A Decentralized Autonomous Organization (DAO) is an organization which is governed by regulations that take the form of code within a computer program. This is transparent and governed by the shareholders of the organization. They are not influenced by any type of central government.
The financial transaction records and the rules of the DAO are contained with a blockchain network. The current legal status of these organizations is currently unknown.
A well-known example of a DAO was “The DAO”. The DAO was intended to gain funding through venture capital and was launched after garnering $100 Million during June 2016. The DAO was immediately targeted by attackers and around $50 Million worth of currency. The hack was reversed after a few weeks, by a hard fork within the Ethereum blockchain. The bailout of The DAO was made possible due to the users of Ethereum, casting a majority vote in favor of the bailout.
DAOs are defined by the fact that they use blockchain technology, to create a distributed ledger so that financial transactions can be verified and traced over the internet. This is very difficult to forge due to the inclusion of trusted timestamping and the distributed nature of the ledger itself.
The costs of operating a DAO are usually offset by the elimination of needing a trusted-third-party and of the requirement that repeated exchanges of contracts are recorded in different records.
For example, if the regulatory space of blockchain was resolved, they could, in theory, replace public paper-based title documents. Examples of this documents would be deeds and titles.