DAO Simplified

DAO is an acronym that stands for Decentralized Autonomous Organization. A DAO is an organization automated by code as long as it was agreed upon by the people who are connected with the DAO via smart contracts. Smart contracts can do anything as long as they can be programmed or coded to do so. Smart contracts can do all the tasks for the whole organization, making it independent, self-sustainable, and in other words, autonomous. DAOs are decentralized, meaning there is no sole authority, stranger, executive, institution, or third party to vote and make decisions for the organization. Decisions are code-driven. Once decisions are made, the code is changed so that the organization is immediately changed. Code will perform much of the decisions in simple routine operations. But surely, code can’t improve itself, can it? DAOs can improve, and they can continue to do so because the shareholders, the ones connected to the DAO, can submit and vote on changes to them. Anyone can look at the code because the code is open source. Open Source projects are more reliable because other programmers can help the main developers recognize bugs in their code, propose ways to fix and improve on them. This is then where tokens come in. In the world of crypto, every token is a vote. The one with the largest vote is the one with the most tokens. That is why tokens are valuable. They allow the DAO to improve and make changes.

Think of an ATM, an Automated Teller Machine. An advanced technological device that enables you to perform financial transactions, especially cash withdrawals, in most cases, in exchange for some form of payment like a withdrawal fee, at any time and without the need for direct interaction with bank staff. Note the “without the need for direct interaction with a bank staff” part. It minimizes the need for humans. Yet, it still needs some humans to run it. There need to be humans to check if cash is low and restock it if needed. For a machine designed to help people without needing a human, it STILL needs humans. Now, imagine if the ATM was a DAO. Any part of the process that needs a human would be replaced with code. It would check its stock of cash in the cash drawer. Then, if it was low, it would send information like which denominations need restocking. Once the cash arrives, it would automatically restock itself. Even take the profit from the withdrawal fees and store it somewhere else. Autonomous. All done by code and no humans, relatively speaking, of course.

If the ATM made any profits, it would redistribute all those profits to the shareholders through its DAO token. Simply put, if the ATM DAO makes a profit, the token value of the holder increases. That is why DAO tokens are valuable and sought after because of the potential profit you can earn and the voting rights that come with them.