You've probably heard the term DAO in conversations about crypto, Web3 or blockchain governance. A DAO is a way for a group of people to hold money and make decisions together, with the rules written into code on a blockchain instead of handled by managers.
What Does DAO Stand For?
DAO stands for decentralized autonomous organization. It's a kind of organization that runs on smart contracts instead of a traditional management structure.
In simple terms, a DAO is a community-led group where members decide things by voting, and code on the blockchain enforces the rules. No single person, such as a CEO, can spend the group's money alone.1
How Does a DAO Work?
At the center of a DAO is a smart contract, a program on the blockchain that holds the group's rules and often its treasury, the funds the group controls together.1 The contract sets:
- Who can vote
- How proposals are submitted
- What happens when a vote passes
Members usually hold a governance token, which gives them voting power. Votes can decide how funds are spent, what features to build, or how a protocol's settings change. In many DAOs, members can also hand their votes to someone else who follows the proposals closely.1
Proposals, votes and treasury payments are recorded on the blockchain, so anyone can check them, and changing the rules takes a vote.1
Not every DAO moves money automatically. Some keep their funds in a multisig wallet, a shared wallet that needs several people to sign before funds can move. After a vote, those signers carry out the result.1
What Are DAOs Used For?
DAOs can organize almost any shared goal. Common examples include:
- Protocol governance. Token holders of a DeFi app vote on its settings, new features and treasury spending.
- Grants and funding. Members pool money and vote on which projects to back.1
- Charity. A DAO can accept donations from anyone and let members vote on which causes receive them.1
- Collective ownership. Members buy digital or physical assets together and vote on how to use them.1
- NFT communities. Holders of an NFT collection vote on the project's creative direction or shared funds.
If a group of people has a shared purpose and access to smart contracts, they can organize as a DAO.
Are DAOs Safe?
DAOs can be useful, but they're not risk-free. The main risks:
- Smart contract bugs can lead to exploits or lost funds. In 2016, an attacker used a flaw in an early Ethereum DAO, called The DAO, to drain more than 3.6 million ETH from it.2
- Low participation can leave a DAO inactive or let a few large token holders decide every vote.
- Legal status. Few jurisdictions have laws that recognize DAOs.1 Wyoming, for example, lets a DAO register as a limited liability company.1,3
What separates one DAO from another is whether its contracts have been audited, how widely voting power is spread, and who can move the treasury.
DAOs on Cardano
Several Cardano apps are run by DAOs:
- Indigo Protocol is a synthetic assets protocol governed by holders of its INDY token. INDY holders who stake their tokens vote on-chain on proposals such as new synthetic assets, new collateral types and changes to protocol settings.4
- Liqwid is a lending protocol. Holders of its LQ token stake it in a governance smart contract to vote on proposals or delegate their voting power to another wallet. The Liqwid DAO votes on new markets, protocol settings and how its treasury is spent.5
You can also set up a DAO without writing code:
- Clarity offers no-code tools to create and manage DAOs on Cardano, Midnight and Radix.6
- Mesh Multisig is a free, open-source multisig wallet for team treasuries. Funds move only when a set number of signers approve.7
Adastack lists more tools in its Voting & DAOs and multisig wallets categories.
Cardano's Own Governance
Cardano's network governance isn't a DAO built on a smart contract, but it works on the same idea: holders vote, and the protocol carries out the result. The first on-chain governance features went live with the Chang hard fork in September 2024.8 Three groups vote on proposals: DReps (delegated representatives, who vote for the ADA holders who delegate to them), stake pool operators, and a Constitutional Committee. No single group can decide alone.9
Cardano also has a treasury: ADA that the protocol holds rather than any person or company. Since the Plomin hard fork in January 2025, ADA can leave it only through a treasury withdrawal that DReps and the Constitutional Committee approve.10,11 For how DReps and voting work, see what is Cardano governance.
Project Catalyst, Cardano's community grant program, ran 14 funding rounds from 2020 in which ADA holders voted on which proposals received treasury funding. The Cardano Foundation took over the program in 2026.12 In its 2026 pilot fund, community curators narrowed the applications down, and a 35-person review panel chose 12 teams, with no public vote.13 For more, see what is Project Catalyst.
Learn More
- What is a DAO?: Explainer on the Ethereum website covering how DAOs work, membership models and DAO laws, with Ethereum examples
- Cardano Governance: Official overview of how Cardano's three voting groups decide on proposals and treasury spending
- Governance guides: Guides to DReps, voting and treasury processes listed on Adastack
