Blitzscaling: Why is this the way DAO should be developed?

What if we could code our mission statement into code with the help of modern information technology? In other words, create an inviolable contract to generate revenue, pay rewards to those who perform certain functions, and find hardware to run for yourself, all without the need for top-down human guidance. ——Vitalik Buterin ( Vitalik Buterin ), 2013

At the age of 19, Vitalik , I will tell you that the era of DAO has come.

A digital organization without jurisdiction that can generate actual economic activity is no longer just an idea. Eight years later, we have hundreds of these digital organizations, composed of thousands of people and billions of dollars in funding, showing in real time how the future of work is being reshaped. The original theory has now been transformed into a new and multi-faceted DAO ecosystem, all DAOs are operating with their own missions.

If you ask me, it’s incredible.

Blitzscaling: Why is this the way DAO should be developed?

Source: Cooper Turley: DAO Landscape‌

When we see these grand experiments being staged before our eyes, it is worth noting that although DAOs are a new and innovative way of organizing productive work, they are by no means completely reinventing the wheel. From the very beginning, mankind has explored various ways to aggregate capital, allocate capital, coordinate tasks, and compensate workers. This took many forms, but ultimately formed the company structure we are familiar with today. It is no accident that we unite companies as the main tool to promote economic activity. This is an effective means of coordinating large numbers of people around a common goal.

Given that DAO is essentially the next iteration of the corporate system, although in a more digital and decentralized way, many lessons can be learned from analyzing the way we build and develop successful companies. There are a lot of books, podcasts, online courses, MBA courses, everything, covering this topic. But one seems very relevant in the context of DAO.

In the current state, although DAO has a lot of resources, its expenditure is very conservative. This hinders growth and makes them vulnerable to competition, which may use their methods to expand and dominate their respective verticals faster.

The DAO needs to learn a lesson from the startup script: Blitzscaling.

Blitzscaling 101

Blitzscaling is a concept promoted by LinkedIn founder Reid Hoffman in his book of the same name. in conclusion:

Blitzscaling is a strategy and a set of technologies used to promote and manage extremely rapid growth, giving priority to speed rather than efficiency in an uncertain environment. In other words, it is an accelerator that allows your company to grow at an amazing speed, thereby winning the competition and avoiding being eliminated.

Blitzscaling is not about controlling spending in a cautious and computationally accurate way, but instead emphasizing growth above all else, even if it means sacrificing efficiency.

Why risk this trade-off? Because the cost of acting too slowly is greater than the inefficiency caused by rapid capital allocation. If you take the time to ensure that every dollar is used for the most effective use, then you put your organization at risk. Competitors may win your time until you can no longer compete. At that point, if you go bankrupt, what’s the point of saving that dollar?

This strategy does not apply to every company in any industry, but it applies to industries with high network effects, where every edge user makes the platform more valuable to the next. These industries are often winner-take-all after reaching escape speed. An obvious example is the carpool industry. When Uber can attract more drivers, it becomes more valuable to passengers, and then they make drivers more profitable, thus starting a virtuous circle. For this reason, Uber now owns nearly 70% of the ride-sharing business in the United States because they can reach a certain scale. And act as fast as possible.

The crypto market, like carpooling, is an industry that meets the prerequisites for such high network effects. Take Uniswap, the DAO with the largest capital scale, as an example. As each additional user starts trading, it becomes more profitable to provide liquidity, so LP will bring in more funds, and then as price execution improves, trading becomes more attractive and your benign Circulation is born from this. As the first AMM to compete with centralized exchanges, Uniswap has already occupied this Uber-like position…at least for now. The analogy is that carpooling has become ubiquitous in the world, and DeFi is still operating on the fringes of the financial world. It is too early to declare any winners at this time.

Blitzscaling: Why is this the way DAO should be developed?

There is no leader in this industry that will continue to lead the conclusion that cryptocurrency is uniquely super competitive due to its open source nature. Any application is susceptible to copy and paste, which makes DAO more urgently in need of rapid expansion.

Continuing to use decentralized exchanges as an example, the rise of Sushiswap clearly shows that by forking other projects, it can also develop into its own ecosystem and become a viable threat. Although SushiSwap is still one second behind Uniswap, it is clear that the ubiquitous threat of forks is reasonable for any project.

