How DAOs Are Reshaping Corporate Structures
As of November 20, 2025, there are over 50,800 decentralised autonomous organisations (DAOs) in existence. These rapidly emerging, community-governed entities are challenging traditional business models by leveraging blockchain technology to create a new way of organising and collaborating on a global scale.
This article will introduce you to what DAOs are, how the DAO corporate structure differs from traditional companies, the way they are governed, and their key benefits and challenges.
What Is a Decentralised Autonomous Organisation (DAO)?
A decentralised autonomous organisation is a member-owned, community-led organisation with no central leadership. Instead of being run by a CEO or a board of directors, a DAO is governed by rules encoded as smart contracts on a blockchain. These self-executing digital contracts automatically carry out actions based on predefined conditions, ensuring that the organisation operates transparently and according to its agreed-upon rules.
In a DAO, members use governance tokens to vote on proposals that determine the organisation's future. This democratic process ensures that all decisions—from allocating treasury funds to making protocol upgrades—are made collectively.
Because all votes and financial transactions are recorded on the blockchain, the entire process is transparent and publicly auditable. This model has given rise to a diverse range of projects, from decentralised finance protocols and GameFi platforms to single-purpose DAOs.
Uniswap: Uniswap is a protocol DAO that governs the DeFi market's leading decentralised exchange, with a total value locked (TVL) of $4.28 billion and a treasury of $2.7 billion.
Sky: Formerly known as MakerDAO, Sky is a DAO that manages the crypto-backed USDS (formerly known as DAI) stablecoin and the Sky Protocol DeFi protocol.
ConstitutionDAO: ConstitutionDAO was a single-purpose DAO that famously crowdfunded millions in an attempt to buy a rare, original copy of the US Constitution.
Decentraland DAO: Decentraland DAO is a GameFi DAO where members govern the rules and development of a vast virtual world.
DAO Corporate Structure: How Does it Differ From Traditional Corporate Structures?
The DAO corporate structure represents a fundamental shift away from the centuries-old hierarchical model of traditional companies. By focusing on decentralisation, automation, and community governance, it introduces a radically different approach to how organisations are managed and operated. The table below highlights the key contrasts:
| Feature | DAO Corporate Structure | Traditional Corporate Structure |
|---|---|---|
| Structure | Flat, decentralised, and community-led. | Hierarchical, with a top-down management structure (e.g., CEO, board). |
| Decision-Making | Democratic and bottom-up; decisions are made via member voting on proposals. | Centralised; key decisions are made by executives and a board of directors. |
| Transparency | Fully transparent; all rules, proposals, and financial transactions are recorded on a public blockchain. | Opaque; operations and key decisions are often private. |
| Execution | Autonomous and automated; smart contracts execute the outcomes of votes without intermediaries. | Manual; requires human action and intermediaries to implement decisions. |
| Trust | Trust is placed in the code and the blockchain protocol ("code is law"). | Trust is placed in people, institutions, and the legal system. |
| Membership | Global and borderless; typically open to anyone who holds the governance token. | Restricted; based on formal employment, contracts, and legal jurisdiction. |
| Legal Status | Legally ambiguous in most jurisdictions, though some (e.g., Wyoming) offer legal recognition. | Established legal entities (e.g., LLC, Corporation) with clear rights and liabilities. |
| Funding | Typically through token sales or community crowdfunding into a collective treasury. | Through traditional channels like venture capital, issuing shares, or taking on debt. |
How Do Governance and Decision-Making Processes Work in DAOs?
The governance process in a DAO follows a transparent, community-driven lifecycle that ensures all members have a voice. While specific rules vary, the journey of a proposal typically involves three key stages.
First is the proposal and discussion phase. Any member who holds a minimum amount of governance tokens can submit a proposal for a new initiative on a community forum, like Discord or a dedicated governance portal. This begins an informal temperature check, where the wider community discusses the idea, provides feedback, and suggests improvements before it moves to a formal vote.
Next comes the voting stage. Once a proposal is formalised, it is put to a vote. This can happen in two ways.
On-chain voting involves recording every vote as a transaction directly on the blockchain, which is highly secure and transparent but can be expensive due to gas fees. To solve this, many DAOs use off-chain voting tools like Snapshot, which allow members to vote without incurring any costs.
While efficient, this method relies on a trusted party or a core team to execute the result. Most DAOs use a "one token, one vote" model, but some are experimenting with other systems like quadratic or delegated voting to reduce the influence of whales.
Finally, there is the execution stage. If a proposal passes with the required majority, the action is implemented. For on-chain votes, this is handled automatically by the smart contract without any human intervention. For off-chain votes, the change must be manually implemented by a core team or a group of elected signatories who control a multi-signature wallet.
Benefits and Challenges
The DAO corporate structure offers several powerful benefits. Its decentralised nature reduces reliance on single points of failure and central authorities, making it more resilient. By operating on a public blockchain, DAOs achieve a high level of transparency, as all operations and financial transactions are publicly auditable.
This model also enables global collaboration, allowing anyone with an internet connection and native tokens to participate, breaking down geographical barriers and making the governance process more democratic and accessible. Finally, the use of smart contracts brings efficiency, automating many administrative processes and reducing the overhead and costs associated with traditional corporate management.
However, DAOs also face significant challenges. Security risks are a major concern; vulnerabilities in a smart contract's code can be exploited, as demonstrated by the historic hack of "The DAO" in 2016. There is also considerable legal uncertainty, as DAOs lack a clear legal status in most countries, creating ambiguity around member liability and taxation.
Another critical issue is power concentration. In many DAOs, a small number of whales hold a majority of the governance tokens, allowing them to dominate the voting process. Research has shown that in some major DAOs, less than 1% of holders have 90% of the voting power. Lastly, the democratic process can lead to inefficiency, with decision-making often being slow, and many DAOs suffer from widespread voter apathy.
A Decentralised Structure for Organisations
The DAO corporate structure offers an efficient, transparent, democratic, and community-driven alternative to traditional hierarchical companies. It represents a significant change in how people can organise, fund projects, and make decisions collectively on a global scale.
However, this new paradigm comes with clear trade-offs, balancing the ideals of decentralised democracy against the very real challenges of security, legal ambiguity, and operational efficiency. While still in an experimental phase, DAOs are already reshaping the future of work and governance, paving the way for more equitable and automated organisational models.
Ready to explore governance tokens? Create an account on VALR to get started!
Risk Disclosure
Trading or investing in crypto assets is risky and may result in the loss of capital as the value may fluctuate. VALR (Pty) Ltd is a licensed financial services provider (FSP #53308).
Disclaimer: Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.