Exercises: DAOs and Decentralized Governance

Conceptual Exercises

Exercise 28.1: DAO Anatomy Mapping

Difficulty: Beginner | Bloom Level: Understand

Choose three DAOs from the following list: MakerDAO, Uniswap, ENS, Aave, Lido, Optimism, Arbitrum, Gitcoin.

For each DAO, research and document: 1. What governance token is used, and how is voting power determined? 2. What is the proposal lifecycle (stages from idea to execution)? 3. What quorum is required for a valid vote? 4. Is there a timelock, and if so, how long is the delay? 5. Is delegation supported? Who are the top 5 delegates by voting power?

Present your findings in a comparison table. Which DAO has the most accessible governance for a small token holder? Which has the most restrictive? Explain your reasoning.

Exercise 28.2: The Fork Debate — Structured Argument

Difficulty: Intermediate | Bloom Level: Evaluate

Write two 500-word essays about The DAO fork of 2016 — one arguing that the fork was the correct decision and one arguing it was wrong. Each essay must address:

• The technical facts of what happened
• The philosophical principle at stake (immutability vs. community welfare)
• The precedent set by the decision
• A real-world analogy from traditional governance or law

After writing both essays, write a 200-word personal conclusion explaining which argument you find more persuasive and why.

Exercise 28.3: Governance Mechanism Selection

Difficulty: Intermediate | Bloom Level: Analyze

For each of the following scenarios, recommend a governance mechanism (token-weighted, quadratic, conviction, delegation, or a hybrid) and justify your choice:

Scenario A: A DeFi lending protocol with $500 million in TVL needs to adjust interest rate parameters weekly. Speed and expertise matter; broad participation is less important.

Scenario B: A community land trust DAO where 2,000 residents collectively own neighborhood property. Each resident holds one membership NFT. Decisions include maintenance budgets, renovation projects, and rules for common spaces.

Scenario C: A public goods funding DAO that distributes $10 million per quarter to open-source software projects. The goal is to fund projects that benefit the most people, not the most powerful stakeholders.

Scenario D: A media DAO where journalist-members produce investigative reporting. Revenue from subscriptions funds operations. Editorial decisions must be independent of financial interests.

For each scenario, also identify the mechanism's primary vulnerability and propose one mitigation.

Exercise 28.4: Voter Apathy Analysis

Difficulty: Intermediate | Bloom Level: Analyze

Using Tally (tally.xyz) or Boardroom (boardroom.io), find three recent governance proposals from any major DAO and record:

1. The proposal title and description (summarized)
2. The total number of votes cast
3. The percentage of total token supply that voted
4. The number of unique voters
5. The vote margin (how close was it?)

Based on your data: - Calculate the average participation rate across your three proposals - Identify which proposal had the highest participation and hypothesize why - If you were designing a solution to improve participation by 3x, what would you propose?

Exercise 28.5: Legal Wrapper Comparison

Difficulty: Intermediate | Bloom Level: Analyze

Research and compare three legal structures for DAOs:

Based on your comparison, which structure would you recommend for: - A small (10-person) investment club DAO managing $50,000? - A DeFi protocol DAO with 50,000 token holders and $100M TVL? - An international open-source software funding DAO?

Technical Exercises

Exercise 28.6: Reentrancy Attack Reproduction

Difficulty: Intermediate | Bloom Level: Apply

Using Hardhat or Foundry, write a simplified version of The DAO's vulnerable splitDAO function and an attacker contract that exploits it. Then:

1. Deploy the vulnerable contract and fund it with test ETH
2. Execute the reentrancy attack and verify the funds were drained
3. Fix the vulnerability using the checks-effects-interactions pattern
4. Verify the fix prevents the attack

Submit your code, test results, and a written explanation (200 words) of why the fix works.

