DAO
A DAO is an organisation where holders of a token vote on decisions and a smart contract carries them out. No director, no board: if a proposal passes, code executes it automatically.
How it works
The token carries the vote, and voting weight usually equals the number of tokens held. A proposal goes up, reaches quorum or does not, and on success the contract performs the action itself, moving money out of the treasury for instance.
A DAO's treasury is a contract nobody holds a personal key to. That is precisely why such organisations manage large sums: spending them around a vote is not technically possible.
In practice voting almost always happens off-chain to avoid paying gas per vote, with only the outcome posted to the network. Cheaper, and it introduces a separate question of trust in the counting platform.
Who actually decides
A typical spread of voting power in a governance token.
| Top 10 addresses hold | often > 50% |
| Turnout on votes | usually 1–10% |
At that turnout a handful of large holders passes anything. Governance is distributed on paper and concentrated in fact, and the public data says so before you buy the token.
What to weigh
- Vote distributionRead the largest holders and the turnout. It says more about how power actually works than the documentation does.
- What is actually voted onSometimes the community picks a logo colour while the team decides the treasury. Check the scope of authority.
- Governance attacks are realBuy enough tokens and you can pass a proposal that drains the treasury. It has happened.
- The legal status is unsettledIn most jurisdictions a DAO is not a legal entity, and the liability of its participants is an open question.