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Decentralized Autonomous Organization (DAO), is an entity that is governed by decentralized technology.
Launched in 2016 after one of the largest crowdfunding campaigns ever, DAO aimed to provide a new decentralized business model for commercial and non-profit enterprises
DAO also attempted to “hard-code” rules and practices into their technological DNA, i.e. the rules that are used to govern an organization are enforced digitally
For example, a DAO’s system of smart contracts could be used to automatically set aside a portion of a project’s profits for a charitable cause.
Other instances of utility include CEO’s position having to be re-evaluated by a blockchain-based vote every two years.
DAO’s code is open source and was initiated on the Ethereum blockchain, boasting no conventional management structure or board of directors.
DAO Setbacks and Influence on Ethereum
Even from its inception, DAO was met with many setbacks and concerns. As a stateless entity, DAO is not tied to any particular country.
As a result, the question of regulatory jurisdiction remains convoluted.
Perhaps its biggest setback came in June 2016 when users exploited a vulnerability in DAO’s code.
This allowed user to siphon off over 30% of The DAO's funds to a subsidiary account.
As a result, the Ethereum community decided to hard-fork the Ethereum blockchain a month later to restore virtually all funds to the original contract.
This move itself was controversial, with the original unforked blockchain being maintained as Ethereum Classic.
Consequently, Ethereum has since operated on two separately, but active blockchains, each with its own cryptocurrency.