Decentralized Autonomous Organization (DAO)
A blockchain-based organization governed by token holders through smart contract voting rather than a central authority.
What is DAO?
A decentralized autonomous organization (DAO) is an entity whose governance rules are encoded in smart contracts on a blockchain, allowing token holders to vote on decisions without relying on traditional management structures. DAOs can control treasuries, manage protocol parameters, fund grants, and make investment decisions — all through on-chain voting processes that execute automatically when proposals pass. Governance tokens are typically distributed to early contributors, liquidity providers, and users, giving them proportional voting weight. DAOs vary in structure: some require large token holdings to submit proposals; others use delegation or quadratic voting to balance power. Notable examples include MakerDAO (governing the DAI stablecoin), Uniswap DAO (governing protocol fee distribution), and Nouns DAO (an NFT-based cultural organization). Challenges include voter apathy, plutocracy risk (whales dominating votes), and legal uncertainty.
Example
Uniswap DAO controls a treasury of billions of dollars in UNI tokens. Any UNI holder with sufficient tokens can submit a governance proposal — such as enabling protocol fee revenue. The proposal passes through a temperature check, then a formal on-chain vote. If approved by a quorum of UNI voters, the smart contract executes the change automatically without any company or board of directors.
Source: Ethereum Foundation — DAOs