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What is DAO and How Do They Work?

April 24, 2024

What is DAO and How Do They Work?

With the groundbreaking potential of blockchain-based technology, Decentralised Autonomous Organisations (DAOs) are revolutionising the regulatory and organisational framework environment. With the help of this resource, we will explore the meaning, kinds, functions, advantages, disadvantages, requirements, rollout procedure, excellent case studies, and answers to frequently asked questions, giving readers a comprehensive understanding of this novel idea. Let go and explore the curious world of DAO’s.


What is DAO and How Do They Work?

10 min read

April 24, 2024

What Is DAO?

Being self-sufficient organisations, DAOs depend on blockchain-based systems and digital contracts to enable their independent operation. Such decentralised organisations, whose guidelines and processes are carefully written into digital contracts, were transparent and equitable. By use of open ballot methods, members cooperatively mould the direction of the DAO, guaranteeing inclusion and fairness in their choices. Throughout the DAO habitat, this decentralised method promotes an agile and engaging atmosphere that drives entrepreneurship and empowers the community.

How Does a DAO Work?

DAOs use blockchain systems to carry out predetermined regulations and procedures in a fast and effective way. Being the cornerstone of DAO efficiency, digital contracts manage every facet of the organisation's functioning, notably proposition acceptance, casting votes and decision-making implementation. By engaging with such digital contracts, participants make significant contributions to the DAO and support an open and open leadership structure. By ensuring efficiency, openness, and accessibility in the procedure for making choices, this decentralised model gives participants the authority to cooperatively choose the direction of the DAO.

What are the Types of DAO?

DAOs take on a variety of shapes that are particular to their goals and functions.

1. Investment DAOs : Collaboratively administer assets and choose which investments to make.

2. Governance DAOs : Concentrate on influencing protocols and procedures for making choices inside blockchain networks.

3. Service DAOs : Offer decentralised goods or services that are decided upon by involvement and agreement within the wider society.

The following are the main advantages of DAO:

1. Transparency : Visible documentation of activities and choices is ensured by the permanent nature of the ledger.

2. Decentralisation : DAOs encourage participatory governance and participation in society by doing away with middlemen.

3. Effectiveness : Operations are streamlined by automated using electronic agreements, which lower functional and managerial costs.

4. Global Availability : DAOs allow involvement from people all over the world, promoting a welcoming and varied belonging, despite restrictions on geography.

Pros and Cons of DAO


• Increased accountability and openness.

• Sturdy security thanks to a decentralised design.

• Giving individuals in the community more influence through regulations.


• Vulnerabilities in smart contracts may arise.

• Complicated legal as well as regulatory problems.

• Possible disputes and disagreements related to governing.

Why Do We Need DAOs?

DAOs provide a decentralised, open, and accessible substitute for conventional centralised organisations, consequently overcoming their shortcomings as well. DAOs promote collaborations throughout several sectors and encourage development by enabling societies and increasing inclusive finance. The groundbreaking strategy of governing is transforming how organisations perform in today's connected world and represents an important transition to an increasingly impartial and democratic paradigm

How to Launch a DAO?

Creating a DAO is an extensive procedure requiring to be prepared and executed with attention to detail. These involve setting precise goals, implementing solid governance platforms, establishing automated agreements to improve workflows, and enrolling participants to engage in the DAO's functions. Thankfully, decentralisation has gotten simpler to accomplish and perform as a result of technologies including Aragon and DAOstack, which supply broad foundations and simple-to-use applications aimed to enhance the rollout method used by ambitious DAO developers easier and quicker.

What are the Most Successful DAOs?

In the field of blockchain innovation, several DAOs have grown in recognition through their distinctive improvements to the community. Although it possessed obstacles the DAO was a pioneering effort that propagated the thought of a decentralised asset pool. One notable accomplishment for MakerDAO is its invention of Dai, a stablecoin recognised for its reliability and permanence. MolochDAO is an essential component in encouraging the expansion of the Ethereum network by providing incentives for imaginative ideas and pursuits.


Decentralised Autonomous Organisations, that embrace the tenets of decentralisation, openness, and inclusion, constitute a profound transition in organisational governance. DAOs offer huge opportunities to change the sector, encourage partnership, and build community regardless of the face of impediments. Their inventiveness builds confidence educates participants, and opens the door to a better future and the vision spanning an assortment of fields.

In the Future Plena Crypto Super App will also have their own DAO for their token governance,details regarding which will be out soon . Stay tuned if you want to be a part of Plena’s DAO.

FAQ's on DAO

How Does a DAO Make Money?

Numerous streams of income are accepted by DAOs as a means to keep up functioning while accomplishing their targets. Amongst those streams of income are dues for joining, which are provided by stakeholders as compensation for the ability to become part of the DAO and cast ballots. By aggregating cash and executing prudent choices in initiatives, DAOs can additionally earn money through the earnings from investments.

How Does DAO Work in a Blockchain?

DAOs use the blockchain system's capabilities—most notably smart contracts—to run independently and openly. The DAO's choices and actions are governed by digital contracts, which are autonomous agreements with predetermined guidelines and limitations written in programming. To submit ideas, cast votes on them, and carry out internal operations, participants communicate with these smart contracts.

How Much Does it Cost to Start a DAO?

A DAO's startup costs might vary based on several factors, including network charges, expenses for development, advertising expenditures, and legal issues. When using already-existing DAO formation platforms, such as Aragon or DAOstack, platform fees can be applicable. Development expenses include the price of writing electronic contracts, creating user experiences, and adding features that are unique to the goals of the DAO.

What is an Example of a DAO?

One well-known illustration of a prosperous DAO in the distributed ledger space is MakerDAO. MakerDAO is well known for its stablecoin Dai which employs a computerised method to keep things consistent. Together, those withholding the DAO's governance coins control the rules by deciding on matters like collateral kinds and modifications to the reliability cost.

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