DAO: How will decentralized autonomous organizations swallow the Internet?

Actionable insights

If you only have a few minutes of free time, then investors, operators, and founders can learn about the DAO.

  • DAO is a new way of organizing people. Traditionally, corporate structure has been the most effective free market method to accumulate talents to achieve goals. This kind of labor is usually convinced and controlled through wages. The DAO seeks a similar goal—creating value—but relies on a decentralized framework in which workers, users, and other stakeholders have real ownership of the entity. 
  • Various types of DAOs have emerged to serve different use cases. As interest in the field increased, DAO began to diversify and try to explore possible boundaries. There are DAOs for investment, DAOs for building new products, DAOs for social interaction, and many iterations between and beyond. 
  • These entities manage meaningful assets. Those who are skeptical of the encryption field, especially the DAO, may want to reconsider their position. These organizations have real influence and real capital. Tens of billions of dollars are managed in top DAOs, and some of them, such as Compound, have nearly $1 billion in funds themselves. 
  • When it comes to DAO infrastructure, we are too early. DAO has many of the same requirements as the company, but given its size, liquidity, and technology stack, it must often deal with greater complexity. This requires the emergence of tools for organization, communication, collaboration, payment, etc. DAO has a few providers that can choose from these categories, but in general, the choices are limited. We should expect that many new entrants will enter this field in the next few years. 
  • DAO has obvious vulnerabilities that have not yet been fully resolved. The first DAO was hacked, and a bad actor tried to steal millions of dollars from Ethereum. Although today’s DAOs are more secure, they are also risky. Contributors often join anonymously, which means that reputation capital is not entirely online. In addition, if there is not enough protection, some DAOs are still vulnerable to exploitation. 

Influencers of the DAO team

Aaron Wright, founder of Tribute Labs

FWB Mayor Alex Zhang

Chase Chapman, co-founder of Decentology

Cooper Turley, ∞ DAO

Derek Taylor, founder of DDDVVV

Jarrod Dicker, Partner of TCG Crypto

Founder of Seed Club Jess Slots

Jihad Esmail, Syndicate Community

Jose Macedo, co-founder of Delphi Digital

Jorge Izquierdo, co-founder of Aragon

Kevin Kelly, co-founder of Delphi Digital

Nadia Alvarez, Head of Growth, MakerDAO

Patrick Rivera, Mirror

Pri Desai, operation of Tribute Labs

Raihan Anwar, FWB community

STATION co-founder Tina He

Will Papper, co-founder of Syndicate

Mario Gabriele, Founder of The Generalist

We don’t always work for the company

Until 1820, only 20% of the American population worked for wage-paying organizations. The rest farm, fish, run their own businesses, or allocate time between these activities. 

Over the next 130 years, the situation changed rapidly. Industrialization provided opportunities for more wealth, and at the same time required an increase in the labor force. This promotes the integration of workers in large organizations with centralized command systems. These shifts meant that by 1950, as many as 90% of the population depended on companies for wages. 

Well, the company is a modern phenomenon, at least in the way we usually think of it. What seems so embedded and difficult to handle today—the default setting for most new businesses—is actually just the latest human attempt to solve the coordination problem. 

A better option may have emerged. Although far from perfect, the Decentralized Autonomous Organization (DAO) tries to make up for some of the company’s shortcomings while achieving large-scale human collaboration. This native structure of the Internet and encryption is designed to decentralize governance and ownership, giving contributors the opportunity to determine the direction of the project and profit from its success. 

Although still in its infancy, the surge in interest in the organizational framework shows that DAO is an idea worth taking seriously. Especially in the past few months, the new DAO has emerged, attracting meaningful capital and high-quality, dedicated talents. Historically, those concerned about this chaos in the crypto space looked prescient after many years-even if the hype seemed to be exaggerated. Both builders and investors should give due consideration to this space. 

In addition to the potential financial benefits, the DAO may also herald a social transformation with lasting impact. After all, we are influenced by the organization in which we operate. The sociologist Charles Perrow argued in his book A Society of Organizations that organizations explain most of the way our world works. He introduced this theory as follows: 

[U] Unless you are an organization theorist… your major will be considered the dependent variable; organization will be the independent variable that shapes political and economic behavior, stratification systems, religion, psychosocial processes, and general history.

As a new independent variable, how will DAO affect each of these dependencies? What impact will this structure have on religion, history, and politics? 

Perot said: “My claim is that organizations are the key to understanding our society, because organizations absorb most of the content of society.” 

If this maxim is true, what parts of life will the DAO absorb? If the company invades the relationships and connections established in the physical realm, then over time, the DAO may assimilate our digital creatures. In short, they may absorb the Internet and become part of our new web3 society. 

We will explore this idea in today’s article while unraveling the current state of the DAO. In particular, we look forward to answering the following questions (saying a word “Tao” to you, then, so much):  

  • definition. Explain what DAOs are and how we view them. 
  • history. The origin of the new organizational structure. 
  • category. There are various types of DAOs. 
  • culture. The values ​​and concepts that underpin the space. 
  • landscape. The main players and the tools they use. 
  • Start a DAO. Explore the benefits of decentralization and the strategies required. Legal Issues. Wyoming has promising development and open issues. 
  • Oppose DAO. The fragility of the structure and its unproven potential. 
  • border. Explore what might happen in the future.

At the end of this article, we hope that you will have a deep understanding of what is happening and why it is important. Although it seems unlikely today, it is not impossible that a large part of the population will work not for centralized entities but for decentralized entities enabled through encryption in a few decades.

History and legend

Want to invent your own financial derivatives? With Ethereum, you can. Want to make your own currency? Set it as an Ethereum contract. Want to build a complete daemon or Skynet? You may need to have thousands of interrelated contracts, and be sure to feed them generously to do this, but nothing can stop you.

These words appear in Vitalik Buterin’s 2013 Ethereum white paper-this is the first ever source of descriptions of the DAO. Buterin’s explanation above not only illustrates the modularity and power of his blockchain, but also implies its intellectual influence. 

In fact, a few years before the advent of Ethereum, let alone DAO, there were “daemons”. In 2006, science fiction writer Daniel Suarez (Daniel Suarez) published a book of the same name, which can be regarded as a kind of original text of DAO. 

In Daemon, Suarez paints a picture of a large-scale computer program that orchestrates an underground cooperative society. Although Daemon is involved in many unhealthy behaviors that we don’t want any web3 organization to draw inspiration from (think self-driving motorcycle assassins!), its basic operations are very similar to today’s DAO: pay bounty, share information in the community, And manage the narrative currency. 

Despite the similar functions, Daemon did not create the name “DAO”. Buterin wrote about ” decentralized autonomous organizations ” before the Ethereum white paper was released , but he included a neat definition in his pioneering work: 

[DAO is] a virtual entity that has a specific set of members or shareholders, of which there may be a 67% majority, who has the right to use the entity’s funds and modify its code.

Like the daemon, the Ethereum DAO relies on self-modifying code. However, unlike Suarez’s creation, Buterin envisions the DAO as fundamentally transparent, with a clear governance process and a path to consensus building. 

The description of the two types of DAOs in the white paper further illustrates this concept: “Decentralized Autonomous Company” (DAC1) and “Decentralized Autonomous Community” (DAC2). (These acronyms are our attempts to distinguish them easily, not norms.) 

Buterin envisions the former as a profit-making entity with tradable shares and dividends, while the latter is more like a democratic entity in which community members can vote on certain issues, such as adding or removing members. In fact, DAC1 operates in a “1 share = 1 vote” mode, while DAC2 is managed in a “1 member = 1 vote” mode. Needless to say, Daemon readers will remember that the almost omniscient program of this book does not have such a clear structure. 

Now, while Buterin’s quote at the beginning of this section can be seen as an invitation, it is also—at least to some extent—a provocation. 

 Want to build a complete daemon or Skynet? …Nothing can stop you…

Someone took nearly three years to accept this challenge. In April 2016, DAO was born. The project started with the best intentions, hoping to become the de facto venture fund of the Ethereum community, managed in a decentralized manner. Community members jointly invest in The DAO and vote on potential investments. 

Facts have proved that this is a tempting proposal for many people. DAO quickly accumulated 12.7 million ETH from more than 11,000 LPs, which was equivalent to 150 million U.S. dollars at the time. Even in traditional venture capital companies, a company of this size makes sense. In terms of context, in the same year The DAO was founded, the legendary fund Union Square Ventures announced the closure of a new $166 million fund, which is not much compared to Ethereum’s native tools. 

