Decentralized autonomous organization

This article is about a way of organization. For the former organization that followed this approach, see The DAO (organization). For the philosophical concept, see Dao.
Not to be confused with Autonomous decentralized system or Autonomous peripheral operation.

A decentralized autonomous organization (DAO), is a software system, typically implemented as smart contracts on a blockchain, that enforces organizational rules and processes through code. It coordinates transactions and state changes among addresses without centralized control, operating autonomously based on predefined logic. In its most fundamental form, it functions as an automated system for maintaining and updating distributed ledgers. For example, Bitcoin’s consensus mechanism has been described by some commentators as a proto-DAO[1], as it systematically organizes block data from decentralized participants without human intervention. The term DAO is often misunderstood, largely because 'organization' is interpreted as a collective of individuals rather than the systematic act of arranging and structuring components, the essential distinction that clarifies the true nature of decentralized autonomous organization. The precise legal status of this type of organization is unclear.[2][3]

DAOs are closely associated with cryptocurrency and Web3. The name and concept became popularized with the 2016 launch of The DAO, an Ethereum-based venture capital fund which amassed 3.6 million in ether cryptocurrency, then worth more than US$70 million, and was hacked and drained of US$50 million weeks later.[4] The hack was reversed in the following weeks, and the money restored, via a hard fork of the Ethereum blockchain. Most Ethereum miners and clients switched to the new fork while the original chain became Ethereum Classic.

Background

Although the term may be traced back to the 1990s, Bitcoin is widely accepted to be the first DAO[5] [6]. The term became more widely adopted in 2013 [7] and has evolved overtime to include smart contracts operating on top of existing blockchain networks.[7]

Decentralized autonomous organization is typified by the use of decentralized technologies, such as blockchain technology, to provide a secure digital ledger to track digital interactions across the internet, hardened against forgery by trusted timestamping and dissemination of a distributed database.[8][9][10] This approach eliminates the need to involve a mutually acceptable trusted third party in any decentralized digital interaction or cryptocurrency transaction.[9] The costs of a blockchain-enabled transaction and of the associated data reporting may be substantially offset by the elimination of both the trusted third party and of the need for repetitive recording of contract exchanges in different records. For example, the blockchain data could, in principle and if regulatory structures permit it, replace public documents such as deeds and titles.[8]: 42 [9] In theory, a blockchain approach allows multiple cloud computing users to enter a loosely coupled peer-to-peer smart contract collaboration.[8]: 42 [11]

Vitalik Buterin proposed that after a DAO is launched, it might be organized to run without human managerial interactivity, provided the smart contracts are supported by a Turing-complete platform. Ethereum, built on a blockchain and launched in 2015, has been described as meeting that Turing threshold, thus enabling such DAOs.[8][12][13] Some decentralized autonomous organizations aim to be open platforms through which individuals control their identities and their personal data.[14]

Issues

Social

Tokens that enable signalling are often not used. Inactive tokens in DAOs can disrupt the possible functionality.[15]

Another risk is the concentration of power. In a study of decentralized finance DAOs, the distribution of tokens was shown to be highly concentrated among a small population of holders.[16]

The precise legal implications of this type of organization system is generally unclear,[10] and may vary by jurisdiction. On 1 July 2021, Wyoming became the first US state to recognize legal entities governed by DAO.[17] American CryptoFed DAO group became the first business entity so recognized.[18] Some previous approaches to blockchain based business associations have been regarded by the U.S. Securities and Exchange Commission as illegal offers of unregistered securities.[2][19]

Security

A DAO's code is difficult to alter once the system is up and running, including bug fixes that would be otherwise trivial in centralized code. Corrections to a DAO require writing new code and agreement to migrate all the funds. Although the code is visible to all, it is hard to repair, thus leaving known security holes open to exploitation unless a moratorium is called to enable bug fixing.[20]

In 2016, a specific DAO, "The DAO", set a record for the largest crowdfunding campaign to date.[21][22] Researchers pointed out multiple problems with The DAO's code. The DAO's operational procedure allowed investors to withdraw at will any money that had not yet been committed to a project; the funds could thus deplete quickly.[15] Although safeguards aimed to prevent gaming shareholders' votes to win investments,[2] there were a "number of security vulnerabilities".[23] These enabled an attempted large withdrawal of funds from The DAO to be initiated in mid-June 2016.[24][25] On 20 July 2016, the Ethereum blockchain was forked to bail out the original contract.

