Greatest Hits Report: DAOs
Hi Fintech Architects —
Welcome to the DAO Greatest Hits report. This content curates and aggregates the most relevant Blueprint articles, across form factors, focusing on a key concept. Today we cover Decentralised Autonomous Organisations, or “DAOs”.
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Decentralised Autonomous Organisations are a novel organisational structure, and have become the cornerstone of many Web3 projects. We think they are likely to become the atomic unit of productivity for the Web3 economy.
DAOs have the potential to open up access to decision making, empower communities, and allow companies to be run by the multiple stakeholders, rather than just employees, through the incentivization mechanisms of ownership via digital tokens on blockchain rails.
Are they decentralized? Maybe, maybe not. DAOs are not controlled from any single particular business or location, and decisions are often made through a token voting process. But economic interests are not equally distributed, or and often there is some centralization of power.
Are they autonomous? Well, not in the sense that a self-driving car is an autonomous agent, and therefore there are robots in Web3 DAOs making AI-based decisions. Rather, human contributors are independent and uncoerced.
Are they organizations? Definitely. You can think of them as something simple, like Internet forums with treasuries, or something complex and ambition, like the future of multi-stakeholder ecosystem governance.
One of the main benefits of DAOs is transparency about decision making, since voting is recorded on a blockchain, which then provides a tamper proof view of decisions taken by a DAO. Further, contributors can remain anonymous while participating, and still partake in value transfer and relationship building, without having to disclose private information. That doesn’t mean that shadow hierarchies and the human condition don’t exist for off-chain collaboration.
The first DAO (“The DAO”) was created in 2016 to finance projects contributing to Ethereum development. The DAO was an investment fund whose decisions were directly made by investors, and had a creation period during which anyone was allowed to send $ETH to a unique wallet address in exchange for DAO tokens. it managed to gather 12.7MM $ETH, worth around $150MM at the time. The platform would allow anyone with a project to pitch ideas to the community and potentially receive funding from The DAO. Anyone with DAO tokens could vote on plans, and would then receive rewards if projects were profitable. But, on June 17, 2016, a hacker found a loophole that allowed them to drain 3.6MM $ETH in funds. To refund the lost money, the entire Ethereum chain was hard forked, sending back the hacked funds to original owners.
Since then, the DAO landscape has come a long way and become more resilient. Modern DAOs rely on open-source code (e.g., Moloch DAO) or can be set up using tools like Aragon, Juicebox, or many others. Here are a few emerging categories that we come across:
DAO Operating Systems - Underlying toolsets for setting up and operating DAOs, such as Juicebox.
Investment DAOs - Gathers a pool of funds from DAO members, which is then invested according to DAO governance decisions. These DAOs are similar to “Collector DAOs” with the exception that they target early stage projects and token sales. The DAO token represents your share of the treasury.
Collector DAOs - Similar to investment DAOs, with a focus on NFTs
Protocol DAOs - Protocol DAOs are one of the most common DAO forms. Tokens serve as voting power for implementing governance over a protocol, such as MakerDAO or Uniswap.
Grants DAOs - Tailored for funding and fostering new projects and ventures, particularly in the DeFi space, with Gitcoin being the most prominent player.
Service DAOs - DAOs that can be hired to help with specific activities. Raid Guild is an example of this, with the DAO providing design and development work for Web3 projects.
Social DAOs - Connecting like-minded individuals and coordinating projects. We also think of this as NFT-driven tribes.
Media DAOs - BanklessDAO is an example. It is in effect a company operated as a open project, where people can contribute and curate content.
There are now over 4,800 DAOs, with over 3.8MM members managing more than $10B in assets. Whether it be your new place of work, a side-hustle, your go-to spot for catching up on your interests, or a service that better fits your needs, we think DAOs are here to stay.
Below you will find our coverage of these topics. It is intertwined, opinionated, and sometimes hard to unwind. We encourage you to dive into the material, see the progression over time, identify how we came to our conclusions, and find ways to build your own mental blueprint. The sections are separated into (1) Key Concepts, (2) Long Takes, (3) Conversations, and (4) Short Takes and Related Topics.
2021, November — DAOs 101, with SharkDAO, PartyDAO, and Juicebox contributor Nicholas
In this conversation, we chat with Nicholas – an NFT developer and a contributor to Juicebox, which is an awesome DAO enablement software, as well as SharkDAO and PartyDAO. He is very active in the ecosystems, got a solidity podcast called Solidity Galaxy Brain, a collaborator with multiple NFT artists, but I could go on and on. We touch on the philosophy behind programming and coding, what a decentralized autonomous organization (DAO) truly is and what it is comprised of, various successful examples of DAOs that Nicholas has been involved in, the concept of community and the value that DAOs serve in this respect, how DAOs leverage tools to achieve their purpose, and so so much more!