Decentralized Autonomous Organizations

Abstract

Decentralized autonomous organizations (DAOs) govern many major DeFi applications. These oversee the allocation of resources tied to the projects they are associated with and ensure the continuing success of the project they support. The community defines the rules by which a DAO operates and encodes in smart contracts. These are transparent and publicly available so anyone can understand the protocol operation. DAOs generally receive funding through token issuance, where the protocol sells tokens to raise funds for the DAO treasury. While there are variations in DAO governance and quorum requirements, the only way to change the rules is through member voting. This chapter explores DAOs, their deployment for DeFi, and some of the risks and opportunities of this emerging form of code-led governance.