Beginner's Guide to Decentralized Autonomous Organization or DAO

In order to understand DAO blockchain clearly, you need to take a look at a practical scenario. Think of a situation in which a ship crashed on an unknown and desolate island with hundreds of survivors. Now, the survivors must work in coordination and cooperation with each other to survive on the island until help arrives. Therefore, the survivors must follow a specific set of rules for maintaining coordinated behavior to survive on the island. However, the survivors would definitely need rulers and people to enforce the rules, thereby leading to the principal-agent dilemma. Interestingly, the principal-agent dilemma provides an ideal explanation for different DAO examples and how they work. The people making decisions on behalf of other people are referred to as agents, and the others are referred to as the principal. Since decision-makers or the agents distribute risk associated with their actions among others, the risk for the principal increases profoundly.