DAOs, what are they and why should you care
And a first look at Tokeners DAO and "The Hitchhikers"
by Jesus Fernandez of beToken Capital Research
This is one of the most complex posts that can be written, a priori it seems simple, an autonomous and decentralized organization, but the implications of DAOs are enormous: from taking democracy to the extreme by implementing new digital nations to an effective way of organizing companies or resist censorship.
Let's start from the beginning...
D.A.O.
Decentralized: online, interconnected, reliable and uncensored
Autonomous: self-governed
Organization: coordination and collaboration around a common goal
Almost nothing.
No, Bitcoin it is not a DAO, it is a decentralized and autonomous protocol, but it is not an organization. Yes, Ethereum yes it is a DAO and in general almost all its competitors and the DApps that make up DeFi are too.
Let's go step by step breaking down the acronyms:
“D”
Decentralized is the greatest revolution of this type of organization, yes... Internet is decentralized, it is its great advantage, there is not a main node but "a cloud" of interconnected nodes (yes, the word "cloud" is important today and is on everyone's lips) and in fact web 1.0 was born decentralized, based on the www protocol that allowed users to navigate from one website to another through a system of links. In that golden age of blogs, it was easy to open your own website and start writing or selling.
Then came web 2.0. generated around giants like Google and social networks: Facebook, Twitter... and blogs were also centralized, either you were on a platform or no one could find you anymore... Electronic commerce was also swept away by the giants, once Amazon arrived in your country , everything was over, competing became an impossible mission. They centralized the Internet, which had been born decentralized.
The problem is that we have lost privacy (they sell our data without hesitation, constantly crossing information), that we have lost freedom..., during web 1.0 on your blog you could say what you wanted (for better or for worse) and people could read you or not. In web 2.0 the platforms decide for you, Google decides what you want to search for, Facebook or Twitter decide what is true or what is not, who has to read what you write and who does not (even your own followers may not receive your publications )…, that's called censorship, and yes, we've gotten used to it little by little, but we're already at limits that are difficult to bear.
And suddenly… Blockchain arrived, and everything has started to change again.
Blockchain enables “decentralized trust” and yes, it blends seamlessly with the Internet, with the TCP/IP protocol radically changing the way we communicate, learn, and do business. But Blockchain is the layer that has always been missing, it is the layer that allows two people who do not know each other to carry out a transaction (such as sending digital money to each other, or selling a digital asset, or simply organizing under a common way of doing things) and that they are sure that said transaction has been carried out, cannot be modified and is verifiable.
And this is where the so-called Web 3.0 appears (beware, it can go well or go wrong, it is still in its earliest infancy)... an Internet where one returns to the origins, an Internet that cannot be censored, nor stop in a simple way, where the users themselves are the ones who can make their decisions, but… we are getting ahead of ourselves.
“A”
Autonomous, that does not depend on anyone in particular, that can fend for itself and is self-governed.
Joining the “A” to the “D” is as the English would say “mind blowing”, your head explodes. Decentralized and Autonomous… For the first time in the history of humanity we can launch a smart contract that allows a group of people, who can be anywhere in the world, to do something (we'll see what later) under rules that everyone can agree on in a transparent and secure manner…, and above all, without needing the blessing of governments, notaries, commercial registries, big technology companies,…, without needing anyone except the big Telcos, which without communication networks all this “falls” (here come the gold fundamentalists saying that… “1 gram of gold in hand is worth hundreds of bitcoins flying in the cloud”).
“O”
Organization, none of the above makes sense without the “O”, without a purpose (well, nothing except Bitcoin)… an organization can be anything that follows predefined rules, it can be a company, it can be a cultural association, it can be the Italian mafia, it could be a town, a country… or it could be Ethereum, which apart from a DAO nobody really knows what it is or where it is.
It must be said that, precisely because a DAO does not depend on anyone, it is more important than ever that Governance is exquisite. It has to have clear rules, very well defined processes and a way for all members to communicate and vote in a simple way (it's easier to write than to make it happen). And all this has to be reflected in the smart contract that defines it.