For those who know what will happen next, it is hard not to take a moment to imagine how amazingly successful this entity might be. If the DAO just insists on its ETH and provides zero alpha, the assets it manages today will be equivalent to US$52 billion. If the DAO even picked a few winners—it would certainly have the most extensive procurement structure in the world—the sum could be much higher. The result will be a tiger of global scale participants in the field of decentralized finance. 

Of course, things did not proceed like that. 

In June of the same year, The DAO was hacked. A full 3.6 million ETH was withdrawn from the entity and transferred to a holding account. In order to give ETH owners a chance to withdraw their funds, Ethereum went through a hard fork. No funds were lost, but this hack led to a split within the Ethereum community and explained the danger of the DAO structure that is not yet fully mature. 

What followed was a DAO winter, and experienced this winter before the broader cryptocurrency cooled down. Nevertheless, even in this slower period, specialized builders are still building in this area. Aragon, co-founded by contributor Jorge Izquierdo, started developing tools for DAO in 2016. MakerDAO was founded in 2015 and its reputation continues to grow, attracting new talents to work in the field. 

In the past 12 months, these first movers have proven vital. The renewed enthusiasm for the DAO has translated into a tangible renaissance, partly because newcomers can rely on the infrastructure and architecture created by organizations such as Aragon and Maker. 

Before we talk about the state of the game, we will think more deeply about the definition of “DAO”.

What is DAO?

Hope the above part gives us some understanding of the subject at hand. However, it is worth taking some time to think about this most direct question: What is a DAO?

Even after understanding the DAO knowledge, answering this question is a seemingly tricky question. Or at least, the answer is good. 

First, we can go back to the source word of the acronym: “Decentralized Autonomous Organization”. 

what does this mean? 

Well, if it deserves its name, DAO should have no central authority (decentralization), operate independently of government or private sector participants (autonomous), and be an organization. 

Is it simple enough?

Incomplete. When you realize that the entity we call “DAO” today rarely really fits this definition, things get pretty vague. True decentralization is rare, especially at the beginning, because most projects require a certain degree of centralization to get up and running. The same is true for autonomy. 

Crucially, these characteristics should not be considered binary. The answer to whether the DAO is decentralized is not a “yes” or “no” question, but a question of degree. Decentralization and autonomy are sliding scales, and “DAO” positions itself in different ways within this range. 

Since literal reading has not taken us far, we need other ways to think about DAO. The tricky part here is that well-designed behavior poses its own problems. In fact, everyone who defines DAO may give you a subtle or meaningful response. For example, an interesting interlocutor might reasonably classify DAO as a group chat with shared bank accounts, a second might classify it as a community with distributed ownership, and a (fantastic) one-third might It will simply be referred to as “atmosphere.”

Everything will be fine, in their own way. DAOs are group chats and communities, many of them separate themselves through their culture or atmosphere. But despite the rich content, some of these depictions make this idea seem short. 

DAO is more than just a Discord channel with native tokens. Rather, they are entities oriented towards a common purpose: creating value . This is the common denominator of our statement. 

Of course, there are different ways of defining value creation. Some focus on building tangible digital products, while others focus on accumulating and compounding social capital. Nevertheless, this basic purpose still exists. 

This is the most basic description of a DAO, and it is not satisfactory. Can’t we say that almost all organizations are committed to creating value? Doesn’t the company pursue the same purpose? What about country and religion? 

“Value” is too subjective and cannot give us enough clarity. In order to have a higher fidelity understanding of DAO, we need to go beyond the nomenclature and look at the characteristics that distinguish this entity form from other entities. 

feature

To understand how DAO is different from other organizations, we just need to look at how they deal with ownership and organization. 

ownership

DAO does not concentrate ownership in the hands of founders and investors, but distributes ownership to various stakeholders in the ecosystem, including contributors, users, strategic partners, suppliers, etc. 

In essence, a DAO is owned by the people who create value in it. This is a radical concept and has real consequences; by going beyond the traditional concept of who should “own” an organization, DAO empowers a broad ecosystem to act and create value on its behalf.

organization

As mentioned earlier, the DAO seeks “autonomy.” Originally, the term referred to the DAO’s desire to act independently at the organizational level—without interference from state or private sector participants. 

Although this is true for some DAOs, it can be said that more important forms of autonomy occur at the individual level. Voters can join the DAO and choose to contribute in the most compelling way they think. There may be guidelines, but in general, stakeholders choose their own workforce and self-organize. 

Again, this is important. Traditionally, the relationship between individual contributors and supervisory entities is a subordinate relationship—workers act in accordance with the requirements of the company. This is not the case here. DAO “workers” join when and where they think they can add value and want to do so. 

By adopting this method, DAO creates conditions for emergency behavior. The formation of complex systems cannot be coordinated from top to bottom by any individual or group. 

Framework

Careful study of characteristics such as ownership and organization can give us a clearer understanding of DAO, but it is still difficult to put them fully in context. 

To better understand how DAOs operate tactically, we can compare them with pre-existing organizational structures. Although fundamentally different, we can learn a lot by trying to think of DAOs as companies, cooperatives, and networks. 

DAO as a company

Despite the differences in ownership and organization, companies are still a useful framework for understanding DAO. 

In fact, larger DAOs usually operate in a company-like manner, with clear “departments” such as product, marketing, engineering, and community. These departments usually have a team leader to guide and support other members, no different from a manager. 

Generally speaking, the leadership in a DAO is often fluid and non-hierarchical, similar to a “cyan organization.” As defined by management theorist Frederic Laloux, the Teal organization is autonomous and develops naturally. They also encourage employees to devote all their energy to the organization. 

DAO as a cooperative

Of course, given that the DAO is different from the company in terms of insignificance, especially in terms of ownership, the above framework only ends here. 

For this reason, cooperatives may be a more appropriate comparison. Cooperatives are owned and controlled by workers who contribute to them. This is similar to DAO, in which stakeholders receive tokens that grant governance rights and distribute ownership. It’s not a million miles from a grocery store near you, and it’s taken into the digital realm. 

DAO as a network

Although the coop framework helps to model ownership, the DAO does not only assign ownership to contributors-reasonably equivalent to employees. Instead, they assign ownership to a range of different stakeholders. This may include users (if the DAO is building a product), strategic partners, suppliers, community members who are aligned with the mission, etc. 

The result is very different from a pure cooperative: the Internet. Members communicate with each other freely, and roles change frequently and fluently. 

In many ways, this is the most useful framework for considering DAO. Of course, although the web is not new—when coordination is complicated, both private and public sector organizations rely on them—it is particularly suitable for the web3 era. As the DAO grows in size and complexity, the network model allows for coordination and alignment in a scalable manner. 

Will these frameworks make sense in two years? How about five? Even today, there may be a dozen or more ways to conceive this concept.

DAO: How will decentralized autonomous organizations swallow the Internet?

(You can view 13 DAO concepts via Twitter)

We believe that the basic goal of shared value creation may remain the same, but given the pace of innovation in this field, our view of DAO may be very different in the next few years. With this in mind, it’s time to delve into the different categories of DAO. 

Types of DAO

Soon, there may be too many DAOs to classify without much meaning. After all, if you ask someone “what types of limited liability companies exist?” they may find it tricky to answer this question. We may reach the point where DAO has the same diversity in the near future. 

However, for now, we can still distinguish the type of DAO. At a high level, most DAOs are either technical or social oriented. 

Technology-oriented DAOs tend to focus on building in the field of encryption. They also tend to perform more operations on the chain. 

The main purpose of the social-oriented DAO is to bring a group of people together and find new ways to interact and convene for them. Governance is more likely to be off-chain or non-existent. 

Now, there are no hard boundaries between these market segments. Just as DAOs exist in the realm of decentralization and autonomy, they usually do so here. 

For example, MakerDAO is fundamentally technology-oriented. But it has an extremely strong social component, with a high degree of community participation and interaction. 

At the same time, friends with interest are social in nature. It serves as a “cultural membership” and digital gathering point for artists, founders and thinkers. However, it benefits from a strong product team that has built meaningful tools such as event token gating (“Gatekeeper”), dashboards (“Pulse”) and editing websites (“WIP”). 

Within this range, there are many subcategories worth decomposing. In particular, we will focus on: Protocol DAO, Social DAO, Investment DAO, Funding DAO, Service DAO, Media DAO, Creator DAO and Collector DAO. (We told you that in this article we have to talk a lot about DAO.)

DAO: How will decentralized autonomous organizations swallow the Internet?

Please note that if you want to learn more, the author of this article, Cooper Turley, has a good in-depth study of these types. 

