A DAO or Decentralized Autonomous Organization refers to a revolutionary way of organizing and operating organizations, making use of smart contracts and blockchain technology to provide transparency, immutability, autonomy and security to them.​

DAO acronyms come from the English Decentralized Autonomous Organization , which means Decentralized Autonomous Organization . This refers to a type of organization that is controlled entirely by computational algorithms. These algorithms are known as smart contracts and they determine the rules of how the parties involved in the DAO must cooperate.

DAOs are not tied to any particular regulation or law due to the decentralized nature where the smart contract is executed and which is coordinated by the organization, the Blockchain development services .

In the same way, these smart contracts can be as simple or complex as it has been decided to program. But they will be transparent and immutable when they are published on the blockchain. This will allow everyone to review its operation and the rules that have been programmed inside, being sure that they cannot be modified in the future.
Being pieces of computer code, that is, a purely digital language, they open the door to a new level of cooperation, being able to manage decision-making between humans, machines and other smart contracts (which can be, in turn, managed by other humans, machines and smart contracts.

That is why DAOs represent a powerful technological innovation. One that seeks to redefine the way different parties cooperate. This is thanks to the fact that they allow the creation of autonomous, self-managed, transparent and more efficient organizations.

Graph of a DAO showing its interactions with different devices that participate within it, Graph of a DAO, A DAO and its interactions with its participants

How does a DAO work?​

DAOs depend on a series of mechanisms that guarantee their operation at all times. The first of these mechanisms is related to the ability to program actions and make them run according to certain parameters . With this, the DAO gains the ability to execute actions autonomously. Seen in a simpler way, this programming would become the set of rules that governs the DAO and the most common way of programming such actions is through smart contracts.

The second mechanism is a consensus protocol . Its function is to ensure that the decisions made within the DAO are made by the consensus of its parties. No factor external to the network and you want to participate directly in it can alter or make decisions.

Next, DAOs have a third mechanism that depends on the issuance of a token or medium of exchange . The purpose of this mechanism is to guarantee a means that financially supports the DAO. In addition to allowing users to gain voting power and at the same time being a mechanism for exchange and economic reward.
Finally, they have a fourth mechanism whose purpose is to record everything that happens in the DAO.

 This task falls to the blockchain development services , where all the information is stored to be accessed publicly and guarantee its security. The union of these four elements is what allows the operation of a DAO at all times.

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