Decentralized Autonomous Organizations (DAOs) represent a novel approach to governance based on computer code and communities coming together for common goals.
Definition and Function of a DAO
A DAO is a group managed by computer code, where participation is open to anyone who meets certain criteria. The 'autonomous' aspect is ensured through the use of smart contracts to automate operations, reducing the need for human intervention. They are created and operated by communities for joint management of projects and funds.
History and Key Events of DAOs
DAOs gained prominence with Ethereum's 2016 venture capital fund known as 'The DAO.' The project faced significant issues three weeks into its token sale when a vulnerability in the code led to an attack. Although the lost funds were recovered through a hard fork, the incident highlighted early challenges faced by DAOs.
The Modern Role of DAOs in DeFi
Despite initial hurdles, the concept of DAOs has evolved and is now a common governance model in decentralized finance (DeFi). While different DAOs may function slightly differently, typically, those holding governance tokens have voting power proportional to their holdings and can propose operational changes.
DAOs continue to evolve, marrying technology with decentralized collective management and becoming a significant element in the blockchain ecosystem.
