Protocol / How it works
A step-by-step walkthrough of the DAC protocol — from token governance to deal execution and automated performance evaluation.
01 — Governance layer
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.
02 — Double token system
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
03 — Modular deal structure
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
04 — Risk isolation
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
05 — Local governance engine
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.
06 — On-chain performance
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.