What Are DAOs in Cryptocurrency? A Clear Guide to Decentralized Organizations
Dec, 23 2025
A DAO in cryptocurrency isn’t a company you can walk into, or a boardroom with executives making decisions. It’s a digital organization run by code and community. No CEO. No HR department. No middle managers. Instead, it’s a group of people who own tokens, vote on proposals, and collectively manage money - all without trusting a single person to make the call.
Think of it like a global co-op where every member gets a vote based on how many tokens they hold. If the group agrees to spend $5 million on a new project, the money moves automatically. No signatures needed. No paperwork. Just code on a blockchain doing exactly what everyone voted for.
How DAOs Actually Work
DAOs run on three core pieces: smart contracts, governance tokens, and voting rules. Smart contracts are self-executing programs stored on blockchains like Ethereum. They’re the rules written in code - what happens when someone proposes a change, how votes are counted, and when funds get released.
Governance tokens are your membership card. Buy or earn them, and you get voting power. The more tokens you hold, the more weight your vote carries. This isn’t one-person-one-vote like a democracy. It’s more like a shareholder meeting, where bigger investors have more say.
When a proposal comes up - say, changing the interest rate on a lending protocol or funding a new developer - members vote. Most DAOs require at least 20-30% of token holders to participate (quorum), and 40-60% approval to pass. Voting usually lasts 7 to 14 days. If it passes, the smart contract automatically releases funds or updates the system.
For example, Uniswap’s DAO governs the largest decentralized exchange in the world. If the community votes to give developers a bonus from the treasury, the money is sent out within hours - no bank, no approval chain.
The Rise of DAOs - From $0 to $21 Billion
DAOs exploded after 2020. In 2020, they managed less than half a billion dollars. By late 2023, that number hit $21.3 billion, according to Messari. Over 10,000 active DAOs now exist, with nearly 5 million unique wallets involved.
The big moment came in 2016 with The DAO, an Ethereum project that raised $150 million in just weeks. Then it got hacked. $50 million vanished. The Ethereum community had to hard-fork the blockchain to recover it - a controversial move that split the network and created Ethereum Classic.
That failure scared people, but it didn’t kill DAOs. It taught them. Today’s DAOs are smarter. They use multi-signature wallets (like Gnosis Safe) that need 3-5 out of 9 people to approve big spends. Some delay transactions for 24-72 hours so the community can react if something looks off.
Four Main Types of DAOs
Not all DAOs are the same. They fall into four main categories:
- Protocol DAOs - Manage DeFi platforms like Aave, Compound, and Uniswap. They control fees, upgrades, and treasury spending. These make up 54% of all DAOs.
- Investment DAOs - Pool money to fund crypto startups. The LAO has backed 78 projects since 2020. Members vote on which startups to invest in.
- Social DAOs - Built around communities, not money. Friends With Benefits (FWB) has 5,000 members who pay $500 in ETH to join. They get access to events, Discord channels, and NFT drops.
- Philanthropy DAOs - Fund open-source projects. GitcoinDAO has given away $50 million to developers using quadratic funding - a system that rewards broad participation over big donors.
Some DAOs even have sub-DAOs. Aave’s Lens Protocol subDAO handles its social media features separately, letting smaller teams move faster without slowing down the whole organization.
Why DAOs Are Powerful - And Why They Fail
DAOs shine when speed isn’t critical and trust is low. ConstitutionDAO raised $47 million in 72 hours to buy a copy of the U.S. Constitution. No lawyers, no bank accounts, no corporate structure. Just 19,000 people sending ETH to a wallet, voting on a proposal, and winning the auction.
But when things go wrong, DAOs struggle. In April 2022, Beanstalk Farms was hacked. The attackers drained $182 million. The DAO couldn’t respond fast enough. Emergency fixes require votes. Votes take days. By the time they voted, the money was gone.
