DAO Use Cases Unpacked: Real-World Applications of Decentralized Organizations

Decentralized Autonomous Organization (DAO) has evolved from a niche concept to the driving force behind most use cases in the real world for blockchain. In this guide, we outline DAO use cases in finance, investing, creative industries, gaming, and social impact, how community-governed organizations function, and why they matter so much today.

DAO use cases matter more than ever. Why? As of early 2023, there were over 12,000 DAOs holding over $25 billion in assets in total. This signals a paradigm shift toward decentralized governance and self-governance in business.

Highlights:

• Building a DAO platform typically takes 2-4 months for an MVP; 6-12 months for a secure, feature-rich version.
• The main role of a DAO is to enable decentralized, transparent, token-based governance in Web3 ecosystems.
• DAO models fit best when community control, trustless operations, or token-aligned incentives are strategic goals.
• You can add DAO features to existing Web2 or Web3 products using governance tools and modular smart contracts.
• Private/enterprise DAOs are possible for internal voting, fund management, or multi-organization governance.

At IdeaSoft, we’ve gained firsthand expertise building DAO-driven platforms. For example, our team developed the Asymetrix protocol. It is an Ethereum-based decentralized staking platform that introduced a DAO governance token for community decision-making.

Table of contents:

1. What Is a DAO and How Does It Work
2. Key Benefits of DAO Models for Businesses
3. DAO Use Cases by Industry
4. DAO Design: What to Consider Before You Build
5. Why Partner with a Tech Company Like Ideasoft for Your DAO Project
6. Conclusion

What Is a DAO and How Does It Work?

DAO (Decentralized Autonomous Organization) is an organization managed by smart contracts and community agreement instead of a central body. Unlike conventional companies with boards or CEOs, a DAO is managed bottom-up by its constituents (typically token holders) who suggest and vote on propositions. All voting and activity is recorded publicly on a blockchain, so anyone can verify all actions.

How do DAOs work? The underlying machinery of a DAO is a set of smart contracts – computer code expressing the organization’s rules. When members vote on a proposal, the smart contract will count votes automatically and apply the outcome if the approval criteria are met. For example, if a DAO responsible for operating a protocol would like to change a fee parameter, a proposal is submitted and voted on by token holders. After passing the proposal, the smart contract updates the protocol’s setup without human intervention.

Most top DeFi projects have DAOs. DAO examples include DASH, Sandbox, Augur, MakerDAO, Decentraland, etc.

Key Benefits of DAO Models for Businesses

Why are companies and communities increasingly interested in DAOs? Adopting a decentralized autonomous organization model offers several compelling benefits:

• Improved transparency & trust. For example, MakerDAO, the decentralized finance DAO behind the DAI stablecoin, makes all governance decisions open for anyone to audit on Ethereum.
• Global and inclusive participation. A great example is Gitcoin DAO, which funds open-source software projects on a worldwide scale by gathering developers and donors from across different continents.
• Community-aligned incentives. For instance, many DeFi protocol DAOs reward active participants with tokens or fee dividends.
• Automation and efficiency. For example, the Colony platform provides DAO tools that automate tasks like budgeting and payments: once the community approves a budget, the smart contract can directly release funds for each task without delays.
• Trustless security. No CEO can override the rules. Changes only happen if the prescribed majority votes for them
• Rapid innovation through crowd wisdom. For example, protocol DAOs in DeFi often get improvement proposals from independent contributors all over the world, accelerating the evolution of the project.
  

In short, DAOs offer a new way to organize people and resources. These advantages explain why we’re seeing DAO use cases in many industries, not just crypto finance. Web3 business integration will occur even quicker.

DAO Use Cases by Industry

DAOs are incredibly versatile. Any collective endeavor can potentially be managed via a DAO structure. As of early 2023, treasuries of DAO DeFi were substantial. The largest DAO DeFi like Uniswap and BitDAO each held more than $2.5 billion in treasury assets. Let’s explore top DAO use cases across different sectors, with examples illustrating how they create value.

