1️⃣ What is a DAO?A DAO stands for Decentralized Autonomous Organization. Imagine it as a digital company without a boss. Instead, everyone involved gets to have a say in how things run by using blockchain technology.
Example:Think of a club where every member gets to vote on what activities to do, instead of having a president making all the decisions. That’s basically what a DAO is!
2️⃣ How Does a DAO Work?In a DAO, the rules and decisions are programmed into smart contracts on the blockchain. These smart contracts automatically carry out actions when certain conditions are met, making everything transparent and fair.
Key Features:Decentralization: No single person or group is in control.Autonomy: Operates automatically based on pre-set rules.Transparency: Everything is recorded on a public ledger for everyone to see.
3️⃣ Governance in DAOsGovernance is just a fancy word for how decisions are made in a DAO. Members usually get governance tokens, which they use to vote on proposals. The more tokens you have, the more influence you have in decision-making. But you are also able to delegate token. For example if you don't have time you can delegate to someone you trust (like me lol) and be sure someone is taking care.
Voting Process:Proposal: A member submits an idea e.g., “Let’s fund this new project” or for example in the AAVE DAO submits a TEMP CHECK to list a new asset. Discussion: Members talk about the proposal. Give their opinion and adjustments will be made. Voting: Members vote using their tokens in most cases in the first step offchain on Snapshot and then onchain. Execution: If the proposal is approved, the smart contract carries out the decision.
4️⃣ Why Are DAOs Important?DAOs are changing the game by moving from traditional, top-down organizations to more democratic and transparent systems. They give power to individuals, reduce corruption, and encourage collaboration across the globe.
Real-World Example:Aave is a decentralized lending protocol with a DAO. The token to carry out votes is called AAVE. By owning AAVE you are able to vote on decisions or delegate to another party which can vote on your behalf to list new assets, change parameter or active revenue sharing with holder staking their AAVE (👀 is this alpha?)
5️⃣ Challenges of DAOsEven though DAOs are cool, they have their own set of challenges:
Security: Smart contracts can be hacked if they’re not well-written. That's why the Aave DAO has two different parties checking every proposal in a formal verification (thanks BGDLabs & Certora) Scalability: Voting and reaching a consensus can take time. Participation: Getting everyone to actively participate and stay informed can be tough. That's why most DAOs adopted incentives systems to encourage votings.
6️⃣ The Future of DAOsDAOs are still evolving, and their potential is huge. They could revolutionize many industries by enabling decentralized governance, from finance and art to gaming and social networks.(Lens hopefully 👀)
Fun Fact:Some DAOs, like MakerDAO, manage large amounts of money and create stable cryptocurrencies used around the world in so called RWA (real world assets)
Hope this thread helps you get a grasp on DAOs and governance! 🌐💡 Feel free to drop any questions or thoughts below!
Also I would appreciate if you would support me as a delegate either in the AAVE or Arbitrum DAO. You do so by delegating voting power here https://ezr3al.tokenlogic.com.au/ or here for Arbitrum https://www.tally.xyz/gov/arbitrum/delegate/0x8659d0bb123da6d16d9394c7838ba286c2207d0e
Are there any other topics you would like to know more about or want some Aave or Arbitrum recap? Let me know in the comments!
Ad: If you are trading futures or just buying spot, feel free to use Bitget. I have been using it for a while now and really like it. You can sign up here. If you do so you support me and get 50% discount on trading fees. https://bonus.bitget.com/EzR3aL