Another problem? Voter apathy. Most DAOs see only 3-15% of token holders vote. A 2024 University of Pennsylvania study found 68% of DAOs die within 18 months because no one shows up to vote. Proposal spam is another killer - hundreds of low-effort ideas flood the system, drowning out real ones.
Then there’s whale dominance. The top 10 token holders control over 51% of voting power on average. That means a few rich wallets can override thousands of small holders. PleasrDAO’s $5.4 million purchase of Edward Snowden’s NFT was a win for community action - but it’s the exception, not the rule.
Joining a DAO - What You Need to Know
If you want to join a DAO, here’s what you’ll need:
- A crypto wallet (MetaMask or Ledger)
- Some ETH or other tokens to buy governance tokens
- Understanding of gas fees (average $3.72 per vote on Ethereum)
- Patience. The interfaces are clunky. One Reddit user spent 4.2 hours casting their first vote.
You can join by buying tokens - like UNI for Uniswap at $4.87 each as of December 2025 - or by contributing work. Some DAOs give tokens to people who write docs, moderate Discord, or build tools. GitcoinDAO pays contributors in ETH for open-source work.
Most DAOs use Snapshot for voting - it’s free and doesn’t require gas fees. But if you’re voting on actual treasury changes, you’ll need to pay Ethereum gas. That’s why some DAOs are moving to Polygon or Solana, where fees are under $0.10.
The Legal Gray Zone
DAOs exist in a legal gray area. The U.S. SEC says many DAOs are unregistered securities offerings. In 2022, the SEC fined The DAO’s creators $25 million. The problem? If your token gives you a share of profits, it’s likely considered a security under the Howey Test.
Wyoming passed the first DAO-specific law in 2021, letting DAOs register as LLCs. The EU’s MiCA framework treats DAO tokens as utility tokens unless they promise returns. Most other countries haven’t decided yet.
That’s why 31% of top DAOs now use legal wrappers - companies set up in places like Wyoming or Switzerland to shield members from liability. MakerDAO uses one. It’s not perfect, but it’s the only way to deal with banks, regulators, and real-world contracts.
What’s Next for DAOs?
Big institutions are watching. BlackRock filed for a DAO-managed tokenized fund in November 2024. Fidelity launched a DAO research team in January 2025. Even corporations like Bosch are testing DAOs for IoT device management.
Upgrades are coming. Ethereum’s EIP-5805, scheduled for Q2 2026, will standardize how voting power is calculated across DAOs. That means your vote on one DAO might work the same way on another.
Delegated voting is already helping. Curve Finance lets you assign your vote to someone else - like an expert who follows proposals daily. This boosted participation by 220% in a 2024 Harvard study.
But the biggest question remains: Will regulators let DAOs grow, or will they shut them down? The SEC’s new framework, expected in Q2 2026, could be the deciding factor.
Final Thoughts
DAOs aren’t magic. They’re not going to replace corporations overnight. But they’re the first real alternative - a way to build organizations that are open, transparent, and global by design.
They work best for long-term, community-driven projects: DeFi protocols, open-source funding, niche social groups. They fail when speed matters, when decisions are complex, or when no one votes.
If you’re curious, start small. Join a social DAO like FWB. Vote on one proposal. See how it feels. You don’t need to be a coder. You just need to care enough to show up.
The future of work, money, and ownership might not be in boardrooms. It might be in a wallet, on a blockchain, with a few thousand strangers voting together.
Are DAOs legal?
DAOs exist in a legal gray area. In the U.S., the SEC has taken action against DAOs it considers unregistered securities. Wyoming allows DAOs to register as LLCs, and the EU’s MiCA framework treats them as utility tokens unless they promise profits. Most countries haven’t clarified their stance yet. Legal wrappers are becoming common to reduce personal liability for members.
How do I join a DAO?
