What is DAO
When it comes to digital currencies and blockchain, it is often referred to a DAO for a certain project like bitcoin or ethereum. And you may have heard of the crowdfunding program called The DAO, which was hacked recently.So, Is it the same with DAO mentioned just now? What exactly DAO is remains a question that has refused so many people. Now I would like to give you an explanation.
Actually, there are differences between these two concepts. The former DAO is short for Distributed Autonomous Organizatio, a blockchain-based structure. The latter DAO is just the name of an ethereum-based blockchain program which is called The DAO generally to differentiate the two DAO.
Sometimes we also call DAO as DAC, that is a Distributed Autonomous Corporation, similar to DAO. No matter it is a DAO or a DAC, it’s an organization that runs automatically without human intervention and management by a set of fair and open rules. These rules are usually appeared in open-sourced software, where everyone can become the participant in this organization through holding its share equities or providing services.
To some extent, DAO is more like a fully automatic robot. Once the program is set, the robot will start to operate in compliance with the established rules. And during the operation, it can also maintain and upgrade by itself continuously according to real conditions around it, and enhance itself unceasingly to get adjusted to its surrounding.
In fact, DAO has a broad explanation of its formation. It could be a digital currency, a system, an institute, or even a self-driving car. They offer services with values which could be money transfer like Bitcoin, application like Ethereum, domain name management system like Namecoin, or other business modes except being taken as a kind of digital currency. In a sense, it is more like the equity to those specific institutions. Each DAO has its own terms and conditions. You can always check the DAO shares you hold, which are disposable in the form of digital currency, and earn dividends from it.
Bitcoin and Ethereum are two typical DAOs, with a most rules like the upward bound of quantity, consensus algorithms and other rules are all open and transparent. So that you can see it as payment institution without man control in some way and everyone that holds bitcoins or ethers could be the shareholder of this institution. Those miners and developers can also become participant. When the demand in the institution increases, the value of the shares they hold rises. Besides, they can also share its profits and grow in line with the institution at the same time.
With that saying, DAO is a brandnew pattern for institution and could be an early form of online organization in the future, which has definite goals and can evolve and develop all by itself without being controlled by any individual.