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What’s a Crypto DAO? Decentralized Autonomous Organizations, Explained

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Nov. 18 2021, Published 11:57 a.m. ET

If you've ever read about cryptocurrency, you've almost certainly encountered the word "decentralized." But certain movements require some sort of organization, even if it's not the traditional centralized hierarchy we know. That's why crypto users have the DAO—decentralized autonomous organization.

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What are crypto DAOs, and how are cryptocurrency traders using them to generate major shifts in the blockchain landscape?

A crypto DAO wants to buy a rare copy of the U.S. constitution

In a newsletter called Not Boring, author Packy McCormick writes about ConstitutionDAO, which has been organized specifically for buying a rare copy of the U.S. constitution. Much like a SPAC emerges for the sole purpose of taking a company public, this DAO was built for the purpose of acquiring a tangible asset to trade on the blockchain.

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According to ConstitutionDAO, "For the first time in 33 years, one of 13 surviving copies of the Official Edition from the Constitutional Convention will be publicly auctioned by Sotheby's. It is one of the two copies that are still owned by private collectors." The current owner of the constitution copy will donate any proceeds from the auction sale.

How a crypto DAO works

Traditional companies or organizations operate using a hierarchy, with a CEO at the top and junior positions at the bottom. By nature, cryptocurrency is decentralized, which means there's no hierarchy or centralized leadership. Because of this, a DAO operates as an egalitarian collective that allows people "to self-govern with unparalleled levels of autonomy and freedom."

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ConstitutionDAO says it's fitting to use DAO technology to "honor and protect the greatest historical tool for human governance: the U.S. Constitution." If ConstitutionDAO secures the tangible asset in the auction, it will get its own place on the blockchain and trade as an NFT (non-fungible token).

How much does the ConstitutionDAO need to make to afford the constitution?

The ConstitutionDAO is trying to buy a $40 million document that's likely to be auctioned for much higher. The organization will publicize the total amount raised after the Sotheby's auction ends. ConstitutionDAO is using a Gnosis Safe wallet with 13 signers, whose names can be viewed on the organization's Twitter.

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Other crypto DAOs

The Certified Digital Assets Advisor (CDAA) group has a DAO specifically for financial advisors to help mediate the cryptocurrency landscape as it develops. Upcoming DeFi platform Popcorn will also use a DAO structure. According to Coindesk, "Popcorn is a yield aggregator that allows some of its returns—up to half of them, in fact—to be directed towards charitable organizations."

Meanwhile, the Augur DAO powers sports betting markets and options by enabling users to make predictions of various kinds. Users can predict election results, sports wins, and even stock values on a specific date.

As McCormick writes, "Web3 isn’t a panacea, but its primitives, like NFTs, tokens, and DAOs, give us new ways of collaborating and distributing ownership. It lets us pool resources to do more together."

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