Finance and DeFi

Perhaps the earliest successful use of DAOs was in decentralized finance, where protocols provide financial services (lending, trading, stablecoins, etc.) without requiring intermediaries. In DeFi, DAOs exist within the following projects.

Stablecoins and Lending Platforms

A prime example is MakerDAO, the DAO that manages the Maker Protocol that mints the DAI stablecoin. Token holders of MakerDAO (MKR) vote and suggest key parameters such as stability fees, collateral assets, and debt limits that maintain DAI stability. This distributed risk management allowed Maker to maintain a $5B+ stablecoin alive based on the collective choice of the community.

Compound, Aave, and other lending protocols also make use of DAOs to decide on interest rate models, new loan markets, protocol upgrades, etc. The community implements changes rapidly or in case of emergency changes (e.g., changing collateral requirements if markets get crazy).

Exchanges and Liquidity Pools

Major decentralized exchanges such as Uniswap and Curve both have DAO governance via their tokens (UNI and CRV, respectively). The DAO of Uniswap oversees a staggering treasury of UNI tokens and ETH, and votes on proposals ranging from placing Uniswap on new blockchains to making fee switches that distribute revenue to token holders. In 2022, Uniswap’s DAO decided to bring the exchange onto Polygon. This illustrates how community leadership guides expansion plans.

Curve’s DAO periodically votes on what liquidity pools should get reward boosts, effectively leaving it up to the community to decide where incentives are directed in the exchange. DAO ensures that users of the platform (traders, liquidity providers) directly impact its development and fee structures.

Decentralized Risk Pools & Insurance:

DAOs are used in cryptocurrency insurance projects like Nexus Mutual (though not a DAO per se, but governed by the members) or Cover Protocol. Members pool funds and vote en masse to pay claims, replacing traditional insurance adjudication with community decisions. The mutual’s token holders vote on whether to pay out claims on smart contract hacks, for instance, based on evidence.

Investment and Crowdfunding

Another area where DAOs truly shine is investment and raising funds. Investment DAOs allow for like-minded people to pool their capital and invest together, democratizing venture capital and crowdfunding in a new way. Instead of a traditional VC fund managed by a handful of partners, an investment DAO allows a group of people to contribute funds and make decisions on how and where they should be invested.

Venture Capital DAOs

One such example is The LAO, which is a groundbreaking legal for-profit investment DAO. The LAO is legally a Delaware LLC but operates as a DAO. Accredited members make ETH deposits into the fund, then collectively vote on startup investment proposals. It has invested in dozens of blockchain projects (NFT platforms, DeFi protocols, etc.) with returns and equity shared among the DAO members.

By a DAO model, The LAO cuts out many middlemen. Smart contracts allow for pooling capital and the distribution of gains. Members negotiate terms over forums, and all members can participate in voting on what startups to invest in.

Crowdfunding & Group Buys

DAOs have also been used for crowdfunding big buys or missions. ConstitutionDAO brought in $40M in an instant. Another case is Krause House DAO, a team of basketball fans crowdfunding with the ambitious goal of buying an NBA team (they raised more than $4M toward this end). While they haven’t yet bought a team, they did use their crowdfunds to acquire a team within a smaller league as proof of concept.

Grant and Charity DAOs

There are profitless DAOs that are keen on grants. Moloch DAO, founded in 2019, started the grant-making DAO phenomenon by funding Ethereum public goods (clients, infrastructure projects) from donations from members. Moloch DAO introduced a “ragequit” mechanism: any member unhappy with a funding decision can exit the DAO before the funds are spent and withdraw their share. This protects minority investors and instills confidence that one will not be forced to invest in something they dislike.

