author:Linda Xie

author:

Proofreading: Luckycat

What are DAOs?

What are DAOs?

A Decentralized Autonomous Organization (DAO) is an organization that comes together for a mission and collaborates by enforcing a set of rules on the blockchain.

One of the greatest advantages of DAOs is that they are more transparent than traditional corporations, as all actions and funds in a DAO are visible to all members. This greatly reduces the risk of corruption and censorship. Public companies are required to provide independently audited financial statements, but shareholders can only see the organization's financials at one point in time at a time. The DAO's balance sheet is on the public blockchain, which is open and transparent at all times, even when it is subdivided into each transaction.

Generally speaking, DAO is more convenient than traditional companies in terms of global collaboration, and the threshold for participation is lower. Due to its transparency and low participation threshold, even when DAO members disagree with certain rules or oppose certain actions, the cost of personnel replacement is lower. DAOs with the same goal may compete for talents, so as to have the motivation to make the organization more transparent, while not squeezing the rent in the organization too much, so as to attract the best talents. At the same time, in order to meet the needs of members, DAO also needs to continue to develop.

DAO vs Corporation. Source: Aragon

The goal of this article is not to introduce every DAO in the encryption field in detail, but to give you an overview and tell you what a DAO is from a higher level. Why are DAOs so interesting? And show you some potential usage scenarios.

The case for DAOsThe DAOPerhaps the most well-known and controversial DAO to date is the one launched in April 2016, it is a decentralized venture capital fund. Members contribute ETH and getDAO tokens

in return. Members can use the token to vote on which projects funds should be allocated to. The DAO raised a total of 150 million U.S. dollars in ETH, but was stolen by hackers with 60 million U.S. dollars. But what is interesting is that although The DAO has disappeared now, until now, everyone can still see all the transaction records that have occurred, because it is on the public blockchain, and these records will never disappear. Unfortunately, the hack temporarily made many people skeptical of the term DAO. But DAOs are an extremely powerful form of organization, and it won’t be long before we see DAOs revived in the crypto world.MakerDAOIf an encryption project itself is governed in a decentralized manner, that is, token holders can vote on the direction of the project and various parameter settings, rather than only being decided by a centralized team, then the project will also Can be seen as a DAO. For example, building a decentralized stablecoin

Token holders can manage the system and vote on parameters such as stability fees.

Example of MakerDAO Executing a ProposalCurve DAOAnother example is building an Automated Market Maker (AMM)

Curve DAO

Stakeholders can directly control the assets of DAO through tokens. These stakeholders can be anonymous and can be located anywhere in the world. These anonymous stakeholders can collectively distribute the DAO's assets for any matter, including staff appointments. That's what's happening now. DAOs are made up of hundreds of known or anonymous members, and are appointed rationally based only on community prestige. For example, the Empty Set Dollar (ESD) DAO paid community manager Lewi $180,000 in salary, which he mentioned was the highest paid position of his career. For exampleTezosandDecredand

And other blockchains also have such systems to reward contributors for their work.

Moloch DAOWe see many DAOs created for investment or sponsorship purposes.

MetaCartel Venturesis a DAO that provides stipend rewards for promoting the development of the Ethereum ecosystem. The DAO also allows members to withdraw funds through "angry withdrawal" if they disagree with the overall decision of the DAO. The MolochDAO contract has been forked many times to create other DAOs.

The LAOIt is a profit-oriented fund that invests in dapps. They are early investors in many excellent crypto projects, such as Zapper and Rai. Members include experienced builders in the crypto community.

is another DAO made up of ethereum enthusiasts who were also early investors in projects such as Boardroom and Aavegotchi.

Both MetaCartel Ventures and The LAO are good examples. They prove that DAO has a strong ability and means to acquire projects (Deal flow) in the encrypted ecosystem, which is as strong as many investment funds, and sometimes even performs better. Because the project founders also want to cooperate with DAO members, because DAO itself reflects the spirit of encryption.NFTWe have also seen the emergence of some DAOs to create more special investment opportunities, such as owningYield Guild GamesArtwork and Virtual Game Items.

FlamingoDAOIt is a game organization with the goal of "earning while playing". It turns players into investors by purchasing NFT in games. Such games include Axie Infinity, League of Kingdoms and The Sandbox.

is a profitable, NFT-focused DAO. They have recently been actively investing in NFTs and created news that they spent $762,000 in ETH to buy a pair of rare CryptoPunk NFTs.Raid GuildThere are also some DAOs organized for work, such asMetaFactoryFocus on fashion and culture, while selling the products they create.

DAO tools

DAO tools

There are currently a number of tools on the market for creating and coordinating DAOs, such as Aragon, DAOStack, DAOhaus, Llama, and MyCo, so members don't have to build everything from scratch.

Example of creating a DAO in DAOhaus

There are also tools like Snapshot, dedicated to managing proposals voted on by token holders, which make it easy to view relevant details and voting status of a proposal.

Voting page for a Yearn.finance proposal on Snapshot

There are even DAO projects where you can buy and sell governance votes, such as Automata. This concept may be controversial as it could lead to those with large amounts of capital being able to control votes, but I think the creation of such a lending system will be inevitable, and it will only make the project governance system more stable.Deep DAOIn terms of metrics, there also exist decentralized autonomous organizations for tracking the DAO ecosystem, such as

Some key DAO metrics on Deep DAO

future use case

future use case

DAOs have many interesting use cases, and we are only at the very beginning of the design field. With DAOs, we will be able to quickly test the governance system to quickly understand what works and what doesn't. For example, there might be a DAO that includes members who place bets in a prediction market, and then uses the outcome of the prediction market to decide on an action.

We will also see Meta-governance when DAOs themselves serve many different protocols and receive governance tokens in return. DAOs will start voting and acting as representatives for other DAOs.

Another interesting use case for DAOs is to have collective NFT artworks, where each member can vote on different properties of a piece of art and change the overall artwork based on the individual properties.

potential problems

potential problemsDAOs are powerful ways to organize, but they can also be potentially problematic, and they're not an ideal system for everything. While DAOs can replace aspects of legal contracts with code and save significant operational overhead, in some cases there is no legal protection other than the rules outlined by the smart contracts that facilitate the DAO. This can create problems if control over DAOs becomes centralized, or is vaguely defined, although some DAOs may also form legal entities behind the DAO itself. The Wyoming Senate Committee also passed aWyoming DAO Act

, the bill would help create legally recognized DAOs.

Depending on how the DAO is set up, it may be more difficult for a DAO to coordinate and move quickly compared to a centralized leadership system like a CEO who makes quick decisions when necessary. However, DAO can also solve these problems, such as setting a decision-making quorum to reduce the length of decision-making, and setting corresponding requirements for DAO members to make decisions, and so on. This means that at the beginning when many decisions are to be made, there may be more centralization among certain members, and then the DAO will gradually decentralize over time, which is called "progressive". decentralization".

Another issue is that by opening up membership so much, there is a risk of lower quality members and more noise within the DAO, but these can be addressed through a DAO screening process or minimum token holdings to at least ensure the interests of the participants Relevant (skin in the game), and incentivize the DAO to achieve success.

resource

resource

《If you want to know more about DAO, you can read Vitalik Buterin's article》——Vitalik Buterin

Incomplete terminology guide for DAO, DAC, DA, etc.

If you want to hear about interesting ideas or projects about The DAO, you can also follow @ljxie on Twitter.

Thanks to Will Warren, Jordan Clifford and Brian Flynn for reviewing this article.