Defining Real and Fake DAOs

“DAO” in its purest form refers to an unincorporated association of persons using censorship-resistant technologies to permissionlessly engage in non-hierarchical governance of shared resources and goals. Organizations that do not meet this definition must not be deemed DAOs.

The Problem: “DAO” Has Lost all Clear Meaning

The term “DAO” is applied to so many different organizations that it has become close to meaningless. Whatever DAOs are, they must fall under 3 clear and distinct concepts: 1) be decentralised, 2) be organisations and 3) be autonomous.

Webster defines “decentralization” in relevant part as follows: "the delegation of power from a central authority to regional and local authorities". This means that decentralization occurs when power is widely dispersed or distributed.

Using blockchain or smart contracts in some superficial way is not enough for an organization to be considered a DAO. For organizations that use smart contracts but aren’t DAOs, Gabriel prefers the term Cybernetically enhanced organizations.

A popular misunderstanding of smart contract technology is that smart contracts work “automatically” without human intervention. Smart contracts are just passive object code stored on the blockchain. This code is called by miners/validators when users request it to be called by offering to pay miners for making such calls. In other words, smart con... See more

A good example of the latter type of decentralization is Bitcoin. Other than the consensus protocol itself, there are no formal governance rules existing among mining nodes, non-mining nodes, users, exchanges and core developers, but these groups all have different kinds of influence over Bitcoin and essentially govern Bitcoin on an emergent basis ... See more

For example, Twitter Inc. is centralized (it has a board of directors as its ultimate decision-making authority) and relatively non-autonomous (it exists to generate profits for the benefit of its stockholders). The Ethereum Foundation, like Twitter Inc., is centralized (it has a board of directors or similar governing body), but, unlike Twitter In... See more

Each of the three words must be there for a reason, with none of them being redundant with the others. We must separately check each of these three boxes in order to determine whether something is a DAO.