In addition to protocols, social media, media, and services, what other areas can DAO develop?

What the Internet does for communication, DAO can also do for capital.

The Internet and social networks have made it easier for like-minded people to communicate than ever before, regardless of geographic location. The emergence of digital native currency and finance has given birth to a new type of social network where like-minded individuals can not only communicate, but also coordinate around capital. Like their predecessors, these new networks are not restricted by geographic boundaries and can be formed on a large scale or span a few selected participants.

The most optimistic scholars believe that decentralized autonomous organizations can completely change the way humans organize and eventually surpass the world’s largest companies in scale and scope.

In this issue of Around The Block, we will explore the prospects of the current DAO and the major issues surrounding its future.

What is DAO?

Simply put, DAO is an organization that supports software. They allow people to pool resources for a common goal and share value when those goals are achieved.

Just as a limited liability company (LLC) was the preferred original form of organization in the industrial revolution, the DAO in Web3 can also be the same. Enterprises are rooted in the traditional financial system and organized through legal contracts, while DAO runs on an open blockchain network, such as Ethereum, which is organized by tokens and its rules are encoded in smart contracts.

DAOs are not tied to a physical location, allowing them to quickly mobilize and attract talents from all over the world.

In addition to protocols, social media, media, and services, what other areas can DAO develop?

But DAOs can do much more than mobilize netizens to collectively bid for historical documents-they can also change the way we organize any economic activity.

What does DAO do?

DeepDAO.io has tracked more than 180 DAOs, has more than 10 billion US dollars in assets under management, and has nearly 2 million members. These include DAOs that help manage some of the largest encryption protocols, as well as smaller DAOs organized around investments, social communities, media, and philanthropy.

In addition to protocols, social media, media, and services, what other areas can DAO develop?

Protocol DAO

Ethereum has led to an explosive growth of new crypto assets. On this basis, the developers created agreements that allow people to trade and lend these new assets (such as Uniswap, Compound, and Aave). However, the purpose of these agreements is to decentralize, which requires figuring out how to manage their growth and development.

The protocol DAO does not give all key decisions to a small team of developers, but as a way to allow protocol users to have a collective say in its future direction. Usually, governance tokens are issued directly to users based on past usage and contributions to transfer voting rights. Any user can propose ways to improve the project, and token holders can vote to decide whether developers should advance the proposal. More tokens = more voting rights.

For example, Uniswap token holders are currently voting to decide on which layer 2 network the decentralized exchange protocol should be deployed. Token holders also made suggestions from marketing plans to how to manage Uniswap’s more than $2 billion vault.

In addition to protocols, social media, media, and services, what other areas can DAO develop?

Governance tokens align the community around the future success of the agreement because they should increase in value as the agreement grows – or depreciate as the agreement fails.

As of December 7, AUM’s largest DAO agreements are Uniswap, Lido, Radicle, Compound, Olympus and Aave.

In addition to protocols, social media, media, and services, what other areas can DAO develop?

Invest in DAO

The second major category is investing and collecting DAO. These allow people to pool their funds to invest in specific assets. Their investment ranges from venture capital such as DeFi agreements or NFTs, to the purchase of rare historical documents and even professional sports franchise rights.

Similar to other forms of encrypted crowdfunding, these DAOs provide a fast and simple way of capital formation. In contrast, typical venture capital funds require expensive and complicated legal settings. These funds are also more transparent than traditional venture funds because members can audit all transactions on the chain.

PleasrDAO, MetaCartel Ventures, Flamingo, Komerabi, are all good examples of DAOs who gather resources, collectively make investment decisions, and share the benefits when these investments increase in value. Similarly, Syndicate is a project to build a set of tools so that anyone can easily create their own investment DAO.

Social DAO

Social DAO aims to gather like-minded people into an online community to coordinate around a token. The most typical example is Friends With Benefits and its $FWB token. To join, members must submit an application and receive 75 FWB tokens. When you enter, you can enter a community full of famous cryptocurrency builders, artists, and creatives, as well as exclusive events.

By organizing around a token, members are motivated to create a valuable community-sharing insights, hosting parties, hosting great parties, etc. For example, as more and more people realize the benefits of joining the FWB community, the tokens have also increased in value. The price of $FWB has been increased from 10 US dollars to 75 US dollars, so the membership cost has increased from about 750 US dollars to about 6000 US dollars. .

In addition to protocols, social media, media, and services, what other areas can DAO develop?

Other social DAOs use NFT as a mechanism to unlock access to the wider community. For example, if you own a Bored Ape NFT, you can unlock Bored Ape Yacht Club Discords, events, NFT airdrops and merchandise. In this case, the perceived value of the community drives the value collected by the NFT.

This type of DAO is still in its infancy, and it takes time to understand which models are effective and which are ineffective, but the rapid rise of these communities shows that they represent a new and powerful form of social organization.

Service DAO

Service DAOs look like online talent agencies, they bring together strangers from all over the world to create products and services. Perspective customers can award bonuses for specific tasks, and once completed, before awarding individual contributors, pay part of the fee to the DAO vault. Contributors usually also receive governance tokens that transfer ownership in the DAO.

Most of the early service DAOs, such as DxDAO and Raid Guild, focused on bringing talents together to build a crypto ecosystem. Their clients include other encryption projects and protocols that require everything from software development to graphic design and marketing.

In addition to protocols, social media, media, and services, what other areas can DAO develop?

Serving DAO can revolutionize the way people work, allowing global talent pools to work on their own time and gain ownership in the networks they care about. Although the early service DAO focused on encryption, we can foresee that in the future Uber will be replaced by UberDAO, which will pair drivers and passengers while paying the driver for network ownership (although it will be required before DAO is integrated beyond the pure digital domain a period of time).

