What is a DAO? How crypto communities run projects with tokens
By SendPay Business · · 2 min read
A DAO, or decentralised autonomous organisation, is a group that runs a crypto project using rules written into smart contracts. Instead of a board of directors, members who hold the project's governance tokens vote on decisions.
How a DAO works
- Members hold governance tokens, which usually give one vote per token.
- Anyone meeting the rules posts a proposal, such as spending funds or changing a fee.
- Token holders vote during a set voting period.
- If the vote passes, a smart contract or a trusted group carries it out.
What DAOs are used for
DAOs run many DeFi protocols, manage shared treasuries of crypto, fund grants for developers, and govern changes to blockchain projects. The votes and the treasury are usually visible on the blockchain.
The risks
Voting power can be concentrated among a few large holders. Bugs in smart contracts have led to losses, and the legal status of DAOs varies by country. Anyone holding governance tokens should understand these risks.
Where SendPay fits
SendPay does not run or list DAO tokens. A SendPay platform lets your customers buy, sell and hold crypto next to their cash, with assets held with regulated partners and a trading fee you set.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.