DeFi 10117 August 2021

What is a Decentralized autonomous organization (DAO)? Here is what you need to know

DAO is short for a Decentralized Autonomous Organization

Summary

  • DAO gives investors a chance to fund projects anonymously
  • A 2016 hack on the first DAO platform led to the loss of 3.6 million ETH
  • Currency exchanges delisted the DAO token in September 2016
  • The popularity of decentralized autonomous organizations continues to grow

As used in cryptocurrencies, this idea of decentralization is what inspired a group of developers to create a decentralized autonomous organization (DAO) in 2016.

A DAO is an organization created to facilitate cryptocurrency transactions and automate decisions. It represents a form of venture capital fund built on open source code on a blockchain with no control by a management or board. It is not affiliated with any organization or nation.

The first DAO was built on the Ethereum blockchain to eliminate manipulation and human error in investor funds by automating the decision-making process, allowing investors to send money anonymously from anywhere in the world. Investors received owner tokens, which gave them voting rights on projects.

Launched in 2016, this project raised more than $150 million from anonymous investors, making it the largest crowdfunding campaign of that time.

In June 2016, a hack on the DAO platform led to a loss of more than 3.6 million ETH, valued at more than $50 million. This caused an uproar from investors, with some calling for the disbandment of DAO.

In September 2016, prominent digital currency exchanges delisted the DAO token, ending DAO as an investment option. However, the interest in decentralized autonomous organizations continues to grow to date, with experts believing that this type of organization will become prominent and even change how people do business in the future.

Kibet Elikana
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