Have you heard how DAOs will create revolutionary social networks?
Social networks (and the internet) have made it easy for like-minded individuals to congregate and communicate.
The advent of crypto will likewise make it easy to coordinate around capital
Internet <-> Communication
DAOs <-> Capital
What is a DAO?
DAOs are software-enabled organizations.
The industrial revolution favored the LLC as the tool to organize.
DAOs will fulfill this role for Web3 at large.
DAOs are leaner than LLCs, attracting talent from all over the world.
What do DAOs do?
Present DAOs have a variety of missions, from:
- Manage large protocols
- Social Communities
- Philanthropic Pursuits
Let's take a look at each category now
From Ethereum came a whole array of new crypto assets.
Protocols were made to let people trade these assets.
DAOs then emerged to let users have a collective say in the future of the protocol.
Voting is done with governance tokens given to users
Ex. Protocol DAO
Some examples of Protocol DAOs are
For example, Uniswap token holders voted on which Layer-2 networks the protocol should be deployed.
Investment / Collector DAOs
These let people pool capital with the aim of investing in specific assets, ranging from NFTs to sports franchises!
This is a fast and simple alternative to venture capital funds.
- MetaCartel Ventures
By organizing around a token, like-minded members have the incentive to create a valuable community
Some like FWB require an application + a fee, others like the Bored Ape Yacht Club use NFT ownership to unlock access.
These are like online talent agencies.
Clients issue bounties for tasks.
Once finished they pay the Treasury + contributors
- Raid Guild
These DAOs have the potential to reinvent work to look like the gig economy.
Rather than rely on ad-based revenue, these DAOs tokenized incentives to reward producers and consumers.
An example is Bankless DAO. Its audience was airdropped BANK, and they can earn more by
- Producing Content
- Graphic Design
- Many Options!
Like Investment DAOs, these DAOs pool capital to allocate later however without the expectation of profit.
Gitcoin is a popular Grant DAO, supporting critical open-source infrastructure.
Hurdle for DAOs
DAOs are reinventing how we govern, invest, work, create, and donate.
However, there are 4 barriers:
- Lack of legal/regulatory clarity
- Lack of efficient coordination mechanisms
- Lack of infrastructure
- Smart contract & sustainability risks
Lack of Legal Clarity
DAOs don't have a jurisdiction whose laws can protect them.
In the US, DAOs have 2 choices:
- Form an LLC in Wyoming
- Be treated as a general partnership
This leaves DAOs either misrepresented or exposes members to liabilities.
Lack of efficient coordination mechanisms
Right now many DAOs have a crude governance structure, where voting power can be a function of buying power than expertise.
Some have suggested a Delegated model where token holders vote for delegates to make decisions.
Lack of developed infrastructure
Corporations benefit from being able to operate on an infrastructure that's been developed and tested for decades.
DAO tools for governance, payroll, reporting, treasury management, communication and other resources are still fresh.
Smart contract, fragmentation, & sustainability risk
The smart contract exploits of 'The DAO' are still relevant today.
Fragmentation within crypto networks, such as the ETH/ETC split, could prove problematic for organizations that want stability.
DAOs have the potential to be a paradigm shift in economic organizations.
We may even one day see institutions built not on legal contracts, but on top of an open crypto network!
This thread was my notes summarizing this article
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