DAO

What is a DAO?

A DAO (Decentralized Autonomous Organization) is an organization where rules and decisions are encoded in smart contracts, and members vote on changes using governance tokens. There’s no traditional management—the code is the boss.

How DAOs Work

Basic Structure

1. Smart contracts define rules
2. Token holders submit proposals
3. Members vote with tokens
4. Approved proposals execute automatically
5. Treasury managed collectively

Governance Process

1. Proposal - Member submits idea
2. Discussion - Community debates
3. Voting - Token holders vote
4. Execution - Smart contract implements

Types of DAOs

Protocol DAOs

• Govern DeFi protocols
• Examples: Uniswap, Aave, Compound
• Vote on protocol parameters

Investment DAOs

• Pool capital for investments
• Collective decision-making
• Examples: MetaCartel, The LAO

Social DAOs

• Community-focused
• Membership-based
• Examples: Friends With Benefits

Collector DAOs

• Buy NFTs collectively
• Shared ownership
• Examples: PleasrDAO, Flamingo

Service DAOs

• Provide services
• Decentralized work coordination
• Examples: Developer DAOs

Famous DAOs

DAO	Purpose	Treasury
Uniswap	DEX governance	$2B+
Aave	Lending protocol	$500M+
MakerDAO	DAI stablecoin	$2B+
Lido	Liquid staking	$1B+

Joining a DAO

Steps to Participate

1. Research the DAO
2. Acquire governance tokens
3. Join community (Discord, forums)
4. Understand proposals
5. Vote on decisions

Where to Buy Governance Tokens

• Exchanges like Binance, Coinbase
• DEXs like Uniswap
• Some require staking or earning

Voting in DAOs

Voting Power

• Usually proportional to tokens held
• Some use quadratic voting
• Delegation is common

Common Vote Types

• Yes/No - Simple approval
• Multiple choice - Select option
• Ranked choice - Preference order

Quorum Requirements

• Minimum participation needed
• Prevents small groups deciding
• Varies by DAO

DAO Treasury Management

What Treasuries Fund

• Development costs
• Marketing initiatives
• Grants to builders
• Protocol incentives

Treasury Diversification

• Many hold native tokens
• Some diversify to stables
• Active management debates

DAO Challenges

Technical

• Smart contract risks
• Governance attacks
• Complexity of voting

Social

• Voter apathy
• Token concentration
• Coordination difficulties

Legal

• Unclear legal status
• Tax implications
• Liability questions

The DAO Hack (2016)

What Happened

• Original “The DAO” raised $150M
• Smart contract vulnerability
• $60M ETH stolen
• Led to Ethereum/Ethereum Classic split

Lessons Learned

• Audit smart contracts
• Bug bounties important
• Decentralization has risks

DAO Best Practices

For Participants

• Research before buying tokens
• Read proposals thoroughly
• Engage in discussions
• Delegate if not active

For DAOs

• Clear governance documentation
• Transparent treasury management
• Active community engagement
• Regular security audits

Future of DAOs

Emerging Trends

• Better tooling (Snapshot, Tally)
• Legal frameworks developing
• Increased mainstream adoption
• More sophisticated governance

Challenges Ahead

• Regulatory clarity needed
• Scaling governance
• Preventing plutocracy