D.A.

O
DECENTRALIZE
D AUTONOMOUS
O R G A N I Z AT I O N  
Introduction
A decentralized autonomous organization (DAO), sometimes called
a decentralized autonomous corporation (DAC), is
an organization represented by rules encoded as a computer program
that is transparent, controlled by the organization members and not
influenced by a central government, in other words they are member-
owned communities without centralized leadership. 
A DAO's financial transaction record and program rules are
maintained on a blockchain. The precise legal status of this type of
business organization is unclear.
Visual
Representation
of differences vari
es in Top-Down
Organizations and
DAOs
Background
Decentralized autonomous organizations are typified by the use
of blockchain technology to provide a secure digital ledger to
track digital interactions across the internet, hardened against
forgery by trusted timestamping and dissemination of
a distributed database.
This approach eliminates the need to involve a
mutually acceptable trusted third party in any decentralized
digital interaction or cryptocurrency transaction.
 Government by algorithm (also known
as algorithmic regulation, algorithmic
legal order or algocracy) is an
alternative form
of government or social ordering,
where the usage
of computer algorithms,
especially of artificial intelligence and 
blockchain, is applied to regulations,
law enforcement, and generally any
aspect of everyday life such
as transportation or land registration.
For ex. AI in government, COMPAS, Cyb
Series - Algocracy ersyn, DAO, Ofqual exam results algorit
hm, Predictive policing, Smart
city, Social Credit System.
Governance
DAO governance is coordinated
using tokens or NFTs that grant
voting powers. Admission to a DAO
is limited to people who have a
confirmed ownership of these
governance tokens in
a cryptocurrency wallet, and
membership may be exchanged.
Governance is conducted through a
series of proposals that members
vote on through the blockchain,
and the possession of more
governance tokens often translates
to greater voting power.
 Issues
with DAO
1. Unlimited Liability 
Problem : DAO members do not generally enjoy the usual protections against liability
as do corporate shareholders. This is because a DAO is not typically formed as a
corporation or LLC.

Therefore, the potential liability of each member in a DAO is unlimited. Therefore, if

Solution : To address this weakness, DAOs would have to register and be recognized as
a legal entity with limited liability.
2. Regulatory Framework

Problem : There is no consistent regulatory framework for DAOs. Because they are
unincorporated, many DAO are defaulted to partnership status—which imposes unlimited
liability on its members and creates various legal issues.

With a DAO, individuals are often anonymous. As a result, compliance with AML/KYC policies
is very complicated, if not impossible. Sometimes, these burdens will prevent a DAO from
being formed in the first instance. Also, because DAOs can include individuals from around the
world, multiple jurisdictions´ laws are at play. Deciding which country´s laws apply can be
difficult and is likely to result in protracted legal battles if a dispute arises.

Solution : Only a consistent regulatory framework can provide the legal certainty needed for
DAOs to flourish without being hindered by regulatory inconsistency and gaps.
3. Ice Phishing & Cyber Attacks
Problem : There are multiple types of phishing attacks in the web3 world. The technology is still
nascent, and new types of attacks may emerge. Some attacks look similar to traditional credential
phishing attacks observed on web2, but some are unique to web3. One aspect that the immutable
and public blockchain enables is complete transparency, so an attack can be observed and studied
after it occurred.

Recall that with the cryptographic keys (usually stored in a wallet), you hold the key to your
cryptocurrency coins. Disclose that key to an unauthorized party and your funds may be moved
without your consent. Stealing these keys is analogous to stealing credentials to web2
accounts. While attackers can utilize a similar tactic on web3 to get to your private key, given the
current adoption, the likelihood of an email landing on the inbox of a cryptocurrency user is
relatively low.

Solution : Review the smart contract you are interacting with. Manage your crypto currencies and
tokens through multiple wallets and/or periodically review and revoke token allowances.
Future of
D.A.O
The ideology of the crypto-utopian is to remove faulty institutions across the globe by developing a blockchain
technology-based model from scratch. Initially, the visualization of cryptocurrency was not an asset but rather a
substitute payment gateway. Smart contracts, proposed by blockchain, are an attempt to establish a trustworthy
form of legal governance. Incorporating both to develop a reliable, efficient, and secure financial system is the sole
purpose of DeFi (Decentralized Finance). 

However, DOA is the reconceptualized on-chain design of the traditional operation. Stan Larimer was initially the
creator of the DAC (Digital Autonomous Corporation) concept, which was later reconstructed as DAO (Digital
Autonomous Organization) by Vitalik Buterin, the originator of Ethereum. 

For example: consider a vending machine requiring manual operations. It requires manual efforts to look for
technical flaws, pay the power consumption bills, collect the money, and reload more products. The human
interactions would have witnessed a reduction or elimination only if the machine was a DAO. 

The mechanism could be capable of shipping records to the server, and subsequently, an automated system that
would perform what humans performed earlier. 

DAOs will replace CEOs’ decisions, border meetings, and routine operations in organizations, thus avoiding extra
meaningless work. In addition, voting by shareholders can be done through tokens.

Also, DAOs can change the recruitment process, salary decision, or hiring developers, all by the power of
tokenomics. 
Conclusion

Continuous innovations have become an integral part of the digital world. Like in
any other innovative system, DAOs are reflecting continuous improvements. As
every technology or concept has some advantages and disadvantages, the same is
true for open-source ecosystems. However, the limitless opportunities to disrupt
analog structures that delay processes with unnecessary administration can be
resolved with DAO in every economic sector. 

While the DAO is still in its nascent stage and trying to strengthen its roots, it is
evident that there is something at the core of the DAO revolution that is here to stay.
Therefore, it will be interesting to witness its growth to the peak.
Thank
You