DAO

A DAO, or decentralized autonomous organization, is a blockchain-based organization that uses smart contracts and token-based governance to coordinate decisions. DAO members are responsible for voting on proposals that often involve treasury spending, protocol upgrades, fees, grants, or project direction. The exact structure depends on the DAO’s rules, token distribution, voting process, and smart contract design. Some DAOs are highly active communities, while others are mainly governance systems attached to decentralized finance protocols or blockchain projects. A DAO does not automatically mean there is no leadership or legal structure. Rather, a DAO describes a blockchain-based coordination model.

A DeFi protocol may use a DAO to let governance token holders vote on whether to change lending parameters or allocate treasury funds to development.