What is a DAO

2021 was the year DAOs made a name for themselves — and changed their definition. Previously, the vanguard was pushed by protocol DAOs like Uniswap voting on grants and treasury allocations. The term has expanded to include an umbrella of web3 organizations leveraging crypto rails. As Balaji Srinivasan notes, think of them [DAOs] as instant entities for group coordination with a shared bank account and payment capability decentralized autonomous organization (DAO), sometimes called a decentralized autonomous corporation (DAC), is an organization represented by rules encoded as a transparent computer program, controlled by the organization members and not influenced by a central government, in other words, they are member-owned communities without centralized leadership

Crowdfunding, deploying capital, and binding votes to tangible outcomes can now be done at hyper-scale, enabling remarkable new possibilities. Experiments like ConsitutionDAO proved that self-organizing groups can amass tens of millions of dollars in a matter of weeks and buy assets together (or at least attempt to). But that’s just the beginning. Much like the existing menu of LLCs, corporations, and nonprofits, DAOs are taking shape for every mission imaginable. Some DAOs have massive treasuries with hundreds of millions (or even billions) of dollars and tens of thousands of users; new ones are also springing up constantly.

DAO accounting & finance

One of the main themes of 2021 was the maturation of our understanding of DAO treasuries. DAOs that considered their native tokens as part of their treasury realized that they did not have access to the number of funds they thought they did. Deploying the value in their unissued tokens is challenging. For example, for Uniswap to deploy some of their roughly $6.6bn treasury, they would need to sell UNI, creating down pressure on the token price and potentially hurting their token holders. Recent work by Llama DAO and Uncommon Core has contributed to conversations around unissued tokens and whether they’re better thought of as parallels to authorized shares in traditional company structures. There’s also a strong argument that DAOs will need to accumulate secondary assets to build a workable treasury. Otherwise, they risk significant capital losses during market drawdowns.

Consequently, we have seen a stampede of DAOs begin to experiment with their treasury by acquiring vote escrow tokens, hoarding stablecoins, adopting PCV, and deploying assets to earn yield. We believe these DAOs are ahead of the curve entering 2022 because they understand that a DAO should be well-capitalized and forge relationships with other protocols to strengthen their position in the community. As for those DAOs that are unsure where to begin, protocols like Tribeca DAO and Andre’s teased ve(3,3) might be a great starting point.

Tooling improvements

The number of DAOs will undoubtedly increase from here, as will the complexity of the largest and most active DAOs, driving demand for better tooling around governance and coordination. This is a big challenge for even the most successful DAOs today. But it’s a sector we’re actively investing in to accelerate more widespread adoption.

Tools

Tooling and experience around DAOs to mature. DAOs emerged as a legitimate form of social and capital organization in the last few years, and many people noticed. We will see a new wave of people who leave traditional workforces and who shift to working with/for DAOs.

API-ification

More X-as-a-Service for DAOs, as we see more DAOs come into existence, projects will be created to offer different XaaS for recurring problems that DAOs run into.

DAOs becoming modular units: As coordination and governance tooling advances, DAOs will interact and contract with other DAOs for economic exchange. Meanwhile, within the DAOs themselves, smaller units of subDAOs will emerge, as pioneered by Yearn 2.0 governance. We expect smaller autonomous business units will increase and execute atop tools such as Orca Protocol and Squads.

Meme DAOs and nonprofits

The number of Meme DAOs will likely explode. ConstitutionDAO, channeling a weird combination of anti-establishment fervor and Nicholas Cage National Treasure memes, managed to get $40m+ worth of contributions to purchase one of the few copies of the U.S. Constitution. With the release of Dune, Spice DAO emerged to purchase and preserve the manuscript for Jodorowsky’s unfinished Dune epic. Even the performance of meme coins like DOGE and SHIB at one point demonstrated how strong memes could drive prices.

As information flow becomes more unrestricted through social media and human interaction becomes disintermediated, the potential for meme mind viruses increases exponentially. The mind-viruses that require some form of trust-minimized coordination to achieve a goal seem a natural fit to organize like DAOs. The biggest beneficiaries of this wave of Meme DAOs will be the tools and platforms that make creating and managing a DAO easier, allowing founding members and contributors to focus more of their efforts on the ultimate mission rather than inefficient operational tasks. DAO tooling will be able to capture some of the value-driven to meme DAOs, just like CEX’s gained value through trading fees on DOGE and SHIB.

Hope you had a fantastic reading

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DigiEx by Shondy Sainthea

I'm Shondy Sainthea and I welcome anyone to come learn with me about Blockchain,Digital assets and technology.(educational purposes only)