Decentralized Autonomous Organizations – DAO
We are now able to form Decentralized Autonomous Organizations or a Wyoming DAO LLC. This is currently the only state to have DAO companies at this time.
So what is a DAO and how do they work?
DAOs are digital organizations that provide a fresh way to fund ventures, democratize decisions, and split proceeds. They’re “decentralized” because they’re hosted on a blockchain and all their stakeholders, not just executives and board members, make decisions. They’re “autonomous” because they employ smart contracts that automatically execute actions when certain conditions are met, without requiring human approval.
Typically, anyone who owns tokens tied to a DAO business can vote on proposals, and their votes are weighted based on the number of tokens they hold – similar to the voting rights attached to shares. If a proposal garners enough votes, a smart contract is triggered, and the approved action is executed.
“If blockchains, NFTs, smart contracts, DeFi protocols, and DApps are tools, DAOs are the groups that use them to create new things,” Packy McCormick explained in his Not Boring newsletter last year. “If they’re the what, DAOs are the how.”
Tech billionaire Mark Cuban expects DAOs, to transform how companies are built and run. DAOs are “the ultimate combination of capitalism and progressivism,” Cuban said.
How Are They Established?
A decentralized autonomous organization is a limited liability company whose articles of organization contain a statement that the company is a decentralized autonomous organization and certain other statements. They must include the words DAO or LAO or DAO LLC, in the name.
Decentralized autonomous organizations can be either Member Managed or Algorithmically Managed.