  • Protocol DAO

As the name suggests, the agreement DAO is a collaborative entity used to help build the agreement. An example is something like MakerDAO discussed above. The Maker protocol is not entirely built and managed by a centralized team, but is orchestrated by the relevant DAO. 

In fact, in its many years of operation, Maker has built a complex structure consisting of 15 core units. Each unit has tasks and budgets, which are managed by one or more coordinators to coordinate and pay contributors to achieve long-term goals within MakerDAO. In addition, each department is an independent structure, governed by its own terms, but still responds to Maker holders. 

Sushi, Uniswap, Compound, DANK can also be considered as protocol DAOs, although each operates according to its own structure. 

DAO: How will decentralized autonomous organizations swallow the Internet?

  • Social DAO

Friends with Benefits (FWB) is a classic social DAO, despite the engineering techniques we mentioned. The goal here is to create a strong community. In this respect, the end result is no different from other online gatherings, especially those with walled gardens. (Some DAOs also focus on connecting online to offline and holding IRL gatherings.) As we discussed, the difference lies in the concepts of autonomy and ownership. 

Seed Club, founded by writer Jess Sloss, is another participant in this field—albeit with a wide range of responsibilities. CabinDAO and Bright Moments are two other examples. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • Invest in DAO

If the social DAO is mainly about the community, then investing in the DAO is mainly about returns. Similar to The DAO—the first ill-fated investment entity—the goal of these projects is to gather capital and investors for deployment. Unlike traditional venture capital companies, decision-making is actually democratic, and LPs vote on relevant opportunities. 

Generally, different investment DAOs will have different focuses. For example, one person may specifically purchase the ENS name, another person may focus on blockchain games, and a third person may fund crypto startups.

LAO, founded by contributor Aaron Wright, is a leader in this field. The parent company has spun off some additional vehicles, including the Flamingo and Neptune. MetaCartel is another notable investment DAO. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • Grant DAO

In the article mentioned above, Turley pointed out that many early DAOs were sponsored and operated as Grant DAOs. Usually, these exist outside of pre-existing projects as a form of community incentives. Through grants, these DAOs seek to advance a broader ecosystem, support promising projects, and open the way for new web3 contributors.

For example, Uniswap operates Uniswap Grants, and Compound and Audius are doing the same thing. Although functionally different from the parent entity, they are still connected through a sense of purpose and are usually a common community. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • Service DAO

Service DAO occupies a unique position in this field. Specifically, these entities act as talent aggregators, bringing together human capital that can be used for certain projects. 

For example, Raid Guild calls itself “the premier design and development agency for the Web3 ecosystem.” However, unlike traditional institutions, Raid has no formal employees or company structure: it is a DAO.

Service DAO works with clients such as 1Up World, Tellor, and Stake On Me. PartyDAO, DAOhaus, Yam DAO and many others fall into this category. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • Media DAO

Forefront, Bankless and DarkStar are Media DAOs. These entities often collaborate to produce public content. The rewards from this content are shared across the team, and governance is also a public matter. Stakeholders can help decide which topics to cover and manage resources. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • Created by DAO

If Media DAO often pays attention to publications, then Creator DAO is centered on individuals. Just as some fan clubs provide the most enthusiastic supporters of influencers with opportunities for consumption and interaction, DAO is also capable of doing so. In addition to being pure fans, stakeholders can actively contribute or work for organizations that support their most passionate creators. 

This is currently a less common structure, but it may become more popular. We have seen many creators adopt “social tokens” through products such as Roll, which laid the foundation for a true Creator DAO. Forerunners include Leaving Records and Personal Corner. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • Collectibles DAO

Although it shares some profit motives with Investor DAO, the final positioning of Collector DAO is slightly different. These entities unite contributors around certain assets or collectibles. NFT is a common choice. 

Although the accumulation of NFTs may also generate extremely favorable financial returns, these communities usually have no intention of selling their goods, at least in the short to medium term. The acquisition of NFT and other collectibles also has a fundamentally different tone-participation is as much as fans and affinity, or even more, because it is related to Alpha. 

These groups also often act as curators for certain projects, adding a kind of institutional life and support. 

For example, SquiggleDAO exists to support and collect generative art, while MeebitsDAO collects Meebits NFT. PleasrDAO acts as an “art collection empire” across projects. NounsDAO is a gathering point for Noun NFT holders, who will gain share in future Noun sales.  

DAO: How will decentralized autonomous organizations swallow the Internet?

Of course, DAO can exist outside or in between these categories. For example, Krause House is a DAO, which is both an investment tool and a social initiative: its assembly goal is to jointly purchase an NBA team. 

Looking to the future, it is worth reiterating that although the above categories are instructive, we are just beginning. Many great DAOs of the future will be drawn beyond these boundaries. 

Philosophy and culture

DAO represents a new framework for large-scale human coordination, and the core of human coordination—whether decentralized or not—is organizational culture. 

It is no different from the corporate culture of early-stage startups or the community culture in the undiscovered music scene. Culture can be defined as the behaviors, patterns, and values ​​that emerge between individual groups . In their seminal article “Squad Wealth”, other Internet research organizations pointed out that culture can be composed of anything, from “memes, hot topics, internal language, ??????????, to only Is formulated as an artifact of a group.”

Although each DAO has found its own way to produce a culture with vision, language, and behavioral norms, two characteristics seem to be particularly common in the entire DAO environment: the tendency of members to behave, and the desire for complete transparency. 

Act like an owner 

When it comes to DAO’s culture, ownership has a huge impact. It not only motivates individuals to participate, but also fundamentally changes the contributor’s view of their efforts and labor. All work is based on the pursuit of greater goals, and the benefits are shared. Ownership is full of creativity, success, and ~resonance. Compared with traditional workers, bosses are naturally more motivated to support their peers financially and psychologically, improve the work of others, put themselves outside the door, and do their best. 

Jesse Walden, the co-founder of the investment company Variant, is particularly prescient on this issue. In this article titled “Economy of Ownership,” Walden pointed out: 

As the role of the individual in value creation becomes more and more common, the next evolutionary step is toward software that is not only built, operated, and funded by individual users—but also user-owned.

In a sense, DAO is exactly this kind of “software.” They promote the individual and give users the opportunity to contribute and own. That is powerful.

Thoroughly transparent

Transparency plays a vital role in any organizational culture because it can build trust among all participants. Due to the open and immutable activity of any DAO’s ETH address on the blockchain, DAO has achieved this at an unprecedented level. This creates a mechanism of implicit and explicit checks and balances, allowing the stakeholder community to know how the DAO exercises its capital at any time, while ensuring that the leadership team makes decisions based on the community.

This thorough transparency encourages cooperation rather than competition, and because individuals have a deep understanding of the organizational environment, they can have autonomy in their work.

Ultimately, the culture of a DAO is defined by the one-to-one relationships formed between groups of individuals, and these relationships can be refined into a set of repeatable behaviors and patterns. 

Through new forms of decentralized ownership and transparency, it is possible for DAOs to create new organizational structures so that users are no longer passive participants on the platform, but active and appropriately motivated network owners—centered on trust and coordination . This distribution of power and culture will bring more agility, flexibility and anti-fragility, which helps to create a world in which a large number of people on the Internet can even interact with the most powerful centralized companies. contend.

landscape

DAO has become the core organization primitive of the entire web3 world. At the same time, an emerging ecosystem has emerged to support the core functions of these organizations. 

Below, we will focus on the influential stakeholders in the DAO field. We should note that this is by no means an exhaustive list-maps are not territories. Web3 is developing rapidly, changing every day, and new entrants are constantly changing the face of the space. 

However, we will outline participants in the following functional areas: 

  • formation
  • communication
  • Community
  • Governance
  • compensation
  • Treasury

We will also mention other well-known organizations and opinion leaders. 

Let’s make DAOwn open for business. 

formation

In order to participate in a DAO, you must first have a DAO . There are currently several projects vying for supremacy, including Aragon, Syndicate, Orca, Tribute and Colony. These are not always in direct competition, as each solution provides a unique value proposition and feature set. 

What are the effects of these projects? An easy way is to think of them as encrypted native versions of Stripe Atlas-they allow DAO to get started. This includes membership management, financial tools, and governance infrastructure. 

In the next few years, we should see more products enter the market to support the formation of DAO. Just as white label solutions are used to handle tasks such as content management, we will soon reach the point where new DAO builders have multiple options. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • Aragon (Allah tribute)

Founded in 2016, Aragon provides a set of applications to create, manage and govern DAOs on a large scale. This includes Aragon Court, Aragon Govern, Aragon Voice and Aragon Client. As one of the earliest teams dedicated to DAO infrastructure, Aragon Association has become an important service provider of DAO and claims to have users of well-known projects such as LidoDAO.