The Moloch model (plain smart contracts + ragequit) was so strong that many subsequent DAOs, like MetaCartel Ventures (a Web3 venture fund DAO) and Flamingo DAO (an NFT investment DAO), adopted similar models. Flamingo DAO, for example, pools money to purchase expensive NFTs (CryptoPunks, collectible art) collectively and uses a DAO to decide on purchases. Members can ragequit if against a proposed acquisition, which ensures consensus-based decisions

Crowdfunded Deal Platforms

New architectures like Syndicate Protocol are making it easy to spin up investment clubs as DAOs. Syndicate allows a group to create an on-chain pooled fund (an “investment club”) in minutes, with wrap-around legal solutions. With these kinds of platforms, dozens of smaller investment DAOs have been spun up – e.g., Orange DAO (a Y Combinator alums’ DAO investing in crypto startups) and SeedClub (a DAO investing in and incubating social token communities).

Creator and Social DAOs

Not all decentralized autonomous organization examples are about hard finance. A trend is the application of DAOs to the governance of creator communities, social clubs, and cultural projects. These SocialFi projects emphasize community development and shared content creation, and tokens frequently gate membership or provide access to exclusive experiences.

Token-Gated Communities

Friends With Benefits (FWB) is one of the more popular social DAOs. It’s essentially a token-gated social club for crypto artists, creators, and innovators. To join FWB, one must apply and hold a certain number of $FWB tokens. Members network and collaborate on projects in music, art, and tech.

The thing that makes FWB a DAO is that members also collectively manage the community treasury and direction. They vote on proposals like hosting events, funding new collaborative projects, or spinning out new initiatives.

Creator Collectives

Beyond social networking, DAOs are also enabling new creator-business models. For example, Mirror is a decentralized publishing platform that enables writers to form DAOs to collectively fund and manage publications. Guilds of writers or journalists can collectively fundraise via a DAO on Mirror to finance their writing, and readers can hold tokens that give them a say in editorial direction or unlock special content.

Similarly, there are music DAOs emerging where fans and artists collectively decide which albums to finance or how royalties should be distributed. These models give the actual world community of artists and fans more control than traditional record labels or publishers.

NFT and Art Collectors

Some DAOs are collector communities. They raise money to buy costly collectibles or artwork and collectively own them. Examples of DAOs here include PleasrDAO, which started within the DeFi community to buy iconic NFTs and digital art together (e.g., the first Doge meme NFT and the Wu-Tang Clan’s one-time album).

The members share ownership of the piece through the DAO token. The group votes on new buys, along with what to do with them (e.g., exhibit the art, fractionalize it again, etc.).

DAOs in Gaming and Metaverse

The gaming industry has also embraced DAOs, with the emergence of blockchain games, play-to-earn models, and metaverse worlds. The majority of gaming DAOs are either seeking to give players ownership and voice within game economies, or they are guilds that coordinate players to play and achieve goals (and profits) together.

Gaming Guilds (Play-to-Earn guilds)

A prime example is Yield Guild Games (YGG), a DAO and gaming guild for play-to-earn games. YGG invests in in-game NFT assets (characters, virtual land, items) of games such as Axie Infinity, The Sandbox, Illuvium, etc., and rents out these assets to players who are not able to afford them upfront. The players (also called “scholars”) then share their in-game income with the guild treasury.

YGG’s model has been hugely successful. By early 2022, it had over 20,000 players (scholars) in various countries playing with guild-owned assets to earn money in games

cointelegraph.com

Game Development and Governance

Some blockchain games themselves are governed by DAOs. Decentraland, for instance, a virtual world, has a DAO where landowners vote on proposals for the world’s development: land auction policy, content moderation guidelines, or funding features developed by the community. Another example is Genesis Worlds (a metaverse project), which is creating a player DAO to guide future game content.

Metaverse and Virtual Asset Management

DAOs are managing virtual property and assets within metaverse worlds. Sandbox DAO and Decentraland DAO both manage multi-million dollar pools of virtual land parcels. The DAO determines strategic sales or partnerships (e.g., should we sell land to a certain brand, or how to invest treasury funds to develop out the world).

Public Goods and Social Impact

DAOs hold tremendous value in the social impact, nonprofit, and public goods management sector.