DAOs can be subject to coups or hostile takeovers that upend its voting structures especially if the voting power is based upon the number of tokens one owns. An example of this occurred in 2022, when one individual collected enough tokens to give themselves voting control over Build Finance DAO, which they then used to drain the DAO of all its cryptocurrency.[26]

List of notable DAOs

Name Token Use cases Network Launch Status
AssangeDAO JUSTICE Purchased Clock, an NFT artwork by Pak, to fund legal defense of WikiLeaks' founder Julian Assange Ethereum February 2022[27] Operational
ConstitutionDAO PEOPLE Purchasing an original copy of the Constitution of the United States Ethereum November 2021[28] Defunct[29]
Internet Computer ICP Decentralized Governance, Protocol Upgrades, Community control of software Internet Computer May 2021[30] Operational
FreeRossDAO[31] FREE Clemency for Ross Ulbricht, criminal justice reform advocacy organization Ethereum December 2021[32] Defunct by May 2023[33]
MakerDAO[34] MKR Dai (cryptocurrency) stablecoin maintainer and regulator, lender Ethereum December 2017 Operational
MoonDAO MOONEY Purchasing two seats on a Blue Origin flight to space and funding research to accelerate lunar settlement.[35] Ethereum December 2021[36] Operational
PleasrDAO PEEPS A group of art collectors who own the sole copy of the Wu Tang Clan album Once Upon a Time in Shaolin[37] Ethereum April 2021 Operational
The DAO DAO Venture capital Ethereum April 2016 Defunct late 2016 due to hack[38]
Uniswap UNI Decentralized exchange (DEX), Automated Market Making (AMM) Ethereum & Celo November 2018 Operational
HairDAO HAIR Organization behind Anagen, attempting to crowdsource online biohackers to solve hair loss.[39] 2023 Operational

