The Decentralized Autonomous Organization (DAO) is a virtual entity that exists in cyberspace / the internet. It comes into existence when a group of people decide to form a DAO.
Once this initial decision to create is taken the participants may decide to extend participation to a wider community. It is possible that this process could well be entirely anonymous (subject to the technical skills of the participants).
A DAO may be established with a view to raising or investing / managing funds raised, for example to develop a specific idea or a range of ideas or within a particular sector. Participants / investors 'invest' their funds from their own cryptocurrency holdings. This transfer of funds appears on the Blockchain. Alternatively the purpose of the DAO could well be civic - to remove the inherent weaknesses of outdated political structures.
A typical Block transaction looks something like this;-
Hash: 0x7c27d7ac1cda6308c9e60ddie77cb6372d3fcc79382b1f77dd3a52ecb32987c777964 Difficulty: 27,777,777,777,777 Miner: sevendwarfs Gas Limit: 4,700,000 Gas Used: 11,000 Time: 2016-01-01 00:00:00 (0 minutes ago) Uncle Hash: 0x1ddc7de7dec77d7aab85b777b6ddd41ad3123451b948a7413f0a142fd40d4934 Root: 0xf02dd777a50f73479267671adce3b957876ca561d33ddd765433f038690da9ec8a3a58 Tx Hash: 0xf09ddie837a50d7775671abcde3b7778777dd561d77afd92d3f077790dd9ec7a7a77 Size: 777 bytes Extra: Geth v1.3.6 (Raw: 0xdd7712345678900077665544332211ddie77992354216) Nonce: 0x7d7d98765432770055374 Each Block has a number, this places the 'Block' in the 'chain' of transactions. It also has the identifier / the keys of the Sender and the Recipient, the amount of the transaction and possibly some data embedded in the transaction. After a brief period of time (often minutes) this transaction is immutable;- ..that means it is unchanging over time or unable to be changed.. Funds flow to the cryptocurrency / Ether account of the DAO, tokens are issued relative to the amount of investment. Once the funds are raised the DAO plan / proposal, as previously agreed, may be to select a primary Contractor who has demonstrated significant / the necessary expertise (or indeed a number of contractors performing a range of tasks). The performance of Contractor(s) would most likely be embedded in a Smart Contract (SC) which would / could / may release funds at regular intervals without further human intervention.
A role within the DAO is that of 'Curator', the Curator would most likely be a group of individuals participating via a multisig wallet/contract, i.e. the wallet requires multiple signatures to release funds. The Curator controls the Whitelist of those contractors authorised to receive Ether from the DAO. The Curator's role is to;-
verify that any contract code submitted by a prospective contractor does in fact match the contract as published on the Blockchain (Contract Source Code is published online and publicly verifiable by anyone.)
verify that the proposal came from an identified person or organization (via a Blockchain transaction containing information uniquely known only to the Curator and prospective contractor.)
The power of the DAO lies with the Token holders collectively. The Token holders are responsible for proposals they accept, this responsibility extends to;-
the auditing of proposal code
the evaluation of proposal merits
What Does a DAO Deliver?
Real Democracy: Deployment of the funds raised are voted upon, there are no cosy deals, bribes, backhanders. The process is open and transparent.
Real Operational Transparency: The DAO votes on proposals put forward by Contractor(s), engagement with Contractors would most likely be via Smart Contract (SC) between the Contractor and the DAO. The operating parameters would most likely be timebound, measurable, quantifiable and contractual.
Real Reputation: The Contractor does not come out of nowhere, in the legacy system one would wake up with a new provider and ask - where did they come from?, inevitably they could be a C level person's 'sponsor'. Real Verification: Within the structure of the DAO the Curator verifies the authenticity of the contract code and the fact that the person / organisation proposing the contract are one and the same.
Real Performance: The Smart Contract will most likely have clauses that are triggered by time, by a numerical / measurable metric. Overall they will be contractual and non-performance will most likely trigger non-payment automatically.
Real Easy Termination: Termination will essentially be automatic, if you cannot perform your stage will cease to exist.
This is very efficient and elegant, the combination of the transparency of the Blockchain, the immutability of the smart contract combine to minimise the need for legal battles or court involvement, or recriminations.
It could be argued that litigation arises from lack of clarity and lack of immutability. Whilst we stand at the dawn of the DAO it may well be that the properly thought out, well structured DAO will ultimately become the vehicle of choice for those joining together for a common purpose. At a political level or in the political sphere the real issue is that the edifice is built on lies, half truths, sleight of mind. It really is no way to run a planet.
The DAO structure is a most important evolutionary step:-
it allows the DAO Token holders to control 100% of funds from day one
it is immutable code-wise
it removes the layers of intermediaries
it negates Government, corporate & community paralysis due to corruption & ineptitude
The DAO Framework
The DAO framework is side project of Slock.it UG and as completely opensource is being made available as a gift to the Ethereum community. Slock.it UG are a Blockchain + IoT solutions company registered in Germany (HRB 30026).
An example of a pseudo DAO (which is not based on the Standard DAO Framework) is the recent Digix funding round - all transactions can be viewed on Etherscan - https://etherscan.io/token/digix - there are specific governance issues with Digix which will analysed in a future article.
Note: this is work in progress which is modified with new information as The DAO moves closer to creation Last Edit 10.55 26/Apr/2016