Overview
A Decentralized Autonomous Organization (DAO) is an organization governed by rules encoded as smart contracts on a blockchain. Rather than hierarchical management, DAOs use token-based voting mechanisms to make collective decisions — from treasury allocation to protocol upgrades.
Core Mechanisms
- Smart contract governance: Rules are code — decisions execute automatically when vote thresholds are met
- Token-based voting: Governance power is typically proportional to token holdings
- On-chain treasury: Funds held in smart contracts, released by governance votes
- Transparent operations: All proposals, votes, and transactions are publicly auditable
Challenges
- Plutocracy risk: Large token holders dominate voting
- Low participation: Most token holders don’t vote
- Attack vectors: Flash loan governance attacks, vote buying
- Legal ambiguity: Unclear legal status in most jurisdictions
Related
- Blockchain — The infrastructure DAOs run on
- Open Value Networks — Alternative to DAOs for commons-based peer production
- Governance and Community — Broader governance models