Public Goods Funding

Gitcoin DAO is one of the most well-known examples. Gitcoin started out as a quadratic crowdfunding site for open-source software funding. It has grown to become a DAO where community-elected stewards vote to decide how to allocate matching funds to thousands of open-source projects on a quarterly basis.

The Gitcoin DAO manages a treasury (donated by donors and protocol revenues) for digital public goods like software infrastructure, climate innovation, etc. Because it’s a DAO, the grant decisions on who gets grants are made transparently and collectively, with reduced bias.

Charitable DAOs

Big Green DAO is a first-of-its-kind nonprofit DAO started by Kimbal Musk’s Big Green organization. Its goal is to decentralize philanthropy. Big Green DAO gives grants to food education and community gardening nonprofits. The novelty is that both donors and grantees are on the DAO and vote on who receives grants.

Cause-related DAOs

The spotlight is on UkraineDAO, which was formed in early 2022 to finance Ukrainian humanitarian aid during the war. UkraineDAO auctioned a single NFT of the Ukrainian flag, fractionalized for communal ownership, and raised more than $6.7 million within a few days. Those funds were then directed to established nonprofits that aid Ukraine, and it was done transparently, in a publicly verifiable manner through the DAO.

Similarly, we’ve seen AssangeDAO raising $50M to bid on an NFT to support Wikileaks founder Julian Assange’s legal fund.

DAO Design: What to Consider Before You Build

Drawing inspiration from DAO use cases and considering launching a DAO? Adopting a DAO model requires forethought. These are some critical design questions and issues to think about before you ever write one line of smart contract code.

Legal and Regulatory Risks

DAOs are legally in a state of limbo in nearly all jurisdictions. Automatically, an unregistered DAO would be potentially treated as a general partnership – i.e., members would be liable personally for its activities. Security, fundraising, and tax regimes also potentially come into play if your DAO is playing with assets or investments. Legal structure should be a consideration:

• Will you “wrap” the DAO in a legal framework (LLC, cooperative, nonprofit) to limit member liability?
• How will the DAO remain in compliance with KYC/AML regulations if it’s investing or dealing with funds?
• In some places, DAOs are being made legally recognized (e.g., Wyoming’s DAO LLC law, and analogous efforts in other regions), which can be used as a model for compliance.

Operating globally means a DAO potentially touches many legal systems, creating a mosaic of laws to navigate. There’s uncertainty about how things like token-holder voting rights are treated legally. Are they like shareholders? Do smart contract decisions hold up in court? These uncertainties can lead to disputes or regulatory hurdles if not proactively managed. To mitigate this:

• Engage legal counsel experienced with DAOs and securities law;
• Be transparent with members when it comes to structure and risk;
• Consider jurisdiction: most DAOs go for U.S. states with DAO-friendly laws, or Switzerland for nonprofit foundations, or other cryptocurrency-friendly jurisdictions.

Briefly, don’t ignore the legal planning.

Community Engagement and Governance Mechanisms

A DAO is as strong as the participation of communities. A common pitfall is voter dissatisfaction – lots of token holders just don’t vote, leaving decisions to a small active minority. Low voter turnout can be bad for the legitimacy of the DAO and result in a capture by insiders or whales. Incentivize active participation:

• Education and onboarding. Most DAOs have regular community calls, tutorials, and FAQ documents to minimize the entry barrier for new players.
• Incentivize voting and contributions. Some DAOs offer voters token incentives in the form of small rewards or use POAPs (Proof of Attendance NFTs) for voting, which can potentially provide benefits. Some use quadratic voting or quadratic funding to provide more influence to the small holders and encourage more participation.
• Delegation. Not everyone can monitor all issues. Let token holders delegate votes to “representatives” or experts they trust. This is one way to arrive at representative democracy within a DAO. For example, Gitcoin’s DAO has Stewards whom individuals delegate, and they are held accountable through regular elections.
• Social incentives. Paying leaders, giving reputation points or non-transferable badges to active members, or running contests for proposal submissions, all can incentivize.