  • Syndicate

Contributor Will Papper is the co-founder of Syndicate, a decentralized investment protocol and social network focused on investing in DAOs. Its mission is to democratize the investment world by allowing individuals and communities to launch investment tools faster and cheaper than traditional funds. Syndicate’s solutions include legal support and social networking agreements, allowing the investment community to convene, exchange, and deploy capital.

  • Orca (DEX based on Solana)

DAOs often find it difficult to maintain high participation rates on a large scale. The Orca agreement has a clever solution to this, and it also reduces the bottleneck of capital and resource deployment. 

Specifically, Orca utilizes the “Pod model” in which a single vault is replaced by a smaller “Pod”, and each “Pod” has its own sub-members and wallets. Essentially, each pod acts as a mini DAO in a larger DAO structure. 

This is a big unlock. By creating infrastructure for pods to attach and detach as needed, it brings composability to DAO, a bit like DAO-lego. It also makes the group smaller and makes coordination and participation easier. 

DAO: How will decentralized autonomous organizations swallow the Internet?

Orca agreement

  • Tribute

As part of the MolochDAO ecosystem, Tribute provides an open source solution framework that DAO can use to expand better. Its technology stack includes solutions to cancel proposals, create non-voting shares, kick out members, use NFT to become members, and whitelist tokens. Tribute is basically modular, allowing DAOs to pick the solutions they need.

  • Colony

Inspired by the ant colony, Colony provides a series of Ethereum smart contracts that can start DAO without any coding. Colony simplifies governance, authority, compensation, etc. 

Colony itself is maintained by Metacolony-an undisclosed DAO. Metacolony will continue to develop and maintain tools for those who take advantage of Colony’s infrastructure. 

communication

Once the DAO is established, it needs to facilitate communication among its members. Of course, healthy discussions are the key to information sharing, which opens up good voting practices, fund management, and broader coordination. No DAO wants to be a quiet place. 

Many tools have emerged to facilitate conversations, including Discord, Telegram, and Twitter. 

DAO: How will decentralized autonomous organizations swallow the Internet?

(Social communication application commonly used by DAO)

  • Discord

It can be said that the main communication and coordination method of DAO is Discord. For those who have not yet entered the dazzling world of fast firepower on web3 servers, Discord is a free voice, video and text chat platform that is rapidly gaining popularity in the ecosystem. 

Its characteristics make it particularly attractive to DAO. On the one hand, starting Discord is relatively simple, and because of its channel and sub-channel structure, organizational communication becomes simple and flexible. (Even if it doesn’t completely quell the madness.) 

Crucially, since Discord has become the default setting in web3, many useful robots and plugins have appeared to support it. The most important one is the “Token Gating” function. As mentioned earlier, some DAOs restrict access to those holding a certain amount of native tokens. For example, if we were to start RandomDAO, we might insist that anyone who wants to join Discord needs to hold 420 $RANDOM tokens. 

Tools like Collab.Land make it easy for the DAO to ensure that only those who meet the token requirements are granted access to private chats. Other widely used robots include MEE6 and Statbot. 

In addition, it is worth noting that Discord integrates well with existing sites; as more and more communities transition to DAO, this is expected to become an increasingly important feature. 

  • telegraph

The most common alternative to Discord is Telegram. Despite its popularity among the encrypted crowd, the adoption rate of chat applications in DAO is different from Discord. This is largely because Telegram does not provide the same level of granularity, especially in terms of robots and sub-channels. 

It’s relatively simple, perhaps because, however, the telegram is often a hotbed of DAO for those who are just starting out and they graduated from Discord. 

  • Twitter

“How is Twitter still free?” This is a joke among the most avid users of the platform, and for good reason. In many ways, Twitter has become a public product, especially in the crypto world. The amount of information and insight flowing through the platform on a given date is staggering, and its supremacy as the de facto social graph of the industry has consolidated its importance. (Of course, others will come to fight for that throne.) 

Although Twitter does not address the DAO’s need for private, high-volume chat, it is still an important communication tool in the ecosystem—especially for discovering new projects—if we at least don’t admit this, we will be negligent. 

  • coordination

Whether it is a local community or a multinational company, one of the biggest challenges facing any collective is coordination, especially in terms of scale. Historically, we have used a hierarchical structure to manage this problem, but what is the best solution in a flat, decentralized structure?

DAO relies on many different tools to manage their community and optimize coordination, including Coordinape, Collab.Land, SourceCred and DAOhaus. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • coordinate

Through the DEFI blue chip agreement, such as the yearning and sushi use, Coordinape helped the DAO coordinate and allocate resources to contributors. 

For example, Coordinape’s “Circle” product allows DAO contributors to “give away” a limited number of GIVE tokens to people they believe are bringing value to the organization. Although the benefits of this are fun and rewarding for participation, it also creates a de facto “salary map” that shows who is driving the project forward. In addition, the compensation process is functionally decentralized, because anyone can choose to reward anyone. 

Critics of this mechanism believe that peer-to-peer compensation will lead to a popularity contest in which the loudest and most extroverted members are over-allocated. 

  • Collab.Land

Collab.Land provides a token-gated robot for Discord and Telegram. It is also useful when assigning roles to DAO members on any platform. Due to its relative ease of use, Collab.Land has become a commonly used tool in the industry. As the number of DAOs increases, its usage rate should increase. 

Although Guild has not yet been fully launched, it is an alternative with a similar feature set. 

  • Source credit

DAO uses SourceCred to measure and reward individual contributions to the project. Those who work hard to bring value to the DAO will gain “credibility” based on the parameters set by the organization. Cred is a powerful way to simply quantify the reputation and work of contributors. 

DAO can also issue “grain” with credit, which can be used as a salary equivalent. SourceCred distinguishes tokens, note: 

If cred answers the question “Who provides value?” Grain will answer “How should we reward people for the value provided?”

  • DAOhaus

DAOhaus is a “no code platform” for starting and running DAO based on the framework built by MolochDAO. The platform allows users to coordinate through a central hub, where they can check activities, governance recommendations and financial status. Membership can also be managed from here. 

Since the platform is based on the structure of MolochDAO, DAOhaus users can access all the tools provided by the parent organization and have the benefit of a user-friendly wrapper. 

compensation

Let’s talk about how DAO compensates contributors from another angle. As we mentioned, some provide payment functionality as part of a larger DAO suite, but there are also specialized products. Superfluid and Sablier are particularly eye-catching. 

Think of these tools as a way of “DAO’s payroll.” They help DAO process payments on the blockchain regularly with minimal gas fees.

For those new to cryptocurrency, many terms in the field may sound confusing. The important thing to note about these projects is that they make it easy for the DAO to pay contributors on the blockchain. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • Superfluid

Superfluid is a protocol that allows programmable cash flow. Using its unique ERC-777 standard, you can define a “value stream” to compensate contributors who automatically and continuously flow to the DAO. It’s a bit like setting up your company’s payroll so that your employees can get paid in real time based on every second of their work, instead of getting paid twice a month. All of these do not require your further intervention. 

  • Superfluid

Like Superfluid, Sablier is a financial streaming platform. Sablier was created in 2019, supports any ERC-20 token, and does not charge a fee for using the contract. 

A distinctive feature of Sablier is that it is truly autonomous. The team that created the project destroyed the management key that controls the layer 1 contract. This means that the manufacturer of Sablier no longer has the ability to prevent the creation of new streams. In the words of its founder, Paul Razvan Berg, it is a “100% decentralized public product.”

DAO: How will decentralized autonomous organizations swallow the Internet?

(You can check the details through Twitter)

Governance

Solving governance and coordinated decision-making on a large scale is one of the most difficult problems facing the DAO today.

  • Why is it so hard? 

One of the highlights of web3 is its censorship resistance and “accessibility without permission.” In other words, anyone can trade with each other or participate in decentralized protocols and applications anywhere without interference from third parties. For example, no government can prevent you from joining the DAO. (At least, in theory.) 

This permissionless access can sometimes be a double-edged sword, especially as the DAO grows and expands. If there is no hard upper limit on membership, DAOs will generally become larger and more diverse over time. In the end, a popular DAO may have tens of thousands of members, each of whom brings different skills, experience, values, perspectives, and backgrounds. 

To be clear, this is a very good question. web3 enables individuals to transform from workers to owners is one of its most basic and compelling attributes. But as the community becomes more and more decentralized, the need for sound governance increases — otherwise, you might end up with a fragmented organization in which every participant just screams in the wind. 

