A Decentralized Autonomous Organization is governed by a set of software rules enacted by smart contracts on a blockchain. Potential use-cases are presented, as well as current applications of the technologies. DAOs promise to enable novel decision-making processes in an organization, innovate the current business models, and create new ones.

1. Decentralized Autonomous
Organizations: Concept & Practical
Examples
Jan Brejcha, Ph.D.
User experience consultant/Business developer
jan@brejcha.name
http://jan.brejcha.name
Expanded and updated from a talk at the
Prague Blockchain Meetup #2, 19.5.2016 (updated 4.7.2016)

2. Contents
• Summary
• About
• The Blockchain
• DAO: Beyond Smart Contracts
• DAO: Prediction Markets (Futarchy)
• DAO: Noteworthy Examples
• The DAO: A Case Study
• Conclusion
• Resources

3. Summary
• This presentation aims at providing a brief introduction to
Decentralized Autonomous Organizations (DAOs), and their
underlying technologies, such as the blockchain, multisignature, and
smart contracts.
• Potential use-cases are presented, as well as current applications of
the technologies.
• DAOs promise to enable novel decision-making processes in an
organization, innovate the current business models, and create new
ones.
• Early adopters or investors should exercise due diligence, as the
current platforms are still under heavy development.

4. About
Jan Brejcha, Ph.D.
Jan is a business developer with a passion for human-machine
interaction. He is focusing on product innovation through user
research. His recent projects include cross-cultural user-interface
guidelines, and financial capability research to improve financial well-
being for millenials.

5. The Blockchain
• Satoshi Nakamoto in 2008 originally defined “an electronic coin as a
chain of digital signatures.” The coin transactions are timestamped
within a peer-to-peer network “by hashing them into an ongoing
chain of hash-based proof-of-work, forming a record that cannot be
changed without redoing the proof-of-work.”
• The chain of transaction blocks, or blockchain, is a shared public
ledger of bitcoin transactions, synchronized in a peer-to-peer
network.
• The idea of using a decentralized, shared, immutable database has
been adopted by other developers (http://ethereum.org or
http://rootstock.io – combining the public blockchain with business
logic algorithms, or private blockchain initiatives – e.g.
http://r3cev.com/ by banks).
• Extending the use of the blockchain beyond finance helps to create
new business models, and potentially disrupt the current ones.

6. DAO: Beyond Smart Contracts
A Decentralized Autonomous Organization is governed by a set of
software rules enacted by smart contracts on a blockchain. The
governance rules (voting, rewards, etc.) are then described in an
accompanying whitepaper.
DAOs can be incorporated for profit, or not for profit. The main
distinctions from other types of organizations/corporations include:
Corporation Cooperative DAO
Management Board of directors Board of members Token holders
Ownership Shareholders Members Token holders
Supervision Supervisory board Supervisory board
team
Curators
Workforce Employees Members Contractors

7. DAO: Prediction Markets (Futarchy)
• The DAO can be also used as an alternative governance system to
promote a democratic decision-making process, be it on the level of
a company/organization’s board, community, or state.
• In this context DAOs can make use of prediction markets to evaluate
a possible future outcome of events (e.g. when voting on proposals
to support development projects).
• The concept of futarchy has been introduced by Robin Hanson in
2000, and is being applied in various cryptocurrency projects
(Ethereum, Augur).

