Inside a DAO: how the pieces fit
- Membership: usually by holding a (e.g. UNI, COMP, AAVE). Some DAOs are non-token (reputation-based or one-person-one-vote).
- Voting: token-weighted by default; designs like and aim to reduce plutocracy.
- Proposals: formal (executable code or signals) are put to a vote; if they reach , executable ones are enacted by the contract.
- Treasury: the holds protocol-owned assets (often the protocol's own token plus stables and blue chips) under governance control.
- Execution: on-chain execution (real contract calls) vs off-chain signaling (votes that humans then execute).
How a DAO decides
Voting designs — and the tradeoffs of each
- Token-weighted (1 token = 1 vote): simple, but inherently plutocratic — large holders (whales, VCs, the team) can dominate. Most early DAOs used this.
- Quadratic voting: vote cost rises (typically with the square of votes cast), so a wide base of small holders can out-vote a single whale of equal total tokens. Favors breadth over wealth; vulnerable to sybil attacks (splitting stake across many wallets).
- Conviction voting: conviction grows the longer tokens are held for a proposal, rewarding persistent preference over sudden vote-buying. Used by 1Hive, Gitcoin.
- veToken (vote-escrow): lock tokens for a time to boost voting power (e.g. Curve's ). Rewards long-term alignment but still wealth-weighted.
- Reputation / one-person-one-vote: used by some non-token DAOs where reputation is granted by the community; resists plutocracy but is hard to scale and sybil-prone.
One whale, 100 small holders