Also, consider the design of governance rules:

• What quorum (minimum % turnout) is needed for a vote to be valid? Having a reasonable quorum can prevent very small minorities from ratifying proposals when everybody else is indifferent.
• What majority should approve different kinds of proposals? Simple majority for the regular ones vs. maybe a supermajority for changing basic protocol parameters or spending an enormous amount.
• Will you have a security council or a backstop multi-sig? A few DAOs vote within a small committee to move responsively in emergencies (e.g., a hack) or to filter out spam proposals, but nevertheless remain accountable to the community.

You must make governance as easily accessible and rewarding as possible.

Tokenomics and Voting Rights

Having the tokenomics right is the most important part of your DAO’s success. That includes the allocation of tokens, the rights they provide, and the economic incentives that go along with them:

• Initial distribution. If tokens are too highly concentrated with early investors or founders, the DAO could never actually be decentralized.
• Supply and utility. Decide if your governance token is an inflationary supply (issuing new tokens as rewards) or a fixed supply.
• Voting power. One vote per token is the norm, but not necessarily the only model. You may experiment with quadratic voting (which removes some influence from whale addresses by making additional votes exponentially costly) to promote more democratic outcomes. Certain DAOs like Maker experimented with vote weight caps (no address may vote over X% even if they hold more tokens).
• Governance token vs. utility token. If your project already has a utility token (e.g., game currency or protocol token), you might just use that same one for governance, too. Or you might have a second governance token.

It’s also nice to address possible abuses in tokenomics like sybil attacks and buyouts/governance attacks.

Tech Stack and Infrastructure

Behind the scenes, DAO examples are operating on specific technology. Choosing the right tech stack and tools is of primary importance:

• Blockchain platform. Ethereum is most commonly used for DAOs since its tooling and ecosystem are well-developed (and many prospective members already have Ethereum wallets). Yet, high gas prices on Ethereum encourage you to consider using Layer 2 networks such as Polygon, Arbitrum, or Optimism, or even alternative chains if frequent on-chain voting is to occur.
• Smart contracts / DAO frameworks. Do not start from a blank slate and code everything from the ground up. There are audited DAO frameworks like OpenZeppelin’s Governor contract, Aragon, DAOstack’s Alchemy, Snapshot + Safe (for an off-chain voting + on-chain execution setup), Colony, Moloch (DAOhaus), and more. Using existing frameworks is a bug-free, time-saving activity. For instance, many projects use a Gnosis Safe multi-signature wallet as a treasury (DAO-managed) linked with Snapshot to vote off-chain, and a module prompting Safe signers to do only what Snapshot votes to do. This setup is quite simple and gas-efficient for voting.
• Voting interface. This can be a lightweight web application or just leveraging Snapshot’s UI (which is thoroughly tested and known by most crypto folks). Display proposal information, countdown on votes, outcomes, and proposer identity prominently.
• Communication platforms. Popular channels are Discord or Telegram as discussion channels, Discourse forums for longer proposals and chat, and Twitter for more general statements. You could also enable forum login with wallet (so that token holders can log in), so that governance discussion is restricted to members.
• Security and audits. Remember that code is law in DAOs. The infamous The DAO in 2016 was hacked by a solidity bug, lost $60M in ETH, and forced Ethereum to hard-fork to recover it.
• Upgradability. Will your DAO contracts be upgradable (through a proxy or through voted-on approvals)? Or fixed? Upgradable contracts adapt to changing needs, but add complexity and some trust assumptions.

Finally, testing governance procedures in testnet or beta environments is a good practice. Run a simulation of a proposal vote and execution to iron out any UX or technical kinks before real money or decisions are on the line.

Why Partner with a Tech Company Like Ideasoft for Your DAO Project

A DAO is a cross-disciplinary project. It cuts across software development, game theory, security engineering, community administration, and legal compliance. Although the vision of “decentralize everything” is exciting, the reality of building a DAO DeFi project is daunting, especially for Web3-ignorant teams. Here’s why it’s beneficial to have an experienced tech partner.