Exercise 28.7: Governor Contract Customization

Difficulty: Advanced | Bloom Level: Create

Starting with the GovernorContract from this chapter's progressive project, modify it to implement the following features:

1. Proposal threshold: Require proposers to hold at least 1% of total token supply
2. Extended timelock for large transfers: If a proposal transfers more than 5% of the treasury, increase the timelock delay to 7 days (instead of the standard 1 day)
3. Vote weight decay: Tokens that were acquired less than 7 days before the proposal snapshot receive only 50% voting power (to discourage last-minute token accumulation)

For each feature, write the modified Solidity code and at least two tests demonstrating correct behavior.

Exercise 28.8: Quadratic Voting Implementation

Difficulty: Advanced | Bloom Level: Create

Implement a QuadraticGovernor contract that uses quadratic voting instead of token-weighted voting. The contract should:

1. Accept votes where the number of "voice credits" spent equals the square of the voting power expressed
2. Track each voter's remaining voice credits per proposal
3. Allow voters to split credits across multiple proposals
4. Calculate final results using the quadratic formula

Test your implementation with the following scenario: - Alice has 100 tokens (voice credits): she spends 81 credits (9 votes) on Proposal A and 16 credits (4 votes) on Proposal B - Bob has 10,000 tokens: he spends 10,000 credits (100 votes) on Proposal A - Charlie has 1 token: he spends 1 credit (1 vote) against Proposal A

Without quadratic voting, Bob would dominate. With quadratic voting, Alice's 9 votes are relatively more impactful. Verify this in your tests.

Exercise 28.9: Governance Attack Simulation

Difficulty: Advanced | Bloom Level: Evaluate

Design and implement a test that simulates a governance attack on a DAO without a timelock:

1. Deploy a Governor contract without a Timelock (proposals execute immediately upon passing)
2. Create a treasury contract holding 100 ETH
3. Write an attacker contract that: borrows governance tokens via a flash loan, creates a proposal to drain the treasury, votes on it, and executes it — all in one transaction
4. Demonstrate the attack succeeds

Then modify the Governor to include a Timelock and demonstrate the same attack fails (because the flash-loaned tokens are returned before the timelock expires, so the attacker cannot execute).

Write a 300-word analysis explaining why timelocks are considered essential security infrastructure for DAO governance.

Exercise 28.10: DAO Dashboard

Difficulty: Advanced | Bloom Level: Create

Using Etherscan's API (or a testnet block explorer), build a simple dashboard (command-line or web-based) that displays:

1. All proposals for a given Governor contract address
2. The current state of each proposal (Pending, Active, Canceled, Defeated, Succeeded, Queued, Expired, Executed)
3. Vote counts (For, Against, Abstain) for each proposal
4. The top 10 voters by cumulative voting power across all proposals
5. Historical participation rate (percentage of supply that voted) per proposal

If building a web dashboard, visualize the participation rate over time as a line chart.

Discussion Questions

Discussion 28.1

The DAO fork of 2016 established the precedent that a blockchain's history can be rewritten by social consensus if the stakes are high enough. Where should the line be drawn? What dollar amount, percentage of supply, or other criterion should trigger a community discussion about forking? Or should the line be absolute (never fork to reverse transactions)?

Discussion 28.2

Optimism uses a bicameral governance system with a Token House (plutocratic) and a Citizens' House (democratic). Is this a genuine innovation or just adding complexity? Could a similar model work for MakerDAO or Uniswap? What are the risks of bicameral governance in a pseudonymous system?

Discussion 28.3

The CFTC's action against Ooki DAO argued that governance token holders are personally liable for the DAO's legal violations. If this precedent holds, what are the implications for DAO governance participation? Would you vote in a DAO's governance if doing so created potential personal liability?

Discussion 28.4

"DAOs are just companies with extra steps and worse governance." Agree or disagree? In what specific situations does DAO governance offer genuine advantages over traditional corporate governance? In what situations is it strictly worse?

Discussion 28.5

Gitcoin's quadratic funding has distributed over $50 million to public goods. Could this model work for government budgeting? What would a city need to implement quadratic funding for its municipal budget? What would go wrong?