This is not to say that the absence of a moat can prevent the incumbent from being immediately usurped. There are brands, communities, and integrations, just to name a few. As DAO expands each of them, they become more and more protective. Therefore, the faster the agreement develops, the less likely it is to compete.

DAO spending issues

We have determined that DAO needs to grow rapidly to take advantage of the inherent network effects of encryption and rapidly scale up to avoid competition. So what must be done to achieve this goal?

In the past year, the three largest DAOs have established funding programs and started funding value-added activities. This has provided approximately $3 million to many different people and organizations who are helping to build better tools, integrate with more protocols, provide more data and research, organize events, and so on.

Blitzscaling: Why is this the way DAO should be developed?

Each corresponding grant program has produced many great results in distributing the funds they receive. We have taken some measures to directly attract hundreds of users, financial dashboards to better understand project finances, and even increase brand awareness through e-sports sponsorship! All of this is great, but can the DAO do more to further promote growth?

The answer is yes.

Blitzscaling: Why is this the way DAO should be developed?

The funds allocated for the grant program are not even a fraction of a fraction. This is simply a drop in the ocean. Now this is a bit short-sighted, because the funding plan does not cover all of the DAO’s expenditures. The treasury is used solely to provide funds for core contributors, stimulate liquidity, and even establish legal radical funds. But the point remains. Most DAOs have idle large amounts of treasury balances that could have been used for growth. As you remember, this is necessary in this type of industry, otherwise, due to the inherent network effect, another more eager project may appear and spend it to scale up to achieve an insurmountable lead.

DAO should have a blitzkrieg, or give it a try

Obviously, DAO can (and should) spend more money. Even if they remain conservative and start allocating low single-digit percentages of their treasury to grant programs, this will greatly help organizations in terms of what they can achieve with more users, value lock-in, and revenue generated.

Blitzscaling: Why is this the way DAO should be developed?

If the DAO spends 0.5% to 1% of the funding, they will be able to increase the number and scale of the programs they fund by an order of magnitude. This means that there are more and better capitalized organizations to establish, research, market and provide various value-added services to help DAO grow.

Raise it to a more aggressive but still reasonable 10% treasury level, and now you have a force that cannot be ignored. In addition, this still gave the DAO 10 years to spend all their funds. That is at least the era of encryption equivalent to centuries.

Given the exponential growth of the industry, we do feel that we are at an important turning point, and the window for the project to become famous may be relatively small. By spending 9 digits, the DAO will put itself in a position where they will cause some serious damage when they bring them to the forefront of not only cryptocurrencies but the entire world.

But what might a project cost 100 million dollars (if not more) for? With the mindset of blitzscaling, there is no shortage of possible value-added services to fund…

First, any reasonably competent team that wants to build useful tools can be funded. Those exceptions that stand out? Provide them with excess funds to ensure that they have the resources needed to build the most useful and user-friendly tools. For example, make your 90-year-old grandma a qualified crypto degen.

And in order to ensure that it will not be trapped by security, even if the project has paid for expensive smart contract audits. But in fact, they can even pay two audit companies. You can even find three. The DAO should hope to focus as much as possible on the internal workings of the global financial system that may become the future. This will ensure that the probability of a hacker attack is as close to 0% as possible to convince the old world that you are taking their money seriously.

The DAO can focus on penetrating mainstream consciousness in a more thoughtful way, rather than attracting thought sharing from negative news like hackers. Like to put their names on shit that people pay attention to. Look at FTX. They spend everything from the basketball court to referee uniforms to the League of Legends team. Of course, they are a $18 billion organization, so they have the ability to spend hundreds of millions of dollars on each transaction, but a large number of DAOs worth $1 billion are enough to sponsor a sports team. Or at least a Super Bowl ad. Public attention is valuable. If your fan base is almost as big as the entire cryptocurrency, you will start to attract more people to see what you are doing.

