Complete Guide to DAOs: Structure, Functioning, and Participation Opportunities

The Rise of Decentralized Organizations in Crypto

The cryptocurrency industry has undergone a radical transformation. After capturing the attention of major companies and institutional investors in 2021, new management and governance models emerged. One of the most disruptive concepts is the DAO (Decentralized Autonomous Organization), which is redefining how blockchain and DeFi platforms operate. Mark Cuban, the famous investor, described this model as “the ultimate combination of capitalism and progressivism,” highlighting the revolutionary potential of these decentralized and transparent structures.

How Do DAOs Really Work?

A Decentralized Autonomous Organization is an entity operated through smart contracts without a traditional board of directors or centralized management. Unlike conventional venture funds, DAOs operate with full automation and collective funding.

The model works as follows: community members receive tokens that grant them voting power on strategic decisions. These tokens allow participation in governance proposals and choosing the platform’s direction. Treasuries integrated into each DAO are managed by community voting, ensuring that every expense is collectively authorized.

Developers who found a DAO relinquish control once the platform is operational, achieving true decentralization. However, an inherent challenge exists: when a significant concentration of tokens falls into a few members, they gain disproportionate power to influence votes.

Classification of DAOs: Five Main Models

Protocol DAOs: The Backbone of DeFi

Protocol DAOs constitute the largest segment of the ecosystem. They govern major DeFi protocols—lending, yield farming, and decentralized exchanges—from a fully horizontal structure. Notable examples include Uniswap, Maker, and Aave, which have democratized access to financial services.

Venture DAOs: Decentralized Investment Funds

They operate by pooling capital from multiple users to invest in emerging blockchain projects. The fundamental difference from traditional funds: the community collectively decides which projects to fund, not individual venture capitalists. This has enabled retail investors to access opportunities that were previously reserved for financial elites.

Grant DAOs: Funding for Innovation

Similar to Venture DAOs but with a different focus. These grant funds to innovative DeFi projects, fostering technological development. They operate with greater flexibility and transparency than traditional project evaluation structures.

Social DAOs: Virtual Communities with Value

Create decentralized social platforms. Members pay an entry fee and access virtual circles where users with shared interests interact. The most prominent example is Bored Ape Yacht Club, which requires owning an NFT BAYC to participate.

Collector DAOs: Fractional Ownership of Expensive Assets

Pool community capital to acquire high-value digital assets, mainly NFTs. Members obtain fractional ownership of these assets, democratizing access to premium investments that were previously inaccessible to small investors.

Established DAO Ecosystems: Case Studies

Uniswap (UNI) - The Leading Exchange

Uniswap is the most consolidated decentralized exchange on Ethereum, with its own DAO model supported by the UNI token.

Current UNI Data:

• Price: $5.82
• 24h Change: -1.74%
• 24h Volume: $4.16M
• Market Cap: $3.67B
• Tokens in Circulation: 629.87M out of 1,000M total

In September 2020, 1 billion UNI tokens were distributed: 60% to the community, 21.27% to the team, 18.04% to investors, and 0.69% to advisors. Uniswap governance allows UNI holders to control infrastructure upgrades, manage the community treasury, and modify protocol parameters. Recently, the community voted to expand the DEX to Polygon, reducing gas costs and network congestion.

Decentraland (MANA) - The First Decentralized Metaverse

Decentraland operates through its own DAO that owns all smart contracts of the virtual ecosystem. This DAO oversees markets, NFT policies, LAND auctions, and virtual world content.

Current MANA Data:

• Price: $0.12
• 24h Change: -2.68%
• 24h Volume: $56.28K
• Market Cap: $223M
• Tokens in Circulation: 1,919M out of 2,193M total

Decentraland’s DAO empowers the community to decide policies, digital collectibles allowed in the marketplace, and even approve contracts in different sections. A Security Advisory Board (SAB) supports smart contract security. Governance uses wMANA as the token, while MANA functions as the currency for transactions within the ecosystem.

Aave (AAVE) - Pioneering Lending Protocol

Aave Governance DAO launched in December 2020, enabling truly decentralized governance of the most important DeFi lending protocol.

Current AAVE Data:

• Price: $155.15
• 24h Change: +0.57%
• 24h Volume: $4.10M
• Market Cap: $2.36B
• Tokens in Circulation: 15.19M out of 16M total

Aave revolutionized DeFi by introducing rapid, non-collateralized loans. AAVE holders can propose changes and have dual voting rights (for voting and proposal separately). To protect the ecosystem, there are “The Guardians”: elected users with the power to halt malicious proposals. Of the 16 million tokens issued, 13 million were distributed to users and 3 million reserved.

OpenDAO (SOS) and ConstitutionDAO (PEOPLE): Innovative Cases

OpenDAO emerged in 2021 by distributing 100 billion SOS tokens to OpenSea users. Distribution: 50% airdrops, 20% DAO treasury, 20% staking incentives, 10% liquidity providers.

Current PEOPLE Data:

• Price: $0.01
• 24h Change: -1.76%
• 24h Volume: $239.79K
• Market Cap: $46.22M
• Tokens in Circulation: 5,066M total

ConstitutionDAO gained fame in 2021 by raising $47 millions to attempt to buy an original copy of the U.S. Constitution at auction. Although the goal was not achieved, the PEOPLE token persisted, demonstrating that DAOs transcend initial objectives and can create lasting communities.

Ways to Participate in DAOs

Integration into Existing Communities

Research DAOs aligned with your interests, study their mission, and join their Discord to explore before committing. The next step: acquire DAO tokens to gain member status and voting rights in governance forums.

Creating Your Own DAO

Define clear objectives, recruit interested collaborators, and distribute tokens via airdrops or rewards. Establish governance mechanisms that determine voting processes and community incentive distribution.

Investing in DAO Tokens

Some DAO tokens offer profitability opportunities in cryptocurrency markets. Access through exchanges like Gate.io makes it easy to indirectly participate in the success of decentralized projects without direct governance involvement.

Competitive Advantages of DAOs

Financial Democratization: Every member feels ownership of the project. Distributed decision-making through transparent voting opens opportunities for retail investors who were previously excluded.

Total Transparency: All transactions and decisions are recorded on the blockchain, visible to anyone. This eliminates manipulation and builds community trust.

Cryptographic Security: Smart contracts execute rules without human intervention. Assets are protected immutably, resisting manipulation more than any centralized structure.

Community Engagement: Rewarding contributions fosters commitment. Motivated communities create more value and profitability potential for everyone.

Risk Distribution: Losses are shared among members through fractionalization. This contrasts with traditional venture funds where risk falls on few individuals.

Inclusivity Without Restrictions: Anyone with capital can participate. There are no gatekeepers excluding investors based on portfolio size.

Pending Challenges for DAOs

Regulatory Complexity: Decentralization makes it difficult to identify responsible parties before authorities. This poses legal risks for participants.

Incomplete Decentralization: In early stages, developers retain significant control. The community must grow sufficiently for true democratization.

Power Dynamics: Minimum voting thresholds can concentrate power among large stakeholders, compromising the ideal of equality.

Code Risk: Poorly programmed smart contracts or flawed vision can cause collapse. Multiple DAOs have failed due to poor execution.

Future Perspectives of the DAO Ecosystem

With the expansion of Web3, awareness of decentralized technologies will grow exponentially. This will drive demand for DAOs as viable community structures.

Developers will need to innovate by addressing regulatory and security challenges. The future will likely include hybrid DAOs combining decentralization with accountability mechanisms.

The transformative potential is undeniable: from revolutionizing finance to managing public assets, DAOs represent a fundamental reimagining of how organizations can operate in the 21st century.