The development of human society is undergoing a massive shift toward decentralization. While a completely decentralized society may not be achievable, the future will likely see a coexistence of both centralized and decentralized structures, with decentralization playing a significant role.
One of the most defining features of cryptocurrencies, exemplified by Bitcoin, is their decentralized nature. This means they operate independently of controlling entities like governments or central banks. Inspired by this decentralization, developers introduced a novel concept: the Decentralized Autonomous Organization (DAO).
Smart contracts have become the core tool enabling DAOs to mature. Just as Bitcoin sparked a revolution in traditional finance, the widespread adoption of DAOs could eventually replace conventional organizational structures, leading to profound societal transformation.
What Is a DAO?
A DAO, or Decentralized Autonomous Organization, is an entity that operates through rules encoded as computer programs, often on a blockchain. Vitalik Buterin, co-founder of Ethereum, described the ideal DAO in 2014 as “an entity that lives on the internet and exists autonomously, but also relies on hiring individuals to perform certain tasks that the automation itself cannot do.”
In a DAO, no single individual has unilateral decision-making power. All operations are transparent, with rules embedded into the organization's code through smart contracts. As an internet-native entity, a DAO has the potential to radically transform corporate governance.
DAOs are open-source and, in theory, tamper-proof. Every transaction is recorded on a blockchain. Crucially, members of a DAO aren’t bound by traditional legal contracts. The only governing law for participants is the protocol or smart contract itself.
Participation in a DAO is voluntary. Individuals can join after fully understanding the rules. They don’t need to trust human representatives—only the smart contract code, which anyone can audit.
Members who help maintain network security or perform other tasks are often rewarded with the DAO’s native tokens. Thus, blockchain and DAOs enhance transparency while reducing administrative costs. DAOs use consensus rules tied to their native tokens to standardize behavior and align the interests of all stakeholders.
Compared to traditional corporations, DAOs are more democratic. They typically raise funds through token sales. Governance is community-based, unlike traditional companies that rely on CEOs, boards, and major investors. DAOs operate with full transparency, while conventional companies often function privately and opaquely.
So why create a decentralized organization like a DAO?
Developers believe that by decentralizing decision-making and automating execution, DAOs can eliminate problems like human error or internal manipulation. Powered by Ethereum’s smart contracts, DAOs have evolved significantly, allowing global, anonymous participation and investment.
Although DAOs face inherent challenges in compliance and security, many experts and investors are convinced they will become integral to the blockchain space and may eventually supersede traditional companies.
Categories of DAOs
The Bitcoin network can be considered the first truly decentralized and autonomous DAO, coordinated by a consensus protocol that anyone can adopt freely.
With the emergence of Ethereum, the concept of DAOs evolved from blockchain protocols to smart contract-based organizations. While early DAOs required robust consensus mechanisms, smart contracts now allow anyone to create a DAO with just a few lines of code.
Since 2019, the DAO ecosystem has exploded with new concepts and models. Today, DAOs serve various purposes and business models. As the theory and practice of DAOs are still evolving, there isn’t a single definitive classification system.
Based on Application Scenario
Investment DAOs
These are primarily profit-driven. Members make collective decisions on investments and can distribute or transfer shares and assets. Examples include MetaCartel, DAOSquare, and DuckDAO.
Grant DAOs
These automate the distribution of development funds based on predefined criteria. Moloch is a well-known example.
Protocol DAOs
Token holders participate in governing a protocol, including parameter adjustments and business decisions. Examples include MakerDAO, Compound, and Uniswap.
Project DAOs
These are managed through decentralized governance, allowing token holders to vote on project direction, technical decisions, and product development. Badger DAO is one example.
NFT DAOs
The recent NFT boom has spurred the growth of NFT-focused DAOs. These organizations play an essential role in the rapidly expanding NFT market. Flamingo and Metafactory are two examples.
Based on Technical Layer
Consensus-Layer DAOs
This category includes consensus algorithms and mechanisms that enable decentralized nodes to agree efficiently on the state of a blockchain. Bitcoin demonstrated how tokens could guide the economic behavior of network participants. Other examples are Ethereum, Dash, and Polkadot.
