DAO Revolution: From the Concept of Autonomy to the Key Evolution of Decentralized Organizations

DAOs (Decentralized Autonomous Organizations) represent a new way of organizational operation. Unlike traditional companies that require a board of directors and management, DAOs allow people from all over the world to collaborate based on common goals without central authority control. As blockchain technology matures, DAOs are evolving from theoretical concepts into practical forces driving change across various industries.

From Theory to Practice: The Origins and Development of DAOs

The concept of DAOs did not emerge out of thin air. In 1997, German computer science professor Werner Dilger first defined self-sufficient autonomous systems in his thesis. This academic concept gained new vitality after the advent of Bitcoin, leading to the idea of “Decentralized Autonomous Companies” (DAC)—a model of autonomous enterprise that distributes shares via tokenization. Anyone who purchases DAC stock or earns rewards through shares can become a shareholder and have a voice in profit sharing, company development, and operational decisions.

Although some consider Bitcoin the first DAO, Bitcoin’s architecture lacks the governance mechanisms required for DAOs. Therefore, the contemporary term “DAOs” refers to decentralized autonomous organizations built on existing blockchains through smart contracts, rather than the blockchain network itself.

A pivotal moment for DAOs occurred in 2016. German company Slock.IT launched Genesis DAO (also known as “The DAO”), the first venture capital-style DAO operated collectively by investors. The DAO ran on the Ethereum blockchain, with its code written as smart contracts. Investors purchased DAO tokens with Ether (ETH) and gained voting rights in organizational management. Token holders could share profits based on project voting outcomes.

However, a coding flaw led to an attack on The DAO, resulting in the theft of $50 million worth of Ether. Subsequently, the community executed a hard fork, allowing token holders to withdraw funds from the Ethereum network. Although this event caused significant losses, it prompted industry reflection on the pros and cons of DAOs and marked an important turning point in their development.

Unveiling the Logic of DAO Operations: Smart Contracts and Governance Mechanisms

The core of DAOs is smart contracts—a type of code that automatically executes on the blockchain when certain conditions are met. Ethereum was the first to implement smart contract functionality, and many other blockchains now support this technology.

Because all content and records on the blockchain are transparent and publicly accessible, any member wishing to join can see how the protocol operates at each stage. All rules set by the DAO community are enforced by smart contracts. Once deployed and activated, changes to rules can only be made through member voting, with proposals for rule changes limited to token holders.

Token Economics and Voting Rights: DAO Financing and Governance Systems

After a DAO is officially recorded on the blockchain, mechanisms for fundraising and governance need to be established. Typical DAOs raise funds by selling tokens, with investors exchanging fiat currency for tokens and gaining corresponding voting rights. These funds are stored in the DAO’s treasury. Once fundraising is complete, the DAO can be deployed and launched.

This model effectively prevents decision-making chaos. Most stakeholders must support a proposal for it to become a rule, with the specific majority decision process defined in each DAO’s smart contract. Although managed autonomously by the community, DAOs are open to the public—open-source blockchains allow everyone to view the code, and anyone can read related information. Additionally, since all fund transactions are recorded on the blockchain, DAO treasury records are fully transparent and subject to oversight by all members.

From Concept to Deployment: Three Key Stages of Establishing a DAO

Building a fully functional DAO typically involves three stages.

First is the Smart Contract Development Stage. The DAO’s smart contracts are written by one or more developers and can only be modified through governance systems once deployed. The development team must conduct thorough testing to ensure no critical details are overlooked, as even a single code error could cause system failure and significant economic loss.

Second is the Fundraising Preparation Stage. The DAO needs to determine how to raise funds and implement governance mechanisms. In most cases, the community raises funds by selling tokens, with token holders gaining voting rights.

Third is the Official Deployment Stage. Once everything is ready, the DAO is officially launched on the blockchain. From this point on, the future of the organization is entirely decided by stakeholders, with developers no longer holding influence over decision-making—this includes the founders.

A New Era of Organizational Forms: Market Trends of DAOs

As blockchain technology matures and becomes more widespread, interest in DAOs continues to grow. The rise of Non-Fungible Tokens (NFTs) plays a key role in DAO governance innovation, redefining who can participate in DAO decision-making.

In September 2021, well-known venture capital firm Andreessen Horowitz supported a DAO project called “Friends with Benefits,” based on a Discord community. Comprising cryptocurrency enthusiasts, artists, and NFT collectors, the community secured $5 million in funding. Subsequently, the organization shifted to operate as a decentralized autonomous organization on platforms like Facebook and Telegram, raising an additional $1 million. This case demonstrates that online communities can still achieve remarkable fundraising even without traditional economic incentives.

DAO investments have also become another significant trend. They enable Web3-native community members to pool funds and deploy them collectively, allowing small investors to compete with established financial institutions. The appeal and buzz around DAOs are expected to be as unstoppable as the NFT wave of 2021. Of course, challenges remain, but these issues will gradually become clearer through future practice.

Looking Ahead: How DAOs Will Reshape Organizational Operations

DAOs represent an innovative organizational structure that could fundamentally change how we run businesses. As DAOs develop across various industries, some are likely to persist and become an indispensable part of society—an exciting prospect.

The operation of DAOs is based on two core principles: autonomy and decentralization. Through coded rules in smart contracts, DAOs can operate independently without human intervention, with members democratically deciding regulations. The open-source software architecture ensures high transparency and accountability. Moreover, the decentralized nature eliminates geographical restrictions, providing unprecedented possibilities for global collaboration.

However, DAO development also faces challenges. Developing DAOs and automating processes is extremely time-consuming, and any code errors could lead to catastrophic consequences. Additionally, due to the lack of clear legal status for DAOs, their global expansion is hindered. Solving these issues will determine whether DAOs can truly become the mainstream organizational form of the future.

Although DAOs are still in the early stages of development, their potential is already evident. With advances in blockchain technology and the gradual improvement of regulatory frameworks, DAOs are poised to play transformative roles in finance, art, investment, philanthropy, and more, redefining how people collaborate.