PAW Documentation

DAOs Explained


What is a DAO?

A Decentralized Autonomous Organization (DAO) is a tool implemented by DeFi projects to allow community members to vote on decisions regarding how the project should operate.

How Does a DAO Work?

  • Proposal Creation: A proposal is made through a process specific to each particular DAO. This process outlines the changes or actions being suggested for the project.
  • Voting Process: Community members vote on the proposal using DAO tokens or the project's native tokens. This process helps democratize decision-making by involving the entire community rather than a centralized group of decision-makers.
  • Public Voting: Votes in a DAO are publicly viewable, ensuring transparency in the decision-making process.
  • Weighted Voting Power: Voting power is typically weighted by the amount of DAO tokens or assets one possesses. This means that the more an individual is invested in the project, the more their vote counts. This system gives individuals who are highly invested in a particular project greater influence over its direction.

Benefits of a DAO:

  • Community Involvement: DAOs give community members a voice in the decision-making process, fostering a sense of ownership and involvement.
  • Transparency: Publicly viewable votes ensure transparency and accountability in decision-making.
  • Decentralization: Decision-making is spread across the community, preventing centralized control by a small group.

By implementing a DAO, DeFi projects can leverage the collective wisdom of their community, promote democratic governance, and ensure that the project's direction aligns with the interests of its stakeholders.