A Decentralised Autonomous Organisation (DAO) is an entity whose rules are encoded in smart contracts and enforced by a blockchain, rather than by a board of directors or legal structure. Token holders vote on proposals — spending treasury funds, changing protocol parameters, electing contributors — and the outcome executes automatically if it passes.
DAOs remove the need to trust a central team: anyone can see the rules, and no single party can unilaterally override them. In practice, governance is often dominated by large token holders ("whales"), and voter turnout can be low, raising questions about how decentralised these organisations truly are.
Legal standing is still ambiguous in most jurisdictions. Some DAOs have incorporated as LLCs in crypto-friendly states; others operate without any formal legal wrapper, which can leave members exposed to unexpected liability.
Worked example
MakerDAO governs the Dai stablecoin through MKR token votes, deciding everything from risk parameters to fee rates.
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This definition is general education, not investment advice. Markets — especially crypto — are volatile and you can lose money. Please read our disclaimer and see our methodology.