A decentralized autonomous organization (DAO), sometimes called a decentralized autonomous corporation (DAC), is an organization represented by rules encoded as a computer program that is transparent, controlled by the organization members and not influenced by a central government. A DAO’s financial transaction record and program rules are maintained on a blockchain.
Decentralized autonomous organizations are typified by the use of blockchain technology to provide a secure digital ledger to track financial interactions across the internet, hardened against forgery by trusted timestamping and dissemination of a distributed database. This approach eliminates the need to involve a mutually acceptable trusted third party in a financial transaction.
With cryptographic instructions that automatically execute when pre-established conditions are triggered, DAOs enable previously unattainable levels of transparency, cost savings, and decentralized decision-making. 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.
Because DAOs embody a marked departure from the structure of traditional organizations and how they operate, there are numerous legal and operational challenges these organizations must overcome.