What is a DAO, and how decentralised is it really?
A DAO, or decentralised autonomous organisation, is a group that makes decisions through proposals and votes, with its rules and treasury held in smart contracts.1 "Decentralised" means decisions are shared among multiple people, but a 2022 study found voting power in two large DAOs held by a very small number of addresses.2,3
A group that runs on votes
DAO stands for decentralised autonomous organisation. Ethereum.org, a website about Ethereum, calls a DAO "a collectively-owned organization working towards a shared mission".1 Decisions are made through proposals and votes. The group's money sits in a treasury that nobody can spend without the group's approval.1
In a 2023 court order, a US federal judge described DAOs by quoting briefs filed by outside parties. DAOs, the order said, let "unrelated parties" use software code on a blockchain without needing a "centralized coordinating authority".4
The parts of a DAO
- Smart contracts. Ethereum.org says a DAO's smart contract defines the organisation's rules and holds its treasury.1
- A governance token. In a token-based DAO, simply holding the token gives you a right to vote.1
- A Governor contract. OpenZeppelin, which publishes widely used smart contract code, says on-chain governance is usually built into a special contract called a "Governor". It counts votes and, directly or through a timelock, carries out proposals that pass.5,6
- A forum and polls. Uniswap's published process starts with a forum post and an off-chain poll, before any binding on-chain vote.7
Three kinds of membership
Ethereum.org describes three models of DAO membership.1
| Model | How you get a vote |
|---|---|
| Token-based | Hold the governance token, which can often be bought freely on exchanges1 |
| Share-based | Ask to join through a proposal, usually offering tokens or work. Members can leave with their share of the treasury1 |
| Reputation-based | Earn reputation by taking part. It can't be bought, transferred or delegated1 |
Ethereum.org says token-based membership is typically used to govern large protocols and tokens.1 This module is about that kind.1
What "decentralised" means, and doesn't
Utah's DAO law gives a short definition: "decentralized" means that decision-making is distributed among multiple persons.2 Ethereum.org says DAOs are usually flat and "fully democratized".1
Real DAOs often start less decentralised than that. OpenZeppelin says the first team often keeps control of a protocol at the start, then hands it to a community of stakeholders over time.5
Researchers have also measured who holds the votes. A 2022 study of Compound, Uniswap and ENS found that power in Compound and Uniswap was "extremely centralized and controlled by a very small number of addresses". ENS looked more like a decentralised community.3 The authors added that one person or firm can control many addresses, so power can be "more centralized than it seems".3 They also found that large delegates did not often use their power, and mostly voted the same way as smaller delegates. The authors stated these observations "without judgement".3
Vitalik Buterin wrote on his blog in September 2022 that typical DAOs "decentralize" by pooling money and letting token holders vote on each spend. He argued that decentralisation matters most in some situations, such as when an application must resist censorship.8
- Decentralized autonomous organizations (DAOs). ethereum.org (page last updated 26 June 2026; read 24 October 2026).
- H.B. 357, Decentralized Autonomous Organizations Amendments (enrolled copy): the Decentralized Autonomous Organization Act, Utah Code Title 48, Chapter 5. Utah Legislature, 2023 General Session; signed by the Governor 13 March 2023 (read through the Internet Archive's Wayback Machine, because the Legislature's site did not respond to us), 2023.
- Analyzing Voting Power in Decentralized Governance: Who controls DAOs? (version 1). Robin Fritsch, Marino Müller and Roger Wattenhofer, arXiv:2204.01176, 3 April 2022.
- CFTC v. Ooki DAO, No. 3:22-cv-05416-WHO: Order granting motion for default judgment. US District Court for the Northern District of California (copy published by the CFTC), 8 June 2023.
- How to set up on-chain governance. OpenZeppelin Contracts 5.x documentation (read 24 October 2026).
- How to set up on-chain governance: proposals, voting power and execution. OpenZeppelin Contracts 5.x documentation (read 24 October 2026).
- Governance Process. Uniswap developer documentation (page says it was last updated in April 2026; read 24 October 2026).
- DAOs are not corporations: where decentralization in autonomous organizations matters. Vitalik Buterin, personal blog, 20 September 2022.
General education built from the publicly available sources listed above. Not financial, legal, tax or investment advice. Naming a company, project or regulator is not an endorsement either way. Last checked 2026-10-24. Terms and disclaimer.