DAO (Decentralized Autonomous Organization)

A DAO (Decentralized Autonomous Organization) is an organization whose rules and governance are encoded in smart contracts on a blockchain. There is no central management — decisions are made by token holders voting on proposals, and outcomes are automatically executed by the code.

How a DAO works

1. Rules are written into smart contracts and deployed on a blockchain
2. Members acquire governance tokens (voting rights)
3. Any member can submit a proposal (e.g., spend treasury funds, change a protocol parameter)
4. Token holders vote; if quorum and threshold are met, the contract executes the decision automatically
5. All votes and actions are publicly visible on-chain

Examples

• Protocol DAOs — govern DeFi protocols (e.g., Uniswap, Compound)
• Investment DAOs — pool funds to invest collectively
• Mining pool DAOs — community-governed pools

Risks

• Smart contract bugs — a flaw in the governance contract can be exploited (the 2016 "The DAO" hack drained $60M)
• Voter apathy — most token holders don't vote, concentrating power in large holders
• Regulatory uncertainty — legal status of DAOs varies by jurisdiction

See also

• Blockchain
• Cryptocurrency
• DAC
• DeFi