The Rise of Decentralized Autonomous Organizations (DAOs)
An exploration of DAOs, the internet-native organizations that are becoming the standard for governing DeFi protocols and communities.
A New Model for Collaboration
A Decentralized Autonomous Organization (DAO) is an organization represented by rules encoded as a computer program that is transparent, controlled by the organization members, and not influenced by a central government. They are a core innovation of the blockchain and DeFi movement.
How DAOs Function
DAOs operate using smart contracts. Membership and voting rights are typically determined by ownership of a native governance token. Proposals are submitted by the community and voted on by token holders. If a proposal passes, its rules are automatically implemented by the smart contract. This transparent and democratic process is a hallmark of DeFi.
The Importance of DAOs in DeFi
Most major DeFi protocols, from Uniswap to Aave, are governed by DAOs. This ensures that the protocol's development and treasury are managed by its community of users and stakeholders, rather than a small, centralized team. DAOs represent a fundamental shift towards a more equitable and user-centric internet.