In-depth analysis of the development history and outlook of on-chain DAO

DAO makes the whole process of governance efficient and trustworthy through blockchain.

In-depth analysis of the development history and outlook of on-chain DAO

Foreword: DAO, Sociology on a Chain
In his book “The Great Disruption”, Francis Fukuyama reveals the essential source of the birth of order in contemporary civilization: “it is no longer considered as a top-down granting of authority by a hierarchy in politics or religion, but as the result of self-organization based on decentralized individuals”. In the blockchain world, which is authority-less, coercion-free, self-organizing, and full of single-player games, the exploration and construction of order generation is probably the most interesting and important intellectual development.

From the first day of the blockchain, all contributors have been channeling ideas to a fundamental question that is also the world’s interrogation of crypto organizational forms: “How will dispersed individuals in an information vacuum form a unified goal and work together in collaboration to achieve it? . In the real world, the influence of social norms is so low that a whole new discipline, sociology, has emerged. In the crypto world, organizational relationships are defined by code as consensus, and this unique product, native to the blockchain, has been given a name full of Eastern Zen rhythm: DAO.

After 12 years of growth, the DAO, like all collaborations, will have a division of labor and development, and it is important to follow the DAO’s path to see its future. The future. So, let DAO it!

An overview of the development of on-chain self-organization
The logical differentiation of DAO concept
DAO as an organizational governance paradigm of collective decision-making corresponds to the blockchain tech stack in three forms: protocol-level consensus, application-level decision-making, and middleware services.

Protocol-Level Governance

Starting with off-chain governance Bitcoin Ethereum BIP EIP Non-formulaic negotiation model

On-chain governance Decred, Tezos, Polkadot Automatic execution of upgrades

Application Layer Governance

Financing-based: The DAO→ Molon DAO

Business decision type: MakerDAO→ Dapps DAO modules

Governance middle layer

As the division of labor in governance has become more refined, tools like Aragon have emerged in the market for creating and managing DAOs. The market has seen the emergence of tools such as Aragon for creating and managing DAOs and proposal integration platforms such as Snapshot.

Aragon, DAOstack→ SubDAO

In-depth analysis of the development history and outlook of on-chain DAO

The evolution of DAO and the crypto market have evolved in tandem. In the pre-Ethereum era, DAO was embodied as Bitcoin’s on-chain consensus and community governance. With the diversification of underlying public chains, the first divergence of DAO implementations emerged here. the formulaic negotiation model of off-chain proposals represented by BIP provided continuous support for network upgrades, but there was still controversy over development efficiency and on-chain execution. some communities believed that more events should happen on-chain, and on-chain automatic execution such as decred and tezos emerged. The governance logic of upgrades. DashDAO, a node dedicated to governance, was created in Dash.

After Ethereum went live, there was the watershed event “The DAO”, the earliest funded DAO project, which culminated in the successful raising of $150 million and ended with the theft of funds. The Moloch, the prototype of a funded DAO, inherited this logic in its simple and functional design. The Moloch, a prototype of a financing DAO, inherits this logic in its simple functional design.

Whereas the underlying technology development decisions are likely to be more concentrated among crypto fanatics and geeks, participation in governance cannot be extended, and then governance can only be the self-indulgence of a few. It is often at the application level that crypto users begin to get involved in governance on a broad scale, and MakerDAO is not only the originator of DeFi, but also the beginning of the real experience of the usefulness of DAO. This direct-to-end-user application layer protocol gives people a real sense of their rights as coin holders.

Until DeFi takes off in 2019, voting governance has not yet become the norm for crypto players due to the concentrated economic distribution of tokens in most projects and the limited size of capital and users. Instead, some visionary practitioners recognized DAO as an organizational prerequisite for the crypto world and a necessary ingredient for any community-based organization. DAO service platforms, represented by Aragon (2016), DAOstack (2018), have provided DAO tools to thousands of community-based projects, sinking hundreds of millions of dollars into governance. Incomplete statistics, DAO participants to exceed 60,000 addresses, from 10,000 at the beginning of last year to more than 60 times growth.

