DAO is the foundation of new governance: a revolution of decentralized autonomous organizations

Digital economy is undergoing a transformation, and at the center of these changes is the DAO — a decentralized autonomous organization. A DAO is not just a new management mechanism but a fundamentally different approach to organizing collective activity, which overturns traditional ideas about how people can work together without a central authority. From startups to large crypto projects, DAOs are becoming a reality that changes the rules of the game in the financial industry and beyond.

DAO as the Basic Infrastructure for Decentralized Governance

A DAO (Decentralized Autonomous Organization) is a self-governing ecosystem operating on smart contracts and blockchain technology. Unlike traditional companies with hierarchical structures, a DAO is a system where every community member has voting rights and can influence decision-making. Imagine an investment fund without managers or administrators — this is the concept that DAOs bring to life.

The main idea behind DAOs originated from developers’ desire to eliminate human errors and manipulation of investment funds. Instead of a traditional management model where decisions are made by a small group of leaders, a DAO provides an automated system where each token holder has a voice in important decisions. Investors can conduct transactions anonymously worldwide, and their rights are protected by transparent and immutable smart contracts.

A notable endorsement of the DAO concept came from the well-known billionaire Mark Cuban. He described DAOs as “the perfect blend of capitalism and progressivism,” noting that such organizations use a fully transparent and decentralized approach to resource management without the need for a central authority. In his view, DAOs can replace many outdated business models and give investors unprecedented control over their assets.

How DAOs Work: Voting and Management Mechanisms

A DAO is a form of collective investment where a community of like-minded individuals pools capital to support blockchain projects and their development. Each DAO has its own governance structure, rules, and voting system, which are determined by the specific community and its goals.

The key tool of a DAO is the smart contract — a software protocol that automatically executes agreed-upon rules without intermediaries. Community members receive governance tokens, which give them voting rights. When someone proposes an initiative, the community votes within a set period, and the decision is executed automatically through the smart contract.

This system ensures full transparency: all members see the voting process, understand how decisions are made, and can verify each transaction. However, there is a problem of power concentration — often, a large portion of governance tokens is held by a small group of participants who can dictate the project’s development direction. Despite this issue, DAOs continue to evolve and improve their mechanisms to ensure true democracy.

Diversity of DAOs: Five Main Types and Their Functions

DAOs take various forms depending on their objectives. Understanding these types helps to see the full range of possibilities for decentralized organizations.

Protocol DAOs — the Heart of the DeFi Ecosystem

Protocol DAOs constitute the largest segment within the DAO world and power the entire decentralized finance (DeFi) ecosystem. Leading platforms use the DAO model to manage their lending operations, farming programs, and infrastructure development. These DAOs apply decentralization principles to ownership and management of financial operations, ensuring fairness — a critical issue that traditional financial institutions have yet to solve.

Venture DAOs — Democratizing Investment

Venture DAOs are the second most popular among decentralized organizations. They operate by pooling capital from many investors to fund promising blockchain projects and early-stage applications. The main difference from traditional venture funds is that the decision on which projects to fund is made collectively by the community, not a small group of professional investors.

Grant DAOs — Funding Innovation

Grant DAOs gather community funds to finance innovative DeFi projects and new applications. They provide startups with a convenient mechanism for raising funds for development. The decentralized community works with greater flexibility and transparency when evaluating projects and distributing funding.

Social DAOs — Community as a Product

Social DAOs bring the concept of social networks into a decentralized format. Participants can join by contributing an entry fee and receive their own DAO tokens. These platforms serve as virtual communities, allowing like-minded individuals to interact and exchange ideas. A famous example is Bored Ape Yacht Club, accessible only to owners of certain NFTs.

Collectible DAOs — Ownership of Expensive Assets

Collectible DAOs enable communities to pool resources to acquire high-value digital assets, such as rare NFTs. This model offers retail investors the opportunity to co-own high-value digital artworks that would otherwise be inaccessible to them.