A significant change, the key to enter to participate in a DAO is a token (yes, a crypto)… said token can be fungible or not (there are already DAOs that are organized around NFTs, without going any further the Cryptopunks or the Bored APEs)… and a token, even if it is hosted on a Blockchain, has to be accessible in some way and its ownership verifiable by the website in which the governance is carried out (eg Discord for communication, Snapshot for voting). Indeed, crypto-wallets are absolutely necessary to access DAOs, for Web 3.0.
Furthermore, those DAO tokens can become very valuable and can even be used for commercial transactions with them, yes, they are keys and they are money!
A DAO is a decentralized infrastructure, which allows the self-governance of people with a common goal and in a reliable way.
Some use cases
Obviously the first one is called Ethereum.
Ethereum is an organization with the original mission of Decentralizing Finance so that the interests of politicians, bankers, etc… would not influence, with the particularity that not even the founders could do what they wanted (no matter how much they influence with their opinions) . It is also a DAO that allows thousands of other DAOs to use its Blockchain to create their own smart contracts, their own tokens...
There are currently hundreds of DAOs with assets that far exceed 10 billion dollars, there are around "operating systems", around DeFi protocols, investment, Grants, Solidarity, Collectors, Social, Media, the Possibilities are endless, but let's take a closer look at some uses:
Programmers' collectives
Obviously, they were the first to realize it, they had been using free software for years (Github is one of the key websites) to compete with the big firms like Oracle (and good news, they have won the battle). Some groups:
BadgerDAO is a community dedicated to bringing Bitcoin to DeFi.
Gitcoin is an ecosystem of developers and contributors collaborating as DAOs to build the decentralized web.
Workers' groups
Yes, the old-fashioned unions are increasingly alienated from the workers, heavily subsidized by governments and run in an increasingly undemocratic way. Some have noticed and are beginning to coordinate with DAOs, they are not called unions, they recover their original name... they are "guilds" in English. For example, the Raid Guild and dOrg are invoking this age-old tradition of worker collectives in their Web3-focused design and development agencies.
Artist collectives
If Blockchain has had an impact on something, it has been the art world, perhaps the first to be interested given the complexity of buying and, above all, selling a work of art. We have a good example with KnownOrigin, an NFT marketplace that stems from the concept tested in 2019 by Osaka DAO.
Social media
I have not an iota of doubt that this is going to be big, very big. In this turbulent time where dialogue has been eliminated through Big Tech censorship, in this time where everything moves through social networks but where the main beneficiaries are large corporations, Web 3.0 social networks are beginning to appear, to show, Friends with Benefits, although it borders on artist collectives. There is even talk of Social Tokens as opposed to Security Tokens or Governance Tokens.
A great example of all this is the Mirror blogging platform, which is trying to compete with Medium by fully integrating with Web 3.0.
Metaverse and Games
DAOs in games and in the Metaverse are a great way to not only leave the core rules and evolution of the game in the hands of the community, but also some of its monetization and value. It is unstoppable, virtual worlds are here to stay and now people can not only play and escape, but monetize their time and even have digital possessions. Some epic examples: Star Atlas, Decentraland, Bloktopia, we could go on and on…
Fan clubs
DAOs have entered sport strongly and we will surely see them in other areas where fans are key, such as music or audiovisuals.
From Fan Tokens that allow you to vote on decisions such as which shirt the club will wear, who will be the second captain or even the name of the new stadium, to NFTs of clubs with historical collections or privileged access to the VIP stands. The imagination is the limit. Do not miss everything that Binance does in this regard in this link.
Investment
Decentralized investment clubs such as Metacartel or The LAO or the recently created FiLAO are emerging, where Investment Training students jointly invest in a private and tokenized investment club.
Other very interesting projects of "decentralized digital asset managers" are also emerging to fully exploit the possibilities offered by DeFi, as shown by Tokemak, a decentralized market making protocol.
DeFi
Literally 99% of DeFi services have their DAO or are in the process of having it. We are not going to name them, we would be writing for weeks, here is a sample: Sushiswap.
The important thing is to know that DAOs are the key so that decentralized finance literally cannot be stopped, and they are the worst nightmare of regulators… Where are they? Who is responsible? Who can I sue? How can I garnish anyone's money? How can I stop them? How can I collect taxes?
The LAOs and Wyoming
The LAO (Limited Liability Autonomous Organization) are a great revolution and we recognize that the State of Wyoming in the USA is a pioneer in its regulation.
