• The DAO stands for Decentralized Autonomous Organization. The name implies, it's a corporation which is both autonomous and decentralized.
• Sometimes, it's also referred to as Decentralized Autonomous Corporation (DAC), but the term DAO is more often used because not all organizations are corporations.
• A DAO is a corporation which is represented by rules encoded as a computer program that's transparent, controlled by shareholders, and not influenced by the central government.
• A DAO is that the most complex form of a smart contract. A smart contract may be a computer virus that autonomously exists on the web, but at an equivalent time, it needs people to perform a task that it can't treat itself.
• A DAO's financial transaction record and program rules are maintained on a blockchain.
• DAO runs on a blockchain, and it's running on a distributed network, you'll have multiple combinations of various parties exchanging value and reaching agreements.
• It means, to a Decentralized Autonomous Organization, it doesn't matter that you are a person otherwise you are a robot. you'll even have devices communicating with devices, or devices communicating with people, or people communicating with people.

• Decentralized Autonomous Organization runs through rules encoded as a computer program called Smart Contracts.
• A smart Contract is an entity that lives on the web and exists autonomously. It also has individuals to perform a particular task that the automation program itself cannot do.

Let us take an example of Uber to know the working of DAO.

• Uber is an organization that permits you to call a car for yourself using a mobile app.
• Once you place your call, a driver will come up during a car, will pick you up and drive you to your destination.
• The app will look out of processing the payment, and therefore the driver is going to be set off to go to the next rider.
• A mobile app runs the whole process. There's a person's component, which is that the driver that drives over and drives off.
• If you tie-in AI, there's no reason to wish a driver to return and interact with you. You'll have a self-driving car come across and pick you up.
• The entire thing is automated and self-executing so you'll actually process the payment directly on the app and the car will interact with you directly, without requiring a human element.
• This type of process is often created into a Decentralized Autonomous Organization. Now, it doesn't necessarily mean that you need to be replaced by a computer.
• You'll even have multiple citizenries on a distributed network, and those human beings will reach these agreements supported smart contracts between each other.

• Shareholder participation in DAOs are often problematic. For eg, BitShares has seen a scarcity of voting participation, because it takes time and energy to think about proposals.

• The precise legal status of this type of business is unclear; some similar approaches are regarded by the U.S. Securities and Exchange Commission as illegal offers of unregistered securities. Although unclear, a DAO may functionally be an organization without status as a corporation: a general partnership. This means potentially unlimited legal liability for participants, even if the smart contract code or the DAO's promoters say otherwise. Known participants, or those at the interface between a DAO and controlled financial systems, could also be targets for regulatory enforcement or civil actions.

• The code of a given DAO will be difficult to change once the system is up and running, including bug fixes that might be otherwise trivial in centralised code. Corrections for a DAO would require writing new code and agreement to migrate all the funds. Although the code is visible to all, it's hard to repair, thus leaving known security holes open to exploitation unless a stay is named to enable bug fixing