Application-Layer DAOs
These are end-user products with practical use cases. MakerDAO, Moloch, and Aave fall into this group.
Middleware DAOs
These provide decentralized infrastructure for operations and collaboration, offering tools that support governance. Examples include Aragon, Moloch, and MetisDAO.
The DAO Ecosystem on Solana
Since the failure of “The DAO” in 2016, the space has seen many influential projects like MakerDAO, Aragon, and MolochDAO—all built on Ethereum.
Although the Ethereum ecosystem has matured significantly, it is still evolving, and widespread adoption of complex DAOs remains a work in progress.
As the Solana ecosystem has grown, it has become clear that DAOs can thrive on its foundation.
Many well-known blockchain projects, especially in decentralized finance (DeFi), have adopted decentralized governance mechanisms. Here are some Solana-based projects implementing core DAO principles:
Solstarter
Solstarter aims to be a leading launchpad on Solana, offering unique utility features shortly after its debut. It plans to establish a DAO for decisions on token mechanics, buybacks, and ecosystem spending. The goal is to empower the community and create a more decentralized system.
ICHI
ICHI is a self-sustaining, community-managed infrastructure that enables crypto communities to create and manage their own non-custodial stablecoins (oneTokens). It uses an innovative DAO-like governance model to incentivize adoption and encourage genuine commitment from members.
Squads
Squads allows users to deploy a DAO on Solana within minutes. By leveraging Solana’s scalability, it democratizes DAO usage for smaller teams. The platform uses smart contracts to manage voting consensus among members and issues a unique equity token for governance or trading.
Lido
Lido DAO is a decentralized autonomous organization that governs a liquid staking protocol. Holders of its governance token (LDO) vote on key parameters like fee structures, node operator selection, and oracle integrations. The community approved a proposal to extend Lido’s services to Solana, enabling users to stake SOL and receive stSOL tokens for use in DeFi applications.
Hiro
Hiro’s LaunchDAO is a consumer-oriented DAO that offers retail DeFi investors access to passive venture opportunities. Creators present their ideas, roadmaps, and self-funding proofs. By reaching voting thresholds, they advance to subsequent stages. This model helps promising projects gain traction while minimizing risk for investors.
👉 Explore more DAO governance strategies
Frequently Asked Questions
What is a DAO?
A Decentralized Autonomous Organization (DAO) is an entity run by smart contracts on a blockchain. It operates based on preprogrammed rules, allowing decentralized decision-making without central authority. Members often use governance tokens to vote on proposals.
How does Solana support DAOs?
Solana offers high scalability, low transaction costs, and fast execution times. These features make it practical for DAOs to operate efficiently, especially when handling frequent votes or complex governance mechanisms.
What are the benefits of using a DAO?
DAOs provide transparency, reduce reliance on intermediaries, and enable global participation. They automate governance through code, minimizing human error and manipulation while aligning incentives via token-based rewards.
Are DAOs legally recognized?
The legal status of DAOs varies by jurisdiction. Some regions are developing frameworks to recognize decentralized entities, but most DAOs currently operate in a legal gray area. Participants should understand the risks involved.
What is the role of tokens in a DAO?
Tokens often represent voting rights, ownership, or stakes in a DAO. They incentivize participation, align member interests, and facilitate decentralized governance through proposal voting and consensus mechanisms.
Can DAOs replace traditional companies?
While DAOs offer advantages in transparency and automation, they are not yet capable of fully replacing traditional legal structures. However, they are increasingly being used for community-driven projects, investments, and protocol governance.
Conclusion
The examples above illustrate how many blockchain projects built on decentralized principles are progressing toward fully realized DAOs.
It’s important to note that the more members a DAO has, the more decentralized it becomes. This is why many projects start with a degree of centralization in their early stages before evolving into mature, community-led organizations.
DAOs represent a new form of organization that could transform governance. An increasing number of projects may adopt DAO technology to automate and democratize operations, bringing us closer to a future of transparent, decentralized, and autonomous organizations.
We believe the age of DAOs has arrived. With its scalability, interoperability, and usability, Solana is poised to become an ideal foundation for DAOs and blockchain governance.