DAOs and tokenomics
What is a decentralized autonomous organization (DAO)?
A decentralized autonomous organization, often abbreviated to DAO, is a form of governance without a central governing body. In a DAO, no member or group of members has authority over one another, and each member shares the same goal of acting in the best interest of the organization. DAOs can be used to govern projects, applications, systems, or any other entity in a decentralized manner. DAOs that are deployed on decentralized systems, such as blockchains, are able to provide members with a transparent, verifiable record of all decisions made on-chain by the DAO through the blockchain's transaction records.
Membership in a DAO is determined by holding a certain cryptographic asset or token, such as an NFT or a system-native token. These ownership of these assets can be verified through a cryptographic . With token-based membership, members may receive voting rights within the DAO by staking the system token.
Network Nervous System (NNS)
The Internet Computer Protocol is governed by a DAO known as the Network Nervous System (NNS). The NNS is a fully on-chain, decentralized system that is responsible for making decisions regarding every aspect of the Internet Computer. To participate in the NNS, ICP token holders must stake the ICP token for a certain period of time in an entity known as a neuron. Neurons provide stability required for the responsible governance of the Internet Computer Protocol by ensuring that the ICP tokens staked within it cannot be exchanged for a specific period of time known as the 'lock-up' period.
Neurons can then vote on proposals, which are proposed changes or upgrades to the protocol. When a proposal has been accepted, it will be autonomously executed. Neurons are encouraged to vote on every proposal, and in return for actively voting, receive voting rewards in the form of ICP tokens.
Some examples of proposals for changes that the NNS is responsible for deciding are:
Upgrading the protocol and guest operating system software used by the nodes machines.
Configuring parameters that control how much must be paid by canisters for resource usage.
De-activating under-performing nodes to protect the network.
Inducting new node providers and machines into the network.
Creating new subnets to increase network capacity.
Splitting subnets to balance network load.
You can learn more about the NNS here.
Proposals, voting and rewards are explained here can be explored in the Governance section on the dashboard.
Read about the [neurons' fund(/docs/current/developer-docs/daos/nns/neurons-fund).
Start participating in the NNS app by checking out the NNS introduction.
Service Nervous System (SNS)
Another feature of the Internet Computer is the ability for on-chain dapps to be governed by a DAO through a Service Nervous System (SNS). An SNS is a DAO for a specific dapp that uses the same format and architecture that the NNS uses to govern ICP. A dapp's SNS uses proposals to vote on changes to the dapp, and the dapp's native token can be staked within a neuron in return for voting rights for that SNS.
Tokens
To obtain ICP tokens, they can be purchased through an exchange, earned through being a node provider or received as a staking reward, or received through developer grants. To learn more about token custody, such as self-custody options, check out the documentation below: