What are DAOs?

A decentralized autonomous organization (DAO) is defined as “a new type of digital-first entity that shares similarities with a traditional company structure but has some additional features, such as the automatic enforcement of operating rules via smart contracts.”

DAOs use blockchain technology to enable decentralized decision-making and management without a central authority, reducing the need for intermediaries. They operate through smart contracts and are governed by consensus among their members. Participants, typically token holders, collectively make decisions on the organization’s activities and investments through voting mechanisms that are encoded in the smart contracts.

DAOs can be used for a variety of purposes—from managing decentralized finance (DeFi) protocols to coordinating community-driven projects.

While there are millions of registered businesses, to date, there are still less than 20,000 DAOs worldwide, according to DeepDAO. In other words, DAOs are still in the experimental phase, and the legalities and use cases are all still shaping up.