The Decentralized Autonomous Organization (DAO) is a virtual entity that exists in cyberspace / the internet. It comes into existence when a group of people decide to form a DAO.
Once this initial decision to create is taken the participants may decide to extend participation to a wider community. It is possible that this process could well be entirely anonymous (subject to the technical skills of the participants).
A DAO may be established with a view to raising or investing / managing funds raised, for example to develop a specific idea or a range of ideas or within a particular sector. Alternatively the purpose of the DAO could well be civic - to remove the inherent weaknesses of outdated political structures. Participants / investors 'invest' their funds from their own cryptocurrency holdings or by converting fiat to Ether (the unit of the Ethereum platform). This transfer of ether appears on the Blockchain.
In exchange for ether, tokens are created which represent membership as well as ownership of a portion of the DAO; these tokens are assigned to the account that sent the ether. The amount of tokens created is proportional to the amount of ether transferred.
The ownership of these tokens can be transferred to other accounts using transactions on the Ethereum blockchain as soon as the funding period is over.
The DAO purely manages funds, it exists purely in the ether. In itself, it does not build a product, write code or develop hardware. It requires contractor(s) to accomplish these and other goals. Contractors are hired when their proposal to the DAO is approved.
Every member of the DAO is allowed to submit proposals to spend a portion of the total ether raised, denoted by transfer, on funding projects.
Members of the DAO cast votes weighted by the amount of tokens they control. Tokens are divisible, indistinguishable, fungible and can easily be transferred between accounts. Within the contracts, the individual actions of members, cannot be directly determined.
An important (r)evolutionary step
The DAO structure is a most important (r)evolutionary step:-
it allows the DAO Token holders to control 100% of funds from day one
it is immutable code-wise
it removes the layers of intermediaries
it negates Government, corporate & community paralysis due to corruption & ineptitude