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Bitcoin burst onto the scene back in 2009 as the first application of blockchain, a decentralized ledger technology with no single point of failure. Satoshi Nakamoto invented blockchain to underpin the world’s original cryptocurrency, but sharp minds quickly realized its potential for multiple applications besides payments.
Over the last decade the number of use cases for blockchain has exploded, but few have generated quite as much excitement as decentralized autonomous organizations, or DAOs.
DAOs are organizations that rely on computer-embedded code as an alternative to the traditional organizational and management structures that govern entities. This enables them to be led by their communities with a democratic consensus on all decisions reached, as opposed to having a centralized leadership made up of a few individuals.
The beauty of DAOs is that they go in the direction of the people who have a stake in it. Community members of DAOs need to acquire tokens that underpin the project, with each token representing the holder’s voting rights.
When a DAO token holder submits a proposal, the community votes on the issue to decide how it will proceed. Those decisions are then encoded as smart contracts, ensuring transparency and an equal voice for all members.
DAOs promise to be revolutionary because they provide a solution to what’s known as the “principal-agent dilemma”, which refers to a conflict in priorities between an individual or a group (the principal) and those who’re making the decisions on their behalf (the agent).
A good example of this is the relationship between a
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