Media DAO

Media DAO aims to reshape the way content producers and consumers interact with the media. These DAOs do not rely on advertising revenue models, but use token incentives to reward producers and consumers for their ownership rights in a given channel.

The idea of ​​decentralized media can be traced back to the 2013 “Let’s Talk About Bitcoin” podcast, but BanklessDAO is a prime example in 2021. Bankless is a media focused on Ethereum, which produces popular podcasts and newsletters. Recently, the Bankless team airdropped BANK tokens to the audience. After purchasing BANK, readers can play an active role in the media and obtain additional BANK income through content production, research, graphic design, article translation, marketing services, and voting on key decisions that guide DAO.

At a time when many people believe that the current advertising-based media model has been broken, the media DAO provides a compelling choice for realigning the interests of readers and producers.

Grant/Charity DAO

A grant DAO is similar to an investment DAO, pooling funds and deploying them to various activities. The only difference is that the allocation is made in the absence of financial return expectations.

Gitcoin is the pioneer of this model, and it supports funding for critical open source infrastructure that would otherwise be difficult to obtain funding. Similarly, large agreements such as Uniswap, Compound, and Aave have specific authorized DAOs that allow the community to vote on how to deploy their assets to pay builders and developers to further advance the agreement.

Charitable DAOs have also begun to appear, rethinking the way charitable donations are made. Dream DAO issues NFTs to raise funds, and then allows NFT holders to vote on how to allocate these funds to the DAO’s mission.

In addition to protocols, social media, media, and services, what other areas can DAO develop?

DAO obstacles

As this increasingly diverse situation shows, DAO can become the organizational foundation of Web3, redefining the way we manage, invest, work, create, and donate. We will see huge changes in the category, quantity and quality of DAOs in the future.

Nevertheless, they still have a long way to go. Today we see 4 main shortcomings:

  • Lack of clear laws/regulations
  • Lack of effective coordination mechanism
  • Lack of infrastructure
  • Smart contracts, fragmentation and sustainability risks

Lack of legal/regulatory transparency

Since DAOs do not exist in any one place and do not operate like enterprises, they cannot clearly adapt to the existing regulatory framework.

When the rules for setting up a new company are well defined while protecting members from certain responsibilities, the DAO must deal with a variety of difficult regulatory and legal issues. How do you view DAO tokens and treasury activities from a tax perspective? How should income paid to DAO members be reported?

All these uncertainties make it difficult for DAOs to interact with non-encrypted/Web3 entities, which is a major disadvantage. At the same time, a16z and OpenLaw have put forward a clear legal framework for the management of DAO, but in the foreseeable future, the operation of DAO will still be somewhat difficult.

All these uncertainties emphasize the concept that in the short term, DAO growth is likely to be concentrated only in the digital domain-when the DAO tries to leapfrog into the physical domain (such as UberDAO), the legal complexity will be magnified. .

Lack of effective coordination mechanism

The company hierarchy exists because you often need qualified people to make difficult decisions. Today, many DAOs exist under some kind of rough governance structure, in which 1 token equals 1 vote. In larger DAOs with thousands of token holders, this can lead to a chaotic decision-making process, where voting power is more of purchasing power than expertise. Similarly, members who have not been appointed but are well-known can gain great influence on decision-making.

Most people agree that for the DAO to be truly effective, they must explore the progress of the governance structure, such as moving to a delegated authorization model, where token holders can vote for qualified leaders and make key decisions in a transparent manner (this is Orca Protocol* is being explored). In the short term, the governance of the DAO is likely to remain chaotic.

Lack of developed infrastructure

Just as companies enjoy a clear legal framework and efficient decision-making process, they also benefit from a highly developed operating infrastructure. On the other hand, the task of DAO is to build most of the same infrastructure from scratch.

DAO tools for governance, payroll, reporting, financial management, communications, and all other resources available to modern companies are still in their infancy. Fortunately, DAO tools are widely used, and hundreds of teams are working through a series of methods to solve these deficiencies.

In addition to protocols, social media, media, and services, what other areas can DAO develop?

In terms of governance tools, there are too many teams that cannot be named, but we are very happy to see Messari’s new aggregator, which can monitor and participate in governance from one interface.

Smart contracts, fragmentation and sustainability risks

When discussing DAO, it is hard not to mention “The DAO”: The first DAO on Ethereum was designed around the venture capital in 2015. 40% of its funds were hacked and lost $60 million. As demonstrated by the recent $130 million vulnerability in BadgerDAO, DAO treasury bonds are still vulnerable to smart contract risks.

Similarly, the largest encrypted network also has a history of divisions caused by divisions within the community. The Bitcoin/Bitcoin Cash split was caused by technical disputes over block size. The split between Ethereum/Ethereum Classic was caused by how to deal with the above-mentioned “DAO” hacker disagreement. There is reason to believe that we will see the largest DAO facing similar headwinds.

On the other hand, when another possible crypto winter comes, how sustainable is the DAO?

Reconnect the world with DAO

Despite the obstacles, the DAO represents a paradigm shift in economic organization. If Web3 is to become an Internet collectively owned by users, DAO will be an organizational primitive in which ownership is measured.

2021 witnessed the revival of new DAO experiments and models. At the same time, the profile of projects and companies that build the tools that DAO needs to realize its true potential is the richest in the industry.

In addition to protocols, social media, media, and services, what other areas can DAO develop?

If these trends continue, we may one day see that the largest organizations, venture capital companies, media organizations, and institutions are not based on legal contracts, but on open encrypted networks. As the encrypted user experience improves, DAO is likely to replace LLC as the preferred organization model in an increasingly digital world.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/in-addition-to-protocols-social-media-media-and-services-what-other-areas-can-dao-develop/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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