How does DAO, with an asset management scale of $12.8 billion, become the core infrastructure of Web3?

Since The DAO (the earliest DAO in the world) was hacked and destroyed in 2016, the DAO has fallen into a long-term trough, but many developers in the crypto community are constantly making new attempts and experiments. In recent years, with mature projects and service providers such as Maker DAO and Aragon playing a huge role, the DAO ecosystem has also ushered in a new round of recovery. Even DAO has penetrated into the “non-encrypted” world. For example, in the past few years, Prague, Athens, New York and many other countries have used DAO to manage funds and projects, as well as the DAO-driven decentralized mutual insurance Nexus Mutual in the United Kingdom, which are all experimental manifestations of DAO.

Nowadays, many experiments around DAO are unfolding, and DAOs of various forms have emerged, covering various fields such as development tools, services, social, media, creation, and collection, attracting the attention and investment of global capital and talents. Especially since the beginning of this year, we have seen that capital is accelerating its deployment and boosting the development of DAO. DAO is becoming one of the protagonists of the market. More and more people believe that with the development of web3.0 vision, DAO will become an indispensable part.

Why is a large amount of capital adding to the DAO? Specifically, perhaps these few questions surrounding DAO can help us answer this point: Why is there a DAO (why do we need DAO)? How is the DAO ecosystem developing now? How to look at its role and relationship with Web3.0? This article will take these questions to explore.

The ecological status of DAO

With the continuous expansion of the digital asset industry and the prosperity and explosion of DeFi in the past two years, the form of DAO has become more and more diverse, covering various fields such as development tools, services, social networking, media, creation, and collection. Since the beginning of this year, DAO has ushered in substantial growth. According to Deep DAO data, the total asset management scale of DAO so far is US$12.8 billion. Compared with the first half of 2021, the amount of funds deposited by DAOs has increased by 1422%, with a total of 186 in the statistics. DAOs, the cumulative number of members of these DAO organizations and members holding tokens totals 17 million. Messari researcher Roberto Talamas recently quoted DeepDao’s data on Twitter, stating that since August, DAO members have increased by 133% to more than 1.6 million entities, spanning 164 organizations.

How does DAO, with an asset management scale of .8 billion, become the core infrastructure of Web3?

The top five DAO projects according to asset management. Source: Deepdao

Currently the top five DAO projects are Uniswap, BitDAO, Lido, Olympus DAO, Compound. Aragon is one of the most widely used DAO frameworks. From the data point of view, the DAO community generally maintains a relatively high degree of activity. There are currently 4,700+ discussion proposals, 15 million votes, and more than 35,000 resolutions. The most active DAO projects in the past week include MakerDAO, ENS, Gitcoin, Lido, WEALTHDAO, PancakeSwap, Decentraland, etc.

How does DAO, with an asset management scale of .8 billion, become the core infrastructure of Web3?

Source of DAO governance: Deepdao

With the growth of this field, DAO is also beginning to try to explore more diverse types. Some are used to invest, some are used to build new products, and some are used to socialize. In general, the current DAO ecosystem mainly includes the following categories: DAO Operating Systems, Protocol DAOs, Investment DAOs, Grants DAO, Service DAOs, Social DAOs, Collector DAO, Media DAOs. The more typical ones are the underlying service providers of DAO represented by Aragon, DAOstack, and Colony. They provide different templates, frameworks and tools to provide usability for creating DAOs on the mainnet. There is also the use of DAO to manage encryption protocols, such as KyberDAO (Kyber Networks), PolkaDAO (Polkadot), dxDAO (Gnosis), etc.

How does DAO, with an asset management scale of .8 billion, become the core infrastructure of Web3?

Of course, the above map only shows part of the DAO ecology, and more and more new DAO organizations are emerging. It’s worth noting that in recent months, many well-known DAO organizations and governance solutions have won the favor of capital. For example, ParagonsDAO, DAO voting platform Snapshot Labs, Colony, and Mean DAO have recently announced the completion of 25 million. , 4 million, 1 million, 3.5 million US dollars of financing, which aroused the attention of investors and discussions on the value of DAO.

How to understand what DAO is?

First of all, we need to clarify the meaning of DAO and its background. DAO stands for Decentralized Autonomous Organization, translated as Decentralized Autonomous Organization. In essence, DAO is an organization that keeps running through smart contracts. It creates, acquires, and distributes value around a common goal.

Generally speaking, DAOs have several characteristics: decentralization, tokenization, autonomy, autonomous rationality, openness and transparency. Decentralization means that anyone can join the DAO and make contributions in accordance with the rules. The community rules of the DAO are formulated by the community and are not controlled or influenced by a three-party centralized organization, and there is no hierarchical structure. Tokenization means that DAO usually introduces Token as a participating governance and incentive mechanism to promote organizational development, while autonomy means that community members do not need to be hired to participate in the governance of the community autonomously; autonomous rationality refers to the operation of DAO At times, all community members can govern together in the form of proposals; while openness and transparency mean that DAO is established based on blockchain technology and is bound by smart contracts. All rules, roles, and resolutions are recorded on the chain. Therefore, the DAO organization has the advantages of openness, tolerance, trustlessness, and transparency.

In fact, the meaning and governance of DAO are not that simple to understand. DAO not only refers to a Discord channel for chat, nor is it a simple distributed community. It needs some tools or core components for more efficient governance, including fund management, governance frameworks, chat communities, voting tools, aggregators, etc. In addition, it usually requires community governance tokens, usually homogenized tokens. (FT).

How does DAO, with an asset management scale of .8 billion, become the core infrastructure of Web3?

