Decentralized Autonomous Organizations (DAOs)
Much has been written and said about Decentralized Autonomous Organizations or DAOs in the last few weeks. Among the pieces out there, I highly recommend Packy McCormick’s The Dao of DAOs and The Generalist’s DAOs: Absorbing the Internet. These pieces are in-depth, and clearly and elegantly written — so I’m not going to pretend I can do a better job than either at giving the full breakdown of what DAOs are, and why they matter. If you’re looking for 5000+ word pieces on DAOs, go ahead and read those.
I’ll try and do something different instead: the writing that follows is a (hopefully) concise, for-dummies version of DAOs, with a Seedtable spin. My own attempt to understand this extremely complex topic, if you will.
Let’s begin at the beginning, shall we?
The Origin of DAOs
Conceptually, Decentralized Autonomous Organizations have existed for almost as long as the Ethereum Blockchain has existed. Ethereum’s founder Vitalik Buterin has been writing extensively about them since the early 2010s, though at the time he dubbed them ‘Decentralized Autonomous Corporations.’ But for simplicity’s sake, let’s fast-forward to the first real example of a DAO out in the wild: The DAO.
It’s a somewhat (some would say very) tragic story: The DAO (stylized Đ) was launched in April 2016 as, put simply, a decentralized version of a Venture Capital fund. By May 2016, it had attracted about 14% of all Ethereum tokens (11.5 million) issued to date, amounting to more than $150 million from ~11,000 investors. It was a hopeful time: the first example of an investment vehicle, as Lincoln would say: “of the people, by the people, for the people.”
But it didn’t last. A month or so later, a group of hackers exploited a vulnerability in The DAO and stole about 1/3 of the organization’s funds, or $50 million. After some debate, Vitalik and the Ethereum core team executed a hard fork of the Ethereum blockchain — and just like that it was as if the theft had never happened.
The money returned to the investors’ pockets, but it was a bitter-sweet ending: now that DAOs had proven to be hackable, no-one wanted to invest in them again. And so the interest for building Decentralized Autonomous Organizations waned almost to the point of total oblivion.
But that’s enough history for today. What followed the DAOs demise can be summarised as: time passed, people’s wounds healed, blockchain technology improved — and now DAOs are the talk of the town once more.
The most salient example of this ‘talk’ is that of the ConstitutionDAO. It is the Show Don’t Tell example, the easiest way to understand the impact DAOs are capable of, without needing to understand what they actually are, or how they function.
Here’s the gist: some time ago, Sotheby’s announced they’d be auctioning off the only privately held first edition printing of the U. S. Constitution. So a bunch of people joined together to create the ConstitutionDAO. It had one goal in mind: crowdsource ~$30 million in ETH to buy it, and share ownership in it (not real ownership, but governance, for regulatory reasons, but that’s a whole other story.) Again, the ending was bitter-sweet: the ConstitutionDAO community was able to raise ~$40 million, but eventually lost the bid. That said, they did manage to break the record for the most money crowd-funded in 72 hours ever…
So… What are DAOs, then? Why would people pitch upwards of $40 million into an organization with the hopes of buying ownership in a copy of America’s funding document, and trust it not to be a scam?
What are DAOs?
The for-dummies Definition: DAOs are a novel way of organizing people. A blockchain-based, decentralized alternative to traditional free-market corporations in which the workers or contributors are also owners of the entity, and have, in most cases, governance say in it.
The expert Definition: doesn’t really exist. Defining DAOs, it turns out, is hard, mainly because it is a highly malleable concept, with shifting parameters. As Packy McCormick writes: ‘Just because something touches crypto doesn’t mean it’s decentralized, and just because something is decentralized doesn’t mean it’s a DAO.’
In fact, very few DAOs today are actually fully and truly decentralized, mainly because bootstrapping a truly decentralized organization is truly impossible; you need some centralization to get up and running. Quoting Packy once more:
DAOs sit a level above NFTs — DAOs can own NFTs and create NFTs, plus do a whole lot of other non-NFT things — and have more transformative potential than NFTs. An NFT is a piece of digital media; a DAO could be a whole media company.
There are no set criteria that deem an organization a DAO. It is not a binary, but closer to a sliding scale, a spectrum. It’s a matter of degree of decentralization. Quoting Mario Gabriele now (emphasis mine):
DAOs are — or can be — a lot more than just a Discord channel with a native token. Rather, they are entities geared towards a shared purpose: the creation of value. That is the common denominator across our stated articulations.
So what are DAOs? As you might have guessed, the definition of a DAO is not something you arrive at, but instead something you approach from multiple angles in the hopes of an almost intuitive understanding.
Perhaps the best way to do this is by looking at some examples of DAOs out in the wild today, the categories they fall under, and their names.
DAOs Galore
While deciding whether something is or isn’t a DAO is a matter of sliding scales or spectrum, we can divide them into two groups (kinda). Quoting The Generalist again:
For now, though, we can still delineate between types of DAOs. At a high-level, most DAOs are either technically-oriented or socially-oriented (…) Now, there is no hard line between these segments. Just as DAOs exist on a spectrum of decentralization and autonomy, they typically do so here, too.