What is an LAO? It is a limited liability company organized and governed as a DAO, in fact in Wyoming the Limited Operating Agreement is allowed to be encoded in a smart contract and hosted on a Blockchain such as Ethereum. The partners instead of having shares, have the issued tokens.
An LAO should not be confused with a DAO, in general it is configured as a private DAO and restrictions are usually placed on the issuance and sale of tokens. However, they share the importance of governance and democracy, since decisions are made among all members. It is true that in almost all companies, whether limited or anonymous, the board of partners makes the decisions... the difference is that thanks to Blockchain and the technologies that web 3.0 is bringing, now everything is more transparent, more automatable, more reliable and much simpler.
LAOs may become the future of business organization.
Politics
No, we have not yet seen it in political parties, which is an example of the low level of our leaders and the lack of interest in improving the internal democracy of the parties.
A DAO has all the ingredients for a political party to flourish: raising money is simple and transparent (doing an ICO is enough); decisions can be made among all party members in a simple way, following pre-defined rules agreed upon by all, in a verifiable way and especially online; the rules of the game can be established, programmed and stored in a Blockchain so that no one can alter or modify them; …
Literally the DAOs were born to promote Democracy.
We can show you a case of political DAO: Estonia DAO a DAO to group all the e-residents of Estonia (more than 60,000); We will be attentive to see how it works for them.
The tribes
We have left it for the end because it seems to us of vital importance. DAOs that bring together people with common interests.
We define a tribe as a group of people who share a hobby, a common characteristic, the same belief or simply the same goal.
The most important thing about these DAOs is to have their Vision and Mission very well defined.
For example: An eToro article in 2021 found that women only make up 20% of users on their platform and other societies report similarly low female participation. To help address this inequality, Zebpay has launched a female-led DAO. New members are admitted by majority consent and any vote must achieve a 60% consensus to pass.
Another example that we like a lot is Bankless DAO, a DAO whose objective is clear, that we can live without banks, that we gain financial freedom thanks to cryptos. Right now Bankless is one of the most powerful crypto tribes there is, we could say that it is a small nation in the "Ether" of the Cryptoverse.
Other well-known tribes are the Cryptopunks or the Bored APEs, which, although they do not have the complexity of Bankless, do have something in common, their partners have an NFT that gives them access to a private "club".
Later in this post we will show you DAO Tokens, our tribe idea around beToken my Friend, which we think will revolutionize the Cryptoverse.
The weak point of DAOs, governance
Imagine for a moment that in a DAO with hundreds of thousands of members absolutely all decisions had to be voted on. We are faced with several problems:
Not everyone votes, or even participates on a day-to-day basis, it is absolutely impossible to ask all users for that level of involvement.
If not all members participate equally, there is a risk that the community itself will begin to disintegrate “why should I dedicate time and effort to the DAO if the one next door does nothing”.
The coordinating effort of so many decisions is too great.
There is a risk of being "too transparent", endangering the execution of certain actions that may require secrecy before being executed. This is a delicate point and one that requires balance.
The crypto community is already working on solutions, some traditional and others terribly new, below we will explain some of them.
Guilds & representative council
The guilds, guilds although in this context they are rather sub-DAOs, they are a way of dividing the work. Within the main DAO, working groups are made that bring together members with a series of specific skills, for example the Marketing Guild, the Promotion Guild, the Analysis Guild... Each guild can in turn organize itself and vote as an independent DAO, although its results are accepted by the DAO at large.
An interesting tool that helps organize DAOs is Sobol, which offers interactive maps of how DAOs are organized.
If the tasks are more complex and require physical representation, the DAOs can choose their representatives for a specific period of time. Typical cases are treasurers; a representative who can act with the power of signature of the DAO (fundamental in the case of LAOs) but who acts under the directives of the DAO; or a group of representatives with the capacity and budget to carry out specific day-to-day tasks.
Lazy vote
It is becoming fashionable in the DAOs and although it has its danger because specific members can use it in their favor, it is a very interesting way to speed up the voting process and avoid blockages, it is based on "not voting represents agreeing with what is being voted on” and in giving a limited period of time, for example 3 days, to end the voting.
Governancemining
The idea is simple and comes to us by analogy with DeFi and its Liquidity Mining: "I leave you liquidity and you give me tokens in exchange". Here it would be translated as "I dedicate my time to you and you give me tokens in exchange".
