Understanding Governance and DAO
DAO is short for a decentralized autonomous organization which is an organization that runs on a blockchain, has a set of rules like working in smart contracts.
An important point to note here is that DAO’s are trustless, which means that there is no one controlling which eliminates the need for supervision, it has governance to which everyone has access, instead of some special users.
The difference between a trustful and trustless organization is that you trust the systems and they are sole decision-makers, but the opposite is the case in a trustless organization, where you can be a decision-maker if you have the required criteria to be one.
To be a member of DAO you need to first join them by purchasing the required cryptocurrency required by the platform, COMP for Compound and UNI for Uniswap.
By being a member of DAO you can contribute to the well-being of the platform by creating proposals, voting for decisions to impose, something that needs to be changed, or needs updations for some ongoing things, etc.
The vote weightage is dependent on the number of tokens you are holding, you cannot just buy tokens and vote on an ongoing proposal, you must be a prior holder of the token.
Now let's discuss the contract part for the Governance
Required contracts are -
1. GovernanceToken – a token that is required by the user to be a member of DAO
2. A contract that needs to be governed
3. GovernorContract – having functions like createProposal, execute, etc.
4. TimelockContract – having functions to keep track of the time required for the proposals
To understand the process we can take the help of Compound Governance
Following are the steps for Successful Proposal -
Proposal Created (Reviewing) -> Voting Active (Active) -> Voting Ends (Succeeded) -> Timelock (Queued) -> Executed
Following are the steps for Failed Proposal -
Proposal Created (Reviewing) -> Voting Active (Active) -> Voting Ends (Defeated) -> Canceled
To write these contracts from scratch is a very difficult task, Openzeppelin has support for the Governance and has really good support.
Link for the contracts by Openzeppelin - https://docs.openzeppelin.com/contracts/4.x/governance