DFO is short for Dao Funded Organization. Essentially, DFOs receive grants from the community to perform functions for the community. One of the problems with traditional DAOs is that they attempt to fund projects directly. While this can work early on with small budgets, in the long term there needs to be a larger ecosystem around the DAO. DFOs have a clearly defined mission statement and must have a quantifiable way of measuring their achievement of said mission statement. Anyone can form a DFO; however, the community decides which DFOs to fund through the masternode system.