DAOs & Governance

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DAOs & Governance Overview

What do we mean by DAOs & Governance?

A DAO, or Decentralized Autonomous Organization, is a new form of human organizational structure that enables people to work towards a shared goal. DAOs operate in a more distributed, transparent, and trust-minimized manner than traditional organizations. They use blockchain-based smart contracts to execute decisions and allocate ownership, making them transparent to members and resistant to tampering.

Despite the term 'autonomous', DAOs are not fully self-governing. They consist of human members and require manual actions, like voting, code deployment, and proposal discussions. The term 'autonomous' refers to certain DAO functions being hardcoded as immutable smart contracts, though human interaction is still necessary for these contracts to execute actions.

Learn More

  • The Ultimate DAO Report (from Bankless)

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Frequently asked questions

Yes! Their types vary based on their purposes and structures, ranging from protocol and investment management to cause support, social networking, and data handling.

Here are some of the main types of DAOs:

  1. Protocol DAOs: These support the development and management of decentralized applications (dApps) or dApp infrastructure, similar to companies or foundations. Examples include Tezos, which uses a DAO-like structure for protocol upgrades, and MakerDAO, which manages the decentralized stablecoin DAI.
  2. Investment DAOs: These make and manage investments using funds from a DAO-controlled treasury, similar to private equity funds or hedge funds. BitDAO, which allocates funds to Web3 projects, and MetaCartel Ventures, a for-profit DAO investing in early-stage dApps, are examples.
  3. Cause-based DAOs: These manage funds and initiatives for specific causes, akin to charities, lobbying groups, and grant programs. Examples include Gitcoin, a DAO that funds public goods for Ethereum and other open-source blockchain projects, and Big Green, a DAO that gives grants for food-growing education.
  4. Social DAOs: These manage shared social spaces, collective artistic ownership, or member events and culture, similar to modern social clubs. Bored Ape Yacht Club (BAYC), an NFT collection whose NFTs also serve as DAO membership, and Krause House, a basketball enthusiast DAO, are examples.
  5. Data DAOs: These manage and develop data under DAO control, typically aiming to sell unique data products to third parties.

DAOs can be designed for a multitude of tasks, but they commonly undertake the following responsibilities:

  1. Approving Protocol Upgrades: DAOs can vote to update an open-source protocol. This could involve upgrading proxy contracts to support a new implementation with altered logic or approving a new standalone version of the protocol for user migration.
  2. Modifying dApp Parameters: DAOs can change parameters within a decentralized application (dApp). This might include adjusting the interest rate of a decentralized stablecoin or determining whether to support a new type of collateral in a lending market.
  3. Assessing Improvement Proposals: DAO members can submit, discuss, and debate improvement proposals. This could involve putting forward a proposal to modify the protocol or the DAO itself, or critiquing the arguments of other proposals before voting occurs.
  4. Allocating Protocol-owned Funds: DAOs can direct funds owned by the protocol to investments or outside accounts. This could involve giving grants from the DAO's treasury to beneficiaries, or deciding if the DAO should invest in a unique, limited-edition NFT.
  5. Managing Leadership: DAOs can handle leadership matters, like voting individuals into or out of management roles, overriding leadership decisions, or changing the DAO's underlying organizational structure.
  6. Resolving Protocol-related Disputes: DAOs can arbitrate disputes arising from protocol, dApp, or DAO-managed infrastructure usage. This might involve deciding whether users should receive compensation for an unexpected protocol hack or bug.
  7. Charting the Protocol's Long-term Course: DAOs can determine the long-term direction and vision of the protocol. This could involve debating whether the DAO should expand an existing use case or deciding which blockchains or layer-2 networks to support.
  8. Adjusting the Protocol's Value Capture Mechanism: DAOs can tweak how the protocol captures value. This might involve determining user fee amounts, deciding whether to burn tokens, or considering if DAO members should receive dividends.