DAO (Decentralized Autonomous Organization)
An internet-native business that's collectively owned and managed by its members.
#Plain-English Definition
A DAO is like a company where there is no CEO. Instead of a boss making decisions, the rules are written into code (smart contracts), and decisions are made by voting. If you own the DAO's tokens, you get to vote on how the organization's money is spent or what rules to change.
In prediction markets, DAOs often govern the platforms themselves (like the Gnosis DAO or DXdao), deciding on fee structures, dispute resolution mechanisms, or protocol upgrades.
#How It Works
- Smart Contracts: The rules (e.g., "anyone with 100 tokens can propose a vote") are coded onto the blockchain.
- Tokens: Membership is usually defined by ownership of a specific crypto token.
- Proposals: Members submit proposals (e.g., "Let's spend $5,000 on marketing").
- Voting: Members vote on the blockchain. If the proposal passes, the smart contract automatically executes the action (e.g., sending the funds).
#Why It Matters for Prediction Markets
- Decentralized Resolution: Some markets use DAOs (like the UMA token holders) to resolve disputes, rather than a centralized company.
- Censorship Resistance: A DAO-run platform is harder to shut down than a traditional company because it lives on a distributed network.
- Community Ownership: Users who trade on the platform can often earn governance tokens, giving them a say in how the platform evolves.
#Key Takeaways
- DAOs are organizations run by code and community votes, not executives.
- They provide the governance layer for many decentralized prediction markets.
- They aim to be transparent, global, and resistant to centralized control.