DAO (Decentralized Autonomous Organization) are companies whose management is carried out exclusively on the terms of complete decentralization, transparency, and the involvement of all project participants in its development.

The massive introduction and popularization of the fundamentally new blockchain technology has contributed to developing new algorithms for interaction between individual ecosystem participants. In each individual DAO organization, the percentage of participants who must approve each new idea to be implemented differs based on the subjective rules and conditions of that organization.

Basic principles

Thanks to the implementation of the DAO development strategy, the following conditions are provided to the participants of such a project:

• transparency of all financial transactions that are carried out as part of the company's work;
• complete decentralization of all processes, that is, significant decisions are made collectively in the community, and every vote is taken into account.

For the technical implementation of the Decentralized Autonomous Organization project, smart contracts and open source code are used, as well as clearly defined conditions and requirements under which the smart contract is executed.

To make decisions in a DAO-type community, a public vote is launched using native tokens. However, the number of tokens and shares can be considered. In companies where voting is based on a participant's shareholding, such requests will not necessarily be open to the rest of the community. It is not uncommon for potential members to be initially subjected to various background checks before they gain voting power. The strength of a participant's vote also usually depends on the number of tokens he has. Voting is carried out either directly on the public community service of the DAO-format organization of the architecture of the company's activities or on particular platforms.

Benefits of the DAO Strategy

There are many advantages of this format of business organization and activities of various communities:

• the classic hierarchy of vote priority is not supported; each interested project participant can take part in voting on an issue of interest to him;
• maximum transparency of all financial statements;
• openness of projects for public activity, which makes it easy to achieve more dynamic and effective development.

In addition, transparent interaction between participants is ensured to achieve set goals without the need for personal trust.

The Decentralized Autonomous Organization concept also has disadvantages; it could be better. Among the most significant are the susceptibility to hacker attacks, the lack of clear regulation, and the slowdown in decision-making processes based on disagreements among community members.