The term DAO stands for “decentralized autonomous organization” and can be described as an open-source blockchain protocol governed by a set of rules, created by its elected members, that automatically execute certain actions without the need for intermediaries.

The DAO’s rules are embedded into computer code, which executes by itself based on the behavior of the protocol.

A DAO helps to keep a network safe and optimized without the need for manual intermediation by its members. Participants are not obligated by a legal contract, but rather incentivized by rewards in the form of native asset tokens that help them work towards a unified goal. 

In order to attract the financing necessary to run a DAO, the protocol will issue governance tokens to investors that represent not only membership but importantly, voting rights (similar to shareholder rights) needed to make changes to it.