Basic Concepts about DeFi DAOs

To understand DeFi DAOs, one would need to have a basic understanding of the following concepts:

DeFi (Decentralized Finance)

DeFi refers to a financial system built on blockchain technology that is decentralized, transparent, and accessible to anyone with an internet connection.

DAOs

DAOs (Decentralized Autonomous Organizations) are organizations that are governed by their members, who vote on proposals and make decisions collectively, through smart contracts on public and secure blockchains.

Governance Tokens

Governance tokens are tokens that give holders the right to vote on proposals and decisions within a DAO.

Voting

Members of a DAO vote on proposals using their governance tokens. The outcome of the vote determines whether the proposal is accepted or rejected.

Quorum

A quorum is the minimum number of votes required for a proposal to be considered valid. This is set by the DAO's governance rules.

Tokenomics

Tokenomics refers to the economic system of a token. This includes factors such as the supply, demand, distribution, and usage of the token within the ecosystem. Understanding tokenomics is important for understanding how governance tokens work within a DAO.

Smart Contracts

Smart contracts are self-executing contracts, with the terms of the agreement between transaction partners directly written into lines of code. They automate and execute the rules of a DAO.

Risk Management

Members need to assess the risks associated with proposals and make informed decisions to minimize the risk of loss.

• @MakerDAO – How does MakerDAO's risk team evaluate and mitigate the economic risks of Maker Protocol's operations?

Some additional key terms to consider:

• Stablecoins

• Money markets

• AMM

• Liquidity pools

• Real-world assets

• Yield farming

• …

© 2023 Xule Lin & Ying-Ying Hsieh. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.