A decentralized autonomous organization, commonly abbreviated DAO, is a self-governing administration of a decentralized project. It is decentralized because it is essentially a distributed database, maintaining its transactions and records on a blockchain. It is autonomous because it is governed by rules and protocols bound by smart contract and once established does not require active management by a centralized entity.
It was first proposed by Dan Larimer (Steem, Bitshares, EOS) as a ‘decentralized organized company’ in an article published on September 7, 2013. A DAO eliminates the need to involve a mutually accepted trusted third party and is censorship resistant and immutable due to its dependence on a blockchain. It is also known as a decentralized autonomous corporation (DAC), and is seen as an efficient model for corporations, government bodies, and non-profit organizations in an increasingly decentralizing world.
In a DAO, the rules are hard-coded and define the actions an organization can take. As an example, in a cryptocurrency such as the Dash DAO, a percentage of the transaction fees are made available to fund updates and improvements to the code. Decisions are made by stakeholders voting on proposals.
It has been noted that voting participation in DAOs has been problematic. In addition, the lack of regulation has made the legal status of this type of business organization unclear. Once regulatory structures are in place it is possible that public records and previously bureaucratically-bound processes could be efficiently managed through a DAO, potentially revolutionizing the management of deeds, titles, birth and death certificates, marriage certificates and other public documents.