of a DAO is distributed among its members, rather than being centralized in the hands of a few individuals or entities.
DAOs can be used for a wide range of purposes, from managing decentralized funds and investing in cryptocurrencies to governing online communities and managing digital assets. They are often used in decentralized finance (DeFi) applications, as they offer a way to manage funds and make decisions in a decentralized, transparent, and trustless manner.
Overall, DAOs are an exciting development in the world of blockchain and decentralized applications, as they offer a way to create truly autonomous organizations that are free from the constraints of traditional hierarchical structures.
How DAOs Work
DAOs rely heavily on smart contracts. These logically coded agreements dictate decision-making based on underlying activity on a blockchain. For example, based on the outcome of a decision, certain codes may be implemented to increase the circulating supply, burn a select amount of reserve tokens, or issue select rewards to existing token holders.
The voting process for DAOs is posted on a blockchain. Users must often select between mutually-exclusive options. Voting power is often distributed across users based on the number of tokens they hold. For example, one user that owns 100 tokens of the DAO will have twice the weight of voting power over a user that owns 50 tokens.
