AIs Transforming DAOs To Autonomous Protocols: Talos Case Study With Oasis Value Add-on

We all know about DAOs. Imagined for web3 and designed for community-led governance, its purpose and potential is undeniable but its adoption has not scaled as expected. Operational bottlenecks and slow decision-making are often the biggest challenges that DAOs face. Could the AI x blockchain technology collaboration serve an answer? It can and it does — in the form of newly emerging autonomous protocols.

This is the next logical step in DAO evolution where AI replaces the human collective as the owner with operational control over a protocol’s code and core functions like its treasury management and future development.

Sovereign Intelligence

The Talos case study helps understand the autonomous AI protocol owner model and demonstrates why it is a level up from traditional DAOs.
The architecture of the autonomous AI protocol owner system can manage its own smart contracts from within a cryptographically secure environment, shielding it from outside interference. The innovation here is the AI’s sovereignty that enables it not only to manage but also upgrade itself and learn the impact of the changes from running simulations, and then implement those modifications without human agency.

This model transforms an automated tool to true autonomy resulting in a self-evolving financial system. Its core principles are simple:

• Self-ownership
• Adaptability
• Resilience

The improvement over traditional DAOs is significant.

Deep dive into Talos model

Talos, the pioneer example of the autonomous AI protocol owner system, is an agentic treasury protocol on the Arbitrum network and has been designed to autonomously manage and grow its portfolio of on-chain assets. Its functionality is three-pronged.

AI-Managed Treasury

As its defined purpose, the Talos AI’s main function is to manage a treasury of yield-generating assets which is done through a dynamic “multi-vault strategy” using the ERC-4626 Tokenized Vault Standard. This standardization provides a uniform API that simplifies integration, enhances security, and ensures transparency while achieving the desired result of dynamic rebalancing.

ETH is the base asset for all vaults. The AI can simultaneously monitor each vault performance. Ability to price any vault’s holdings at any time in its equivalent ETH value provides a unified risk metric. The AI can then autonomously decide and use this to shift capital from underperforming vaults seamlessly to those offering superior risk-adjusted returns.

Economic Design for Long-Term Alignment

There are two aspects here fostering a successful and cooperative ecosystem.

• Talos uses the Stag Hunt game theory encouraging cooperation. The logic is that participants are better off working together for a large collective reward (hunting a stag) than acting alone for a smaller, guaranteed reward (hunting a rabbit). This is true embodiment of the DAO philosophy of the community coming together collectively.
• Staking rewards are directed only to those who stake tokens and delegate voting power, ensuring that “only the aligned receive protocol inflation.” The AI can also dynamically adjust these rewards and initiate bond sales based on its analysis of market conditions and social sentiment. This creates an intelligent, self-regulating economic system.

Governance: A Symbiotic Relationship

The shared cognition governance model works three-way and is uniquely integrated in Talos.
So, we have the AI which is the ultimate protocol owner and operator.
Then we have the Council which is a human oversight body purposed with approving strategy proposals before the AI can deploy capital. It is the safety layer.
Finally, there is the Community which is the foundation of this protocol, similar to any DAO. Token holders empower the Council through delegation and can drive innovation by submitting Talos Improvement Proposals (TIPs).

Technology behind sovereign AI

Having read this far, developers must be itching to know the “secret sauce” that make autonomous protocols like Talos tick.

The foundation of Talos stack is secured by the Trusted Execution Environment (TEE), and within the enclave, the AI can:

• Hold the private keys needed to execute transactions.
• Privately review the code of new proposals.
• Run sandboxed simulations of potential upgrades.
• Execute self-upgrades without any possibility of external tampering.

Oasis comes into the picture offering integration of the decentralized TEE cloud through its ROFL ( runtime off-chain logic) innovation. The strategic benefits are immediately evident.

• Decentralized key management for the AI’s private keys.
• Auditable execution and solving AI’s trust problem with verifiable privacy and remote attestations using ROFL’s SGX & TDX TEEs where off-chain computation and on-chain proof cryptographically guarantees that the AI’s logic is safe and sound, operating as intended.
• The treasury protocol maintains its competitive edge by keeping the AI’s strategy logic private by running the proprietary models for sentiment analysis or yield prediction confidentially inside the TEE.

The Talos case study is a work in progress as the protocol is evolving as it builds on the AI’s autonomy and trustlessness. Its 4-phase roadmap looks like this.

But what’s next in line for the autonomous AI protocol owner model? Well, DAOs are only the beginning. The success story can be translated and replicated in other web3 use cases as well, eg DeFAI. The model is set on course to carve out a viable path toward a new category of digital entity where complex intersections of artificial intelligence, decentralized governance, and financial innovation come together to build the future.

Source: Oasis Academy course

Originally published at https://dev.to on August 29, 2025.

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AIs Transforming DAOs To Autonomous Protocols: Talos Case Study With Oasis Value Add-on was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.