In-depth analysis of the development history and outlook of on-chain DAO

As the crypto industry grows rapidly in scale and business refinement, DAOs are also evolving at a rapid pace, and while Ehereum’s competitor ecosystem is growing rapidly, its organizational paradigm is also seeking innovation. polkadot has adopted a model of on-chain governance and timely upgrade at the protocol layer, and the multi-chain architecture provides a new ground for DAOs to develop. Unlike Etetherem’s “strong application and weak protocol” status, a latecomer like Polkadot relies on strong tool-like support to provide a silky-smooth development experience for projects to help applications get off the ground efficiently at low cost. SubDAO was born to help Polkadot projects create and manage DAOs in an agile way, and to become a solid middle platform for the entire ecosystem to further realize the value capture of DAOs.

Application-Level DAO Scenarios
According to Deep DAO, Aragon is now the largest DAO platform, supporting more than 1300 decentralized projects of all kinds. There are relatively few decentralized communities on similar platforms, DAOstack and Colony. Interestingly dozens of forked communities have been generated based on Moloch, the most common DAO model in financing.

Classified according to application-level scenarios, we discuss the mechanisms of DAO in the following environments.

In-depth analysis of the development history and outlook of on-chain DAO

DAO application scenario classification

  1. Financing scenario

Purpose: Created to fund investments or grants, decentralized incubator to support project development

Moloch dao, Duckdao, Marketing dao, DAOSquare, DAOX, DEPO

Extended Application: Initial DAO Offering

The following is an example of Moloch to understand the rationale behind financing, i.e., DAO, and its use as a financial business origination scenario.


The Moloch DAO, which emerged in 2018, was created to manage allocations for Ether 2.0, the ongoing Ether scaling initiative. v1 was designed to provide a classic paradigm for on-chain DAO investments, shaping the supply and demand negotiation model for early investments into an on-chain specification through clean and elegant code. a Minimally Viable DAO.

Moloch can be described as two main smart contracts :

Moloch.sol – responsible for managing membership, voting rights, proposal submission, voting and processing of voting results

Guildbank.sol (union bank) – responsible for managing union assets

Financing of new members upon joining

SHARE native assets are minted and allocated to new members, who are introduced by the proposal of the original member. The old members save 10ETH and initiate a proposal, which specifies the number of shares to be allocated to the new members, and those who hold shares will vote for or against the proposal.

Moloch’s forks

In 2019, developers in the Ether community forked the code, and this fork was used to modify smart contracts in order to develop more complex DAOs, such as MetaCartel Ventures and Marketing DAO, which are able to allocate and transfer shares and other assets among members. Since then, MetaCartel Ventures, a for-profit DAO focused on early-stage investments in ethereum projects, has raised nearly $24 million from its 64 members.

Other DAOs like DuckDAO and DAO Maker also operate token public offerings. rSHO by DAO Maker has even been approved by regulators in Malta. The program uses on-chain address analysis to find historical transactions to identify applicants who are likely to become long-term token holders and train them to become valuable community members.

  1. DeFi Scenario

The governance of the respective projects in the application layer varies based on their business models, with the following scenarios being more representative :

The DAO module in DeFi.

Mainly used to make decisions in a decentralized way about key parameters in DeFi business, starting with MakerDAO, the governance to Uniswap has become a landmark transaction for on-chain activities and is widely marked as a criterion for projects to screen qualified users (e.g. for airdrops)

Cross-chain liquidity DAOs.

Represented by BadgerDAO, BoringDAO and LidoDAO, aiming to solve the problem of centralization in the cross-chain process of assets.

  1. NFT Crypto Art Scene

DAO projects that focus on crypto art investment and ecological construction. As the NFT boom (or bubble) reached its peak, the DAO formed around it also attracted attention. the Pleasr DAO was founded with the express purpose of winning Pplpleasr artworks, and the DAO organization has since purchased three more artists’ works and plans to continue investing.

