🤔 What is a DAO and What is it For?

We're continuing our series on common DAO questions this week by going back to some basics, but also getting into the nitty gritty of a complete DAO software stack (Web 2 & Web3).

Feb 08, 2021

With the launch of the full DAOHaus V2 on the horizon we’re doing a series of “🤔” posts in which we’ll be covering some of the common questions that come up for DAO summoners. Have something you want us to hit? Let us know on Discord, and be sure to subscribe (👇) so you don’t miss the next answer filled post!

This week we’re back to basics, although it sure seems like we should have hit this sooner. Our bad. The question that came in via Twitter was “What even is a DAO? What are they for?” It’s a very fair question. Mainly because the term is thrown around in a bunch of different ways, which came make it hard to catch from context alone. Sometimes it’s referring to a group: “I have to ask the DAO,” sometimes it sounds like a tool: “you should use a DAO.”

We’ll jump in on what a DAO is (and the whole DAO software stack) in just a sec, but before we do it makes sense to start with a look at what a DAO is for.

What is a DAO for?

Whether referring to a group of people using DAO software, or the software itself, the purpose of the DAO is to facilitate coordination. The main point is the organization, and keeping that group of humans moving toward a goal. DAO software works in service of this goal, and any group using the software is using it to reduce coordination failure. And DAO software is really good at reducing coordination failure.

DAOs are so good at doing this because they allow for collective ownership over the organization and decision-making that was previously very difficult to maintain at scale. This collective mindset can have a huge impact on everything from a club, to a corporation, and DAO software can help cement.

So that short answer is this: DAOs are for facilitating human cooperation via collective ownership.

If you want to take a look at some examples a good place to start is our post from last week breaking down some of the templates we’ve built into DAOhaus to help you get started.

What is a DAO?

Let’s back it up and start from the basics. DAO stands for “Decentralized Autonomous Organization.” Because of the “organization” part the term ends up used to represent a group of people. But, that organization is decentralized, and the ultimate actions of the organization are made autonomous through the use of software, which is why it can end up sounding like a tool and not an organization.

With all that said, it makes sense to break it down like this:

A DAO is people.

At DAOhaus we are very focused on the idea of “community first” development, so naturally we’re going to start by talking about the people. DAO software works in service of communities of people, and they give those communities coordination superpowers. Superpowers so great that those communities take on the label DAO.

So, when you hear someone say “you should join a DAO” what they mean is that you should join a community, team, project, whatever… that is using DAO software to coordinate decisions.

A DAO is software.

DAO software uses Web 3 smart contracts to facilitate decentralized group decision-making. At the core of the DAO is the organization’s bank, sometimes called a treasury (or hoard or whatever on DAOhaus you can customize our noun/verbage.) This isn’t just some sort of representation of a groups bank account, this is the actual account, the DAO software allows the organization to actually hold (and move around) crypto currency.

Decisions need to be made about what to do with the money in the bank, but also about membership, and really anything the group wants to coordinate around. So, DAO software also has built in mechanisms to help with this. Members are voted in (or added when the DAO is launched) and the software allows members of a DAO (or even non-members) to submit proposals, and the other members to vote on those proposals. It’s simple software, so all of this can be done with just a few clicks. And it’s Web 3, so there is no central point of control for any of this software or the associated records of votes, etc.

So, when someone says “maybe you should use a DAO” what they means is that your organization, or team, or project might benefit from the use of DAO software for coordination purposes.

Now lets take a look at what exactly we mean by a “DAO Stack.”

The DAO software stack (or Anatomy of a DAO.)

So you’re sold on a DAO? Awesome. Keep scrolling for a quick rundown of what we consider to be a complete “DAO software stack”. That is, all of the software Web 2 or Web 3 that you’ll need to really get you DAO running smoothly

Web 2 Tools

Ordered by typical evolution of idea to completed task

The reality is that the Web 3 stuff is only part of the picture when it comes to the stack that makes up “a DAO.” There are a bunch of other traditional Web 2 tools that DAOs use to handle other aspects of coordination.

Chat (ephemeral, async, rapid, casual, public/private)
Examples: Discord, Telegram, Slack, etc

This is usually the place where a community will start to coalesce.

Forum (persistent, async, slow, formal, public/private)
Examples: Discourse, Reddit

This is a good place to start with longer form discussion, where keeping a record might be of greater value. Sort of a precursor to DAO proposals.

Community Call
Examples: Discord, Zoom

At some point it’s usually a good idea to use something like this to set up weekly calls for synchronous discussion on main topics.

Project/Task Management/Operations
Examples: Trello, Clickup, Airtable, etc

Once you’re really rolling toward a goal it’s time to fire up some task management software to keep track of what everyone else is doing.

Comms (external)
Examples: Twitter, Reddit, Website, Blog

Eventually, you’ll want to tell the rest of the world about what you’re working on, and maybe even invite them to take part.

Web 3 tools (Enter the DAO)

Now this is where things get interesting. So far your organization is just a group of people using normal software. This is where your organization gets superpowers! (Here we’re not gonna give you software examples because 🤷‍♂️ the answer is DAOhaus.)

At DAOhaus one of our long term goals is also to bring more and more of the above services into the platform, either through integrations like our Discord bot or future boosts which will provide fully decentralized versions or integrations with the same.

DAO Assets/Bank
This is your DAO bank, it can hold ETH, other tokens, NFTs, Art, anything that you group wants to own as a collective.

DAO Voting
The voting systems control membership, voting distribution, ownership distribution, and decision making within the group. Proposals are submitted for all manner of decision and vote on by the group.

The Blockchain
This is where the DAO software lives making access to your bank and your group’s power to make DAO decisions censorship resistant.

Like we said, our goal is to bring more and more Web 3 features that your DAO powered community into our platform, but until then there are a number of project we love which are already starting to build these bridges.

Collabland - use tokens to control permissions in Telegram and Discord

Mintgate - use tokens to gate any web content

Sourcecred - track community contributions to Discord discussions and Github repos.

Web3+ = Digiphysical

This is where it starts to get really interesting. Once we’re talking about organizations empowered by DAO software we can start to add layers that have interesting impact in the real world.

Legal wrapper
Examples: LLC, Non-profits, etc

A legal wrapper for your DAO will give it real world powers and real world legal protections.

Registered Agent
A registered agent can be associated with your DAO to handle things like paperwork filings and contact from outside entities (in case the government ever wants to talk.)

Payroll/Tax Compliance/Benefits
Examples: Opolis, Llama, Superfluid

Plugging in a number of emerging services can allow your DAO to start to handle normal company things like payroll, taxes and benefits. more effectively

Boom! That’s it. Literally everything we could think of that you’d need to launch a DAO powered organization.

Armed with everything above and ready to launch our DAO? Suhweet. Go here and get started.

✌️ 🏰

Reach DAOHaus 👇

Haus Party