You typically join by buying governance tokens (like UNI for Uniswap or MKR for MakerDAO) or by contributing work and earning tokens. You’ll need a crypto wallet (MetaMask or Ledger), some ETH or other crypto to pay for tokens and gas fees, and time to learn how the voting system works. Some DAOs, like GitcoinDAO, let you earn tokens by helping with open-source projects.
Do I need to be a programmer to use a DAO?
No. While some DAOs need technical skills for development, most only require you to vote on proposals. You don’t need to write code to participate. Many DAOs have non-technical roles like moderation, content creation, or community outreach. The main barrier is learning how to use wallets and navigate voting platforms like Snapshot or Discord.
What’s the difference between a DAO and a regular company?
A traditional company has a CEO, managers, and a hierarchy. A DAO has none of that. Decisions are made by token holders voting on proposals. Rules are enforced by code, not lawyers. Money moves automatically when votes pass. There’s no central authority - just transparency, smart contracts, and collective ownership.
Why do DAOs have so many failed proposals?
Many DAOs suffer from proposal spam - hundreds of low-quality ideas flood the system because there’s little cost to submit one. Some DAOs, like Compound, now require a deposit of tokens that’s burned if the proposal fails. This discourages spam. Another issue is voter apathy - if only 5% of members vote, even bad proposals can pass if no one shows up to oppose them.
Can I lose money in a DAO?
Yes. You can lose money if the DAO you invest in gets hacked, if the token you bought loses value, or if a bad proposal passes and drains the treasury. Smart contract bugs, voter manipulation, and regulatory crackdowns are real risks. DAOs are experimental. Treat them like high-risk investments, not guaranteed returns.
What’s the biggest DAO in the world?
By assets under management, MakerDAO is one of the largest. It governs the DAI stablecoin and manages over $7 billion in collateral. By participation, Uniswap’s DAO has one of the most active communities, with tens of thousands of voters on major proposals. Both are protocol DAOs that control critical parts of the DeFi ecosystem.
roxanne nott
December 23, 2025 AT 18:02DAOs are just corporate governance with extra steps and gas fees. If you need a vote to unfreeze a wallet after a hack, you’re not decentralized-you’re just slow.
Lloyd Yang
December 24, 2025 AT 13:20Let me tell you something real: DAOs aren’t about tech. They’re about trust. You’re handing your money to strangers on the internet who may or may not care about your vote. That’s not innovation-that’s emotional labor wrapped in a smart contract.
But here’s the beautiful part: when it works, it’s the first time in history that a group of people from Lagos, Lisbon, and Lima can collectively own a piece of the future without a single CEO breathing down their necks.
I’ve seen DAOs fund open-source devs who couldn’t get a grant from a university. I’ve seen a 19-year-old in Manila get paid in ETH to write docs for a DeFi protocol. That’s not capitalism. That’s something else.
Yeah, voter apathy sucks. Yeah, whales dominate. But the alternative? Banks. Boards. Bureaucracy. At least here, you can see the code. You can audit the ledger. You can leave if you hate it.
DAOs aren’t perfect. But they’re the first real crack in the corporate armor. And that’s worth fighting for-even if your vote costs $3.72 and takes 4 hours to cast.
Dan Dellechiaie
December 25, 2025 AT 02:46Wow. So DAOs are just shareholder democracy with more crypto jargon and less legal recourse? Brilliant. Let me guess-the next thing is a DAO that votes on whether your cat gets fed. 10/10, zero accountability.
And don’t get me started on ‘quadratic funding.’ That’s just a fancy way to say ‘give more money to the people who already have the most followers.’
Meanwhile, the SEC is watching, the IRS is auditing, and your ‘decentralized’ treasury is sitting in a multi-sig wallet with 3 guys from Discord who all use the same password: Crypto123.
It’s not a revolution. It’s a very expensive group project gone wrong.
Radha Reddy
December 25, 2025 AT 17:15While I admire the vision of DAOs, I find it challenging to reconcile such a radical governance model with cultural norms in many regions where consensus-building requires face-to-face dialogue, not just token-weighted votes.
