What is DAO and How Does It Work?

DAO (Decentralized Autonomous Organization) has breathed new life into the crypto world. DAO, which follows the same path as cryptocurrencies as is frequently mentioned like Metaverse. You can find out how the DAOs, which are increasing in popularity day by day, emerged and also the working logic in our blog.

What is DAO and How Does It Work?

What is DAO?

DAOs, called “Decentralized Autonomous Organization” are an organization or organization that is governed by voting by their mass community, without being tied to any center. The system is built on computer codes and is still maintained through codes. While its decentralization increases the interest, it has reached a high number of users in a short time.

How DAO Works

The DAO was first announced in April 2016 and started collecting users immediately. Using the Ethereum network, the DAO gets all its usage and power from smart contracts. The purpose of the DAO is to use the decentralized structure through smart contracts and to ensure that the decisions are taken by the crowdsourced structure. The funds required to maintain this structure are made with the tokens in the system.

Users from all over the world invested in the DAO systems and were included in the system and received tokens in return. These tokens represent a say in the future of the system. The future of the projects that will be included in the DAO system is determined by voting.

After the hard fork of the Ethereum network as a result of the theft of 3.6 million ETH in the attack in June 2016, the DAO lost its users and popularity to a large extent. In the ongoing process, the system managed to recover itself and regain its former popularity, DAO started working for a more secure network and got the results in a short time.

What is the Purpose of the DAO Project?

Making a financial transaction requires trust, even between individual investors or institutions. Partnerships or transactions on the Internet require much more trust. DAO provides interaction between individuals or institutions through smart contracts to provide this environment of trust. DAO is 100% transparent.

Bitcoin is an example of the first DAO project. The structure can be applied to any business model, with the money collected jointly for the project and then the token distributed among the participants. This model allows entries from all over the world. Projects such as charities, freelancer networks, initiative models, grants, and volunteering are implemented.

What are the Differences Between DAO and Traditional Organizations?

DAO and Traditional Organizations


  • It has a democratic structure.
  • All kinds of decisions are determined by voting.
  • The result of the voting is automatically activated.
  • All organizations are transparent and open to the public.
  • Projects are checked automatically.

In Traditional Organizations

  • There is a hierarchy.
  • Decisions are made by a person or a group of people.
  • The result can be changed.
  • Organizations are confidential and completely non-public.
  • It is controlled manually.

The Future of DAO

DAO draws a very positive graph for the future if it overcomes legal problems. The fact that the community was damaged after the attack showed the power of the DAO that the system recovered in a short time with the studies carried out later.