Course 1: What is a DAO?

Welcome to Module 8-Course 1 of Mission Web3! In this module, we will explore what a DAO is and how they work!

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Written by Zeno
Updated over a week ago

Welcome to Module 8-Course 1 of Mission Web3!

In this module, we’re putting Decentralized Autonomous Organizations (DAOs) on the dissection table to understand the components that makes a DAO and how they work.

Let’s dive in!

What is a DAO?

A DAO, which is short for decentralized autonomous organization, is exactly what the name says — it is an organization that is decentralized (which means it has no central governing body) and autonomous (each member of the DAO has an equal right to make decisions for the organization). A DAO’s purpose ranges from finance, art, social impact, gaming or even purchasing an original copy of the United States Constitution (ConstitutionDAO).

This form of organizational structure heavily relies on smart contracts to automate standard procedures such as financial processes and ensure each member complies with the rules established.

How Does a DAO Work?

Most DAOs that exist today have their respective governance tokens that can be used to vote on key decisions, which will then be executed through smart contracts.

Let’s put this into context and take tomiDAO for example. tomiDAO, which is the establishment behind tomiNet, follows this process:

  1. Proposals are (and can only be) initiated by Pioneer NFT holders

  2. TOMI token holders will vote on whether they are “For” or “Against” the proposal; holders also have the option to “Abstain” from a vote

  3. If the proposal achieves enough “For” votes, the smart contracts will execute it automatically, thus changing the fundamentals of the DAO permanently

On top of this, tomiDAO also keeps an archive of all their proposals so members can keep a tab on the developments of the DAO and maintain its governance transparency.

Of course, each DAO will have its respective processes according to its purpose and the type of decisions to be made.

Not only that, while DAOs are built on the notion of decentralization and democratic governance, individual DAOs may vary in their levels of adherence to those principles. For instance, the team behind the organization may be able to execute certain actions without any community involvement through multi-sig wallets, which can pause the entire protocol during emergencies.

Examples of DAOs

To some, the Bitcoin network is the first conceptualization of a DAO as it does not have a central governance and requires network participants to achieve a consensus for a proposal to be executed.

However, Bitcoin is rarely classified as a DAO by today’s standards. Instead, let’s look at DAO Maker — an establishment founded to provide growth technologies and Software-as-a-Service (Saas) solutions to web3 projects. Think of them as the incubator for new projects.

The DAO Maker governance system consists of two predominant components: a governing system and a token-based incentive structure. The former is the oil to the platform’s wheels that permits members to weigh in on important decisions such as the rules and regulations, while the latter is a system designed to reward active users who participate in the voting process and safeguard the organization from malicious actors who may attempt to manipulate the voting process.

The entire DAO Maker ecosystem is then powered by its native utility token, known as DAO. The DAO token is distributed among users as a reward for those who participated in the network and contributed to the organization’s growth. On top of that, members of the DAO can also use their DAO tokens to access exclusive features such as discounts on services.

Galxe DAO

Galxe DAO is an establishment that focuses on the web3 credential industry and is dedicated to delivering credential services to more web3 organizations and applications. Galxe DAO is run by $GAL holders, who have the ability to control funds held by the Galxe Community Treasury. $GAL holders who got governance rights to propose in the forum and vote in the snapshot.

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