Why is this concept important?
Because you have to reward the members of a DAO who are actually actively contributing to it. Perhaps DAOs based on Protocols (highly automated) do not require a very active participation of their members (in fact they reward more the contribution of liquidity than participation) but other types of more participatory DAOs do depend on the activity of their members. So it is fair that those who contribute the most value are rewarded.
It is complex to implement, because you have to have mechanisms where you can identify both the generation of value and the dedication of time by members, but there are more and more tools available for it (keep reading and you will see a few).
Governance mining is possibly the most effective way to get DAOs to reach their full potential, rewarding not only the financial capacity of its members, but also their talent and involvement.
The DAO dilemma
The DAOs can be the new companies or even the new countries (without borders) but of course they need a Treasury to maintain themselves.
However, many DAOs have their own Token in their treasury, which has certain risks that may affect its future viability.
The dilemma that DAOs face is that they need to diversify their treasuries away from their native concentration of tokens; however, they cannot simply sell their native tokens on the open market without moving the market or causing negative perception by market participants or members of their community.
In part, DAOs are powerful because their members, their community, are at the same time their owners (note, that is not always the case).
The key for a healthy DAO is that its governance is aligned with the interests of its members and with the economy of its token (the famous Tokenomics have to incentivize what is necessary while preserving the value of the Token).
The remuneration of contributors with native tokens, especially in the genesis of the DAO, allows members to gradually accumulate capital and then participate in the future success of the DAO. This remuneration structure reflects the successful implementation of compensation schemes in traditional startups.
However, native tokens are exposed to general market volatilities and are not immune to strong sell-offs during bear markets. It is in such circumstances that the day-to-day operations and functionality of a DAO can be disrupted due to a lack of cash reserves for its regular funding.
Part of the Treasury must be diversified in low-risk payment assets such as stable currencies (stablecoins such as USDT, or USDC) to be able to pay for daily operations and even continue to build their network and develop during episodes of market stress.
However, selling native tokens against stablecoin is easier said than done: a sale of native tokens by the DAO itself can generate a negative perception in the market and among members of the community, even if said sale is in the best long-term interest of the DAO.
This leads us to the fact that the Treasury of a DAO must necessarily be well diversified, possibly in a similar way to a Family Office, and/or have a way of obtaining liquidity in stable currency on a recurring basis thanks to its operations. . In addition, it is necessary that there are mechanisms in its Tokenomics so as not to disturb the market with strategies such as vesting investors or founders and that it has a good liquidity mechanism to guarantee efficient markets, in this line the innovation of the so-called DeFi 2.0 has moved.
The big question to answer is, how much treasury should be in cash, how much in the native token and how much in other liquid assets such as Bitcoin, Ethereum or even other cryptos that are in the process of gaining value?
The key to the treasury of a DAO could be a strategy similar to that of a Family Office, in which elements of high risk (but with high return potential) are combined with elements of very low risk, with elements of high risk. intermediate.
An example could be, in addition to keeping the Token itself:
High risk
Art —> Blue chip NFTs (Cryptopunks, Gen Art, …).
Real Estate —> plots in Decentraland or ships in Star Atlas.
Small CAP equity —> Emerging crypto tokens, such as Celo or Polkadot.
Angel investing —> enter the seed phase in crypto projects with high potential.
Medium risk
Fixed term —> Blue chip crypto farming or liquidity mining, for example, at Uniswap
Active Stockpicking —> Blue chip crypto, for example invest in Ethereum
Low risk
Fiat money or stable currency of day-to-day operations
Bonuses —> Stablecoin Farming
It is clear that not all DAOs can follow these strategies, which in general require active management and far from the necessary consensus in DAOs, although there are more and more DAOs that move in this line and have a diversified Treasury that allows greater robustness in the future.
DAO tools
Here are some tools to manage DAOs:
Discord - community tool, almost all gaming and crypto communities use this service.
Telegram - messaging, voice and groups in real time, widely used in the crypto world and as a source of alternative news and communication.
Gnosis Safe - Multi-signature wallets generally used to manage DAO treasury.
Snapshot - Off-chain voting platform for easy governance based on having tokens in your wallet.
