A DAO is an on-chain governance structure where rules are encoded in smart contracts and decisions are made collectively by token holders or members.
A Decentralized Autonomous Organization (DAO) is a community-led entity with no central leadership. Rules and treasury management are enforced by smart contracts, and proposals are executed when predefined quorum and voting thresholds are met. DAOs enable transparent, programmable governance for protocols, treasuries, or communities.
Protocol DAOs manage parameters like fees or emissions. Investment DAOs pool capital to fund initiatives. Service DAOs coordinate contributors for tasks like audits or marketing.
Governance in DAOs is typically token-weighted, though some use reputation or soulbound credentials. Proposals are discussed off-chain (forums, Snapshot) and executed on-chain via time-locked contracts, multisigs, or governor contracts.
A DEX DAO might propose reducing swap fees from 0.3% to 0.25%. Token holders vote; if passed, a timelock updates the fee parameter in the AMM contract.
DAOs face coordination, voter apathy, plutocracy, and governance capture risks. Smart contract bugs or treasury key mismanagement can be catastrophic.
A low-turnout vote passes due to whale influence, pushing through changes that benefit a few large holders at the expense of most users.
All terms and definitions may update as the Cryptionary improves.