History And Achievements Of DAOs

One of the most incredible concepts successfully implemented with blockchain technology is DAO — decentralized autonomous organization. Decentralized autonomous organizations are organizations that operate based on smart contracts. Its financial transactions and rules are encoded in blockchain, effectively eliminating the need for a central governing body — hence the descriptors “decentralized” and “autonomous.

A decentralized autonomous organization (DAO) is an organization without central leadership. Decisions are made from the bottom up, managed by a community organized around a specific set of rules enshrined in a blockchain.

DAOs are collectively owned and operated by their members. They have built-in treasuries that can only be accessed with the approval of their members. Decisions are made through proposals that the group votes on over a period of time.

The DAO was an early iteration of today’s decentralized autonomous organizations. It was launched in 2016 and was designed as an automated organization that acted as a kind of venture capital fund.

Those who owned DAO tokens could profit from the organization’s investments, either by receiving dividends or by benefiting from rising token prices. DAO was initially seen as a groundbreaking project and raised $150 million in Ether (ETH), one of the largest crowdfunding efforts of the time.

DAO was launched on April 30, 2016, after Ethereum protocol engineer Christoph Jentzsch released open source code for an Ethereum-based investment organization. Investors bought DAO tokens, translating Ether into its smart contracts.

A few days after token sales began, some developers expressed concerns that a bug in the DAO’s smart contracts could allow attackers to drain its funds. While a proposal was developed to fix the bug, an attacker took advantage of it and siphoned more than $60 million worth of ETH from The DAO’s wallet.

On June 17, 2016, however, the hacker found a coding loophole that allowed him to pump funds out of The DAO. Within the first few hours of the attack, 3.6 million ETH was stolen, the equivalent of $70 million at the time. Once the hacker had done the damage he intended, he called off the attack.

In this exploit, the attacker was able to “ask” a smart account account (DAO) to return Ether several times before the smart account could update its balance. This was made possible by two major issues: that the DAO coders did not take recursive calling into account when creating the smart contract, and that the smart contract first sent ETH funds and then updated the token’s internal balance.

Decentralized autonomous organizations have gained popularity over the past few years and are now fully incorporated into many blockchain projects. For example, decentralized finance (DeFi) uses DAOs to allow applications to become fully decentralized.

According to some, the Bitcoin (BTC) network is the earliest example of DAO. The network scales through community agreement, although most of the network’s members have never met each other. It also lacks an organized governance mechanism, and instead, miners and nodes must signal support.

By today’s standards, however, Bitcoin is not considered a DAO. By today’s standards, Dash would be the first true DAO because the project has a governance mechanism that allows stakeholders to vote on the use of its coffers.

At this point, the DAO list is too extensive. Over time, it has become a clear concept that is gaining momentum. Some projects are still striving to achieve full decentralization through the DAO model, but it is worth noting that they are only a few years old and have yet to achieve their final goals and objectives.

As Internet-based organizations, DAOs have the capacity to change the way corporate governance is done completely.

One of the latest DAO platforms I’ve ever heard of is Joystream.

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