# Decentralized Autonomous Organizations (DAO)

With the mass adoption of blockchain technology, a new form of interaction between people is gaining popularity. A decentralized autonomous organization, or DAO, is a company managed in a decentralized manner using blockchain-based [smart contracts](https://kb.iqbid.io/books/glossary/page/smart-contract). The main idea behind a DAO is to give a large community of stakeholders the opportunity to participate in its governance and future development.  
DAOs work thanks to a combination of various [smart contracts](https://kb.iqbid.io/books/glossary/page/smart-contract) that allow participants to take an equal part in the decision-making processes within the organization. Decisions made by the community of contributors include how the company will use funding and resources. In order for the organization's plans and rules to be adopted, a certain percentage of the community must reach a consensus. This consensus is achieved through a decentralized, distributed blockchain, and each DAO independently determines the percentage required to approve decisions.

Initially, Bitcoin was perceived as the first project that came close to the ideal of a DAO. However, it was only the emergence of the Ethereum blockchain and the capabilities of its [smart contracts](https://kb.iqbid.io/books/glossary/page/smart-contract) that gave a boost to the development of DAOs, bringing them closer to their ultimate goal of full transparency and community governance.

The idea of decentralized autonomous organizations is still constantly evolving, as it is a relatively new phenomenon in the business world. An important distinction to note is that DAOs cannot produce goods or develop code or hardware. However, DAOs can easily hire contractors to perform all these services once a community consensus approves a hiring contract.

Decentralized autonomous organizations are designed to be fully transparent so that all financial transactions conducted by the company are visible to all shareholders and the DAO community. The [smart contract](https://kb.iqbid.io/books/glossary/page/smart-contract) and the DAO's underlying code are also publicly available. Such a high level of transparency is absolutely essential for the concept of a DAO. Like the core motive behind cryptocurrencies, the idea of a DAO is to transcend traditional centralized corporate management and create an absolutely transparent organization whose actions and finances are completely public.

Decentralized applications (DApps) play an important role in the operation of DAOs. DApps are software products developed using [smart contracts](https://kb.iqbid.io/books/glossary/page/smart-contract), and DAOs are actually a type of decentralized application. While most DApps are created to handle financial management, DAOs are designed to serve as a decentralized platform for community decision-making.