What is a DAO? (In 2022)

A deep dive into Decentralized Autonomous Organizations (DAOs), their governance structure, as well as some DAO examples.

by Steven Tey

Decentralized Autonomous Organizations, or DAOs for short, are self-governing organizations that enable groups of like-minded individuals to work towards a mutual goal.

Think subreddits, but:

  • Instead of clicking "Join" to join a subreddit, you have to own a DAO's token to be a part of it.
  • Instead of having a moderator to make sure all the content is appropriate, a DAO self-governs through a pre-determined set of principles/rules.
  • Instead of upvoting/downvoting posts, each DAO member has voting rights that allow them to make governance decisions for the DAO. These voting rights are proportionate to the number of the DAO's tokens that they own.
  • Instead of transacting in Reddit Gold, which is controlled by Reddit and can be shut down at any time, DAOs transact via the Ethereum blockchain, which is decentralized and censorship-resistant.

In other words, DAOs are a safe and efficient way for complete strangers to work together over the internet without having to worry that one of them is going to go rogue and run away with the money.

There is no hierarchy, red tape, or any of the bureaucratic BS that plague traditional organizations. Everything is done on-chain, which provides complete transparency and reduces the chances of corruption.

Governance Structure in DAOs

Unlike traditional organizations, where hierarchy matters, DAOs generally have a flat structure.

When a new idea is proposed in traditional organizations, it usually requires approval by someone from the "managerial" or "executive" layers before it can be implemented.

In DAOs:

  • Proposed ideas are voted on by everyone in the DAO in a fully-transparent manner using tools like Snapshot, which is powered by IFPS + the Ethereum blockchain.
  • Any discussions prior to voting take place on platforms like Discourse (e.g. Uniswap's Governance Discourse), which is fully open-source and customizable.
  • For a full-suite DAO governance & management experience, DAOs also use tools like Boardroom, which gives a 30,000 foot view of their DAO's operations.

This method of governance is inspired by the concept of "holocracy", which encourages autonomy and ownership over bureaucracy and hierarchy.

Types of DAOs

There are several types of DAOs in today's market:

  • Protocol DAOs
  • Service DAOs
  • Product DAOs
  • Special Purpose DAOs
  • Social DAOs
  • Collector DAOs
  • Investment DAOs
  • Grants DAO
  • Education DAOs
  • Media DAOs

Protocol DAOs

Think money, but programmable. Protocol DAOs introduced the concept of transferrable ERC20 tokens that power all sorts of transactions in the secondary market. DAO members are able to vote on proposals to change the underlying mechanisms of the protocol itself.

Uniswap, for instance, has a list of proposals on Snapshot for token holders to vote and provide feedback on. Once a consensus has been reached, the proposal is then accepted and implemented.

Service DAOs

The world needs talent, now more than ever. Service DAOs are talent aggregators, where professionals of the same field come together and form an on-chain alliance to provide their services as a collective whole.

From software development (Developer DAO) to design (Vector DAO) to legal services (Lex DAO), service DAOs provide a way for companies to hire talent in web3.

Product DAOs

Similar to service DAOs, product DAOs are individuals united to build products/projects to achieve a certain goal. Revenue generated by these products is then funneled back into a treasury governed by the DAO's token holders.

Some notable examples:

  • Bankless DAO: building products like DAO Dash and Bounty Boardto help DAOs better manage their communities and hire better talent.
  • Index Coop: built products like the Defi Pulse Index, which gives investors a safer, capitalization-weighted index to invest in the DeFi market.
  • DAO Central: this very site itself is built to help DAO contributors discover DAOs that align with their personal values & help DAOs hire the best talent to join their communities.

Special Purpose DAOs

Imagine raising $50M in 3 days from thousands to purchase an original copy of the U.S. constitution. Or raising $8M to support Ukrainian soliders fighting the Russian army. Or raising $6M via an NFT auction to free Ross Ulbricht, the creator of Silk Road.

Special Purpose DAOs are very effective crowdfunding vehicles that also issue governance tokens to their contributors:

Social DAOs

Humans are social animals. We naturally gravitate toward like-minded people and form social groups around a common topic.

Social DAOs exist to give these groups of people a space to interact and have discussions – similar to good ol' Reddit. For members of social DAOs, financial returns are not as important as community-exclusive perks such as early access to latest releases, member-only meetups, etc.

Some examples include – Friends With Benefits, Krause House DAO, and Links DAO.

Collector DAOs

NFTs – the buzzword of 2021.

All around the world, people were marveling at the meteoric rise in NFT prices. However, this led to blue chip NFTs like Bored Apes and CryptoPunks being too far out of the commoner's reach.

To overcome this, folks started pooling together resources to buy NFTs as a DAO. Flamingo DAO, a fund that amassed 7,920 ETH & $1B worth of NFTs to date, was one of the first collector DAOs that made their name buy purchasing CryptoPunk #2890 for 605 ETH back in January 2021. In fact, PartyBid was built with that very idea in mind – to allow people like you and me purchase a fractional share of a blue chip NFT without having to sell a kidney.

Investment DAOs

Investment DAOs allow users to pool together large sums of money and make investments in projects that align with their manifesto (e.g.: Klima DAO's manifesto).

These DAOs are usually mission-driven and have a large following behind them. Some prominent examples include the climate-change driven Klima DAO, one of the world’s largest token governed treasuries Bit DAO and Orange DAO – a group of YC alumni investing in web3.

Grants DAO

Similar to investment DAOs, grants DAOs are one of the earliest real-world application for DAOs.

These DAOs aggregate funds to provide non-profit grants focused on creation and impact. Some examples include Seed Club that builds and invests in communities like Forefront, Cabin DAO, and Party DAO, MetaCartel that invests in DApps & consumer products in the crypto space, and Gitcoin, a DAO sustaining web3 projects with quadratic funding.

Education DAOs

These are DAOs that leverage EdTech and web3's incentive structure to provide quality education at a fraction of the cost to students.

From learn-to-earn models pioneered by Rabbithole, to web3 intro courses produced by Odyssey, to tools like DAO Masters that empowers you with the tools to start your own DAO – the education DAO space is making waves by incubating the next generation of web3 builders.

Media DAOs

In a world where ad-backed media is so dominant, media DAOs put the power of content creation back into the hands of the very consumers of the content itself.

One great example is Madrealities, the first interactive dating show where the community decides what happens (and who happens). Holders of their genesis membership NFT passes were able to vote on their cast choices, interact in real-time with the show, and attend exclusive in-person events.

DAOs = Future of Work

DAOs have grown a lot in popularity in recent years, thanks to the rise of Web3 and the rising desire for operational transparency and autonomy in today's workforce.

While there are still certain limitations when it comes to running a DAO (e.g. over-abundance in autonomy leading to a never-ending decision-making process), DAOs are still in their infant stage.

As we see more innovation in the DAO tooling space (e.g. Zenefits for DAOs), DAOs will continue to evolve and mature. And who knows, maybe one day, instead of registering an LLC/C Corp in Delaware, we'll be registering a DAO on the Ethereum blockchain instead.

Further Reading

Below is a growing list of resources to learn more about DAOs:

The DAO Ecosystem in 2022 🧵 Who did we miss? 👀
The DAO Ecosystem in 2022 🧵

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