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What is a DAO?
A DAO (decentralized autonomous organization) is a group run by rules written in smart contracts, where members vote on decisions and on spending from a shared treasury. In many DAOs, holding a governance token gives you votes.
What it means for you
In token-voted DAOs, whoever holds the most tokens holds the most votes, so a few large holders can change fees, rules or treasury spending. Some US states have laws that give a DAO a legal status. Check how votes are counted and who holds the supply.
A common mistake: “A DAO has no one in charge.”
In fact: In token-voted DAOs, large holders can carry votes, and the ECB found governance supply concentrated in a small share of addresses. Who holds the tokens decides who steers the treasury.
How it works
A DAO's core is a smart contract that holds the treasury and encodes the rules: members submit proposals and vote, and funds cannot be spent without group approval. Membership can be token-based (voting power bought on the open market), share-based (members admitted by proposal and given shares) or reputation-based (voting power earned through participation, not transferable). In a 2022 sample the ECB found about 1% of governance-token holder addresses held around 97% of supply. Wyoming, Vermont and the Virgin Islands have legal frameworks for DAOs.
Sources: ethereum.org: Decentralized autonomous organizations (DAOs), ECB Macroprudential Bulletin: Decentralised finance · checked 4 October 2026
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Educational content, not financial advice. Written by hand and checked against the source named above. Something wrong? Tell us and we reply within two business days.