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Understanding DAOs

Learn about DAOs and other key concepts.

What is a DAO?

DAO stands for Decentralized Autonomous Organization.
DAOs allow groups of people to pool and secure funds without using intermediaries.
DAOs leverage open-source code to create and execute business logic that can be verified by anyone.
DAOs enable trust between people. In this way, they are similar to corporations, non-profit organizations, and nation states. Except instead of relying on the legal system to create and enforce contracts, DAOs use smart contracts and crypto-economic guarantees.

How did DAOs come to be?

The first DAO was an early investment DAO named “The DAO” and it ended in epic failure.
Later, DAOs succeeded. The first DAOs to succeed were protocol DAOs like MakerDAO and Compound.
Today, there are many types of DAOs, including but not limited to protocol DAOs, investment DAOs, product DAOs, service DAOs, impact DAOs, and NFT DAOs.

Who controls a DAO?

The control of a DAO is typically decentralized and distributed among its members. This means that the members of the DAO collectively make decisions and control the organization, rather than a single individual or group. The specific decision-making process and governance structure of a DAO can vary, but it is generally designed to be transparent, democratic, and decentralized.

How do DAOs work?

DAOs operate via decentralized governance. Members engage in open, democratic processes to make decisions. DAOs use decentralized governance to manage their funds, maintain and improve their products, and invest in growth. For on-chain DAOs, decisions made via decentralized governance are executed trustlessly using smart contracts.
DAOs typically use DAO governance frameworks to enable decentralized governance. Tally supports OpenZeppelin Governor, which is the most popular DAO governance framework. Tally provides a user-friendly OpenZeppelin Governor interface that makes it accessible for anyone to start, join, and grow DAOs. DAO members use Tally to manage governance, as well as to create, pass, and execute governance proposals.