A brief history of DAOs
If this organizational structure sounds a lot like a co-op, you’re on the right track. Businesses formed as a collective of independent people and small businesses with a like-minded goal have been around for a long time (for example, maybe you have a local farmers’ co-op where you buy groceries). The twist here is that DAOs are created and managed on a blockchain, the same distributed ledger system that cryptocurrencies use.
Not long after the Ethereum blockchain network was launched in 2015, the very first DAO -- simply called The DAO -- was started. It was envisioned as a decentralized venture capital fund geared toward investing in Ethereum developer projects. By May 2016, The DAO had raised $150 million in investor funds, but security issues were exploited by hackers over the summer of 2016. Some one-third of The DAO’s funds were diverted to the hackers’ account, and The DAO’s ownership tokens were delisted from crypto exchanges by the end of the year.
Since then, many security issues have been addressed and numerous DAOs have popped up in the crypto and digital asset community. A diverse mix of uses are emerging for DAOs. One mentioned earlier, ConstitutionDAO, raised almost $50 million in funds to bid (unsuccessfully) on an original copy of the U.S. Constitution. The metaverse real estate platform Decentraland (MANA +1.02%) that sells virtual parcels of land is a DAO. Crypto trading site Uniswap and its Uniswap Protocol Token (UNI +1.80%), built on Ethereum, are also part of a DAO. In fact, most decentralized finance (DeFi) platforms are managed with a DAO.