See also

Notes

References

  1. ^ "Bitcoin, a DAO?". arxiv.org. Retrieved 2026-02-25.
  2. ^ a b c Popper, N. (2016-05-21). "A Venture Fund with Plenty of Virtual Capital, but No Capitalist". New York Times.
  3. ^ Barbereau, Tom; Bodó, Balázs (2023-07-01). "Beyond financial regulation of crypto-asset wallet software: In search of secondary liability". Computer Law & Security Review. 49 105829. doi:10.1016/j.clsr.2023.105829. ISSN 0267-3649. S2CID 258733922.
  4. ^ Price, Rob (2016-06-17). "Digital currency Ethereum is cratering amid claims of a $50 million hack". Business Insider. Retrieved 2016-06-17.
  5. ^ Hsieh, Ying-Ying; Vergne, Jean-Philippe; Anderson, Philip; Lakhani, Karim; Reitzig, Markus (2018-11-30). "Bitcoin and the rise of decentralized autonomous organizations". Journal of Organization Design. 7 (1): 14. doi:10.1186/s41469-018-0038-1. ISSN 2245-408X.
  6. ^ "Bitcoin, a DAO?". arxiv.org. Retrieved 2026-02-25.
  7. ^ a b Hassan, Samer; De Filippi, Primavera (2021). "Decentralized Autonomous Organization". Internet Policy Review. 10 (2). doi:10.14763/2021.2.1556. hdl:10419/235960. ISSN 2197-6775. S2CID 235559086.
  8. ^ a b c d Vigna, P.; Casey, M. J. (2015-01-27). The Age of Cryptocurrency: How Bitcoin and the Blockchain Are Challenging the Global Economic Order. St. Martin's Press. ISBN 978-1-25006563-6.
  9. ^ a b c Hodson, H. (2013-11-20). "Bitcoin moves beyond mere money". New Scientist.
  10. ^ a b Wright, A.; De Filippi, P. (2015-03-10). "Decentralized Blockchain Technology and the Rise of Lex Cryptographia". SSRN 2580664.
  11. ^ Norta, A. (2015-08-18). "Creation of Smart-Contracting Collaborations for Decentralized Autonomous Organizations". Perspectives in Business Informatics Research. Lecture Notes in Business Information Processing. Vol. 229. pp. 3–17.
  12. ^ Pangburn, D. J. (2015-06-19). "The Humans Who Dream of Companies That Won't Need Us". FastCompany.
  13. ^ Evans, J. (2015-08-01). "Vapor No More: Ethereum Has Launched". TechCrunch.
  14. ^ Deegan, P. (2014). "Chapter 14—The Relational Matrix: The Free and Emergent Organizations of Digital Groups and Identities". In Clippinger, J. H.; Bollier, D. (eds.). From Bitcoin to Burning Man and Beyond: The Quest for Identity and Autonomy in a Digital Society. Amherst, Massachusetts, USA. pp. 160–176]. ISBN 978-1-937146-58-0. creating an operational and autonomous Trust Framework [that can i]ntegrate with a secure discovery service in the form of a Decentralized Autonomous Organization ...{{cite book}}: CS1 maint: location missing publisher (link)
  15. ^ a b "The DAO of accrue: A new, automated investment fund has attracted stacks of digital money". The Economist. 2016-05-21.
  16. ^ Barbereau, Tom; Smethurst, Reilly; Papageorgiou, Orestis; Sedlmeir, Johannes; Fridgen, Gilbert (May 2023). "Decentralised Finance's timocratic governance: The distribution and exercise of tokenised voting rights". Technology in Society. 73 102251. doi:10.1016/j.techsoc.2023.102251. S2CID 258245920.
  17. ^ "Decentralized Autonomous Organizations Find a Home in Wyoming". JD Supra. Retrieved 2021-07-09.
  18. ^ "Wyoming becomes first US state to legally recognise DAO". finance.yahoo.com. 2021-07-07. Retrieved 2021-07-09.
  19. ^ "SEC Charges Bitcoin Entrepreneur With Offering Unregistered Securities". US Securities and Exchange Commission. 2014-06-03.
  20. ^ Peck, M. (2016-05-28). "Ethereum's $150-million Blockchain-powered Fund Opens Just as Researchers Call For a Halt". IEEE Spectrum. Institute of Electrical and Electronics Engineers.
  21. ^ Vigna, P. (2016-05-16). "Chiefless Company Rakes in More Than $100 Million". Wall Street Journal.
  22. ^ Waters, R. (2016-05-17). "Automated company raises equivalent of $120M in digital currency". Financial Times.
  23. ^ Popper, N. (2016-05-27). "Paper Points Up Flaws in Venture Fund Based on Virtual Money". The New York Times.
  24. ^ Popper, N. (2016-06-17). "Hacker May Have Taken $50 Million From Cybercurrency Project". New York Times.
  25. ^ Price, R. (2016-06-17). "Digital currency Ethereum is cratering amid claims of a $50 million hack". Business Insider. Retrieved 2016-06-17.
  26. ^ "Democratic DAO Suffers Coup, New Leader Steals Everything - VICE". Vice.com. 2022-02-15. Retrieved 2022-02-16.
  27. ^ "'Cypherpunks have rallied to Assange': NFT auction raises $52m for WikiLeaks founder". The Guardian. Reuters. 2022-02-09.
  28. ^ Roose, Kevin (2021-11-17). "They Love Crypto. They're Trying to Buy the Constitution". The New York Times. ISSN 0362-4331. Retrieved 2021-11-17.
  29. ^ Fox, Matthew (2022-01-19). "Tokens of the defunct DAO that failed to buy a copy of the constitution are worth $300 million even after disbanding". news.yahoo.com. Retrieved 2022-01-28.
  30. ^ Matthew, Leising (2021-05-11). "Overnight Crypto Sensation Sets Out to Undo Internet's Failings". Bloomberg.
  31. ^ Collier, Kevin (2021-12-10). "NFT of Silk Road founder's art sells for more than $6 million". www.nbcnews.com. NBC News. Retrieved 2022-05-10.
  32. ^ Mak, Aaron (2022-01-25). "Ross Ulbricht Went to Jail for Letting People Buy Drugs With Bitcoin. Can These Crypto Obsessives Get Him Out?". slate.com. Slate. Retrieved 2022-05-10.
  33. ^ "FreeRossDao website". Archived from the original on 2024-09-21. Retrieved 2024-11-16.
  34. ^ Ehrlich, Steven. "How Crypto's Original Bubble Boy Rode Ethereum And Is Now Pulling The Strings Of The DeFi Boom". Forbes. Retrieved 2022-07-20.
  35. ^ "Space Business: MoonDAO's Golden Tickets". Quartz. 2022-08-04. Retrieved 2024-03-21.
  36. ^ "MoonDAO Will Pick 2 of the Next Blue Origin Astronauts With the Help of NFTs". CNET. Retrieved 2024-03-21.
  37. ^ Leight, Elias (2021-10-20). "Revealed: The Crypto Fans Who Secretly Paid $4 Million for Pharma Bro's Wu-Tang Album". Rolling Stone. Retrieved 2022-11-09.
  38. ^ Finley, Klint (2016-06-18). "Someone Just Stole $50 Million from the Biggest Crowdfunded Project Ever (Humans Can't Be Trusted)". Wired. ISSN 1059-1028. Retrieved 2019-11-16.
  39. ^ Pearson ·, Jordan (2025-05-28). "Inside the Discord Community Developing Its Own Hair Loss Drugs". 404 Media. Retrieved 2025-10-03.

Further reading

  • Learning materials related to Decentralized autonomous organization at Wikiversity
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