It is worth mentioning that $25 million is a lot of money, which will greatly help combat the elderly politicians in Washington who hinder the widespread adoption of encryption technology. But this is just a project. Do you know what would be better? The industry is 100 million U.S. dollars. Even a billion dollars. This may not directly put DAO ahead of its direct competition, but it will avoid even worse forms of competition. If enough projects join the ranks of Uniswap, and the recent Year, Curve, and Sushi projects to fund more active legal activism, we can ensure that those in power fully understand that cryptocurrency is a beneficial force for making the world more transparent , The fair world, if they try to regulate its existence, they will be cursed.

When it comes to transparency, 10k and 10q reports are a thing of the past. We now have a real-time balance sheet and income statement, and we can view the financial status of the agreement at any time. However, we have not yet touched the surface of the potential. DAO can fund more SQL wizards so that they can get every possible data point that interested parties want to know in a variety of clean, filterable dashboards. This is more than transparent. This will be a very clear and translucent organization, an organization that has never been seen before. DAOs that can’t keep up will die, because the ecosystem will begin to demand the gold standard for project reporting.

In addition, although these numbers are important, they are meaningless numbers without proper context. Fortunately, there is a large group of analysts who can take these numbers and use them to tell stories about what they are and why they are important. Through thorough research, DAO can not only let their key decision-makers understand the situation, but also allow the broader crypto community to keep up with all major developments, in order to attract more developers, investors, and users with the right knowledge.

I can continue, but you get the idea. There are many problems to be solved, but finding a way to spend money on something useful is not one. If DAO wants lightning expansion, it can.

Points to consider

While owning rights, they are also given great responsibilities. Handing tens of millions or even hundreds of millions of dollars to the funding committee will of course give considerable power. In its current form, the funding committee is not able to assume this responsibility. With this consumption power, the DAO service economy will flourish, and various companies will compete for funding, which means that the number of applications will skyrocket. Therefore, either the size of the committee needs to be expanded, or more plans for specific goals (ie, separate funding plans for products, marketing, research, etc.) are needed. As operations become more and more complex, they need to develop into their own small companies, which brings many additional problems that need to be solved.

Another issue to consider is that token holders may be reluctant to fund this type of spending plan because it is funded with local tokens, but the recipient may want stablecoins. If every grant is sold off by the market, this may cause the price of the currency to fall. However, DAO can implement release plans where it makes sense, and can even be creative through more exotic means (such as KPI options) to prevent immediate sell-offs. This will create a more dispersed group of stakeholders, all of whom have a vested interest in the success of the entire DAO.

There is also a “no net expenditure” method to fund projects. As we saw in Flipside’s latest proposal, the proposal essentially borrows US$25 million in UNI to earn income to fund data analysis. This will provide the DAO with a way to use their funds without actually spending anything, because they can always recover the grant in full. This specific proposal failed because many stakeholders appeared to be blinded and raised reasonable concerns about its oversight. In any case, this revenue-generating structure is a net benefit to all parties, because service providers and the wider community can get paid for value-added services, while DAO just puts non-productive assets into use without having to exhaust them. Balance sheet.

The report only focuses on the outflow of funds from the DAO, while ignoring the potential inflow of funds. Going back to the idea of ​​DAO as a company, the goal is not to burn money on the balance sheet, but to generate income to fund ongoing expenditures. Many of these projects generate millions of dollars in revenue each year, if not now, they have the ability to turn on the switch to turn on the revenue machine. In this case of offsetting cash flow, as the rate of treasury funds consumption decreases, the reason for blitz expansion becomes more sufficient.

Concluding thinking

Blitzscaling has become a common saying in Silicon Valley. Startups have learned that when there are strong network effects at work, you are in a race against time. Today’s largest companies in our daily lives: Amazon, Facebook, Uber, AirBnb, they all understand that if they want to reach their current level, they need to grow at an uncomfortable rate, ignoring the old and tried-and-tested business logic.

We have seen similar phenomena in encryption, where conditions seem to be conducive to rapid implementation of large-scale protocols. So far, the growth rate of DAO has exceeded the imagination of early supporters. But they are still far from reaching their full potential. Just as the emergence of companies allows us to organize resources more effectively to promote human progress, DAO can open the next level of growth. In the process, they will face fierce competition, but the winners will be those who embrace blitzscaling.


Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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