Too many things are being referred to as DAOs. In this post I’d like to discuss what constitutes a DAO, and what we should refer to other concepts as.
Smart contracts are a foundation of Ethereum. They allow a contract to be executed and all aspects of their execution to be verified by any anonymous observer. With this being a major difference between Contracts and Smart Contracts, I think it is reasonable to use “Smart” to refer to this in other terminology.
A DAO is a Decentralized Autonomous Organization. There are three simple requirements for something to be a DAO: It must be Decentralized, it must be Autonomous, and it must be an Organization.
A DAO must be decentralized. Many organizations that try to call them self a DAO are organizations with a centralized leadership that must be trusted to provide a service. Even if everything that the organization does is verifiable on a blockchain, if the organization itself is hierarchical, it cannot be a DAO.
Organizational autonomy is not the same as robotic autonomy. Just because an organization is expected to continue existing on its own forever, does not mean that it is autonomous. An autonomous organization must be autonomous from, or independent from all other organizations. The most obvious offenders are subsidiaries of other organizations. The offender which is most often called a DAO is a for-profit organization. If your organization has a fiduciary duty measured in a currency, it is not autonomous from the issuer of that currency, even if that currency is managed by a DAO.
A DAO must be an organization. It has to be a way for multiple people to decide how to expend their labor. A contract is not an organization. An account is not an organization.
One requirement that I did not list was to have anything to do with a blockchain. Blockchains have created new and exciting ways to create DAOs, but the concept has been around for hundreds of years. I plan to talk in the future about how the Rochdale Pioneers created an early DAO in the 19th century.
Other terms to use instead
Aragon allows people to create organizations where all operations of the organization can be verified by an anonymous observer. This is the same advancement that turns contracts into smart contracts, so I would argue that it should also turn an organization into a smart organization. It can also be used to refer to things as Smart Corporations, Smart Non-Profits, and Smart LLCs.
Another major use for Aragon which is not DAOs is the creation of individual accounts with more security features than simple public/private key accounts. These should probably be referred to as smart accounts rather than personal daos on account of not being decentralized, and not being organizations.