Decentralized autonomous organization (DAO)

Decentralized autonomous organizations are built using smart contracts to set the rules (bylaws) of the organization as a method of decentralizing trust with the organization, and to users or customers of the organizations products and services. When conditions of smart contracts are met within the organization the actions stipulated in the smart contracts are automatically executed, helping to ensure compliance and rule enforcement within the organization in real time. This allows organizations to make decisions based on pre-defined rules and conditions.

Basically, almost any kind of organization can be transformed into a DAO. A public library analogy illustrates the concept well.

Consider a public library in some city where people come by freely, lookup for books of their interest and read them as they wish. There are also new books coming in by time. The operating costs of public libraries are normally supplied by city municipals or by some foundation. If we would have transformed a public library into a DAO, how would we do that?

A public library doesn’t require permission for access. Anyone can start browsing books just by showing a government-issued id. In Public Library DAO, there is no need to show anything. Just a crypto wallet will be required when you interact with something at the library. Because DAOs are trustless.

In a public library, there is a central authority that decides which new books to acquire into the library. In Public Library DAO, people who have Public Library DAO Tokens, have a right to vote on which books to acquire. This is a fundamental concept in DAOs. DAOs have tokens and anyone who would like to have a voting right can buy/earn tokens. And voting can be applied to almost anything such as opening/closing hours of the library, which shelves hold which books, should we deploy a security guard etc.

Public Library DAO will also have a reward system that will incentivize people for holding tokens. Whenever someone rents a book, for example, the amount will be split up between token holders.