Challenges of launching a DAO project

So:

• Secure smart contract coding. Compiling the contracts that manage a DAO (voting, treasury, token, etc.) is risky business. Many DAO examples that tried to cut corners on audits or had dev talent experience have been subjected to massive exploits and fund loss.
• Sophisticated integrations. You may need to integrate a token contract, a governance module, a multi-sig wallet, oracle feeds (for external data), snapshot systems, and front-end interfaces. Having all these pieces play nicely together requires architecture-level planning.
• UX and onboarding. How do users get tokens? How do they vote? For most, it’s not simple to work with Web3 wallets or to understand gas fees. Without thoughtful UX, you will see low adoption. An experienced team will know solutions like WalletConnect integration, optimization of gas fees, and mobile optimization.
• Governance design and testing. Governance design is not purely technical. It is enhanced by experience and even simulations. Experts will demonstrate the potential failure modes (e.g., quorum too high to ever be reached, or treasury vault with no timelock) before you deploy.
• Compliance and legal tech. While not lawyers, a seasoned blockchain firm like IdeaSoft has seen the typical legal hurdles. We can introduce solutions such as token gating U.S. IP addresses if needed, or integrate identity verification APIs for KYC compliance in permissioned DAOs. We’ve worked with legal teams before and can shape the tech to fit legal requirements (e.g., ensuring the DAO only does certain actions that are compliant, like not distributing profits unless criteria are met, etc.). Early-stage decisions here (such as whether to geo-block certain participants or limit token transfers until a legal wrapper is in place) can save you from headaches down the road.

There are an infinite number of technical and non-technical pitfalls, and mistakes can mean money down the drain, trust lost with the users, or worse yet, regulatory actions. 

How a Tech Partner Guarantees Success

Partnering with a dedicated blockchain development company like IdeaSoft gets you to have a seasoned guide who will keep you out of these pitfalls:

• DAO architecture design. We start by establishing your goals and then organizing the optimal architecture. We will map out each aspect (tokens, voting system, treasury management, proposal workflow, etc.) with security gating at each intersection.
• Smart contract coding (Expert-level). Our blockchain engineers are expertly trained in Solidity and Rust. More importantly, they’ve implemented complex smart contract systems in the past, like DAO governance modules, staking contracts, etc. As a result, you’re left with solid contracts that perform what they were designed to do, in a gas-efficient manner, and are understandable for community audits.
• Integration with DAO tooling. For instance, going end-to-end with Snapshot for voting off-chain and linking to on-chain execution via a Timelock + Gnosis Safe setup is something that can be set up end-to-end. If your DAO needs a custom voting dApp, we can build that out and work in WalletConnect or whatever wallet flow your users need.
• UX & front-end development. We can offer an elegant DAO dashboard where the user sees proposals, votes on them (with tooltip support to explain each proposal, perhaps even multi-language support if your community is global), and sees results.
• Security audits and testing. We will connect you to reputable independent auditors and work with them by providing them with clean documentation of what is intended to occur with the contracts (making their job less difficult and the audit more effective). If bugs happen to be found, we close them promptly and openly.
• Knowledge transfer and documentation. We leave behind documentation (developer-facing and end-user-facing) explaining how your DAO works. We can be long-term tech partners, handling maintenance and updates as the DAO grows. We can work like the “DevOps department” for a decentralized org.

Examples of DAOs prove there’s no substitute for hands-on experience. We invite you to leverage ours, so you can focus on your vision while we handle the technical heavy lifting to make it a secure reality.

Conclusion

The DAO use cases we explored show that DAOs are no longer theoretical. They’re managing stablecoins that underpin financial markets, funding startups and public goods, curating art and media, and enabling new play-to-earn economies. Some of the best DAO projects, like MakerDAO, Uniswap, Gitcoin, FWB, and YGG, have demonstrated that decentralized governance can be viable and effective at scale.