What is a DAO (Decentralized Autonomous Organization)?
Answer
A DAO (Decentralized Autonomous Organization) is an organization whose governance rules are encoded in smart contracts on a blockchain, with members (token holders) voting on decisions without centralized leadership. Key characteristics: (1) Token-based governance — holding governance tokens (like UNI for Uniswap) grants voting power proportional to holdings; (2) On-chain voting — proposals are submitted and voted on via smart contracts; passed proposals execute automatically; (3) Treasury management — DAOs hold funds in a multi-sig or smart contract treasury; spending requires governance approval; (4) Transparent — all proposals, votes, and treasury transactions are on-chain and auditable. Examples: Uniswap DAO (governs protocol fee switches), MakerDAO (governs DAI stablecoin parameters), Compound, Aave. Challenges: low voter participation (plutocracy if few whales control votes), slow decision-making, vulnerability to governance attacks (flash loan voting), and legal ambiguity. DAO tools: Snapshot (off-chain gasless voting), Tally, Aragon, Governor contracts (OpenZeppelin).