Several teams are frantically solving this problem, building tools that help organize and motivate members. Snapshot and Discourse are two seemingly powerful products that are widely used in the space. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • Snapshot

Snapshot is an off-chain, gas-free voting platform, mainly used by DAOs that issue ERC-20 and ERC-721 governance tokens. The expensive gas fee on Ethereum excludes on-chain governance for everyone except the largest token holder. 

Snapshot has gained popularity by providing an easy-to-use and low-cost method of participation in governance. Essentially, DAO contributors can go to their organization’s snapshot page to view the topics to vote on and make trade-offs. For example, the following is a proposal recently voted by the Sushi community. 

DAO: How will decentralized autonomous organizations swallow the Internet?

Sushi snapshot page

To give a few noteworthy examples, such as MakerDAO, most token DAOs now integrate Snapshot voting into their governance process. It should be noted that the product “SafeSnap” (discussed below) produced by Gnosis allows off-chain voting to be performed on-chain. It achieves this by using the combined function of Snapshot and Gnosis Safe.

What does it mean?

Basically, DAO participants can still vote outside the chain-saving fuel costs-the subsequent results, and later on the chain seamlessly, without the possibility of interference. 

The right to speak

The Discourse Forum is like the “Senate” of the DAO, representing a place for formal discussions and feedback on proposals. Discussions and debates around governance proposals may take place in back-end channels such as Discord, Telegram, and even Twitter, but usually submitted content will eventually be held on Discourse for more targeted long-form discussions. Due to its more formal function, the Discourse forum also serves as an archive of discussions and proposals related to the DAO.

DAO: How will decentralized autonomous organizations swallow the Internet?
Aave Discourse page

Treasury

Many community DAOs require members to invest upfront funds to participate. Then, the funds will be pooled into the DAO’s “treasury.” Like traditional companies, DAO wants to effectively manage their assets and wants to increase their holdings. For this reason, many people invest their funds in the assets of the entire digital ecosystem, including NFTs, social tokens, crypto projects, etc. In effect, they act as decentralized investment funds.

To avoid thinking that such experiments are insignificant in scale, it is worth noting that today the DAO collectively manages tens of billions of dollars. These are organizations with complex needs and meaning. 

DAO: How will decentralized autonomous organizations swallow the Internet?
Open organization

Most DAOs have ambitious plans, but smart management can be difficult. First, the encryption industry is very unstable. As asset prices rise and fall, DAO’s assets may fluctuate by 20% or more on a certain day. In order to prevent these fluctuations, DAO must be diversified.

Llama, Parcel, and Gnosis aim to provide financial managers with the tools and insights they need to deal with such turmoil. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • Call

Llama is a DAO that focuses on assisting other DAOs (meta universe) in fund management. LlamaDAO has coordinated some large clients through Gitcoin grants. It creates dashboards, reports, money management guidelines, coordinated sales and financial statements for protocols such as Aave, PoolTogether, Uniswap, Gitcoin, and FWB.

  • Parcel

Parcel is the financial suite used by some of the largest DAOs in DeFi, including Aave Grants, Compound Grants, and Synthetix. Currently in the closed beta phase, Parcel provides services for 8 DAOs and has been used to pay 3 million US dollars in batches for various programs. As the DAO expands, they will need solutions provided by Parcel to manage the flow of funds to effectively grant recipients, pay contributors, and deploy funds.

  • Gnosis Safe

Gnosis Safe is a service developed by GnosisDAO to provide a better user experience for DAO multi-signature wallets. 

What is “multi-signature”?

It is just a wallet that requires multiple signatures to approve transactions. It is not that one person can approve a payment, but multiple parties are required. The DAO has traditionally used this framework to manage funds, prevent abuse, and decentralize. 

Unlike some alternative solutions, Gnosis Safe supports ERC-20s and ERC-721s assets, allowing DAO to store NFTs in a multi-signature wallet. As the prices of many NFTs have risen sharply, powerful funding tools are becoming more and more important here. 

Other famous organizations

DAO has the opportunity to bring the next 100 million or more users to web3. As an infrastructure for organizational development and deployment, DAO will reveal new ways of coordinating individual and professional participation, rethinking how we operate and make decisions as a collective. 

When the tools and strategies mentioned above are combined, it is worth highlighting some popular projects that bring them to life. 

DAO: How will decentralized autonomous organizations swallow the Internet?
  • PartyDAO

PartyDAO is a decentralized collection of developers, writers, engineers, and designers who design and build DAO tools. Their first product “PartyBid” allows users to pool funds to bid for NFTs. Users have used PartyBid to pool funds to bid on Cryptopunks, Andrew Yang’s NFT and CryptopToadz. With the release of “Party Splits” at the end of September, PartyDAO can now fragment the NFT and distribute ownership. 

  • Mirror

Mirror was founded by Denis Navaroz and is a decentralized publishing network. Through the intermediary of WRITE tokens, users can pay WRITE to create their own mirror domain, and they can publish articles to the domain and influence the approval of new members through their voting rights. 

Soon, Mirror has become the de facto place to post ideas about web3 and start community work. For example, “Crypto, Culture, & Society” initiated by the CTO of Mirror used the platform to outline an encryption learning DAO, raising 25 ETH in the process.

  • Seed Club

The Seed Club is a DAO that builds, supports, and invests in a tokenized community. The community includes many top influencers and founders in the social token space. The Seed Club has collaborated with famous DAOs and communities, including PartyDAO, Forefront, The Generalist, and SquiggleDAO.

  • FWB

We have already talked about FWB, but the impact of DAO deserves a little discussion. Just this week, the large social DAO announced that it has raised $10 million in funding from a16z, Pace and other companies. 

FWB is one of the largest collection of encryption thinkers and hosts extensive discussions. One channel of Discord might talk about music, another channel might talk about NFT, and a third channel might talk about investment. In addition to being a web3 social club, FWB members are also actively building products for the community, as discussed. In short, it is becoming the true culture and generation home of cryptocurrency. 

  • LAO

By definition, LAO is not exactly a DAO. In contrast, the entity of founder Aaron Wright is a “limited liability autonomous organization.” Although it retains many of the characteristics of DAO, LAO is a true Delaware consolidated entity. By placing products in the traditional legal world, LAO seeks to straighten out and simplify difficult legal and tax issues for its members. 

In addition to its differentiated structure, LAO’s influence in the field of investment DAO is also very good. Not only did it receive more than $65 million in donations, it also spawned a wave of subsidiaries. This includes Flamingo (an NFT collective), Red DAO (a digital fashion DAO), Neon (a metaverse DAO), Neptune (a DeFi liquidity DAO), etc. As pointed out by the diversity of DAOs mentioned earlier, a limited liability structure can help throughout the entire scope of encryption-related projects.

Given that these entities have been very active in the crypto space for the past few years, paper returns are almost certainly crazy. Wright himself stated on Twitter that Flamingo’s asset management scale is expected to reach $1 billion: 

DAO: How will decentralized autonomous organizations swallow the Internet?

  • MetaCartel

MetaCartel is a decentralized group of builders. They were initially committed to supporting Dapp development, but later turned to incubating DAO. MetaCartel educates people on DAOs, conducts case studies on real-world DAOs, and assists in everything related to the development and guidance of new DAOs.

MetaCartel also established an investment department called MetaCartel Ventures. In turn, it invested in several other DAOs. 

  • Moloch DAO

Moloch DAO was originally established to fund the development of Ethereum public infrastructure related to ETH 2.0. Since then, Moloch has expanded into Grants DAO, supporting projects such as Tornado Cash, Lodestar, and Dapp nodes through its grants. Many sub-guilds have been created to evaluate projects for funding. 

In addition, MolochDAO provides an open source DAO framework with v2 smart contracts. We noticed earlier that both Tribute and DAOhaus benefited from Moloch’s work. 

  • Rabbithole

Rabbithole is a DAO that learns to make money. It provides consumers with a way to learn about cryptocurrencies and at the same time get rewards. 

In this process, Rabbithole provides an encryption protocol with user acquisition function. In the past year, the number of encryption protocols and products has exploded, making it difficult for some projects to find and retain active and skilled participants. 

Through “tasks,” Rabbithole helped the protocol acquire well-trained community members who demonstrated their abilities in the process. Aave, Opensea, Matcha, Perpetual Protocol and PoolTogether have already collaborated with Rabbithole.

As the new DAO receives increasing attention, this list of influential organizations is expected to grow rapidly in the coming months and years. 

Why start DAO?

Summarizing the environment as we did in the previous section makes some things very clear: DAO is difficult. Even at the best of times, it is difficult to coordinate a large group of people toward a common goal. The DAO accepted this challenge, added layers (and layers) of technical and social complexity, and introduced huge economic fluctuations. 

