What is a DAO? Well, imagine this. A society where each humanโs identity is tied to computer code that does your job for you. You get paid a Universal Basic Income for your codeโs work, and maybe the best part is you donโt have an annoying boss. This type of reality may not be that far off due to the adoption and creation of DAOs, or Decentralized Autonomous Organizations.
This article will cover what DAOs are, how they work, and some real-world examples.
Disclosure: No content in this article should be taken as financial advice. Investing can be risky, so it is recommended that you consult with your accounting, legal, and tax advisors before engaging in any kind of transaction.
What is a DAO (Decentralized Autonomous Organization)?
Alright, so what is a DAO? A DAO is essentially an automated organization that runs completely autonomously. A DAO can be any kind of company, such as Microsoft, or even a local restaurant. The difference between a DAO and a traditional company is that a DAO doesnโt need humans to operate. Now, this doesnโt mean humans are completely worthless (yet), but weโll get into more on that later.
These types of organizations will run even without input from the original creators. This also means no more bosses!
How DAOs Work
So, now that we know what a DAO is letโs talk about how they work. DAOs are run entirely by complex programming. This code is written on smart contracts on the Ethereum blockchain. As new players enter the space, we may also see DAOs written on other types of blockchains.ย
Hereโs an example of how a DAO could work. Imagine a completely autonomous restaurant called DAO Eats, which has been created by a group of developers that have partnered with Michelin-star restaurant owners to provide a modern alternative to traditional dining. Inside the restaurant, everything is autonomous, from chefs to waiters and all the processes in between. Smart contracts, created on a blockchain like Ethereum, will run daily activities, such as collecting meal payments. The smart contracts would use the payments collected to maintain the restaurant, pay food and material vendors, and even adjust meal prices based on food costs. Technology can even be implemented to automatically adjust menu items based on seasonality or common geographic food preferences.ย
All of this runs without the need for humans โ pretty crazy, right? Some people may not eat at a restaurant like this because they would miss that human element. This was an extreme example. But the possibilities for DAOs are truly endless. Other examples of DAOs playing a major role would be self-driving transportation and gaming companies.ย
So, will we have completely automated restaurants or kitchens anytime soon? Probably not. But use-cases for DAOs are already possible today. A more basic example would be a convenience store that knows when shelves are empty and can re-order and pay for replacement products automatically. How complex or simple a DAO is, is really up to the programmers behind it.
Where Humans Fit In
Hereโs a question to keep you up at night. With all of this automation, will humans eventually be obsolete? Personally, I donโt think so. DAOs do have stakeholders who own tokens and have voting rights. So, this means humans will be involved in voting for decisions for any changes made to the DAO.
DAOs are decentralized by nature, meaning there should not be a hierarchy or CEO. Any idea can be brought forward and voted on by the organization. If an idea is voted on and passed, the code to the DAO is changed, and the change is effective immediately. This means that the DAO can continuously evolve and improve itself based on feedback from the shareholders.
Making Money with DAOs
Now, this all sounds cool, but how can you or I make money from DAOs? Since a DAO doesnโt need humans to operate, any profits would be distributed among shareholders with a DAO token. If the DAO is successful, you could sell your tokens for a profit. If youโre handy with computer programming, you could also be a developer for the DAO.
What to Expect in the Future
So, what should we expect from DAOs? I was recently watching an interview with Elon Musk, whose viewpoint is that we will eventually move to a universal basic income due to advances in automation technology. But donโt count on this anytime soon. We are just on the brink of whatโs possible with DAO technology, and itโs something to keep your eye on in the coming years.ย
So, I want to hear from you guys. What do you think is a good business use case for a DAO?ย Let me know your thoughts in the comments,
