How DAO Governance Works

What you'll learn

• The Governance Process
• The Life of a Proposal
• Voting Systems Explained
• Governance Platforms and Tools
• Understanding Vote Delegation
• Quorum and Threshold Requirements
• Real-World Governance Attacks
• For Deeper Reading

Key terms

Snapshot

The dominant off-chain voting platform for DAOs (snapshot.org). Used by Uniswap, OlympusDAO, BanklessDAO, Aave, and thousands of others. Voting is gasless because votes are signed messages stored on IPFS rather than blockchain transactions.

Tally

The leading on-chain governance platform (tally.xyz), securing more than $30 billion in treasury value and facilitating approximately $700 million in proposal value. Provides a clean interface for OpenZeppelin Governor contracts.

Aragon

A comprehensive DAO infrastructure platform (aragon.org) that hosts more than 3,000 active DAOs. Provides templates and modular tools for creating and managing DAOs.

Quadratic voting

A voting system where voting power equals the square root of tokens held, reducing the influence of large holders and giving smaller participants proportionally more voice. Used in mechanisms like Gitcoin's quadratic funding.

Conviction voting

A voting system where the longer you signal support for a proposal, the more weight your vote carries. Rewards sustained commitment over flash votes and is well-suited for ongoing funding decisions.

Optimistic governance

A model where proposals are automatically approved unless someone actively objects within a specified time frame. Increases governance speed for routine decisions while still allowing community vetoes.

Vote delegation

Assigning your governance voting power to a trusted representative who votes on your behalf. Tokens remain in your wallet, and delegation can be revoked at any time. Critical for major DAOs like Uniswap and Compound.

veToken model (vote-escrowed)

A governance system pioneered by Curve's veCRV. Token holders lock their tokens for a period (1 week to 4 years for veCRV) in exchange for amplified voting power, fee sharing, and gauge votes. Widely copied across DeFi.

Quorum

The minimum number of votes or participating tokens required for a governance vote to be considered valid. Compound uses 400,000 COMP, Uniswap uses 4% of UNI supply (40 million UNI).

Proposal threshold

The minimum number of tokens you must hold or have delegated to you to create a governance proposal. Compound requires 25,000 COMP, Uniswap requires 2.5 million UNI. Prevents proposal spam.

Timelock

A mandatory waiting period (typically 24 to 48 hours) between a governance vote passing and the approved action executing. Provides a safety window to catch problems and respond to malicious proposals.

Beanstalk attack

A flash-loan governance attack on April 17, 2022 that drained $182 million from the Beanstalk stablecoin protocol. The attacker borrowed $1 billion from Aave, acquired 67% of Stalk governance tokens, and called emergencyCommit() to push proposal BIP-18. Net profit was approximately $80 million.