DAO stands for Decentralized Autonomous Organisation. It is an automated organization that aims to allow everyone to govern a protocol, either by voting or by proposing initiatives.

A DAO works thanks to smart contracts that govern the rules of governance, which are immutable and transparent on the blockchain (99% of the time on ethereum).

To understand how it works and its usefulness, we will take the example of MakerDAO, a protocol that allows you to borrow $DAI, the decentralized stablecoin of their protocol.

The $MKR token allows to participate in the governance of the protocol, 1 MKR = 1 vote. Thanks to the DAO, MKR holders can influence the interest rate linked to the loan, the assets that can be used as collateral and many other parameters.

They can even propose their ideas to be voted on to improve the protocol.

if the vote is favorable to the proposal, then it will be automatically taken into account thanks to the smart contract, contrary to a traditional system which would have required an intermediary.

Like MakerDAO, more and more protocols are using this technology, which makes their protocol completely decentralized and autonomous, even if the team disappears.

We can see a lot of use cases for this technology, there are already cooperatives like @NexusMutual offering mutual insurance services that use a DAO to automate actions. We can also think of a decentralized and autonomous Uber.

To conclude, the DAO could be applied to any decision making, and allows to find a decentralized, secure, autonomous and especially community alternative to the governance of any type of organization.