What You Will Be Able To Do

• Define a DAO and name its parts.
• Trace a proposal from idea to execution.
• Compare token voting, delegation, and multisig.
• Explain safe treasury practice.
• Diagnose plutocracy, apathy, and attacks.

What Is A DAO

• A group with shared funds and shared rules.
• Rules live in smart contracts.
• The chain counts votes and moves money.
• People still write, argue, and build.

The Anatomy Of A DAO

• Membership: token, badge, or invitation.
• Proposals with executable actions.
• Voting rule and time window.
• Execution contract and treasury.
• Forum and chat for discussion.

The Life Of A Proposal

• Idea and feedback in a forum.
• Formal on-chain submission.
• Voting period of several days.
• Quorum and threshold checked.
• Timelock, then execution.

forum -> draft -> on-chain proposal
  -> voting -> quorum? -> passed?
  -> timelock -> execute

Token Voting

• One token equals one vote.
• Simple and hard to fake.
• Influence follows money.
• Snapshots of balances stop last minute buying.

On Chain Or Off Chain

• On chain votes cost a fee and execute automatically.
• Off chain votes are free signed messages.
• Off chain raises participation.
• Many DAOs use a signal vote, then a binding vote.

Delegation

• Assign your voting power to a delegate.
• You keep your tokens.
• You may change delegate at any time.
• Delegate statements and records guide your choice.

Treasuries

• Funds sit in a contract wallet.
• Passed proposals release money.
• Public budget and regular reports.
• Reserves are diversified beyond the native token.

Multisig Wallets

• Needs M of N signers to approve.
• Fast for operations and emergencies.
• Signers form a small trusted group.
• Safe is a widely used implementation.

signers: A B C D E
threshold: 3 of 5
tx approved when any 3 sign

Failure: Plutocracy

• Voting power follows token holdings.
• A few holders pass anything.
• Small members stop believing in votes.
• Measure the share held by the top ten.

Failure: Voter Apathy

• Reading proposals takes time.
• One vote rarely changes the result.
• Low turnout favors organized minorities.
• Delegation and clear summaries help.

Failure: Attacks On Rules

• Flash loans borrow voting power for one transaction.
• Snapshots in a past block defend against them.
• Timelocks give time to respond.
• Hidden admin keys defeat decentralization.

Case: The DAO Of 2016

• An early investment DAO on Ethereum.
• A flaw in its contract code was exploited.
• Funds were drained.
• The community debated a contested network split.

Habits Of Healthy DAOs

• Start with a small, clear purpose.
• Use a forum stage before voting.
• Set quorum from real turnout.
• Publish the powers of special roles.
• Track turnout and concentration.

Recap

• A DAO is shared money plus executable rules.
• Proposals pass through stages and a timelock.
• Delegation and multisigs trade power for convenience.
• Plutocracy and apathy are the main failures.

Next Week: Mechanism Design And Plural Governance

• Incentives and Sybil resistance.
• Quadratic voting and funding.
• Conviction voting and futarchy.

Questions And Exercise

• Exercise: audit one real DAO in a one page report.
• Record turnout and top ten concentration.
• Read Buterin on moving beyond coin voting.