Ever since the meteoric rise and tragic demise of the 2016 DAO, the very idea of a decentralised autonomous organisation, composed of a bundle of smart contracts and deployed on a given blockchain, has lingered in the background and then started steadily expanding. Nowadays, hundreds and even thousands of DAOs or similar blockchain-based decentralised arrangements going by other names are in full operation. The recent growth of DeFi has only made DAOs and similar arrangements difficult to ignore.
DAOs are – like many other similar phenomena – difficult to define with precision, but one could say DAOs are forms of human organisation based on the blockchain technology, in which various associates pool funds (usually, but not necessarily, cryptoassets) to undertake a given activity (not necessarily for-profit).
What makes DAOs different is that the governance of the organisation is largely automated and decentralised, which means that the traditional role of the management body is replaced by a mix of direct management by associates and automated management through smart contracts.
- They are decentralised because there is no centralised management and many important decisions are taken directly by associates, attempting to mitigate the traditional agency problem between shareholders and management.
- They are autonomous because many decision-making powers traditionally held by the management can be entrusted to a smart contract. The smart contract defines the rules of the organisation and usually holds the DAO’s treasury. Imagine a mix between a company’s bylaws and management bodies.
Evidently, if one stretches the definition of a DAO wide enough, every blockchain could theoretically be considered a DAO. In this Project we focus on a more restricted concept in which like-minded people get together, pool their assets, deploy a bundle of smart contracts in order to invest in other projects or to provide services.