Set up a Guardian DAO

A Guardian DAO is a DAO created to protect liquidity providers (LPs) by giving them the final say over proposed vault changes. Depositors govern the Guardian DAO with their vault shares (the "LP token") to collectively block those changes.

Vault curators are responsible for investment strategies and risk parameters, but LPs may disagree with their proposed changes. The Guardian DAO gives depositors a binding onchain veto that cancels the pending change when executed. The model can be used across different vault frameworks, with its exact protective powers determined by the role given to the DAO.

This guide explains how to create a Guardian DAO on Aragon. It also covers the option to make the DAO immutable.

How it worksCopy Anchor Link

1. A vault curator submits a timelocked change. The change remains pending while the vault's timelock is active.
2. A depositor creates a proposal in the Guardian DAO to veto the pending change.
3. LP token holders vote on whether the pending vault change should be cancelled.
4. If the DAO proposal passes and is executed before the vault's timelock expires, the pending vault change is cancelled.

Many LP tokens do not implement IVotes and cannot natively be used with Token Voting. Wrapping or locking lets holders use them for governance:

• Wrap with Token Voting. LPs deposit their LP tokens into a wrapper to receive governance-compatible tokens. They must do this before the proposal is created in order to vote on it.
• Lock with Lock to Vote. LPs lock their LP tokens to vote. They can join a vote even after it has already opened.

For Guardian DAOs, we recommend Lock to Vote, developed by Aragon in collaboration with Morpho and Steakhouse Financial. LPs can keep their vault shares deployed elsewhere in DeFi and lock them when they need to veto a change, even after the vote has opened. Compare voting-power mechanisms for more on these participation models.

Before you beginCopy Anchor Link

Have the following ready:

• A deployed vault. For an ERC-4626 vault, the vault address is also the address of the ERC-20 LP token that depositors receive. You will use that LP token as the DAO's governance token.
• Voting parameters. Choose voting thresholds, proposal duration, whether participants can change their votes, and who can create proposals to veto vault changes. Account for expected participation and leave enough time to vote and execute a veto before the vault's deadline.

1. Deploy the DAOCopy Anchor Link

1. Open Aragon, connect your wallet, and select Create a DAO.
2. Select the network that the vault is deployed on and customize the DAO's name, description, logo, and social links.
3. Publish the DAO and confirm the transaction in your wallet.

The wallet address you used to deploy the DAO is its initial admin and lets you complete the rest of the setup.

2. Install a governance pluginCopy Anchor Link

You need to install a governance plugin that can be governed by the LP token. LPs create and vote on veto proposals through this plugin, which instructs the DAO to veto the proposed actions on the vault.

Choose a compatible token-based governance plugin using the participation options described above in How it works.

Add a governance process from the DAO dashboard:

1. Give the veto process a name, an optional description, and a process key. For example: Steakhouse USDC veto, “Allows steakUSDC holders to propose and vote on vetoes of pending vault changes,” and VETO for proposal identifiers such as VETO-1.
2. Use a Basic process with one voting body governed using Token Voting or Lock to Vote. For Token Voting, import the LP token using its address. For Lock to Vote, provide the LP token's address as the token to lock.
3. Configure the voting parameters below. Read voting thresholds, voting modes, and participation differences for the detailed rules.

4. Set the minimum voting power required to create a veto proposal, using wrapped LP tokens where needed for Token Voting or locked LP tokens for Lock to Vote.
5. Give the process Any action permission so it can execute approved proposals through the DAO.
6. Publish the process and confirm the installation transactions with your admin wallet.

3. Make the DAO immutable (optional)Copy Anchor Link

Some vault curators make their Guardian DAO immutable so LP token holders cannot vote to change its governance rules in ways that undermine other depositors' ability to veto. For example, extending the minimum proposal duration beyond the vault's timelock would prevent a veto from executing in time.

Making the DAO immutable preserves your intended rules, but also prevents adjusting them later. Follow Make your DAO immutable, using Admin to execute the changes and remove its own authority in the same transaction.

Then continue with Verify the DAO setup.

4. Remove adminsCopy Anchor Link

Skip this step if you already removed Admin authority while making the DAO immutable.

Use Remove all admins in Settings with your admin wallet and submit the removal through Admin. The admin removes its own control in a single transaction, leaving the DAO to be unilaterally controlled by LP-token governance.

5. Verify the DAO setupCopy Anchor Link

Open Settings → Governance and check that the governance process uses the intended LP token or its governance wrapper, voting parameters, proposal-creation requirements, and authorized actions.

You can also use the Permission Viewer to confirm that the voting plugin holds Execute permission on the DAO and Admin no longer does.

6. Assign the DAO to your vaultCopy Anchor Link

1. Copy the DAO's contract address from Settings → Contracts. This address executes veto calls on the vault.
2. In your vault's management tools, assign the DAO address as the guardian, sentinel, or equivalent role, completing any required waiting period and activation.
3. Confirm in the vault interface or block explorer that the DAO address holds the active role. For Morpho, see vault roles.

Tip: LPs can subscribe to Aragon Notifications from the DAO dashboard to receive Telegram alerts when a veto proposal is created.