It is not, however, the first DAO to commit to NFT; Flamingo DAO is a project launched by LAO in October 2020. According to Wright, the company already has 40 members, a $10 million fund, and has acquired about 6-700 NFTs, including NBA Top Shot decks and rare CryptoPunk.

  1. Service aggregation scenario

The increase in projects comes with a strong demand for DAO, and DaaS (DAO-as-a-Service), which specializes in providing developers and projects with easy-to-use standardized modules for integrating DAO, will become standard in any blockchain ecosystem.

The DAO ecosystem at a glance
Asset management is riding high in the crypto ecosystem, with over $700 million in assets deposited by just the dozens of projects mentioned above, as counted by Deep DAO. In Ethereum’s standalone ecosystem, for example, the cost of capital to organize synergies is only 0.07% of the market cap in an economy with a current market cap of about $1 trillion. On one hand, we can understand that in the crypto world, people can collaborate at a very low cost, and on the other hand, it shows that the whole market of DAO still has great potential.

In-depth analysis of the development history and outlook of on-chain DAO

(Data source: DeepDAO Data acquired on May 19, 2021)

SubDAO plans to become a parallel chain of Poka, a decentralized, highly customizable, low development cost and multi-asset supported DAO platform as a service platform. In addition, the project is actively exploring diverse usage scenarios and attracting more partners, which will eventually become an ecological development enabler, providing a complete and easy-to-use governance module for the project, promoting refinement of governance, specialization of division of labor and efficiency of decision making.

Capturing the Value of DaaS
In the traditional world, infrastructure is difficult to sink and capture the value it carries, often as a public good to export positive externalities. In the crypto world, the value of the protocol layer has been validated, and middleware and tool-based items can become sunk value through sensible usage scenarios and tools.

Aragon establishes a good model for capturing value in a general-purpose governance infrastructure, and the project ANT token combines the dual value of managed value and utility-based tokens. First we need to understand that Aragon establishes an on-chain, non-legal concept of a governance jurisdiction within which governance is distributed as an economic activity. Since Aragon-based projects fall under its governance jurisdiction, Aragon courts are created to establish its jurisdictional rules and to resolve conflicts within and outside the organization in case of disagreements among participants. The project token ANT serves as an incentive for jurors and underlying transactions with global oversight. This is reflected in (source: Placeholder Blog)

Management properties: with planned future economics, enhancing its stored value status in Aragon’s jurisdictions

Court Pledge: Pledged to the court system through the casting of ANJs, with jury members requiring lock-in security

Validation pledge: by casting ARA for pledge and payment of Aragon Chain

In the SubDAO system, the project token GOV contains both the utility token and the governance incentive equity of this parallel chain. Firstly, GOV will be used for network fees to pay node maintainers and also as voting rights to elect SubDAO council. In the SubDAO network, there is a capital opportunity cost for organizations to create governance pools, and these organizations can earn GOV by mining, while governance pool asset certificates and GOV can be combined for higher returns.

SubDAO provides a complete set of convenient and easy-to-use DAO development tools and management system for POCA developers based on the infrastructure of POCA’s DAO ecosystem, and plans to implement application scenarios such as intelligent capital management, reputation system and im, and more use cases of GOV in future exploration.

It is still not the “final form of governance
In the real world, Fukuyama once asserted in “The End of History” that democracy would “become the ultimate form of governance for the world”. The DAO is an attempt at a new form of human organization, making the entire process of governance efficient and trustworthy through the blockchain. However, the current DAO is also far from being asserted as the final state. The security risks and legal risks of code are original issues that cannot be ignored, and the lessons of The DAO are a vivid lesson for us. In addition, there are still a lot of areas that can be optimized in the mechanism of DAO.

  1. a series of deficiencies caused by insufficient governance incentives.

The low voting rate is still a constraint, the governance pledge rate is much lower than the overall pledge rate of the industry (Governance Staking vs DeFi TVL is still several orders of magnitude different), the scope of participation is limited, attracting limited funds and insufficient support for new projects, thus forming a vicious circle.

