What are DAOs and how did The DAO manage to raise $108 million in funds?

By Daniel Zo Bitcoin, Blockchain, FinTech, DAO, Ethereum

DAO, which stands for decentralized financial organization, represents a new concept that is quickly gaining ground in the financial, and developer markets.

To put things better into perspective, what makes DAO organizations special, is the fact that while they do have regulations and bylaws just like all other companies, their legal documents are actually embedded, and hard-coded into the distributed ledger we know as the blockchain. During the last year, financial institutions, enterprise tech companies and startups have all begun focusing on this exciting new technology, and thus started looking for ways to initiate secure transfers, incorporate smart contracts, and improve our current financial infrastructure.

DAO Ethereum

One of the DAO companies is ‘the DAO’, which represents a decentralized, autonomous organization first launched by the founders of Slock.it. The DAO, which has recently managed to raise a total of 10,600,000 Ether, which equals to roughly $108 million, represents a huge, complex smart contract firm that experts compare to a venture capital firm. Perhaps one of its most intriguing features, consist in the fact that it offers its very own voting shares, known as DAO tokens, in exchange for Ether, the digital currency that it is based on. While its tokens do not represent a form of equity, they can be used for various transfers, and to further facilitate blockchain adoption. In a recent press statement, the Eris Industries founders described DAO as “an algorithmically-governed programme that, in using trustless decentralised computing, can serve as a way to formalise multilateral relationships or transactions outside of traditional legal architecture.”

To further encourage shares to be bought, the DAO used various marketing techniques that granted users more tokens for the Ether spent, thus contributing to the initial success of the decentralized organization.

Based on this, those who decide to buy into The DAO will have the possibility to issue votes on how the organization’s funds are used, directly via the Ethereum interface. At this moment in time, reports indicate that two startups are the main candidates for DAO’s initial venture run.

It’s important to keep in mind the fact that currently, those who are interested into investing for The DAO, will be able to purchase shares via Ether, until May 28th.

Based on everything that has been outlined so far, what do you personally think about the DAO, and its foal to enhance the sharing economy? How about the $108 million in Ether that they have gotten? Let us know your thoughts in the comment section below.