---
# System prepended metadata

title: 'Chapter 3, Section 3: What Is A DAO?'
tags: [Chapter 3]

---

# Chapter 3, Section 3: What Is A DAO?

###### tags: `Chapter 3`

DAO stands for Decentralized Autonomous Organization.

In plain english, a group of people governing an entity, without the [[traditional hierarchical structure]].

**The Details**
You can think of a DAO as an entity where every member is personally invested in its success.

That is because everyone has a stake in a DAO. You join a DAO by [[buying a token]] to enter the organization.

As there is no central governing body in a DAO, all members vote and [[govern]] it collectively.

[[Smart contracts]] make sure that decisions made by a DAO are righfully executed. No under-the-table deals here, all transactions are made public (on the blockchain).

## Terms To Nutshell

1. Traditional Hierarchical Structure

Most corporations follow a hierarchy, with the CEO and Board of Directors at the top, trickling down to executives, managers, and the common worker.

The DAO abolishes this. 

Instead, everyone has a seat at the decision-making table.

However, this doesn't mean that everybody is "equal". This heavily depends on how invested you are in a DAO.

2. Buying a Token

Most DAOs are exclusive, in which only token-holders are allowed in the DAO.

These tokens can be NFTs, cryptocurrency, or a private access code shared IRL.

To join a DAO, you must almost always buy their token.

3. Governance

Governance plays a huge part in DAOs.

As a member of a DAO, you are entitled to voting on things that go on in the DAO.

In Lil Nouns DAO, members can vote on proposals - whether they'd like to see it happen or turn them down.

4. Smart Contracts

Smart contracts are protocols which executes itself, upon certain parameters being hit.

They are pre-programmed to execute an action, like transferring $1000 to Elon Musk, upon receiving a specific input, for example if the majority of members in a DAO vote "Yes" to that.

Smart contracts reside on the blockchain, so it's details are free to view by the public.

This is crucial in DAOs - since smart contracts are the executioner, there is no point "voting" or "governing" if the smart contract is fraudulent.