What are Decentralized Autonomous Organizations (DAO)?

Work has changed a lot recently.

Activities that you thought would have trouble going digital have done so seamlessly.

That is the result of a diversified economy involving a variety of work and ways to work.

Crypto has added some interesting opportunities for work in the future. The space has also created new ways of assembling around a common vision or idea. And crypto has allowed for different visions of corporate governance.

This is occurring through Decentralized Autonomous Organizations (DAO).

DAOs are a growth area that we will be hearing a lot more about through 2022.

One big reason is the way that DAOs use the crypto infrastructure and contribute to it.

 A curated list of DAOs (Decentralized Autonomous Organizations) courtesy of Cooopahtroopa
Curated DAOs courtesy of Cooopahtroopa

Defining a DAO

A DAO can be described as a blockchain with smart contracts and a Telegram or Discord account. In other instances, it can be the blockchain, smart contracts, Discord, and a treasury.

The organization brings together interested parties around a core idea. There is a wide breadth of ideas that can be served by a DAO. Currently, DAOs fall into roughly four applications.

1) Supporting software projects

2) Investment pools

3) Service providers

4) Targeted purchases

Each case will have a unique structure designed to serve the users or participants.

Because all of the participants are distributed, participation is shaped by the governance of the DAO. Some have loose participation requirements relying on the wisdom of a small informed group. Others require an upfront investment. Some DAOs rely on a social system of recommendations and collaboration.

What is powerful about the DAO movement is that it has created ways for a wide range of people to participate and contribute. It is more of an ownership attitude model than an employee work model.

And this is an example of the new financial literacy we’ve talked about previously.

The origin of Decentralized Autonomous Organizations

The Decentralized Autonomous Organization began as an idea back in 2013. Dan Larimer, the future founder of EOS, began talking about Decentralized Autonomous Corporations back around that time. That was followed by thoughts from Vitalik Buterin, founder of Ethereum, and his exploration of the concept.

It is also interesting to note that another flat organizational structure was emerging at the same time. This one is most commonly attributed to the late Tony Hseih of Zappos. HolacracyOne started in 2014, around the time the discussion around DAOs emerged in the crypto space. I cannot say if there is a coincidence, but it is interesting timing.

The first DAO was created in 2016 on Ethereum, and its impact shaped Ethereum as it is today. That DAO was hacked following its ICO, which led to the hard fork of the platform and the creation of ETH, ETC (Ethereum Classic).

Since this auspicious start, the most well-known DAO after that was MakerDAO which has provided a synthetic stablecoin like product.

DAOs are built around a core idea

The evolving view of a DAO is for a project to be started and funded, then eventually left to the users and stakeholders to manage. In essence, this is how Ethereum runs now. Other cryptocurrencies (altcoins) like DASH are frequently mentioned as DAOs.

More recently, DAOs have been explored as ways to express the values or vision of a group around a core idea.

For example, Aaron Wright is part of a DAO designed for investment in crypto art. The DAO had an original buy-in amount or stake, and all participants can vote on which NFT art to add to the pool.

The regulatory situation around investment pools remains unclear. But for the purposes of a legal entity, this type of DAO is considered a Special Purpose Vehicle (SPV).

Here a DAO is being used to advance the NFT space by making speculative investments on NFT projects agreed upon by the participants.

Funding for DAOs can come from a variety of sources.

One option is a token sale. Another option is to use NFTs. Some DAOs have investors that provide upfront capital. In other instances, a DAO may be funded by providing services or membership dues.

Each organization has to choose the funding model that suits the purpose of the organization.

For example, Bankless DAO used a token sale and has a governance token, BANK.

Work is being redefined by the DAO model

Participants in DAOs come from various walks of life with a variety of skills. People who have joined DAOs to get experience describe the process as one of active learning and participation. It’s a bit like going to crypto school.

You are expected to learn how the organization operates and to find a way to contribute. That contribution can eventually result in payment or rewards of tokens from the DAO.

DAOs foster an ownership and participation attitude amongst those involved. This is unique from an employer-employee model. And in my view an important development, particularly for the digital native.

Once participants gain experience in one DAO, they can take that to other DAOs, although participation is described as consuming. In other words, it’s hard to spread your attention and participation effectively across several organizations.

The self-organized and free association of the DAO model is likely to be an important draw. It will appeal to people looking for meaningful places to spend their time and energy.

Services are being developed to support the DAO business model

There are a variety of services that underpin the growing DAO universe. This growing list of services provides a unique economy for a variety of DAO-related matters.

For example, with Rabbithole, you can learn how to earn tokens by making on-chain contributions.

With Sybil, you can track on-chain governance for DeFi DAOs like Uniswap, Compound, Aave, and others.

Boardroom helps members of DAOs participate in the governance of the DAOs they are involved in. This platform includes ways to brainstorm, learn and vote.

Tally provides a dashboard for tracking voting.

Sourcecred and Coordinate help DAO communities identify contributors, measure their contribution, and reward them for it. Then you can use Parcel to execute the financial elements of the DAO.

Services also include bots added to the DAO’s Telegram or Discord account like Collabland. Here, the bots measure token holdings to maintain membership in the community.

There are also services for multisig wallets and to make and track off-chain voting and governance.

These are some of the services that support this crypto innovation.

From devs to AMMs to NFT investment and a football team

The list of DAOs has expanded rapidly along with crypto generally over the last two years.

Here is a list of some selected DAOs.

Gitcoin is a community built around open source development of the web. They have over $52 million in funding and more than 300,000 active developers.

BanklessDAO is designed to create financial freedom for everyone with access to an internet connection. Full membership in this DAO requires a stake of 35,000 BANK.

Uniswap is the first Automated Market Maker on Ethereum. You can be a staker or user of Uniswap and participate in governance through their UNI token.

There are numerous DAOs built around other aspects of DeFi, including Badger and Wonderland. These DAOs have significant treasuries and typically hundreds of millions in TVL (total value locked).

Flamingo DAO is focused on investment in NFTs. This is an example of a DAO that is restricted to accredited investors. Investors buy units of Flamingo for ETH at a price of 60 ETH for 100,000 flamingo units. Each block of 100,000 units is equivalent to 1% of the fund, and no member can own more than 9%

A recent DAO was formed to buy the US Constitution. And BuyTheBroncos DAO has been formed to make a $4 billion offer on the Denver Broncos football team.

DAOs are a digital expression of humanity

Decentralized Autonomous Organizations represent an exciting area of crypto. It brings together numerous elements into a formal but decentralized and distributed organization.

DAOs represent the ultimate in free assembly and the ownership economy. These opportunities will continue to grow.

The regulatory elements of the area remain largely unexplored, with the exception of the investment side. Additional regulation should be anticipated as the space grows and matures.

Ultimately, DAOs demonstrate some of the most important elements of humanity. These include the ability to assemble freely, contribute and transact. The ability to own and participate. The desire to learn, earn rewards for contributions, and compete.

DAOs may represent a powerful antidote to authoritarian impulses rising across the world. And they will shape the world of work in a positive way for hundreds of millions into the future.



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