How do DAOs govern through smart contracts?

Okay, no problem. Let's talk about this in plain language.

How DAOs Govern Through Smart Contracts? An Easy-to-Understand Explanation

Imagine you and a group of friends want to pool money to do something together, like make a joint investment, manage a gaming guild, or buy an expensive piece of digital art.

In the real world, you might do this:

1. Elect the most trustworthy person as the "treasurer" and everyone transfers their money to them.
2. Create a WeChat group (or similar messaging group) and vote on any decisions there.
3. Once a vote passes, the "treasurer" then spends the money to execute the decision.

There's a big problem here: you have to trust that "treasurer" one hundred percent. What if they run off with the money, or don't act according to the voting results? Everyone would be at a loss.

DAOs (Decentralized Autonomous Organizations) were born to solve this "trust" problem. They are like a company without a "treasurer" or a CEO, where all the rules are written in code and managed collectively by everyone. The core tool that makes all this possible is the smart contract.

Simply put, a smart contract is a program written on the blockchain that automatically executes. You can think of it as a disciplined, tireless, and impartial robot butler.

Now, let's see how DAOs specifically govern through this "robot butler" (smart contract). The entire process can be divided into four core steps:

1. Governance Token: Your "Voting Power"

To become a member of a DAO and participate in decision-making, you typically need to hold a specific token issued by that DAO.

• This is like owning "shares" in a company or having a "membership card" for a club.
• The number of tokens you hold usually determines your "voting weight." For example, if you have one vote, someone holding ten times your tokens might have ten times the voting weight.
• The distribution and ownership of these tokens are clearly and transparently recorded on the blockchain, making it impossible for anyone to forge.

2. Proposal: Initiating an "Agenda Item"

When any member wants the DAO to do something, such as "we should take 10 Ethereum from the common treasury to sponsor a developer," they can't just shout it out in a group chat. Instead, they need to submit a formal "proposal."

• This proposal will be submitted to the DAO's governance smart contract, forming a standardized agenda item.
• The proposal will clearly state what is to be done, why it should be done, and specific execution details (e.g., which address the money should be sent to).
• This is akin to submitting a formal resolution at a company board meeting, visible to everyone.

3. Voting: Making Decisions Together

Once a proposal is published, it enters the voting phase. All members holding governance tokens can participate in the vote.

• You use your tokens to cast your vote ("approve" or "reject").
• The entire voting process takes place on the blockchain and is completely open and transparent. Who voted, what they voted for, and the total number of votes can be checked by anyone at any time and cannot be tampered with.
• The smart contract automatically sets a voting period, for example, 7 days. Once the time is up, the voting channel automatically closes.

4. Smart Contract Execution: The Most Crucial Step

After the voting ends, the smart contract automatically counts the votes. If the proposal receives sufficient support (e.g., more than 51% of votes in favor), then the coolest thing happens:

• The smart contract automatically executes the operations specified in the proposal.
• No one needs to approve it, and no finance department needs to transfer funds. Code is law, and the voting outcome is the command.
• If the proposal was to "take 10 Ethereum and send it to a certain address," then the contract will automatically send 10 Ethereum from the DAO's public treasury to that specified address.

The DAO's public treasury is itself a smart contract, and its funds can only be accessed after a community vote passes. No individual has the authority to directly use these funds, fundamentally eliminating the possibility of funds being misused or stolen.

Example: A DAO Managing Public Funds

Let's say there's an "Aspirations DAO" with 100 Ethereum in its treasury, pooled by all members.

1. Proposal: Member Xiao Ming submits a proposal on the DAO's governance page: "Propose to use 10 Ethereum from the treasury to purchase a popular digital artwork (NFT)." The proposal includes the purchase address and price of the artwork.
2. Voting: The proposal enters a 3-day voting period. All members holding "Aspirations DAO" tokens see the proposal and begin casting their votes with their tokens. Zhang San votes in favor, Li Si votes against... all voting records are verifiable on the blockchain.
3. Result and Execution: After 3 days, voting ends. The smart contract automatically counts the votes and finds that 70% are in favor. The proposal passes! Immediately, the smart contract is triggered, automatically executing the operation: transferring 10 Ethereum from the DAO's treasury to the seller, and transferring the ownership of that artwork (NFT) to the DAO's treasury address.

The entire process involves no middlemen, no "treasurer," and no managerial approval. Everything is driven by code and community consensus, making it efficient, transparent, and trustless.

Summary

So, the core idea of how DAOs achieve governance through smart contracts is:

To replace reliance and trust in individuals within traditional organizations with transparent, self-executing code rules.

It transforms the organization's "charter" and "financial regulations" into smart contracts and then distributes decision-making power (voting rights) to community members via tokens, thereby realizing a truly community-driven, decentralized management model. This is the beauty of blockchain technology in organizational collaboration.