DAO refers both to decentralized autonomous organizations generally and to the Ethereum-based DAO (organization) of the same name that collapsed in 2016.
DAO stands for "decentralized autonomous organization," the concept described in a March 2016 white paper written by Christoph Jentsch, who helped found the DAO. The point of any DAO is to automate decision-making in an investment fund. The fund is created by individuals paying in ether and receiving a proportionate number of DAO tokens. The DAO holders can propose to use some of the ether to fund projects that employ smart contracts on Ethereum, the ether platform. DAO holders vote to approve or disapprove an individual project and share in the revenues generated by successful projects. The white paper is general, meant to apply to any venture capital decentralized autonomous organization.
As of September 2022 there are nearly 5,000 DAOs in existence, about 2,300 of which have assets of more than $1 million, according to the tracker DeepDAO. A number of crypto projects have transformed themselves into DAOs, partly in an attempt to avoid regulatory scrutiny.
The DAO organization was an early experiment that failed due to a glitch in the protocol that was exploited by an unidentified developer. The DAO was a German cryptocurrency-based venture capital fund which failed shortly after its launch in May 2016.
In July 2017 the SEC issued an investigative report about the origins and failure of the DAO in which it clarified its views on the rapidly developing markets for ICOs. According to the report, almost any cryptocurrency that results from an ICO would be viewed as a security in accordance with the "Howey Test." Subsequently, the SEC and its then-chairman, Jay Clayton, made a number of statements and issued warnings to the public regarding ICOs.
A Singapore company, DigixGlobal, launched an example of one of the early DAOs, DigixDAO, which is governed by the holders of its DGD coins. DigixGlobal raised $5.5 million worth of ether in a half day-long crowd sale in April 2016 to create DigixDAO. Since then, DigixDAO launched the gold-based stablecoin DGX.
In December 2019, the online cryptocurrency news service CoinDesk, reported that Digix CEO Kai Cheng Chng had launched a project to consider the full dissolution of DigixDAO in an example of DAO governance. The company called it "Project Ragnarok." Operation of the Digix platform as well as issuance of DGX gold tokens were not to be affected by the outcome of the vote. In mid January 2020 Chng announced that 52 DGD holders, representing more than 90% of the holdings, voted to liquidate the $64 million treasury.
- ↑ Coinbase is adding another cryptocurrency to its platform. Business Insider.
- ↑ Crypto DAOs and Their Token Holders Aren’t Safe From the CFTC. Bloomberg.
- ↑ Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO. U.S. Securities and Exchange Commission.
- ↑ SEC Statement Urging Caution Around Celebrity Backed ICOs. SEC Division of Enforcment and Office of Compliance Inspections and Examinations.
- ↑ Chairman’s Testimony on Virtual Currencies: The Roles of the SEC and CFTC. U.S. Securities and Exchange Commission.
- ↑ Digital Gold 'Done Right' With DigixDAO Crypto-Trading On OpenLedger. Forbes.
- ↑ This Token Project Offered to Shut Down. Its Market Cap Shot Up $10M. CoinDesk.
- ↑ Project Ragnarok. Digix.
- ↑ DigixDAO Votes to Liquidate $64M Treasury. CoinDesk.