Discourse - Forum commonly used to discuss governance proposals.
CollabLand - Bots providing token-based and tipping access to group chats.
Coordinape - Gamified coordination tool to determine which members deserve tokens for their work in the community.
Parcel - Treasury Management to send and manage payments.
SafeSnap -Governance and treasury tool.
JuiceBox - Crowdfunding tool.
SourceCred - Tool to track participation in the community and give prizes to the most active members.
Mirror - Blog web 3.0.
Tally - Governance dashboard to manage the on-chain voting history of different protocols.
Messari Governor - Aggregator of governance actions in different protocols.
Sybil - Creation and monitoring of on-chain governance delegation.
RabbitHole - Token rewards for completing specific on-chain tasks.
The number of applications to manage DAOs continues to grow and grow…, with the correct combination of them, almost everything is already possible.
Not bad, right?
Tokeners DAO
The crypto world goes very fast and expands at breakneck speed... Exploring it is not easy and from there came beToken my Friend, the Hitchhiker's Guide to the Cryptoverse, a daily newsletter that combines information curation, with education for Beginners and access to First class research.
However, we have seen another need, the need for a new Tribe in the Cryptoverse, a community with a clear vision:
Promote the disruption that Blockchain and the Cryptoverse represent, their advantages and their possibilities, so that people, politicians and regulators can get the most out of Economy 3.0.
Yes, we have said it well, Economy 1.0 was the one that existed before Nixon left the gold standard, an economy where money was backed by assets; then we entered Economy 2.0 that we are in now, a debt-based economy where both central banks (ie a centralized economy where one entity, the FED, makes almost all decisions) and normal banks create money (debt) out of thin air ("out of thin air" as the English say) and that has led us to a global debt of more than 350% of what we produce and where people's money (including the shares of companies they buy) are in the hands of third parties (in general, yes, from banks); and now, with Bitcoin and Ethereum, as spearheads, we enter Economy 3.0. a decentralized economy, which no longer allows uncontrollable debt generation, where all transactions are reliable and transparent, and above all, where people regain direct control over their finances and assets.
The Tribe is called Tokeners DAO.
And our mission is threefold:
Educate in the crypto world all the people (millions) who are yet to enter.
Generate a Decentralized Community where Experts and Advanced and Rookies can help each other, discussing strategies, learning from each other, generating new business ideas.
Organize a Lobby towards politicians and authorities so that they know, allow and benefit from the disruption that the Cryptoverse represents.
And we have the necessary tools:
Learn-to-Earn, we will promote that people who subscribe to beToken my Friend or who decide to educate themselves in the crypto world receive tokens via our Grants.
Governance Mining, we are going to promote those who add the most value to Tokeners DAO, both internally and externally. Our vision is to promote the Cryptoverse and for this we need to know what happens in it, and many times even have a Voice in the different Metaverses and Protocols, so that if an Expert wants to be our voice, it is fair that they earn tokens.
A well diversified Treasury. We don't want to be sitting on piles of our tokens, our Tokenomics will be well balanced so that there is liquidity and the token holds its value. But the goal of the Treasury is diversification; Supported by the Experts of the community, we will invest part of the treasury in the best assets (cryptos and NFTs) of the Cryptoverse.
In the coming weeks we will give you details about the steps we are taking to make Tokeners DAO a reality: we will share the White Paper; We will tell you about Tokenomics in detail; We will tell you how to be on the whitelist and be among the first to get the token; how to get an airdrop (hint: paying subscribers of beToken my Friend will be sure of it) and last but not least, we will tell you about an exclusive club around a collection of NFTs that will make history: “The Hitchhikers of the Cryptoverse”, the germ of Tokeners DAO.
Do not hesitate, subscribe and stay up to date with everything that happens in the Cryptoverse and the evolution of Tokeners DAO 👇👇👇👇👇
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beToken Capital Research Lab is the promoter of beToken my Friend and part of the Genesis team of Tokeners DAO.
beToken Capital is made up of a team of experts in venture capital, financial markets and cryptocurrencies with the aim of contributing to the democratization of finance by promoting people's financial education.
It provides Institution-grade Research services in Crypto (some of them we share on beToken my Friend) and also invests early in the companies and protocols that are going to revolutionize Finance and Web 3.0.