Technically-Oriented DAOs bring people together for coordination and cooperation in building and maintaining technical assets, such as Tokens. Socially-Oriented DAOs, on the other hand, bring people together to “find new ways to interact and convene.
Investment DAOs: these entities pool people together to form crowd-sourced investment vehicles for any number of spaces, including VC, NFTs, and Equities. The DAO was an Investment DAO. The LAO is another example.
Service DAOs: these entities pull together talent in order to direct it towards specific projects. Sort of like a Talent Agency, but without the centralized corporate structure. Key examples include:
Collector DAOs: here we can place the ConstitutionDAO — these entities pull people together in order to (through shared ownership and governance) purchase, manage (and potentially profit from) unique assets or collectibles, including NFTs, Trading Cards, the US Constitution. Other than the Constitution DAO, key examples include:
- MeebitsDAO
- PleasrDAO
- NounsDAO
- FingerprintsDAO
- SquiggleDAO
Gaming Guild DAOs: the DAO version of gaming clans, the kind you’d see in games like Runescape (which is loads of fun, by the way). These entities function much like Collector DAOs, but with an in-game focus and a stronger social component. These DAOs usually operate within play-to-earn games such as Axie Infinity or Crypto Raiders. Perhaps the most famous example of this type of DAO is Yield Guild Games.
Media DAOs: these entities are the decentralized version of media corporations; they produce content, often through collaboration, with profits or rewards shared among the DAOs members, and shared ownership and governance. Key examples include:
Protocol DAOs: the clearest example of Technically-oriented DAOs, these entities bring people together to collaborate on the building and maintenance of a blockchain protocol. A key example here is the MakerDAO.
And there are others, of course. This is not an exhaustive list by any means, but a good place to start. This article is a great further-reading resource.
Why DAOs Matter, And What Their Future May Be
While it may appear that DAOs are everywhere now, I think it is safe to say we are still early. DAOs may look like simply a decentralized version of a corporation, or like a 2.0 version of a Coop, but they are much more complex and, by extension, more malleable. They could be the by-default governance infrastructure for a Web3 world, but since we’re just at the very beginning of Web3, it’s safe to say we’re at the beginning of what DAOs are capable of.
DAOs allow for a brand-new sort of cooperation: one where people within and between the organization can act based not on centralized authority, but on cryptographic consensus and transparency. This is why they matter so much: DAOs may (some would say will, or are designed to) become the governance infrastructure for a Web3 world precisely because they are native to that world, and follow its ethos of the aforementioned consensus, transparency and decentralized trust.
There may even be a future in which the Web3 ethos and, by extension, DAOs, seeps into our most ‘traditional’ institutions, changing the forms we govern ourselves (new forms of democratic collective action and legislation, for example). Politics, after all, is downstream from culture, which is downstream from technology.
Interesting links
Twitter Vigilantes Are Hunting Down Crypto Scammers
Visa Tumbles on Amazon Ban in U.K. as Fight on Card Fees Expands
Hackers Compromised Middle East Eye News Website to Hack Visitors, Researchers Say
NFT Makers are trying to build the next Disney
Clean energy faces its own supply chain crisis
Cities going circular: how London can cut its emissions from food consumption by 31%
Building the foundations: a vision for the UK’s quantum economy
The telephone is still the king of customer support, so why aren’t SMEs using it?
Europe’s 10 most active healthtech investors
Dispatches from a new VC: Europe’s eight hottest under-the-radar startups
From robo-advisers to NFTs: Six insights from Sifted’s wealthtech panel
UK opens in-depth probe of Nvidia-ARM deal, citing national security and competition concerns
The browser wars are back
How trains could replace planes in Europe
Paris e-scooters forced to slow down in busy areas
Money stuff
Gen Z social audio platform Walkie-Talkie dials in $3 million in pre-seed money
Banking compliance automation solutions provider iconicchain raises €1 million
Balderton raises $600 million, its largest-ever fund for early-stage startups
Fullview wants to redesign customer support, raises $1.8 million in pre-seed funding
Cazoo swipes up Spain’s Swipcar, continues march across continental Europe
Digimarc to acquire product intelligence platform EVRYTHNG
Dubit raises $8 million launches esports Metaverse Gaming League
Italy’s Dedalus Group acquires Swiftqueue Technologies
Estonian blockchain gaming developer Fracture Labs raises $3.5 million
Synthace raises $35 million, helps scientists automate biology experimentation and insight sharing
Helping healthcare systems join the digital age, Lifen raises €50 million
TIER shifts into high gear, snaps up bicycle sharing company nextbike
AI-powered software testing platform Virtuoso raises $13.3 million
Making the maps for the bots, Mimica raises $6 million
Business planning and forecasting platform Pigment picks up $73 million
Urban mobility data collector Vianova raises $3 million
London’s customer data and marketing platform Ometria raises $40 million
Πηγή: Gonz Sanchez
seedtable.com