DAO tool map

Some of these tools may be familiar to everyone, so I won’t introduce them here. Mainly speaking about a few common ones, most of the DAO’s vaults are usually managed by Gnosis Safe, while the Snapshot platform is widely used for voting. Discord channels or CollabLand are commonly used for proposal discussions and community chats, which are used to communicate and synchronize information with the public. The tool mainly uses Mirror. These tools and mechanisms lay the foundation for DAO’s value distribution, enabling it to become a fully self-sufficient organization.

After understanding the meaning and characteristics of DAO, let us trace a question back to briefly understand how DAO appeared?

According to information, as early as 2006, science fiction writer Daniel Suarez published a book called Daemon. In the book, the computer application Daemon secretly took over hundreds of companies based on the distributed nature, and organized an underground cooperative society. Although Suarez did not propose the concept of “DAO” in the book, people later believed that the underlying operation of Daemon was very similar to the current DAO, so Daemon was regarded as the earliest textual origin of DAO.

As for the term DAO was officially proposed in 2013, Vitalik Buterin (V God) wrote an article about “decentralized autonomous organizations” before founding Ethereum, and understood him at that time The DAO has a simple definition: “DAO is a virtual entity, it has some members or shareholders, 67% of whom have the right to spend the entity’s funds and modify its code.”

However, it was very late to try this concept. It was not until April 2016 that the world’s first DAO-“The DAO” was born. The goal of this project is to become a venture fund in the Ethereum community, managed in a decentralized manner, members crowdfunding to The DAO, and voting on investment together through tokens. Unfortunately, in June of the same year, The DAO encountered a hacker attack and more than 3.6 million ETH was stolen and transferred, although the funds were later recovered through a rollback. However, while an event exposed the risk of the immature DAO form, it also had a significant impact on the history of blockchain development. This is where the fork of ETC (Ethereum Classic) and ETH (Ethereum) came about.

With the fall of the first DAO project, the development of DAO has fallen into a long-term low period since then. Although several of the earliest DAO projects are still exploring, such as Aragon, MakerDAO, etc., they have been in a state of no one for a long time. Until 2019, with the development of DeFi, the popularity of some DAO projects began to rise gradually, which attracted everyone’s attention in this field. Especially since 2020, DAO has ushered in a new round of outbreak in the call of Web3.0.

How to view the role of DAO?

So, with the strong growth of DAO, how do we play its role in the crypto world and its relationship with Web3.0?

First of all, for DeFi, almost all major DeFi applications, from Uniswap to Aave to MakerDAO, are managed by DAO, so DAO plays a vital role in this field. Before the DeFi boom, the economic distribution of tokens for many projects was relatively concentrated. In addition to the limited capital and user scale, voting governance in the community did not become a normal operation for decentralized players. However, there are still some encryption practitioners who firmly believe in the trend of DAO and practice it, which is a necessary form of community governance for decentralized projects. Take MakerDAO as an example. Its success allows decentralized players to directly feel the many rights they enjoy as token holders and the true utility of DAO. Therefore, as a project that hopes to extend the power of governance and decision-making to its token holder community, the concept of DAO still has a relatively strong appeal and usability.

In recent years, with the emergence of more and more DAO service platforms, such as Aragon, Colony, Gnosis Safe, Moloch, DAOstack, etc., the rapid development and maturity of these platforms have provided DAO tools for various community projects, attracting hundreds of The precipitation of billions of dollars in funds.

With the refined development of various platforms such as financing DAO, governance DAO and tool DAO, the development and adoption of DAO will become very simple, and the cost and technical threshold will be small, which will make DAO like a blockchain wallet, browser It will become the future infrastructure of the encrypted world. As Vitalik recently talked about his views on DAO, he said that DAO and smart contracts are like Lego blocks for governance, allowing people to easily create new and different structures. The DAO organization reduces the cost of people doing these things.

In addition, from a larger perspective, DAO is also extremely in line with the vision and development trend of Web3.0, and will play a key role in the development of Web3.0. Especially when the popular IPs such as Metaverse and NFT are hot, DAO can continuously enrich its production ecosystem. DAO is the embodiment of the core spirit of Web3.0 and an important infrastructure for production value. If you want to understand Web3.0 in one sentence, “DAO produces and sells NFTs in the Metaverse, generates profits, and turns profits into The point of view of “asset value” seems quite interesting. It illustrates the role of DAO in the popular concept of Web3.0, which can be used for readers’ understanding and reference.

Although for now, the development of DAO is still in its early stages. If DeFi is a “currency Lego building block”, then DAO can be called an “organizational Lego building block”. Compared with the explosion and growth trend of DeFi in the past year, it includes DAO’s total asset management scale (Total AUM) and the entire DeFi field. Compared with DeFi TVL, DAO’s governance staking rate (Governance Staking) and DeFi TVL still have a big gap, so the DAO ecosystem is still in its infancy. On the other hand, DAO still faces some common challenges, such as how to lower the threshold of meaningful contribution, how to solve the contradiction between efficiency and decentralization, and how to coordinate decision-making on a large scale.

But it is foreseeable that DAO will continue to be promoted as a widely adopted organizational model in the digital world, and will continue to promote the growth of DeFi and other fields. In the latest annual report “Crypto Theses for 2022”, Messari stated that DAO is one of the most important structures in cryptocurrencies. It will change all aspects of the economy and politics, and may even change the next few years. your life. If 2020 is the year of DeFi and 2021 is the year of NFT, then 2022 will be the year of DAO.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-does-dao-with-an-asset-management-scale-of-12-8-billion-become-the-core-infrastructure-of-web3/
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