The Decentralized Autonomous Organization ('DAO') is a fully decentralized and autonomous corporation where shareholders, who buy DAO tokens (think voting shares) using Ethereum's ETH, vote on innovative projects put forward by other 'shareholders' who own DAO tokens.
If gaining approval via a majority of votes, projects are then funded using the paid in capital (Ethereum ETH) provided by DAO token holders. Projects which generate revenue can either then retain these earnings in the DAO, or distribute them to token holders.
The DAO has already raised $130m in paid in capital, making it one of the largest crowdsourced projects of all time. Its unique structure purports to provide transparency, true democracy, universal participation (so long as you know how to manoeuvre ETH and DAO) and privacy to 'shareholders'. Unlike a traditional corporation, there is no restriction on who can buy into the corporate entity, there is complete shareholder anonymity, voting is real-time and power of authority isn't delegated to executives or a board of directors.
Critics aren't convinced. The main drawback of a DAO is that experienced management is replaced by shareholders, which introduces potential lack of expertise and coordination into the process.
Any cursory review of modern history (or a quick read of Animal Farm) will flag up the problems: indecision paralysis; wasted time and resources on voting and bureaucracy; entirely non-diplomatic means of grabbing power just to get things done; uninformed decision making; exploitation of the ignorant; tragedies of the commons scenarios and last but not least: a lack of skin-in-the-game accountability for poor decision making leading to post-facto due diligence processes with dire consequences for capital, human resources and environments. We won’t even mention that $110m raised in illiquid tokens based on mark-t0-market valuations is akin to a paper profit only, and might create a helluva Ether currency collapse if it’s actually spent on resources in the real-world…