What Is DAO Proposal?

In most DAOs, the proposal process consists of several stages. The idea is first discussed on a community forum; then an off-chain sentiment poll that requires no gas fee is usually held with tools such as Snapshot. If it gains support, the proposal is put to an on-chain vote together with the code containing the actions to be executed. To submit a proposal, one often needs to hold a certain amount of the governance token or delegated voting power.

For a vote to be valid, a predetermined participation threshold (quorum) must be reached and yes votes must be in the majority. Accepted proposals are generally executed automatically by smart contracts after a timelock period; this waiting period gives users who object to the decision an opportunity to exit the protocol. For example, the DAO of a lending protocol can vote on a proposal to change an asset's collateral ratio.

Low participation, voting power concentrated in a few large token holders, and governance attacks are the main weaknesses of the process. In 2022, in the Beanstalk protocol, an attacker temporarily obtained a voting majority with a flash loan, got a malicious proposal approved and seized the funds.