The result is like trying to build a country on a new planet, where the population is growing by 5,000% every year, and your natural resources are changing dramatically every day. 

So why would anyone want to create a DAO?

In addition to enjoying something truly new and still revolutionary, there are three core reasons for creating a DAO:

  1. Easy capital formation
  2. Shared advantage
  3. transparency
  • Easy capital formation

In short, DAO is one of the easiest ways to pool funds that can be managed by a group. For example, it is much simpler and cheaper than setting up a traditional investment company. 

Since DAO is built on a public blockchain, it has benefited from the global financial infrastructure from the very beginning. Starting a shared wallet under collective control is simple. Although there are still many shortcomings in getting started with encryption, once you have a wallet and some tokens, you can transfer those tokens to any other account in the world, no matter where they are located. In essence, DAO allows you to create cross-border funds with collaborative functions. 

Capital formation is important because it enables communities to invest in projects they care about. In the past few months, the DAO has raised funds to collect NFTs, build software, create Internet-native social clubs, make music, promote carbon removal, and more.

  • Shared advantage

As we have outlined, DAO membership is usually enforced by crypto tokens. For many DAOs, if you hold a specific NFT or amount of ER-C20 tokens, you will be considered an “official” member. These tokens can provide many functions related to governance, access, status, value capture, etc. The last point-value capture-is critical because it allows people to make a living by contributing to the DAO. 

Historically, the financial benefits of the project were mainly concentrated on the founders, early employees and investors. Encrypted tokens provide a smooth way to reward a range of stakeholders, including freelancers, service providers, and even customers. 

It should be said that there are legitimate concerns about the lack of accessibility of certain tokens. As some DAOs have become more popular, their token prices have increased, making de facto memberships expensive.

Many DAOs have begun to solve this problem by introducing funding programs and scholarships that support high-potential members with limited financial means. Over time, we hope to see more such initiatives.

  • transparency

As we pointed out in the “Philosophy” section, most DAOs have a strong culture of transparency. For this reason, many DAOs feel more like open source projects than companies. In addition to just building in public places, DAOs can also communicate, join, trade, and govern in public places. This helps produce meaningful and different interactions and behaviors. The following is the performance of this in terms of communication, membership and governance. 

communication

As mentioned above, DAO tends to use Discord or Telegram for synchronous communication. Generally, anyone can join the public channel to learn more about the project.  

There are also channels dedicated to private members. Although they do not exude the most transparent atmosphere, they are still important records of DAO’s history and decision-making.

membership

Since DAO membership is usually denominated in encrypted tokens, anyone can view the relevant information. On the chain, you can see how many token holders there are, discover the value of members, and check who bought or sold the tokens over time. 

Interestingly, since encrypted tokens are used for membership, DAOs can reward other DAO members based on their token holdings. For example, Rabbithole can provide rewards to anyone holding $FWB tokens in their wallets. This may usher in “member composability” in the next few years, allowing communities to collaborate in a more pro-social way. 

Governance

DAO’s decision-making and capital flow are also transparent. Community members can propose new initiatives and vote on key decisions. This turns governance into a social feature.

For example, Nouns DAO has raised more than $50 million from NFT auctions in the past three months, and members voted to spend this money by donating to charities, building iOS apps, and publishing comic series. Although by no means a panacea, the DAO structure does have obvious benefits .

How to start DAO

If the above part piqued your interest, you may want to know how to start a DAO. Although it is not a trivial matter, when a DAO is formed, a DAO is created, and the more difficult tasks are easier to last. Frankly speaking, the new birth in this field means that we still don’t know what a DAO with persistent exceptions looks like. 

If you just want to rotate a DAO structure, the PlayBook may be similar to the one listed by the contributor Jesse Sloth in the following tweet:

DAO: How will decentralized autonomous organizations swallow the Internet?

Sell ​​some NFTs, cultivate cool people in your community, close Discord, and discard some tokens. mission completed. 

But this is actually just the beginning of future tasks. To understand how to build a DAO of real value, it is helpful to zoom out and look at the four stages involved in most DAO releases. 

1. Summon an adventure

2. Ownership distribution

3. Governance

4. Incentives and rewards

Summon adventure

Compared with terms such as “mission” or “vision,” the call for adventure more accurately describes the purchase of the DAO by the participants. 

Of course, joining is moving towards a goal, but the road ahead is particularly hazy and has never been really involved. Those who join are signing up for adversity, potential failure, and struggle with difficulties in a dynamic, fluid structure. 

Some wonderful adventurous appeals from DAO:

  • KrauseHouse seeks to be the first NBA franchise owned and managed by the DAO. 
  • GitCoin is building and funding “digital public products”. 
  • FWB, it is building a strong influence at the intersection of culture and encryption. 

Ownership distribution

After attracting the attention of true believers, the DAO needs to distribute ownership.  This is an important task and a key design decision. Some DAOs distribute ownership through tokens from the beginning, just like NFTx and Sushi. Others choose to build with smaller teams, and then assign ownership after the product or community proves the need and motivation. Uniswap and Compound are examples here. 

After all, DAO can distribute ownership to contributors in a variety of ways. One method is “airdrop”, which is to distribute tokens to members based on previous operations (such as buying NFT). The other is through “bounty”; for example, Rabbithole will provide tokens when users learn about crypto projects on their platform. Others open up token purchases through decentralized exchanges, such as Uniswap.

If done well, the distribution of ownership will place the tokens in the hands of individuals and organizations with consistent values, which will help and help the DAO move forward. 

A few different examples of how DAOs assign ownership: 

  • Squiggle DAO requires you to have a Squiggle NFT to join Discord. Later, $SQUIG tokens were airdropped. 
  • SuperRare distributed $ RARE tokens to artists and collectors using its NFT platform . 
  • FWB requires members to own 75 USD FWB tokens. These can be purchased on Uniswap or obtained through grants. 

Governance

Deciding how to make decisions as a group is an important stage of the DAO startup process. The group that handles such decisions is often referred to as the “governance structure.” A meaningful part of web3 pays great attention to this topic and is constantly researching new methodologies and methods. Even the founder of Revenge, Vitalik Butlin, weighed the issue recently.

In its simplest form, governance is the process of establishing legitimacy in the decisions made by the DAO or the team operating within the DAO. 

There are many governance structures, but the most common decision-making method is ” token weighted voting .” In this system, one token represents one vote. Member proposals and tools (such as Snapshot) allow users to indicate their preference for the topic at hand. The results of these votes are either automatically executed or confirmed by multi-signature signers.

Some governance structures ultimately look more like direct democracies, with members voting on most proposals, while other governance structures act as representative democracies, in which an authorized core team votes on behalf of the group. The governance structure usually evolves over time. 

The DAO version of “How the Act Becomes Law” might look like this:

1. Discuss and shape. A member put forward an idea in Discord, which was formed through dialogue and established an early consensus. 

2. Formalization of the proposal. Proposals may be posted on Discourse, leading to more formal conversations and comments. In the process, the proposal can be improved. 

3. Vote on the proposal. Using Snapshot, DAO authorizes token holders to vote on proposals within a specified time. 

4. Implementation of the proposal. Once the voting is over, the multi-signer will execute the transaction or operation. 

The focus of governance is to make the right decisions and push the project forward. Good governance ensures that voices are heard, legitimacy is managed and momentum is built. 

Incentives and rewards 

The DAO coordinates its efforts to achieve its goals; incentives drive this effort. The first reward provided by the DAO is usually the native governance token, which gives ownership to early contributors.

Although these tokens may not have direct value in the market, they represent the relative value of individual contributions to the new organization and the shared ownership of the collective value of the DAO. 

Of course, not all rewards are financial rewards. The types of DAO incentives include: 

  • Token rewards . These are the types of tokens mentioned above, which give holders ownership and influence. 
  • Social capital . Valuable members may earn official titles on Discord or through NFT. Being a “host” or “leader” can grant social status within the scope of the DAO. 
  • Bill payment tokens . Contributors may receive more widely circulated currencies, such as USDC or ETH. This is more similar to wages, because the liquidity is higher and the assets held can be easily exchanged for local legal tender. 

Although these rewards can be powerful, to reach true scale, the DAO needs to find a way to pay contributors enough so that they can pay the bills. 

One way is to create a market for DAO governance tokens. Tools such as Uniswap and Sushi make this possible, but they can be complicated to use. In addition, only very mature organizations are likely to see meaningful transaction volume here. 