Examples of DAOs That Changed the Industry

Uniswap — the Most Popular Decentralized Exchange

Uniswap, the largest decentralized exchange (DEX) on Ethereum, uses its own DAO model for governance. The governance token UNI was launched in September 2020, transferring control of the platform to the community. Developers distributed 1 billion UNI tokens as follows: 60% to the community, 21% to the development team, 18% to investors, and 0.69% to advisors.

As of now (February 2026), the UNI price is $3.40 with a 24-hour change of -0.84%, and the market cap reaches $2.15 billion. UNI token holders participate in votes on platform development, treasury management, and protocol fee adjustments. Recently, the community voted to integrate DEX into the Polygon ecosystem, which reduced gas fees for Uniswap.

Decentraland — the First Fully Decentralized Metaverse

Decentraland, a leading project in the metaverse market, has its own DAO that owns all smart contracts and assets within the ecosystem. The DAO manages land (LAND), estates, wearables, content servers, and the marketplace.

MANA, Decentraland’s native token, trades at around $0.10 with a 24-hour change of -0.51% and a market cap of $188.22 million. A significant portion of tokens is held in DAO reserves, ensuring the organization’s financial autonomy. The DAO community sets platform policies, decides which NFTs and digital collectibles can be listed, and manages land auctions.

Aave — Revolution in Decentralized Lending

Aave, a leading DeFi protocol for lending and borrowing, launched the Aave Governance DAO in December 2020 along with the AAVE governance token. Before that, only Aave developers could propose protocol changes. Aave allows users to earn interest on crypto deposits and borrow assets without collateral via flash loans.

The current AAVE price is $123.91 with a 24-hour increase of +0.14% and a market cap of $1.88 billion. All AAVE holders can propose changes and have double voting rights — they can vote directly or delegate their rights. To protect the project from malicious proposals, Aave introduced the “The Guardians” mechanism — a group of selected users who can halt dangerous initiatives. Of the 16 million AAVE tokens issued, 13 million are distributed to the community, and 3 million are held in reserve.

OpenDAO — Supporting NFT Collector Community

OpenDAO was launched in late 2021 as one of the newest initiatives in the DAO ecosystem. The project distributed free SOS tokens among OpenSea users (the largest NFT marketplace). Anyone who transacted on OpenSea before December 23, 2021, received SOS based on the size and volume of their transactions.

Out of 100 trillion SOS tokens: 50% are allocated for distribution to users, 20% are held in the DAO, 20% are reserved for staking incentives, and 10% are distributed to liquidity providers. The DAO aims to use its funds to compensate victims of scams on OpenSea, support NFT artists, and grant developers.

ConstitutionDAO — An Ambitious Crowdfunding Project

ConstitutionDAO gained fame immediately after its launch in November 2021 thanks to its ambitious idea — a decentralized fund-raising effort to buy the original U.S. Constitution at Sotheby’s auction. Organized by Ioni Ehrlich and 30 team members, the DAO raised about $47 million on the Ethereum blockchain.

Although the project failed to acquire the historic document, the high interest from the crypto community led to the decision to preserve the PEOPLE token. Currently, PEOPLE trades at around $0.01 with a 24-hour increase of +0.73% and a market cap of $34.60 million. The founders offered participants a full refund at a rate of 1,000,000 PEOPLE per 1 ETH via a smart contract on the Juicebox platform.

How to Start Participating in the DAO Ecosystem

Join an Existing DAO

The first step is to identify your interests and find a DAO whose mission aligns with your goals. Study its governance principles and organizational structure. Join the DAO’s Discord community to better understand its culture. Then, acquire governance tokens — this will make you a full community member. After that, participate in governance forums, vote on key initiatives, and submit your own proposals.

Create Your Own DAO

If you have a vision and like-minded people, you can create a DAO from scratch. Define a clear goal, find interested collaborators, and establish a governance structure. Create and distribute tokens to participants via airdrops or rewards. Set up voting processes and mechanisms to incentivize active participation.

Invest in DAO Tokens

If you prefer indirect participation, you can invest in governance tokens of promising DAOs through cryptocurrency exchanges. Many DAO tokens perform well on the market and offer potential profits alongside influence over project management.

