Recently, DAO (Decentralized Autonomous Organization) has been heralded as the substitute for the centralized organization. DAO also stands for an AI-based decentralized network which is a system created by Vitalik Buterin and Ethereum developers. DAO maximizes productivity by dividing the work into computational interaction tasks, and by providing incentives to DAO participants. DAO can be thought of as a company operating under certain rules that no individual can intervene. Rules within the DAO are implemented in the form of verifiable open source software distributed on the computers of shareholders participating in DAO. People can become shareholders of a DAO either by purchasing the shares or by acquiring the shares through providing services to the organization. Shares in DAO represent the qualifications of owners to share the interests of DAO.
DAO uses blockchain technology to track transactions on the Internet, and ensures that digital books are not forged when creating and distributing timestamps on distributed databases. This method simplifies financial transactions by eliminating intermediary intervention.
In addition, DAO is an organization managed by codes and programs, operating independently without an intermediary or central entity. Using Smart Contract, DAO receives external information and operates based on opinions derived from the information. The entire operation of a DAO is conducted according to the designated Smart Contract without any human intervention. DAO is usually operated by community equity holders who provide incentives according to token mechanisms. DAO's rules and transaction records are transparently stored on the blockchain ledger, and those rules are usually determined through voting among share holders. In general, decisions within DAO are made when a proposal acquires votes from most of equity holders or a a proposal meets a set of network agreement protocol.
DAO might seem similar to exiting organizations such as companies and countries, but it operates in a more decentralized manner. While traditional organizations operate in hierarchical structures and multi-layered bureaucracy, DAO has no hierarchy. Instead, DAO uses economic mechanisms (especially Game Theory) for the benefit of the organization and members.