What Is the Role of Decentralized Autonomous Organizations (DAOs) in Governing and Resolving Disputes Related to Financial Smart Contracts?

DAOs can act as a governing body for a protocol of financial smart contracts. Members of the DAO, typically token holders, can propose and vote on changes to the protocol's parameters, such as fee structures or risk margins.

For dispute resolution, a DAO can vote on how to handle an unexpected event or a bug. Some systems use specialized arbitration DAOs, like Aragon Court, where jurors are staked to review evidence and vote on a resolution.

This provides a decentralized, community-driven alternative to traditional legal systems for managing and updating financial agreements.