8. DAO: Noteworthy Examples
• The DAO (http://daohub.org): A universal DAO hub working as an
investment fund/equity crowdsourcing platform.
• Maker (https://makerdao.com): Maker DAO backs the value of the
dai stablecoin on the Ethereum blockchain. A stablecoin is a
cryptocurrency with price stability.
• DIGIX (http://dgx.io): The first DAO on the ethereum blockchain is
DIGIX; a digital gold asset platform that will interchange ethereum
tokens with DGX gold tokens.
• Colony (http://colony.io): A platform for organizations, and job market
for freelancers based on the wisdom of the crowd
• Augur (http://augur.net): Prediction markets have proven to be more
accurate at forecasting the future than individual experts, surveys or
traditional opinion polling

9. The DAO: A Case Study
DAO token holders: Right to vote on contractor’s proposals
(deliverables, responsibilities, and operating parameters), Receive
rewards generated from the output from the contractor’s proposals
Contractors: Submit proposals for the development of products or
services
Curators: Can add Contractor addresses to the whitelist, authorizing
them to receive ETH from The DAO, A mechanism that indirectly
prevents a 51% attack
Legal framework: E.g. DAO.LINK (http://daolink.io/), gives real world
companies the ability to work for DAOs while still being able to fill out
the necessary documentation required to stay compliant (regulatory,
tax, VAT solutions)

10. Conclusion
• Blockchain-based technologies can provide an innovation
opportunity of current business models, and can create new ones. In
this regard they can help create a blue ocean (uncontested market).
• The DAO is an example of a novel entity that could help lower
transaction and information costs, increase member (or token
holder) rewards, and improve the quality of the decision-making
process by integrating the wisdom of the crowds.
• As these technologies are quite young, they need to be thoroughly
tested to find both the most suitable use-cases, and potential
vulnerabilities (security, privacy issues).
• On the whole, blockchain-based technologies have a promising
potential, when applied to solve real user needs (e.g. financial
inclusion), and when presenting such solutions in a useful, usable,
and appealing way.

11. Online resources
• ADRESEN, Gavin. M-of-N Standard Transactions. 2011-10-18. URL:
https://github.com/bitcoin/bips/blob/master/bip-0011.mediawiki
• BUTERIN, Vitalik. DAOs, DACs, DAs and More: An Incomplete Terminology
Guide. 2014-05-06. URL: https://blog.ethereum.org/2014/05/06/daos-dacs-das-
and-more-an-incomplete-terminology-guide/
• BUTERIN, Vitalik. An Introduction to Futarchy. 2014-08-21. URL:
https://blog.ethereum.org/2014/08/21/introduction-futarchy/
• HANSON. Robin. Shall We Vote on Values, But Bet on Beliefs? Journal of
Political Philosophy, 2013. URL: http://hanson.gmu.edu/futarchy2013.pdf
• SZABO, Nick. 1997. Formalizing and Securing Relationships on Public
Networks. URL:
http://firstmonday.org/ojs/index.php/fm/rt/printerFriendly/548/469.
• NAKAMOTO, Satoshi. Bitcoin: A peer-to-peer electronic cash system. 2008.
URL: https://bitcoin.org/bitcoin.pdf

12. Books
• ANTONOPOULOS, Andreas M. Mastering Bitcoin: unlocking digital
cryptocurrencies. O'Reilly Media, Inc., 2014. ISBN 978-1449374044. Available
commercially from Amazon.
• CHAMPAGNE, Phil. The Book of Satoshi–the Collected Writings of Bitcoin
Creator Satoshi Nakamoto. 2014. ISBN 978-0996061315. Available
commercially from Amazon.
• MOUGAYAR, William. The Business Blockchain: Promise, Practice, and
Application of the Next Internet Technology. 2016. ISBN 978-1119300311.
Available commercially from Amazon.
• TAPSCOTT, Don; TAPSCOTT, Alex. Blockchain Revolution: How the
Technology Behind Bitcoin is Changing Money, Business, and the World.
Penguin, 2016. ISBN 978-1101980132. Available commercially from Amazon.
• WATTENHOFER, Roger. The Science of the Blockchain. CreateSpace
Independent Publishing Platform, 2016. ISBN 978-1522751830. Available
commercially from Amazon.

13. For more details please get in touch:
Jan Brejcha, Ph.D.
User experience consultant/Business developer
jan@brejcha.name
http://jan.brejcha.name
https://www.linkedin.com/in/janbrejcha
https://twitter.com/jbrejcha