What is DAO?

Data Access Object - a component providing a unified interface for communication between an application and a data source (e.g. a database or a file). It is often combined with other design patterns. Thanks to DAO, an application does not need to know the way and final place of storing its data, and possible modifications of any of the factors do not entail the need to modify its source code. This component is often used in MVC model (Model-View-Controller) to separate data access from business logic and presentation layer. Ready-made tools to use DAO are included in many popular programming languages and platforms (e.g. Java EE, Ruby on Rails).

Decentralized Autonomous Organization (DAO) - is a decentralized autonomous organization that, unlike traditional companies, is based on open source code and is fully supported by its community through smart contracts.

DAO organizations are run by smart contracts and are subject to the collective work of co-workers and community members. Most often DAOs are implemented as a series of smart contracts linked by a common domain of activity and sharing their API. Unlike smart contracts, which reflect the transactional relationship between the parties to the contract, the role of DAO can be autonomous asset management or decision making. DAOs are open source software, which is transparent and theoretically incorruptible. All transactions of the organization are recorded and maintained in the blockchain system.

DAO (Decentralized Autonomous Organization). Generally speaking, DAO is a system of rigid rules that defines what a decentralized organization will do. However, the term DAO can also refer specifically to an organization called "DAO", which was developed on the blockchain Ethereum in 2016.

Simply put, DAO refers to a particular type of organization that, unlike traditional companies, is based on open source code and is fully supported by its community. Therefore, the basic structure and mechanisms of DAO are not based on any hierarchical management (quite common in traditional companies).

In other words, the DAO has neither a single responsible entity nor any license plate and, as the name suggests, there is no centralized power. DAOs are run according to computer-coded rules (smart contracts) and are subject to the collective work of their associates and community members.

Although the idea of decentralized organizations (DOs) is not new, the use of smart contracts to automate some of their mechanisms of operation and functionality makes DAOs a useful and interesting concept. This innovative structure allows for a completely new business model in which different types of activities can be performed in a completely decentralized and automated way.

Several notable uses where the DAO model can be useful include automated fundraising campaigns (such as ICO), digital token issuance and asset tokenization, as well as decision making and motion voting systems. In addition, the DAO model enables the creation of more efficient systems by reducing the need for human resources, which in turn reduces overall operating costs and risks associated with human behavior.

Just as Bitcoin has created a digital peer-to-peer economic system, eliminating the need for banks and other trusted third parties, DAOs can revolutionize a wide range of industries by using decentralized management models based on smart contracts.