  1. Uneven development of DAOs across ecosystems.

Currently, the main DAO organizations and toolchain platforms are concentrated in the Ethereum ecosystem, but Ethereum has already attracted the main resources in the entire crypto market, and the lack of DAO development will reduce the vitality of the community and the diversity of market players for the related and heterogeneous ecosystems outside of Ether.

  1. Functional and liquidity fragmentation.

The liquidity of financing DAOs is fragmented, and the functions of each governance platform are isolated.

  1. Paradoxical issues of efficiency and decentralization.

Coordination and agile action are far less important than centralized decision making, making it easy for projects to fragment or miss strategic growth opportunities in decision wavering.

  1. Chain performance issues.

Scalability and high gas fees are problems for Ether and obstacles to DAO development. To counter this, projects like Metis are building so-called Layer2 solutions, while others see the need to keep transactions on the chain. This leads to another debate on the issue of Layer2 not being decentralized enough.

In summary, DAO development is still a long way off. In the emerging ecosystem, we expect projects such as SubDAO to bring new breakthroughs in DAO by solving incentive problems, enabling cross-chain asset management and interaction, and expanding application cases.

Development Trends

  1. Integration of DAO with corporate governance

In April, dOrg became the first legally recognized DAO in the United States, when the Wyoming Senate, through its first member, recognized the legal status of decentralized autonomous organizations as DAOs and granted them limited liability company (LLC) capabilities. This allows the virtual digital management jurisdictions on the chain to be given the status of off-chain jurisdictions as well, and we can expect that the accompanying DIDs will also gain a place in the evolution of contemporary TechReg. On-chain sociology will affect real-world organizational structures and social patterns, which could be another exciting paradigm shift in modern society.

  1. DAO will also become the traffic portal of the crypto world

Each public chain ecosystem will have a complete system of financing DAO, governance DAO and DAO tooling platform, with minimal cost for developers to adopt DAO and simpler for users to join, and the refinement of DAO tooling platform will eventually make DAO easy to adopt and a fundamental building block like wallets, browsers and Oracle. The DAO platform, which is the first to provide richer public chain ecology expansion, more complete SDK tools, and more robust modular functions, will also become the traffic portal of the crypto world.

  1. Combinability with more tracks

Decentralized identity system: The identity reputation system built based on DAO makes the user behavior of participating DAO generate precious value data, providing tools for credit rating, on-chain identity audit and diversified scenarios, which is a key part of the combinable building blocks

Normalization of governance incentives: Inflationary incentives for participation in governance will become the base yardstick for yield in DeFi

Integration with other models: e.g. NFT+DAO

And at the moment we are already seeing a number of projects seeking possibilities for DAO scalability. In particular, in the financial direction, Automata buys and sells governance votes to create such lending systems, and SubDAO plans to provide a personal reputation system based on on-chain governance behavior and support for on-chain financial operations.

The ability to absorb funds will be a key metric for evaluating DAO platforms

The development and wrestling power of DAO is mainly shown in the optimization of voting rate incentive and governance pledge mechanism, especially DaaS, whose management fund scale (AUM) is a key indicator to evaluate the competitiveness of the platform, similar to the traffic competition period of DeFi, attracting the amount of governance funds with innovative model will make the project a track stealer, and SubDAO’s governance mining model is already SubDAO’s governance mining model is already demonstrating.

Industry-based Key Metrics Establishment

DAO track maturity will be enhanced to form a tracking metrics-based service tool to provide a more valuable decision basis for the entire DAO market. We believe that the DAO module will give birth to a vertical data and other tool-based service ecology.

  1. DAO Venture may be the real form of VC in the crypto world

DAO will assume a stronger function of early value discovery. As the platform becomes more functional and the network effect increases, DAO will precipitate more excellent projects, gather larger base funds and unite the most active and enthusiastic practitioners and promoters for ecological development.

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

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2021-05-22 13:35
Next 2021-05-22 22:36

Related articles