Glossary · D
DAO (Decentralised Autonomous Organisation)
An organisation governed by token holders through on-chain voting, with rules encoded in smart contracts rather than legal documents. Major DeFi protocols (Uniswap, Aave, Compound) are governed by DAOs. Token holders propose and vote on protocol upgrades, treasury spending, and parameter changes.
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How DAO works in practice
A DAO coordinates a group through on-chain voting rather than a company structure. In practice most DAOs sit somewhere between genuine collective control and a core team executing with periodic ratification, and where a given DAO sits is worth establishing before relying on it.
Worked example
A DAO votes to allocate treasury funds to a grants programme. The vote passes, a timelock elapses, and a multisig executes the transfer. Each of those three steps is a place where control actually lives.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
'DAO-governed' says little on its own. The questions that matter are who holds the multisig, whether there is a timelock, what quorum is required, and how concentrated voting power is. Many DAOs are a single team with a voting interface.
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DAO: common questions
- What is DAO?
- An organisation governed by token holders through on-chain voting, with rules encoded in smart contracts rather than legal documents. Major DeFi protocols (Uniswap, Aave, Compound) are governed by DAOs. Token holders propose and vote on protocol upgrades, treasury spending, and parameter changes.
- How does DAO work in practice?
- A DAO coordinates a group through on-chain voting rather than a company structure. In practice most DAOs sit somewhere between genuine collective control and a core team executing with periodic ratification, and where a given DAO sits is worth establishing before relying on it.
- Can you give an example of DAO?
- A DAO votes to allocate treasury funds to a grants programme. The vote passes, a timelock elapses, and a multisig executes the transfer. Each of those three steps is a place where control actually lives.
- What do people get wrong about DAO?
- 'DAO-governed' says little on its own. The questions that matter are who holds the multisig, whether there is a timelock, what quorum is required, and how concentrated voting power is. Many DAOs are a single team with a voting interface.
- Where can I learn more about DAO?
- Our full guide, What Is a DAO?, covers DAO in depth with worked scenarios and the risks involved. This glossary entry is the short definition.