What is a DAO and why it matters in crypto
- Tri Huynh Thien
- May 9
- 4 min read
Investy.ai May 9 2025
If you’ve spent more than five minutes in the crypto space, you've likely come across the term DAO. It stands for Decentralized Autonomous Organization, which sounds like a mouthful, but the concept is actually pretty straightforward.
In this article, we’ll break down how DAOs work, how they’re changing the way people make decisions in crypto, and look at some real examples of DAOs in action in 2025.
What is a DAO?
A DAO (Decentralized Autonomous Organization) is basically a community with a shared wallet, run by smart contracts instead of managers. No CEOs, no bosses, just code and collective decision-making.
Here’s the short version:
People who join the DAO usually hold its tokens
Those tokens give them voting rights
The rules and logic behind the DAO are written into smart contracts on a blockchain
Members vote on proposals (like how to spend funds or change the rules)
Once the vote passes, the smart contract makes it happen - automatically
That’s what makes a DAO “autonomous.” It follows the rules, no matter what. No middlemen needed.
How is a DAO different from a regular company?
Traditional companies have hierarchies - CEO, managers, staff. DAOs flip that on its head.
In a DAO:
The community decides how things run
Rules are coded into the system and can’t be changed without a vote
Everything is transparent, anyone can see the treasury and the votes
Decisions are made on-chain, not behind closed doors
Instead of sitting in meetings or sending emails up a chain of command, members vote on proposals and the smart contracts do the rest.
How do DAO smart contracts work?
Smart contracts are the engine behind DAOs. They’re bits of code that live on the blockchain and do what they’re programmed to do.
For example, if the DAO agrees to fund a project, the smart contract checks the vote, confirms the result, and releases the funds. No one needs to manually approve it. The contract just follows the instructions.
DAO governance and voting explained
Most DAOs use token-based voting. The more tokens you have, the more weight your vote carries. But some DAOs are getting creative, using things like:
Quadratic voting (to give more power to smaller holders)
Reputation scores (to reward active contributors)
Proposal staking (to prevent spam or attacks)
In 2025, Uniswap DAO, which manages over $5.4 billion in its treasury, added a Veto Council to stop malicious votes and required proposal backers to stake 2.5 million UNI before a vote goes live.
Can anyone join or start a DAO?
If you can buy the DAO’s token and follow its rules, you can usually participate. Some DAOs are wide open, others are more exclusive.
Starting one is trickier—you’ll need:
A mission or purpose
A token (for voting)
Smart contracts (for automation)
A governance plan
Tools like Aragon, Gnosis Safe, and DAOstack make it easier to launch DAOs without being a coding wizard.
Pros and cons of DAOs
Why people love DAOs:
Full transparency - everything’s on the blockchain
No central control - everyone has a say
Global access - you can join from anywhere
Automated execution - no red tape
What’s tricky about them:
Hackable smart contracts (bad code = big problems)
Voter apathy (lots of people don’t vote)
Legal gray areas (some countries still don’t know how to classify them)
Governance risks (whales can dominate the vote)
In short: DAOs are powerful, but they’re still figuring things out.
Popular DAOs in 2025
Here are a few active DAOs making waves in 2025:
Uniswap DAO – Massive DeFi protocol with billions in treasury, adding more guardrails for safer governance.
Aave DAO – Powers a major crypto lending platform, with features like flash loans.
KlimaDAO – Uses crypto to fight climate change by tokenizing carbon credits.
FWB (Friends With Benefits) – A social DAO where members collaborate on events, art, and culture.
CityDAO – Bought land in Wyoming and is trying to build the first blockchain-governed city. Yes, really.
What’s new with DAOs in 2025?
DAOs have come a long way, but this year has had some drama:
🟠 Governance attacks are real – A group called the “Golden Boys” hijacked a Compound DAO vote and funneled $24 million in COMP tokens into a whale-controlled wallet.
🟠 Legal trouble is growing – A U.S. judge ruled that Lido DAO and its backers might be liable for selling unregistered securities, shaking up the way DAOs approach compliance.
🟠 Creative DAOs are thriving – UnicornDAO, co-founded by Pussy Riot’s Nadya Tolokonnikova, continues supporting women and non-binary artists in Web3 through NFT sales and grants.
Why DAOs matter for crypto
DAOs aren’t just an experiment anymore. They’re the future of how decisions are made in crypto. Whether it’s managing billion-dollar treasuries, supporting artists, or building decentralized cities, DAOs are redefining what it means to work together online.
As they get more secure, legally recognized, and user-friendly, expect to see DAOs powering everything from finance to climate projects, and even everyday businesses.
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