DAOs: Internet Organizations

Companies without a CEO

A traditional company has a hierarchy: CEO makes decisions, board approves, employees execute. A DAO replaces this with code and votes.

In a DAO, token holders are the decision-makers. They propose changes, vote on them, and if a proposal passes, a smart contract executes it. No CEO. No board. No headquarters.

How a DAO vote works

1. Proposal: A token holder writes a proposal (e.g., "Spend $2M from treasury on a marketing campaign")
2. Discussion: The community discusses it on a forum (often Discourse or Snapshot)
3. Vote: Token holders vote with their tokens. More tokens = more voting power
4. Execution: If the vote passes (meets quorum and majority), the smart contract executes the action

Most DAOs require a quorum — a minimum percentage of tokens must participate for the vote to be valid. This prevents small groups from pushing proposals through when nobody is paying attention.

Real DAOs today

The challenges

DAOs are an experiment. They work, but not perfectly:

Low participation: Most token holders do not vote. Typical participation rates are 2-10%. This concentrates power in the hands of a few large holders (whales).

Speed: Governance votes take days or weeks. A traditional company CEO can make a decision in hours. This matters during emergencies.

Coordination: Reaching consensus among thousands of anonymous token holders is hard. DAOs often struggle to make unpopular but necessary decisions.

Plutocracy risk: More tokens = more votes. Wealthy holders have disproportionate influence, which is not so different from traditional shareholder governance.

Key takeaways

• DAOs are organizations governed by token holders through on-chain voting.
• Governance follows a cycle: propose → discuss → vote → execute.
• Major protocols (Uniswap, Aave, MakerDAO) are governed by DAOs managing billions.
• Low voter participation and whale dominance are ongoing challenges.