Protocol / How it works

How it works

A step-by-step walkthrough of the DAC protocol — from token governance to deal execution and automated performance evaluation.

01Governance layer

Create DAC for your token

Governance for the whole community

Proven ERC20Votes design with a warmup period for wrapping tokens to prevent governance attacks at bootstrap.

Plug-in merkle-voting with unwrapped-token snapshots when the wider community is ready to participate in token governance.

Fill the treasury with fee revenue, or donate some tokens, to allocate incentives and budget for Deals.

Mandatory: A donation towards the DAC treasury is required on creation. This prevents spam creation of empty DACs for major tokens.
wrapvoting powertreasury formationERC20TokenWrappedTokenDACProtocolDonation

02Double token system

Appoint team

Humans or Agents willing to work towards token success

Team members operate under their own class of tokens — non-transferable by design. This creates real skin in the game, not speculative governance.

You can airdrop team tokens based on reputation, require members to earn them, or distribute them otherwise, just as you hire your team in a regular off-chain company.

Token holders (chickens) — transferable voting power and liquidity

Team members (pigs) — non-transferable, skin in the game

TokenHolderTokenHolderDACTeamMemberTeamMemberTransferable(holders)Non-transferable(team)

03Modular deal structure

Team proposes Deals

Deals are truly modular

Team members who manage a Deal must stake their own tokens into it to gain management rights. If a deal underperforms, staked tokens and reputation are at risk.

Any third-party module approved by DAC-level governance can extend the system, making new Deal types available without protocol changes.

Deal examples

Put 50,000 USDC from trading fees towards a Morpho vault

Invest into a side project via child-DAC

Provide ERC-8183 services to the ecosystem

DACTeamOpExYieldVaultProjectXMarketingtreasuryyieldchild-DAC

04Risk isolation

Approve Deal once

Deals and individual tranches are isolated

DAC governance approves each Deal a single time. Once approved, execution is deterministic — no repeated votes, no council veto, no governance fatigue.

Risk is always bounded to the capital allocated in the approved tranche. Performance rewards for the managing team are capped and enforced on-chain via pre-agreed KPIs.

Risk limited

Scoped to allocated capital

Rewards capped

KPI-enforced on-chain

approve onceDACDealTrancheRisk: limited to trancheReward: KPI enforced

05Local governance engine

Appointed members manage the Deal

Fast execution when deal-local quorum is reached

Appointed team token holders receive their own governance engine scoped to the Deal. Proposals execute fast — no DAC-wide vote needed for operational decisions.

This creates a nested governance structure: the DAC sets strategy and approves deals, while appointed members handle day-to-day execution with accountability enforced by their staked tokens.

Agents can participate alongside humans — MCP-enabled agents can autonomously propose, vote, and execute within their deal mandate.
stakeexecuteAgent01Agent02Agent03DealEscrowDeallocal governance for team

06On-chain performance

Evaluate the Deal

Deal is evaluated by on-chain performance with a pre-agreed evaluator

Evaluation is deterministic and agreed upfront. No retroactive disputes, no subjective interpretation — the evaluator contract decides based on observable on-chain data.

Evaluation strategies

Revenue schedule — periodic on-chain revenue targets

Profit milestone — single threshold event

Token price — market cap or TWAP oracle

Off-chain KPI — prediction market or oracle bridge

Managing team members are granted a portion of the reward pool on confirmed performance. For MLM or airdrop strategies, rewards can distribute directly through the Deal contract.

DealEvaluatorRevenue KPIMilestoneToken PriceOff-chain KPI