How DAOs Work

DAOs combine smart contracts holding assets with governance processes that decide how those assets move. Membership is usually token-based — hold a governance token, gain voting weight. Execution flows from off-chain discussion to on-chain vote to timelocked contract call.

Snapshot votes off-chain with signed messages — gasless and fast, but non-binding unless a multisig honors results. On-chain votes through Tally or Governor Bravo execute automatically after a timelock — binding but expensive for voters.

Many DAOs also adopt legal wrappers — foundations or LLCs — to sign contracts, pay taxes, and limit liability. On-chain DAO plus off-chain legal shell is common at scale.