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Do you know what is and how does the DAO work? The main idea behind a DAO is to establish a company or an organization that can work with absolutely no hierarchical management. The DAO model, or Decentralized Autonomous Organization, has been used on the cryptocurrencies market since the Bitcoin managed to get rid of intermediaries in financial transactions.

The proposal is innovative and promising, since it seeks to solve the most common problems found in current organizations management.  A DAO perfectly structured gives the opportunity to shape the organization for each investor.

As there is no hierarchical structure, it allows anyone to submit all innovative ideas. Thus, the entire organization can assess and consider the proposals. In addition, there is a set of pre-written rules that every investor should be aware of before joining the organization, as well as the voting system. As a result, there is no room for discussions or different interpretations.

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How does the DAO work?

The site CoinTelegraph published an article explaining how the DAO works. Initially, the bitcoin was considered the first fully functional DAO, because it has a set of preprogrammed rules. Besides, the currency works autonomously and is coordinated through a distributed consensus protocol. Since then, the use of smart contracts was also enabled on the Ethereum platform. In view of that, the creation of the DAOs got closer to the general public and shaped its current looks.

To be fully operational, a DAO must have a set of rules that define how it will operate. Those rules are codified as a smart contract, which is basically a computer program that exists autonomously on the internet. However, at the same time, it needs people to accomplish the tasks that it cannot perform by itself.

Next, the DAO gets into the financing phase. Once the funding period ends and a DAO is deployed, it becomes completely autonomous and independent from its creators or anyone else. In addition, all the rules and financial transactions are recorded in a blockchain. This makes the DAOs fully transparent, immutable and incorruptible.

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