Decentralised Autonomous Organisations (DAOs)

  • DAO stands for Decentralised Autonomous Organisation, which by definition does not have any central authority and is community-led.
  • Autonomy and transparency are the ideological backbones of DAOs.
  • The DAOs are designed to be self-governing and self-sustaining and are powered by blockchain technology.
  • It is managed by a set of rules that are agreed upon by all the members of the organization.
  • Additionally, they are meant to be transparent and accountable, and their operations are open to public scrutiny.
  • They are highly efficient, as they are run by computerized smart contracts, which can be programmed to execute complex tasks quickly and accurately.

How do DAOs work?

  • DAOs are self-governing organisations where their rules are etched in the code on smart contracts. People buying into the DAOs agree to abide by these rules.
  • DAO has a built-in treasury where it stores a cache of its digital currency which the members only have access to, approved by the organisation.
  • To participate, typically you need to own a token of that particular DAO. That’s how you buy a stake there, similar to how you would buy stakes in a centralised company, except for DAO, you have a direct influence on decision-making.
  • So, those with stakes in a DAO will get voting rights and will be able to influence how it runs, by deciding on or proposing governance rules.
  • In theory, if anyone transgresses the rules or is found in violation of the smart contract, the funds are locked and no one will be able to use the DAO. This was made to keep transparency in motion and bad actors in check.


  • legality and regulatory framework : Traditional legal systems are still catching up with the decentralised nature of these entities, leaving room for uncertainty in many jurisdictions
  • Taxation of transactions within DAOs, identity verification, and compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations further add layers of complexity to the legal framework.
  • Dispute resolution, often relying on code-based solutions, present a unique challenge in the absence of traditional legal mechanisms.

Why are DAOs gaining popularity in India?

  • In India, DAOs are gaining popularity due to their potential to provide more efficient and secure services.
  • Both Crypto and blockchain are in their nascent stages in India but they are rapidly growing.
  • The adoption of blockchain and crypto has paved the way for the increase in popularity of DAOs. Added to this, there is a large unbanked population in India who are not part of the formal economy as they cannot avail of banking services.
  • The DAOs can be a reliable way for this unbanked population to have access to financial services.
  • Community-driven decision-making and low transaction costs are acting as catalysts in the adoption of DAOs.

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