On the contrary, most DAOs need to deposit USDC or ETH in their treasury as a way to pay for the efforts of contributors. DAOs can do this by exchanging governance tokens or generating on-chain revenue when possible. For example, DAO may choose to sell NFT in ETH, which can be added to the treasury and then paid to contributors based on their contributions. The DAO may also agree to provide certain services to the organization—such as blockchain development—in exchange for compensation. 

The question of how to structure the reward is a question that most DAOs spend a lot of time. The definition of DAO in this regard is usually not clear. There is no boss, no structured compensation plan, or even a clear role. There is no central human resources department that can make decisions about wages.

Without this control, the DAO will reward contributors through different mechanisms, some of which we have already discussed:

  • Bounty rewards contributors who use a certain amount of tokens to complete clearly defined tasks. 
  • The subsidy rewards contributors for the development of a larger and smaller set of well-defined challenges and tokens. 
  • Coordinape Circles rewards the working group’s efforts with tokens raised by other contributors. 
  • Salaries can be paid to core team members on a regular basis to reward their efforts. This is usually paid in a mixed form of USDC, ETH and native tokens. 

DAO models, processes, and tools are being built every day, usually by communities that need them. There is no real script yet, although both Sushi and Index Coop have developed structured recruitment and compensation methods. 

In the end, as mentioned above, in many cases, there are currently only one or two commonly used technical solutions for each stage of DAO requirements-a far cry from the rich SaaS tools that compete to serve each market segment. 

Although participating in an emerging model like DAO has its challenges, it presents a huge opportunity to shape the next Internet.   

Work for DAO

If you are not ready to start a DAO, those who are interested in this field can earn their support by working for one person. In order to understand how to solve this problem, we will go through a hypothetical recruitment process and unravel different steps, including: 

  1. Choose your career
  2. Find the right role
  3. Onboarding
  4. cooperate 
  5. Get paid 

Choose your career

When it comes to working for a DAO, it can be difficult to know where to start. What are the roles in DAO? What kind of talent is really needed? 

The good news is that it is simpler than you think. Although there will definitely be many changes based on the focus of the DAO itself, there are some common roles. 

  • Community managers. Of course, DAO is a community. This makes this role particularly important-moderators and managers are the glue that holds the project together and helps it move forward. 
  • Recruiters and promoters. Especially in the early days, DAO needs to spread the gospel and attract outstanding people to join the project. Recruiters are valuable here. 
  • Scribe. Create and disseminate large amounts of information through DAO. Writers can have an impact in clearly recording this information and contribute to marketing and knowledge. 
  • artist. NFT has become a popular way for DAOs to earn income. Therefore, artistic ability and emotion may be highly sought after. 
  • engineer. Some DAOs have begun to build their own tools or other products in the web3 field. If you are a programmer, or want to become a programmer, DAO provides an opportunity to learn. 
  • Treasurer. As we mentioned, DAO manages large AUMs. They need savvy financial operators to help effectively manage and deploy expenditures. 

Of course, this is far from exhaustive. Game designers, digital marketers, and various other functions are very useful for DAO.

Find the right role

How do you find vacancies in the DAO world? The truth is that there is no formal discovery process, and most opportunities arise accidentally on Twitter, closed Discord chat, or encrypted podcasts. Although this opacity makes it more difficult to break in, the lack of a “workboard” may feel like a feature rather than a bug. People first find opportunities they care about by interacting with communities they trust. 

Onboarding

Once you find a DAO you want to join, what then? The onboarding experience often varies greatly from DAO to DAO, although high-quality organizations usually excel in this area. After all, if new members have the right background and support, they can contribute better. 

For this reason, some DAOs organized structured conference calls for new members onboarding, similar to university open days. Index Coop is a decentralized asset management company that creates crypto index products. It holds weekly new entrant meetings and provides a detailed guide called “Cooper Owl Quest” to learn how to get started. 

DAO: How will decentralized autonomous organizations swallow the Internet?
Index Cooperative Manual

DAOs like NounsDAO, which are centered on user-generated creativity, take a different approach. Nouns created a playground and opened up tools, so members can start participating in the work of the community, and then receive funding from the community. 

cooperate

Once you enter, you can start adding value . For DAO, most of them are achieved through collaboration. DAO’s decision-making power is distributed, rather than a centralized management team that defines the workflow. Everyone has the right to express their vision for the future, and the leadership team usually comes from people who can identify the needs of the community and work hard to address those needs. 

This bottom-up approach is visible throughout the DAO environment. For example, a team of six dedicated Sushi contributors applied for a grant to help resolve user failures and create a multilingual customer service portal. Such an initiative is classic in DAOS-contributors discovered a pain point in the Sushi ecosystem, proactively proposed a solution, requested and received resources, and started to build. 

Where is this work done?

As we mentioned, Discord and Discourse are popular places for conversation. Most of the remaining cooperation takes place in places such as Google Docs, Notion, Airtable, Figma, and Github. Although a powerful platform, none of them are built for teams that are extremely fluid on web3. 

On the one hand, these platforms store user information on a centralized database, and usually assign access permissions based on an individual’s role in the organization. The DAO works differently, and roles and contributors may wish to remain anonymous. 

We should expect a native web3 productivity stack to emerge in the next few years. This may grant permissions based on the number of token holdings in the community and past contributions. 

Get paid 

We mainly introduced the different types of rewards that DAO contributors received in exchange for their efforts. Another topic worth noting is that DAO sometimes associates compensation with certain KPIs. The UMA project has created a framework that will pay more synthetic tokens if the DAO reaches a predetermined goal before a given expiration date. 

Although this may be an incentive, there is a risk of the community over-indexing the wrong indicators. In addition, bad actors may try to play around with the system to maximize their contribution to certain KPIs, but avoid meaningful work. Whenever an algorithm or program controls access to the wreath, it is inevitable that someone will try to manipulate it. 

Legal Issues 

In the best sense, blockchain and blockchain-based systems (such as DAO) are designed to operate outside the scope of the law. As a result of the technology deployed, these entities comply with autonomous rules encapsulated as blockchain-based code. Nevertheless, the technology is adjustable.

Today, compared to many traditional legal entities and other business associations, DAO operates with different assumptions. DAO is a fluid design, not managed by a board or manager, but designed to be managed by a democratic or highly participatory process or algorithm. Unlike traditional organizations rooted in a certain jurisdiction, the DAO is spread across the world, stitching together thousands of members, no matter where they live; the only requirement is an Internet connection. DAO usually tries to avoid written agreements or other forms of legal procedures. Members mainly agree to use software and code rules to comply and manage their affairs.

Although not defined in most jurisdictions, the state of Wyoming (the original creator of a limited liability company) recently passed a law granting DAOs operating on the blockchain legal corporate status, provided they are organized as Wyoming State limited liability company. This forward-looking view of the “equal country” provides responsibility protection for DAO members. If there are no such safeguards, DAO can be regarded as a general partnership, and if problems arise, the members will be held personally liable. Although Wyoming is a pioneer, we are seeing many other jurisdictions thinking deeply about the future of the DAO. Examples of DAOs that use the limited liability state structure include the aforementioned LAO (risk-based DAO) and some related structures. 

Tribute Labs (formerly OpenLaw) has been exploring alternative structures, including “unincorporated non-profit organizations” or UNA. This method can be created when a group of people want to form an association without formalizing it through registration. The UNA structure is used for the construction of the digital museum MUSE0, where collectors and artists donate NFTs, and the community decides whether to enter the permanent collection. 

DAO: How will decentralized autonomous organizations swallow the Internet?
Muse0 series

Although no paperwork is required to start UNA, if the purpose of the unincorporated association includes profit-making intent, then a general partnership has already been created. In fact, UNA is very suitable for groups that want to take non-profit actions and need to develop guiding principles.

The importance of DAO is increasing, and there are early signs that blockchain-based governance will have a significant impact on the way companies are governed-whether through digital traditional governance mechanisms or providing new ways to fundamentally organize companies.

Legally speaking, the way forward is being clarified, and supporters should be cautiously optimistic about the way forward.

Against DAO

Although there are many reasons to be optimistic about DAO, this is a space in its infancy. It takes time and effort to achieve large-scale deployment and adoption. 

Even with this in mind, DAO is not perfect. Although modern companies have their problems and the DAO is a response to their flaws, we should not pretend that the company structure is useless. Doing so will ignore the lessons learned over the centuries.  

For example, a well-managed company has two key responsibilities in its operations. 

1.  Fiduciary responsibility. Company ownership and management rarely overlap completely. Therefore, those responsible for company decisions (think executives or the board of directors) must act in the best interests of the shareholders (the true owners) rather than their own. 

