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What is a DAO?

What is a DAO?

June 11, 2022
3
 min read

A DAO is a community that’s owned and managed by its members. Let's compare DAOs to traditional companies to understand how they work.

By Alex, Peter

A DAO is a community that’s owned and managed by its members.

DAOs vs. companies

The simplest way to describe how a DAO works is to compare it to a company:

Org structure

  • Company: Hierarchical structure led by the CEO and other executives. 
  • DAO: Flat structure led by a group of core contributors.

Decision making

  • Company: Management approves proposals and makes decisions behind closed doors.
  • DAO: Members submit proposals and vote on them using DAO tokens in public.

Onboarding

  • Company: Candidates need to apply and pass interviews to get hired.
  • DAO: Some DAOs let anyone join while others require a minimum number of tokens. Tokens can be bought or earned by contributing to the DAO (e.g., taking meeting notes).

Career advancement

  • Company: Employees need to climb the corporate ladder to get promoted.
  • DAO: Members can start contributing right away to gain the trust of core contributors.

Compensation

  • Company: Most employees work full time and are compensated through salary and stock.
  • DAO: Most contributors work part-time and are compensated through DAO tokens or other cryptocurrencies (e.g., stablecoins).

As you can see, DAOs have both advantages and disadvantages compared to companies:

  • Advantages include letting more people contribute, participate in decisions, and own the upside.
  • Disadvantages include having to coordinate a part-time workforce in a decentralized manner.

DAOs in practical terms

Practically speaking, most DAOs use:

  1. Communication tools like Discord and Discourse to stay in touch.
  2. Governance tools like Snapshot for members to vote on decisions.
  3. Crowdfund tools like Mirror to raise capital for the DAO.
  4. Treasury tools like Gnosis Safe to manage the DAO’s treasury.

Now that you have a high-level understanding of DAOs, let’s cover how you can find one to join.

Up next: How to find a DAO to join?

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DAOs vs. Companies

DAOs in practical terms

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