Original source: Nansen

Original source: Nansen

Original compilation: EnlightDAO

If you're reading this, you're here very, very early.We believe that the 169 DAOs in existence todayfirst level title

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What are DAOs?

What are DAOs?

DAO stands for Decentralized Organization and refers to a crypto-native organization formed around a common purpose; this common purpose usually (but not always) involves funding and investing in accordance with a specific goal/mission.The use cases for Dao are endless and still evolving. they can be pureSocial platforms, such as token-basedDiscord server(For example, Friends With Benefits that received investment from a16z), it can also be pureInvestment Driven Platform

, such as MetaCartel Ventures.

PleasrDAO is another interesting use case; it's a hybrid of social and art collecting, with a mission to buy culturally significant digital art.

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Explanation of DAO Governance Model

The easiest way to explain DAO is to start with the acronym. First, DAOs are autonomous, meaning they are organizations governed by smart contracts.

These smart contracts are self-executing lines of code, agreed upon by the DAO's early developers, and stored on the blockchain. They enable organizations to keep running on their own when it comes to hiring, assigning rewards, and bureaucracy or other important issues often encountered in organizations.

Second, unlike traditional organizations, in a DAO decisions are made collectively, not by the CEO or senior management.In practice (which may vary from DAO to DAO), members who own one or a predetermined number of DAO native tokensChanges to smart contracts can be submitted and voted on, projects can be initiated, investment ideas proposed, and more

, thus allowing the DAO to develop and grow. It should be noted that different DAOs have different access modes, economic rights and governance rights enjoyed by members.

DAO membership is represented by holding the DAO's native tokens. Different DAOs require different amounts of tokens. You can buy tokens on the day of launch, after launch, or make a contribution to get these tokens (different DAOs may have differences).While normally DAOs are open to all,But small-scale DAOs require higher authorization than large-scale contract DAOs.

In this case, simply owning tokens is not enough, a written application as well as an invitation from other members is required.

After joining a DAO, owning the DAO's native token can provide different benefits, from voting rights to getting a share of the profits generated by the organization. Due to the token's hard supply cap, members can benefit from the overall appreciation of the token when the demand for the token increases.Generally speaking, in large-scale contract DAOs of financial service platforms (such as multi-chain platforms like BitDAO or lending platforms like Compound),Token ownership unlocks voting rights on compensation and distribution issues.

Most members are rewarded for staking tokens and providing liquidity to the protocol.

In some other cases of large DAOs, governance tokens provide further governance authority but have no intrinsic monetary value. This is the case, for example, with AaveGotchi’s native token, GHST.In smaller DAOs (500 members and below),Membership usually involves working for a DAO.

In addition to voting rights, members make contributions in exchange for tokens, token investment income, pre-determined vault shares, or cryptocurrencies such as Ether, Dai, and Cash.This is especially true for investment DAOs (e.g. The LAO, MetaCartel Ventures) and collector DAOs (e.g. PleasrDAO). Some investment DAOs, such as MetaCartel Ventures, require that if members want to stay in the DAO, they must

Ongoing participation in administrative tasks, ex-ante surveys, proposals and investment votes.Once you become a member, you also get voting rights, but voting rights vary between DAOs.The minimum requirement for voting could be holding one of the DAO's native tokens, holding a predetermined amount of tokens, or a threshold of the total amount of tokens held

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Why The DAO Pattern Is A Paradigm Shift For Human Organizations?

The DAO model is revolutionary and constitutes a paradigm shift in human organization in two ways.

First, for the first time in history, Internet users can collectively create and exchange value in a trusted environment.

This environment is the blockchain. Blockchain technology first enabled DeFi, then non-fungible tokens (NFTs), and now it is creating spaces for people to come together and work.

In fact, financial transactions no longer need to introduce a third party, and all financial transactions and rules are recorded on the blockchain. This makes DAOs independent of government agencies, because the blockchain is the third party.

Second, unlike other forms of organization, there is a stronger alignment of incentives in DAOs.

Members are incentivized by voting rights, which may in turn affect the pay and rewards they receive; but members are also incentivized by the fact that they can earn a share of profits through tokens, token buybacks, or cryptocurrencies.Since the birth of the traditional web2 platform,Most of the value created by users has been captured by these platforms, especially their founders and CEOs.In the new frame set by the DAO,Other members are also able to capture a share of the output value.

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potential limitations of the model

However, the characteristics of DAOs that are fundamentally superior to traditional organizations may also be a source of vulnerability. It relies on blockchain technology, which makes it trustless and transparent, but it also makes its code open to everyone, including potential hackers. A classic example is the 2016 hack of The DAO, where a hacker exploited a bug in the code.

Likewise, a DAO cannot be shut down by an official or government because it relies on the blockchain as a third party, which may soon gain more and more attention from regulators.However, we see the emergence of DAO proxy voting, which can make governance more efficient and effective. In general, DAO structures will become increasingly diverse, incorporating agents, sub-teams, and professional administrators.

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Learn about this disruptive wave

You now understand the basic model of a DAO and are already enthusiastic about understanding this emerging trend. You may be wondering: How can I get involved?

The answer is to join The DAO to get its native token.

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06

Drivers of Value in DAOs

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Establish an effective incentive mechanismIt's important to understand how members are incentivized for their contributions. Generally speaking,Governance rights, rewards for contributions, or profit shares can incentivize members

Work for the DAO and actively participate in governance. This in turn makes the organization more efficient.Another way of looking at this problem is,

Tokens have a secondary market value that increases as the DAO becomes more successful.

If a DAO becomes more and more successful, it will attract the attention of other market watchers hoping to benefit from the DAO's creative output, financial gains, and voting rights in treasury and other transactions. Therefore, DAO tokens can increase in value.

When the value of the token increases, it can motivate members to work, and then continue to promote the success of the DAO and increase the value of the token.Therefore, we can predict that in the long run,The more members are rewarded for their contributions, the higher the DAO can go.

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high turnout

The smaller the size of the DAO, the more relevant this metric is. You will find that the largest DAOs are usually the ones with lower turnout. The reasoning behind this is that these DAOs are primarily contract DAOs of a larger scale, where collective decision-making is currently limited to marginal issues.

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DAO size and voter participation

You can watch the overall turnout; you can also identify the wallet address that received the largest amount of tokens from the vault, and get a more granular look at the main contributors. This can tell which members are rewarded the most for their contributions.This can indicate that this DAO has gained the support of experts in the field.

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Continuous Delivery Project

If there are good incentives and members are actively engaged, then the DAO should deliver projects and programs continuously. A DAO that can regularly promote projects means high collective participation, strong execution capabilities, and long-term value-added potential.

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in conclusion

in conclusion

In summary, The DAO marks a new chapter in the crypto world.

While we don’t know the extent to which it will disrupt organizations of all kinds, The DAO’s governance model has already been a hit with the crypto-native community. It will go beyond traditional organizations as it enables Internet users to collectively create and exchange value in a trusted environment and be rewarded for creating value.

This new governance model will continue to thrive despite its own challenges such as vulnerability to attacks.

Today, we only see 169 DAOs. But one day, the number of DAOs will reach tens of thousands. Now is the time to join this revolutionary wave and get involved with one or more DAOs. The current practice is only an early experiment, but it has marked the history of the encryption world, and perhaps the history of mankind.