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What is a DAO? – The Framework Behind Cryptocurrency

What is a DAO? – The Framework Behind Cryptocurrency

What is a DAO? – The Framework Behind Cryptocurrency

DAO

A decentralized autonomous organization or DAO is a set of rules within a computer program representing an organization. Not being influenced by a central authority is a system of reporting and recording rules and transactions within a blockchain. It’s a system of shared governance operated by a non-central entity. DAOs are the framework behind blockchains.

Historically, DAOs have been used within blockchains to create a safer arena for tracking financial transactions. It is this tool that makes the decentralized aspect of cryptocurrency and other blockchain use cases. Logistically, DAO members can vote on changes within the organization to change some of the details regarding the operation of the DAO.

In Summary, a DAO is the structure behind blockchain and thus cryptocurrency. Its design promotes equality in a decentralized fashion. However, in practice, there are some concerns like legality and security.

Decentralized Finance’s Interest in DAOs

Concerning Decentralized Finance (read about it here), DAOs have created hype within the prospects of a decentralized global financial market. Specifically, it is the tool that would facilitate a marketplace free from external organizational pressures, like governments.

Legal Questions Raised in the United States

The exact legal status of DAOs in the United States is currently unknown. Some people in the space believe that DAOs should be reported to the SEC to sell illicit securities. The growth rate of DAOs will fuel change within the United States legal systems. Read about the SEC’s thoughts on DAOs as securities here.

Future of DAOs

While it is unclear how DAOs will develop over the next decade, the framework promotes equality and transparency through decentralization. However, in practice, questions are raised about the ethics of DAOs on a global stage, including their liability.

Talk to a Crypto Taxation Professional 

At Nimrod Yaron & Co., we serve as a professional resource for individuals and companies invested in cryptocurrency. We are specifically assisting with intelligent cryptoasset tax planning. Contact us today to learn about all of the services we offer.

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