2.  Minority protection. Different shareholder groups usually own different shares in a company. The operation of a fair company must benefit the company equally with respect to the shares of all shareholders. The large shareholder group cannot force other shareholders to comply with the requirement of disproportionately rewarding the majority at the expense of the minority. 

These are the basic operations of a sound enterprise, and companies that do not abide by these rules will face credible threats of legal proceedings. However, it is difficult to recreate similar operations in DAO, at least without trade-offs. 

On the one hand, in the case of breach of contract, there is no traditional court to rely on. In addition, since the DAO is essentially a trustless computer program that runs as a smart contract, it cannot determine whether a certain proposal satisfies fiduciary duties or whether minority shareholders are adequately protected. This judgment is fundamentally subjective and cannot be explained well by software. 

Most of the time this may not be important, but if the DAO’s voting rights fall into the wrong hands, it will become very important. For example, if a bad actor (or malicious group) succeeds in gaining 51% of the voting weight (or exceeds any threshold set), they may propose and approve changes to the organization that reward them disproportionately, at a cost Are other members of the community. 

DAO may not be able to prevent this, especially at the software level. For the DAO’s code, the legal proposal looks exactly the same as the proposal of the threat organization. Since people in the community will not be able to protect themselves under these circumstances, solving the problem requires input from trusted external sources capable of such assessments.

The pseudonym further complicates the problem. Many people use “discarded identity” to contribute to the DAO, which means that the reputation risk of bad actors is small. In a completely adversarial environment, the DAO is open to anyone, and there is almost no obstacle to violating the above attributes—at least without any external incentives. If given the opportunity, some people may think that leaking DAO’s resources is worthwhile, especially because they can operate without attribution. 

Why have we not seen more such attacks?

To some extent, this may be due to other motivating factors at work. In many DAOs, the supply of tokens is concentrated in the hands of a few founders or reputable investors. These people usually think about the long-term and disclose their identities, which means that reputational risks are threatened. Any attack can be shot down by these whales, even if their rational economic decision is to support it. This possibility even prevents attempts of such operations. 

In many cases, those responsible for managing DAO’s multi-signature may also be relatively easy to violate the interests of the community. However, the social capital accumulated with the world regulated by DAO and web3 prevents this behavior, even if nothing prevents them from acting selfishly. 

Other methods have been proposed to address these risks, including angry quitting and vetoing. 

Quit smoking in anger

Moloch DAO has an “angry exit” mechanism that allows token holders to exit the DAO with a proportional share of their assets. Crucially, angry ex-smokers will leave with the share they had before the proposal is officially passed, unless they vote for it. Essentially, if you don’t like the decision the DAO just made, you can pack and take your tokens with you. 

For potential attackers, the existence of this exit mechanism is a major obstacle. If contributors believe that an attack is ongoing, they can leave with their own funds instead of being forced to join. Even if potential bandits accumulate a 51% majority, they may not be able to obtain any funds. 

The disadvantage of the anger exit mechanism is that it is a very nuclear method. In addition, it is not particularly good for DAOs that hold non-fungible assets such as NFTs. If you, me, and our 98 friends each invest 1 ETH to buy some boring apes, and you decide to give up your anger, how can we allow you to leave with some of your shares? There is no easy answer. 

Ultimately, any large DAO that uses this method will combine it with a full review process of members. This ensures that the social capital is in danger and prevents the rogue proposal from happening from the beginning.

veto

Some DAOs did not quit angrily, but vetoed them to prevent attacks. In this case, a trusted entity or mechanism will step in to ensure the legitimacy of the proposal and shut down malicious behavior. 

For example, the founders of Nouns DAO can veto malicious proposals, but they plan to “provably revoke” the right over time. Again, the method here relies on social capital rather than code. 

Some protocols try to solve the problem head-on by providing subjective input. For example, the Aragonese court helps deal with such disputes through a network of “guardians”. When problems arise, the judgment can be postponed to this independent court, and their fair efforts will be rewarded. Kleros’ “Justice Agreement” is a similar solution. 

In addition to the threat of attack, the DAO must also resolve some outstanding issues surrounding the effectiveness of its structure. Can the decentralized approach produce the best results? 

High-impact startups have been integrated into a fairly default operating manual, in which senior leaders drive the direction of the organization, intellectual property rights are proprietary, recruitment is structured, and confidentiality is essential. In the past few decades, this method has produced some very good results.

Of course, DAOs behave differently, they tend to be completely transparent and flat structures. Although this model has proven to be very effective in situations where decentralization is crucial (Bitcoin and Ethereum can be considered DAOs), it is not clear whether it is suitable for other types of organizations. 

It will be very interesting to see DAOs competing with centralized teams in specific markets, and to observe the relative strengths and weaknesses of the model. 

border

Perhaps the most exciting part of the DAO world is that we barely touch the surface of its potential. Although new technologies inevitably surprise us in how, where, and why they are deployed, it’s worth trying and envisioning the future they might foreshadow. 

On this topic, we will cover the importance of DAO to our future, the changing concept of ownership and creativity, and the potential new era of organization. 

The importance of DAO

The widening gap between rich and poor is one of the biggest headwinds we face as a society, and the consequences of COVID-19 will only exacerbate this problem. This is not only an ethical issue, but also an economic issue. The cruel fact is that labor and wages are not the best solution to build sustainable wealth; asset ownership and access to capital are. Historically, those who own capital have usually received disproportionate benefits compared to those who provide labor, usually in exchange for a fixed salary. Again, if you want to become rich and gain financial freedom, you need to own assets-capital> labor.

Web3 means a lot to many people, but as we discussed, one of its core pillars is the concept of ownership. By spreading this capital more widely, this space has the potential to drag millions of people out of traditional wage labor and turn to ownership. 

The background of currency devaluation only reinforces the feeling that at the moment when the world needs cryptocurrency, it is becoming a widely investable asset class. 

DAO is a key part of this movement. Not only are they opportunities to create wealth in themselves, but they may also play a leading role in the education and skill upgrading of people entering the ecosystem. 

creativity

As many of us know, citizens of all classes are increasingly worried that advances in automation, artificial intelligence, and robotics will replace many of today’s jobs, and this worry is not entirely wrong. However, the explosive growth of web3 and related DAOs may give rise to hundreds of new industries, thousands of new organizations, and millions of new jobs that did not exist before.

Creativity may be particularly affected. As rote labor is automated, more acumen talents may stand out. An increasingly mechanized world may also encourage connectivity, even through the digital realm. 

DAO is the perfect embodiment of these two trends. The Creator DAO will enable artists to interact with fans and in many cases create wealth for generations. In turn, most of it will be shared with the people who helped generate it. 

Micah Johnson is an example of this possibility becoming a reality. Johnson, a former MLB player and active artist, is the creator of an NFT-based character named Aku. Not only did Akku become a popular incarnation, Johnson’s work was also sponsored by Visa. It is not difficult to imagine how “Akuverse” might expand in the next few years, resulting in a real DAO and a participating community. 

DAO: How will decentralized autonomous organizations swallow the Internet?
Aku World

New organizational structure

Up to now, all traditional assets are valid legal structures, and the rights of asset holders are enforced by the courts. 

As more and more assets are transferred on the chain, smart contracts and programmatic incentives will replace the legal system as a way to guarantee ownership. Similarly, DAO will replace legal entities as the main method of coordination around these assets. Instead of forming a company, individuals create DAOs to manage assets on the chain. 

As we mentioned, DAO is a paradigm shift to traditional companies, because they can be global from the beginning, can join or contribute without permission, and minimize such things as identity, employment contracts, job interviews and even Real-time compensation. Although there are many problems in this process today, we have every reason to believe that these problems will be resolved over time. 

In short, encryption provides stronger protections for property rights and the global “permission-free” financial system, and anyone can use it to convert assets into capital in a more efficient way than today’s outdated alternatives.

Whether the DAO will fulfill its extraordinary promise remains to be seen. The past ten years are stranger, darker, and more magical than we thought, and the next time it may bring about a greater transformation. 

However, it is reasonable to believe in strong and positive changes. If you visit a new field full of vision for free and openly, some people will find a way to improve the livelihoods of many people. The few and most people may find that they are not working for the company, but for the DAO-a fluid, constantly changing corner of the digital space that has absorbed the Internet.

The information provided in this article is for general guidance and information purposes only. The content of this article should not be considered investment, business, legal or tax advice under any circumstances. We do not take any responsibility for personal decisions made based on this article, and we strongly recommend that you conduct your own research before taking any action. Although every effort has been made to ensure that all information provided here is accurate and up-to-date, omissions or errors may occur

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/dao-how-will-decentralized-autonomous-organizations-swallow-the-internet/
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