How Do Decentralized Autonomous Organizations (DAOs) Govern DeFi Protocols?
DAOs govern DeFi protocols by using smart contracts to encode the rules and decision-making process. Token holders vote on proposals for protocol upgrades, fee changes, or treasury allocation.
This distributed governance model ensures that no single entity controls the protocol, aligning with the decentralized ethos of DeFi.
Glossar
Distributed Governance
Mechanism ⎊ The underlying mechanism for protocol modification relies on on-chain voting weighted by token holdings, ensuring that changes reflect the consensus of the most invested parties.
DeFi Protocols
Protocol ⎊ Decentralized finance protocols represent a paradigm shift in financial infrastructure, leveraging blockchain technology to automate and disintermediate traditional financial services.
Decentralized Autonomous Organizations (DAOs)
Governance ⎊ Decentralized Autonomous Organizations (DAOs) represent a novel paradigm for organizational governance, leveraging blockchain technology to establish rules and execute decisions autonomously.
Smart Contracts
Function ⎊ Smart contracts are self-executing agreements with the terms of the agreement directly written into lines of code, residing on a decentralized ledger.