What is a DAO?

A DAO aka Decentralized Autonomous Organization, is an entity without a central authority. In other words, it is a multi-party-led entity that uses crowd intelligence to steer decision making. 

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Other important aspects of a DAO, apart from being fully autonomous (as the name suggests) are that it is transparent. This is achieved by using smart contracts, that lay out the foundational rules, and in a further step also execute upon agreed decisions. A DAO also needs to contain means to put forth proposals and a voting mechanism to achieve consensus. 

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The interesting part about a DAO is that all proposals, the voting process, and the underlying code can all be publicly audited and therefore grant 100% transparency throughout the decision making process.

Ultimately, a DAO is governed entirely by its members who take action as a collective to decide about the future of a project. This can include but is not limited to, technical upgrades, treasury allocations, and grant disbursements.

Under normal circumstances, community members are the ones that create proposals that decide about the future of the protocol. These community members then come together in order to vote on the different proposals. If proposals reach a predetermined level of consensus, they are to be considered passed, and must therefore be enforced by the rules instantiated within the smart contract.

These kinds of hive intelligence frameworks should align the incentives for participants. It should be in any individuals' best interest to make use of their voting rights and to approve proposals that serve the best interest of the protocol

A robust and healthy protocol will gain more users and use cases, which in turn will increase the value of the token of each DAO member. In short, as the protocol improves and succeeds, so does the token holder.

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