In my experience, trust is built slowly-through relationships, not smart contracts. The idea that someone in Nigeria or India can meaningfully influence a decision made by a group in San Francisco, simply by holding UNI tokens, feels more symbolic than substantive.
Perhaps the real innovation isn’t the technology, but the global community trying to find a new way to belong. That’s worth exploring, even if the execution is messy.
Melissa Black
December 26, 2025 AT 16:13DAOs are the only governance model where the most active participants are the ones who don’t actually hold the majority of voting power. The real power lies in delegation. Curve’s 220% participation spike? That’s not democratization-that’s influencer capitalism with a blockchain veneer.
And don’t even get me started on ‘social DAOs.’ FWB isn’t a community-it’s a gated NFT club for people who think ‘I’m in a DAO’ makes them sound cool at brunch.
Luke Steven
December 27, 2025 AT 11:19There’s something poetic about DAOs. They’re like open-source software, but for society.
You don’t need to be a coder to join. You just need to care enough to show up. Even if your vote is worth $0.03 in UNI, you’re still part of the protocol.
It’s not about power. It’s about participation. And yeah, most people won’t vote. Most people won’t even understand it. But that’s the point. The system doesn’t need everyone. It just needs enough.
Like a forest. Not every tree needs to be tall. But if enough roots are connected, the whole ecosystem survives.
Sarah Glaser
December 28, 2025 AT 14:50The real tragedy of DAOs isn’t the hacks or the whales-it’s the quiet erosion of meaning. We used to talk about collective ownership as a radical act. Now it’s just another way to tokenize attention.
When every interaction becomes a vote, and every vote becomes a transaction, we lose the humanity behind the decision. DAOs promise autonomy, but deliver algorithmic compliance.
And yet… I still check Snapshot every week. Because maybe, just maybe, this is how we rebuild trust from the ground up.
Dusty Rogers
December 30, 2025 AT 01:03I joined a DAO last year just to see what it was like. Spent 3 hours trying to connect my wallet. Then I voted on whether to fund a meme generator. It passed. No one cared. I still got my tokens. That’s it. That’s the whole story.
Sheila Ayu
December 31, 2025 AT 08:05Wait-so you’re telling me that a DAO that raised $47 million to buy the U.S. Constitution… didn’t even get it? And now everyone just pretends it was a noble failure? That’s not community-it’s performative activism with a gas fee.
And why are we still pretending that ‘quadratic funding’ isn’t just a way to make rich people feel good about giving $500 to a project that already has $10M in backing?
Also, ‘legal wrappers’? So you’re not a DAO anymore? You’re just a LLC with a Discord server? That’s not innovation. That’s legal arbitrage.
Tyler Porter
December 31, 2025 AT 19:44Look, I’m not a tech guy. But I joined a DAO because I wanted to help write docs. I got paid in ETH. I bought a pizza. It was cool. I voted once. I didn’t know what I was voting on. But I felt like I was part of something. That’s enough for me.
Don’t overthink it. Just show up. Even if you’re wrong. Even if you’re late. Even if you mess up the wallet.
That’s the whole point.
Rebecca F
January 1, 2026 AT 07:45DAOs are the spiritual successor to the dot-com bubble-except now, instead of selling shares in a website, you’re selling shares in a Discord server with a token that might be a security.
And the people who run these things? They’re not visionaries. They’re ex-bankers who realized they could make more money pretending to be anarchists.
Wake up. This isn’t liberation. It’s finance with a new coat of paint.
Ashley Lewis
January 1, 2026 AT 16:16DAOs are legally indefensible. The SEC has already established precedent. The fact that anyone still refers to them as ‘decentralized’ is either willful ignorance or deliberate obfuscation.
There is no such thing as a truly decentralized organization when governance tokens are concentrated in the hands of venture funds.
