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Decentralized Autonomous Organizations (DAO) are organizations that work independently, without any staff. The entire operation is written out in programming code by means of smart contracts. Smart contracts can be compared with a computer program that provides a computer with the correct work instructions.
The idea of DAOs arose closely after the launch of Bitcoin. The hypothesis was: “if money can be decentralized, it can be done for organizations too”. The launch of Ethereum and its smart contracts made this idea reality.
The following prerequisites are needed for a DAO:
Compared to traditional organizations, DAOs bring a number of notable advantages:
However, there are also points that make a DAO less interesting:
This issue has been experienced by Ethereum’s project, ‘The DAO’. This project was supposed to make it possible to run a decentralized investment organization. At first it looked like it was going to succeed. However, a hacker found a leak in the programming code and saw the opportunity to cash out his investment several times. By doing so, he managed to channel away millions of dollars. Ultimately, this incident was the impetus for the hard fork of Ethereum: Ethereum Classic.
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