What Are DAOs And How Do They Work?

Humans are social animals and living without a group is not natural to us. Despite all the peace that we get after living in solidarity, there is something that drags us to social groups.

When the world is evolving at such a pace and we are moving towards a decentralized metaverse where most of the digital ownership will not belong to a particular authority, social groups are evolving as well.

Decentralized Autonomous Organizations Explained

Decentralized Autonomous Organizations (DAO) are the answer to this rising evolution which connects a large pool of people using blockchain and cryptography to create an anonymous social group.


This article is going to discuss some of the key aspects of Decentralized Autonomous Organizations and will point out the advantages and disadvantages of using DAOs. 

What are DAOs?

DAOs are Decentralized Autonomous Organizations that are curated over a network of computers and keep all the rules and regulations fixed and clear without the need of having an admin panel or any regulated authority.

As the name suggests, these DAOs are one hundred percent anonymous in their operations and hence quite effective when it comes to reducing the risk of exposing your identity to an unwanted group of people.

DAOs are completely democratic and all the members are provided with an equal vote while taking decisions.

In other words, DOAs are owned by the members only. DAOs allow you to interact and collaborate with completely unknown entities without any fear of having a personal threat as your identity always remains disclosed. 

Why Do We Need DAOs?

We often find ourselves in situations where we do not want to disclose our identity while entering an online space due to the cyber threat and leaking of personal information, Decentralized Autonomous Organizations or DAOs could be an answer to this problem.

Trusting a random internet stranger to maintain your rights in an organization is a shaky platform to build trust upon and thus a decentralized authority that is regulated by the hard rules, pre-determined by its users through democratic rulings, seems a better option any day.

DAOs allow us to have a voice in the group while also reducing the setup cost of having a full-fledged organization.

DAO Examples

In this segment of the article, we are going to discuss some great examples where DAOs are already operating and changing the way we come together.

A Freelancer Network

DAOs are a boon for those who are looking to create a career out of freelancing. The gig economy is growing every day with a total valuation of over 1.5 Trillion USD but the major drawback that a common freelancer face is the fact that most of the communities or organizations which give a listing for jobs charge a high commission on every single trade which not only cost freelancer but also affects the services seekers.

DAOs are coming into this scene with a boom by reducing the commission cost to zero percent and providing clear-cut B2B or P2P connections which can be life-changing for any gig worker.


Who thought that cryptography is going to change the way we contribute to a higher cause?

Decentralized Autonomous organizations are providing a platform for various philanthropic activities which is free from any error or commission from the organization’s end.

Such DAOs conduct crowdfunding for a better cause, making sure that every single penny is spent for the short-term or long-term wellbeing of this planet.

How Do DAOs Work?

DAOs are based on pure blockchain just like any cryptocurrency. The technology which allows a transparent ledger and auditable code makes sure that all the things which are going on in the background are safe and secure for its users.

All the members are empowered with the ability to take a look at the ledger and see how the transactions are happening in the group, making it completely scrutinized by its users.

Advantages and Disadvantages Of DAOs 

Like any other aspect of life, DAOs have two sides to their utilization. One is the safe, secure, and useful side, and the other is the dark one.

In this segment, we are discussing a few advantages and disadvantages of using DAOs

Advantages Of DAOs

  1. DAOs are completely safe to access and use and provide a detailed and auditable ledger of transactions making all the transactions happening in the organization completely public.
  2. DAOs reduce the cost of creating, maintaining, and managing an organization by leaving all the important decisions to be made by the public votes. 

Disadvantages Of DAOs

  1. DAOs are completely anonymous and can be used for criminal grouping and collaboration. 
  2. DAOs are based on the principle of majoritarianism and all other members are bound to follow the rules created by the majority. 


Being a part of a decentralized network could be a boon for those who are aspiring to create a change in the organizational structure of traditional groupings as it provides exactly what is required for such a change.

However, these great things come at the cost of extreme privacy which can result in increased criminal activities over the internet which will be untraceable.

DAOs are going to change the way are seeing this world and we hope that this article has given you a sneak peek into the future of decentralized grouping.

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