What Is the DAO?
The blockchain is a shared, decentralized, digital ledger that cryptologically seals and stores a permanent record of all transactions that occur on it. Bitcoin, the digital currency, is perhaps the most well-known and widely used application of blockchain technology. Ethereum is a different blockchain from Bitcoin and was created with the intention to allow self-executing smart contracts to be coded directly into it, permitting trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism. (See also: Is Ethereum More Important Than Bitcoin?)
The organizational theorist Arthur Stinchcombe once wrote that contracts are merely organizations in miniature, and by extension all organizations are just complexes of contracts. Firms are created using a series of contractual agreements, ranging from employment contracts and employee benefits, to deals with vendors and suppliers and obligations to its customers, to building leases and sales & purchases of equipment. Traditionally, these contractual obligations are quite costly because they need to be enforced externally by society in the form of a trusted legal system and through legal enforcement. Courts, lawyers, judges and investigators all form this system of contract enforcement. With a blockchain-based smart contract, however, much of these costs are greatly reduced or eliminated. This promises to make blockchain-based organizations more efficient, cost-effective, and competitive compared to traditional firms in the marketplace. (For more, see: Decentralized Autonomous Organizations: IoT Today.)
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