DAO: New type of organizations in the light of smart contracts.


DAO for its acronym in English, means decentralized autonomous Organization, according to the web site the DAO; it is a new type of human organization unprecedented. This organization is driven by a computer code immutable, unstoppable, and irrefutable, operated entirely by its members, and fed by the ETH which creates tokens of DAO.

Unlike traditional companies, a DAO has automated, formalized governance rules and enforced through software. Also carries with it a community participation, in such a way that are not only that company directors who have the power of decision, but the community in possession of tokens (DAO’s tokens in this case) can introduce proposals, participate in voting, or making proposals to be voted. This ensures full community participation in all decisions taken by the DAO.

DAO operation

The DAO is a software: does not have the capabilities for the manufacture of a product, writing code, developing hardware or sweep the streets. Required of worldwide and physical actors for the majority of tasks, these are called contractors.

The DAO is free to work with as many or as few contractors in the real world as it sees fit. The contractors presented their proposals for the development of products or services which must be written in plain English and supported by a code of software in the form of a smart contract that defines the relationship between the DAO and the contractor for example: deliverables, responsibilities and operating parameters.

In addition, holders of the DAO Token can debate the viability and profitability of the proposals through a service chosen by the community of the DAO (discussion forums like DAOHub.org, Slack, discussions, etc.). While the DAO token holders may choose to “disconnect” the contractor at any time (subject to the terms of the accepted proposal).

This is a significant advantage, since it provides predictability to the contractor while minimizes considerably the risk of non-payment of the organization. The DAO can also select a replacement for a given proposal contractor, because projects can continue where left him rather than being abandoned completely.


A DAO is created for profit and is made up of people who do not know each other, and their composition is the product of anonymous transactions completely, making it impossible to track who owns DAO tokens and in what quantities.

This reality could expose the DAO to a dangerous attack: someone could purchase 51% of DAO tokens, and then present a proposal that allows you to send all ETH himself. Fortunately, the curator concept makes this attack and any other called “tyranny of the majority” are not possible.

When the DAO is formed, its community appoints a curator. Only the curator can add contractor addresses to the white-list, which authorizes them to receive ETH from the DAO. This means that an attacker would have to become curator to run its proposed attack. If an attacker has 51% of the tokens of the DAO, and 51% of the votes, the fact to vote for himself as the curator of the DAO is therefore theoretically possible.

No matter how many attempts makes the attacker, the DAO will always be able to detect their malicious proposed and in case of failure to reach an agreement involved may divide proportionately investment, leaving the attacker with his own ETH. If there is a dissension, both would continue operating, each one with their own unique chips, each with potentially different curators and contractors. This would be the equivalent of a major division of the company in two.

In other words, a conservator is a proof for failure mechanism that indirectly prevents the execution of an attack of 51%. The curators do not add centralization to DAO since they are nominated by the community itself, and they can be dismissed at any time and for any reason.

Source: daohub.org

Image: daohub

Disclaimer: InfoCoin is not affiliated with any of the companies mentioned in this article and is not responsible for their products and / or services. This press release is for informational purposes information does not constitute investment advice or an offer to invest.


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