Benefits of DAOs: Why They Are Changing the Industry

Democratization of Ownership and Management

The decentralized DAO model ensures that every community member feels like an owner of the project. Participants vote openly and transparently on the platform’s future, making investment opportunities accessible to the general public, not just the elite.

Full Transparency of Processes

Built on blockchain, DAOs offer complete transparency of all operations. Members see the entire voting process, understand how decisions are made, and can verify each transaction. This ensures fairness and prevents manipulation.

Cryptographic Security and Safety

All actions within a DAO are executed via smart contracts protected by cryptography and are immutable. The governance system cannot be altered without the knowledge of other participants. All decisions are executed automatically, minimizing human intervention and errors.

Increased Community Engagement

DAOs reward participants for their contributions to the project’s development. This creates a stronger community attachment to the organization’s vision and goals. The higher the level of involvement, the greater the potential value of the DAO and its tokens.

Risk Distribution Among Participants

Just as DAOs distribute ownership and responsibility, they also distribute risks. If an investment decision fails, losses are automatically shared among all participants, reducing the impact on each individual.

Inclusivity and Accessibility

Anyone who can afford to buy tokens becomes part of the DAO and can vote. This has allowed retail investors to access opportunities previously available only to large venture funds and angel investors.

Challenges and Drawbacks of DAOs

Regulatory and Legal Uncertainty

The decentralized nature of DAOs complicates accountability from a regulatory perspective. Authorities cannot identify a single responsible entity, creating legal ambiguity.

Difficulty Achieving Full Decentralization

Most DAOs find it challenging to attain true decentralization at early stages. Until the community accumulates enough governance tokens, the core development team retains control and can dictate the project’s direction.

Concentration of Votes Among Major Holders

As DAOs grow, governance can become more difficult. Some organizations set minimum ownership thresholds for voting participation, which can concentrate power among large holders and contradict democratic ideals.

Risks of Poor Code and Technical Errors

DAOs operate through smart contracts, and poorly written code can lead to the collapse of the entire project. History shows several DAO failures due to technical bugs, resulting in significant losses for participants.

The Future of DAOs: Development and Prospects

As Web3 technologies become mainstream, awareness of DAO potential will only increase. End users will better understand the benefits of decentralized organizations, boosting demand for DAOs as viable online communities.

Although DAOs face challenges, growing attention may stimulate innovations to address these issues. Developers are working on highly accountable systems that will ensure true decentralization. The responsibility for creating sustainable DAO ecosystems that solve existing problems will fall on creators.

The evolution of DAOs reflects a broader movement toward rethinking how organizations can operate in the digital age. As technologies improve and communities gain experience, DAOs will continue to develop and adapt, offering new models of governance and collaboration.

Key Takeaways About DAOs

1. Basic Definition: A DAO is a decentralized, self-governing organization where community decisions are made via smart contracts and blockchain technology.

2. Diversity of Structures: There are many types of DAOs — protocol DAOs for DeFi management, venture DAOs for collective investment, grant DAOs for funding, social DAOs for interaction, and collectible DAOs for digital asset ownership.

3. Concrete Examples: Uniswap, Decentraland, Aave, OpenDAO, and ConstitutionDAO demonstrate the variety of DAO applications within the crypto ecosystem.

4. Ways to Participate: You can join existing DAOs, create your own, or invest in governance tokens.

5. Significant Advantages: Democratized management, full transparency, cryptographic security, community engagement, and inclusivity make DAOs revolutionary.

6. Real Challenges: Regulation, power concentration, technical risks, and the difficulty of full decentralization remain pressing issues.

7. Promising Future: As Web3 develops and communities better understand DAO benefits, this technology is likely to revolutionize many sectors — from finance to corporate governance.

8. Conclusion: DAOs are not just a passing trend but a fundamental shift in how people organize and manage collective activities. The success of these organizations depends on whether developers and communities can solve existing challenges and build ecosystems that deliver long-term value and sustainability.