DAO stands for Decentralized Autonomous Organization. It’s a term used to describe an organization run by software rather than by humans.
A DAO has no centralized management structure; it functions through smart contracts and blockchain technology. These contracts ensure that the organization’s funds are safely stored and distributed according to pre-established rules.
In this way, a DAO functions like a company or nonprofit without human employees: it collects funds from investors, decides how those funds will be used, and disperses them accordingly. This means that decision-making can be done entirely automatically — without any need for human oversight or input.
How DAO Works
DAOs, or decentralized autonomous organizations, are a relatively new concept in business. They are corporations that do not rely on centralized leadership or management. Instead, they rely on blockchain technology to provide transparency and security for all stakeholders.
DAOs can be created based on the Ethereum platform, a blockchain-based software. DAOs are often referred to as Decentralized Autonomous Corporations (DACs). These are corporations that have smart contracts rather than people-run.
Decentralized autonomous organizations have many advantages over traditional companies. One of their biggest advantages is that they don’t require human oversight or management. This means that the costs associated with running a traditional corporation are greatly reduced because there is no need for managers or executives who oversee operations.
DAOs also offer better transparency because everything is done through code rather than manually by humans; therefore, everything can be tracked easily, and there’s never any question about what happens when something goes wrong — it’s all written down in code.
Example of DAO Projects
There are various DAO projects available for investors in the crypto market. Here is a look at one promising DAO project called Swerri Circles.
Swerri circles are a type of DAO that can be formed on the Swerri platform. Swerri circles let any platform user invite friends and family to collaborate on de-fi projects with a social focus and to contribute, lend, and borrow money.
Every Swerri circle is powered by a smart contract that has DAO-like characteristics such as:
- It can be created by anyone who has the required permissions; it can be funded with money from users
- It can issue tokens representing equity in itself
- It can pay dividends to its shareholders; it can buy back shares from shareholders
- Its shareholders can liquidate it at any time they want.
Members can borrow, lend, and guarantee each other by providing collateral in the form of crypto assets. In return for this guarantee, the borrower can access credit and earn interest for the guarantee. If the borrower does not repay the loan or return its collateral, the guarantor will also lose their crypto asset.
Swerri Circles allows members to find new opportunities and grow together with other like-minded individuals. It creates a new form of social engagement in crypto where everyone can benefit from being part of the community and sharing their knowledge, skills or experiences.