It’s not a revolution. It’s a tax optimization scheme dressed in blockchain.
vaibhav pushilkar
January 3, 2026 AT 00:09From India, I can tell you: DAOs are the first time I’ve seen global participation that doesn’t require me to move to Silicon Valley. I contributed to a Gitcoin DAO sprint last month. Got paid in ETH. Paid my rent. That’s real.
Yes, the UI sucks. Yes, gas fees hurt. But for the first time, my skills have value outside of a corporate ladder. That’s worth the hassle.
Zavier McGuire
January 3, 2026 AT 08:25DAOs are a scam. The only thing decentralized is the way they scam people. You think you’re voting? Nah. You’re just feeding the whales. The code doesn’t care. The code doesn’t feel. The code just moves money to whoever holds the most tokens.
And the ‘community’? That’s just a bunch of people who think they’re rebels because they use MetaMask.
Wake up. It’s all just a bigger Ponzi than the last one.
Jordan Renaud
January 3, 2026 AT 12:47DAOs are like open mic night for the internet. Some people come to perform. Some come to heckle. Some just want to watch. Most don’t understand the rules.
But every now and then, someone says something that changes everything.
That’s why we keep showing up.
Janet Combs
January 4, 2026 AT 15:11I tried to join a DAO and spent 2 hours trying to figure out how to vote. I thought I did it right. Turns out I voted on the wrong proposal. I felt so dumb. But then someone in Discord DM’d me and walked me through it. No judgment. Just help.
That’s why I’m still here. Not because I believe in blockchain. But because I believe in people who don’t give up on each other.
Shubham Singh
January 4, 2026 AT 18:30Let me be blunt: DAOs are a Western fantasy. You think a farmer in rural India can meaningfully participate in a governance vote that requires understanding of EIPs, gas fees, and multi-sig wallets?
This isn’t decentralization. It’s digital colonialism with a token.
Charles Freitas
January 5, 2026 AT 07:07Oh wow, another article about DAOs. How original. Let me guess-you think this is the future? Newsflash: the future is already here. It’s just not evenly distributed.
And the fact that you’re still excited about ‘community governance’ while 90% of DAOs have less than 5% voter turnout? That’s not optimism. That’s delusion.
Also, ‘PleasrDAO bought Snowden’s NFT’? Cute. That’s not a revolution. That’s a vanity project with a PR team.
Rachel McDonald
January 6, 2026 AT 18:23I love DAOs. I really do. But I also love crying into my coffee at 3am because I just spent $12 in gas to vote on whether to fund a new Discord bot.
Why is this so hard? Why does everything feel like a glitch?
…but I still do it. Because when it works? It’s magic.
Vijay n
January 7, 2026 AT 17:13DAOs are a CIA psyop to destabilize traditional financial systems. They want you to believe you’re free while they quietly control the code behind the scenes. The ‘community’ is just a front. The real power lies with the devs who wrote the contracts-and they all have backdoors.
Remember: if it’s on the blockchain, it’s not safe. It’s just visible.
Collin Crawford
January 8, 2026 AT 00:59Let’s be clear: DAOs are not a new form of governance. They’re a loophole. A legal gray zone exploited by venture capitalists to avoid regulation, taxes, and liability.
‘Decentralized’ is just a marketing term for ‘we didn’t hire a compliance officer.’
The fact that you’re still calling this ‘innovation’ tells me you’ve never read a single SEC filing.
Jayakanth Kesan
January 8, 2026 AT 07:43Been in a few DAOs. Some died. Some thrived. The ones that worked? They had a core group who showed up every week. Not because of tokens. Because they cared.
That’s the real secret. Not code. Not votes. Just people showing up.
Megan O'Brien
January 9, 2026 AT 04:29DAOs are the ultimate example of solutionism: ‘Let’s solve governance with a token!’
It’s like trying to fix a broken heart with a Spotify playlist.
And now we’re all just arguing about who has the most UNI while the whole thing collapses under its own weight.