Thanks to Angela Kreitenweis and David Minarsch for feedback and review.

The origins of decentralized autonomous organizations (DAOs) trace back to foundational ideas developed long before Ethereum’s inception. In 1996, Nick Szabo introduced the concept of "smart contracts," self-executing agreements embedded in software that could automate and enforce terms without intermediaries. By envisioning a system where computational logic governs contractual obligations, Szabo laid the groundwork for creating entities capable of operating autonomously. These early theoretical frameworks prefigured the emergence of DAOs as self-governing organizations.

Decentralized Autonomous Corporations

In 2013, Vitalik Buterin introduced the concept of decentralized autonomous corporations (DACs) in a series of articles published in Bitcoin Magazine. In his writings, Buterin envisioned DACs as blockchain-based entities characterized by three core principles:

1. Autonomy: Operations are guided by rules encoded in smart contracts, allowing the system to function without requiring ongoing human input.
2. Decentralization: Authority and decision-making are distributed among participants rather than centralized in a single entity.
3. Transparency: All processes and activities are recorded on a public blockchain, ensuring accountability and visibility for all stakeholders.

Buterin’s early work proposed that DACs could be implemented on Bitcoin’s blockchain. However, Bitcoin’s scripting language lacked the flexibility to handle the complex logic required for such entities. This limitation highlighted the need for a more advanced blockchain capable of executing sophisticated programs.

This was one of the gaps in Bitcoin that motivated the development of Ethereum—a platform designed with a Turing-complete programming language. Ethereum’s advanced capabilities enabled the realization of DACs in a more functional and versatile form, eventually evolving into what we now recognize as DAOs.

From DACs to DAOs

The transition from DACs to DAOs was not merely a rebranding but an expansion of the concept. While DACs were initially framed as blockchain-based corporations with predefined operational rules, DAOs expanded the idea to include more flexible governance models.

Key distinguishing features of DAOs include:

• Programmable Governance: DAOs operate based on rules encoded in smart contracts, ensuring decisions are automatically executed when conditions are met.
• Tokenized Voting: Members use governance tokens to propose and vote on changes, enabling decentralized decision-making.
• Transparency: Every action and decision is recorded on-chain, ensuring accountability and verifiability.
• Global Accessibility: DAOs are open to participants worldwide, fostering a diverse and inclusive membership.
• Modular and Adaptive Design: DAOs can evolve over time, incorporating new features or governance mechanisms to meet the changing needs of their communities.

These features allowed communities to create organizations tailored to their specific needs, ranging from venture funding to community resource management. By integrating programmable governance and decision-making, Ethereum’s DAOs addressed many of the limitations that had constrained the original DAC vision. For instance, platforms like Aragon emerged, enabling users to design DAOs with modular governance systems, and MolochDAO demonstrated simplified, trust-minimized funding mechanisms.

This evolution from DACs to DAOs reflects the broader shift in blockchain innovation—moving from static, rigid frameworks to dynamic systems capable of adapting to a wide variety of use cases. It also highlights how Ethereum’s design addressed the limitations of Bitcoin’s infrastructure, paving the way for decentralized governance.