A Love Letter to DAOs | State of the DAOs
You're reading State of the DAOs, the high-signal low-noise newsletter for understanding DAOs.
Gm and welcome to DAO life! Sometimes, working in DAOs can be hard work. Hiro Kennelly shares his experience falling down the DAO rabbit hole. In many ways, DAOing full time can be a lot like falling in love. At first, everything is magical, but there comes a time where the infatuation ends, challenges become apparent, and you have to realize that in order to build something that lasts, you have to be willing to work sustainably. Eventually, white-hot flames must become consistent smoldering or risk burning out completely. Hiro shares his story.
After that, we share the TL;DR on the latest DAO ecosystem takes and thought pieces, making it easy for you to cut through the noise and stay up to date on the world of DAOs.
This is the current state of the DAOs.
Contributors: Bankless DAO Writers Guild (hirokennelly.eth, Alvo Von Alvensleben, March.401, Thalia_M, Ssasho0, siddhearta, Jake and Stake)
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A Love Letter to DAOs
I fell for you hard and fast, DAOs. I’ve never considered an affair, but I imagine the beginning feels a lot like this: you are transported to a timeless space where you sense high potential energy, a passionate opening of the universe and a broadening of what you thought was possible, a landscape of limitless opportunities for novelty, exploration, and connection. You are firmly situated in the present and tilting towards the future. All that came before is hazy, and slowly fades into the before-times.
I love you DAOs, but we have to talk. You’re so special to me, and at this moment in history, I don’t want to be anywhere else. But we gotta get polyamorous, because while I want to spend a ton of time with you, I also miss my other life. And really DAOs, you have some growing up to do, some maturing. I’m fond of saying that you are the opportunity of ten lifetimes, and while this is true, you have some problems to solve before you can scale. Otherwise, these amazing new systems we build every day in the depths of Discord will deploy devoid of their full potential for revolutionary social change.
Building new worlds and ways of living is hard work, and if we don’t start to criticize what we’re building and where we’re heading, we won’t reach our full potential, the promise of your revolutionary model. While you will change the way we coordinate social affairs and thus the world, we need to really consider what kind of world we are building, and what our vision for a blockchain-enabled world looks like. Are we building for cyberpunks or cypherpunks, solarpunks or lunarpunks, DAOpunks or cryptopunks?
We also have to understand what you really are: how you’re organized and governed, how capital is deployed to fund projects and contributors, how to properly incentivize a tokenized community towards a mission in a productive and sustainable manner, and what you have to solve before you are ready to scale.
I’ve noticed you operate at the confluence of contribution and collaboration, coordination and consensus, cohesion and community, all fueled by capital through a tokenized incentive structure. These C’s are the social legos with which you are built, yet we don’t really understand how these pieces fit together and so we’re building in ways that are unfocused and haphazard.
We’re trying to construct these new things with old tools, which is causing mental health issues in contributors and dysfunction in DAOs, and the words we use to describe our processes create confusion and inaction. Your many moving parts are challenging to coordinate and govern. Long-term contributor retention is an emerging concern across the ecosystem, and tired full-time DAOers are beginning to burn out. I know I did. And this is that story.
Falling for You
My first three months in DAOs were delusional ecstasy — a hallucinatory state fueled by hope, dreams, and coffee. I dropped into voice channels, hit unmute, and quickly started contributing. Right off the bat and with no warning to anyone, I was at the keys for 16-18 hours per day. I had been writing in my basement prior to that, and a lawyer before, and while I was successful by many measures, I’d never felt such a deep sense of purpose and connection. A war footing is a poor analogy, but the feeling of being on the edge of something new and unknown, maybe even a bit verboten and dangerous, was beyond exciting. It was all I wanted to do. This feeling permeated my every cell — it still does.
As days turned into weeks, my Discord server icons spread vertically as I clicked on links to new servers, new people, new communities, and new opportunities. My DM list grew even faster. I spent as much time talking with people in DMs and on Discord as I did creating and shipping content or building communities. Maybe more. Pseudonymous intimacy became my way of being. Without much thought, I even created a Twitter account, something I swore I’d never do.
I’m not a programmer, but I now knew what it felt like to be a builder of novel things in new places. DAOs are self-discovery devices, pushing the outer limits of our inner spaces and extending the outer reaches of what’s possible at the frontier of technology and people and imagination. It’s everything I wanted but didn’t know I needed.
I not only learned how to DAO, but how to create a DAO: how to build out a Discord, how to coordinate new forms of consensus, how to cohere and incentivize new communities, how to create and ship content. After three months of this, I was on the Core Team of two DAOs, held multiple roles and responsibilities in another, had consulted for a few more on community development, and was routinely asked to join and build in new places, including privately-funded Web3 companies. I was a full-time DAO success story. Until I wasn’t, at least by the measures that matter.
Homecoming
I’m married with young children. We homeschool and haven’t worked outside the home since before the pandemic. That’s a short way of saying we are all at home, all the time, and we worked to keep the show running at a good clip. And the show ran pretty well, until it didn’t.
Through falling deeply in love with DAOs and the people within them, I almost entirely abandoned my family, including my wife and a three-week old son. The pull of this space was so strong that I didn’t even realize I was gone, but they sure did. My home life took a slow but steady turn for the worse, but I was too engaged to notice. I mean, I knew things were bad:
but I didn’t even have time to consider the consequences of my wife’s increasingly angry, pleading face, or the meaning of the gentle and not-so-gentle tugs from my children. I was up early, going to bed late, and I didn’t stop. Until Christmas.
My kids demanded that I not work on Christmas. And I didn’t. And I was miserable. Christmas was the first time I had stopped moving. Motion is not just physical, after all. After three months of 16 hour days, I was all-parts agitated, distant, grumpy, sad, and despondent.
Even before I had children, Christmas was my favorite holiday, by far. Christmas allows us to both relive the suspended animation of childhood and, at least after children, helps us to strengthen family bonds through living in a shared magical space. But last Christmas, I was struggling to be present and feeling a strong desire to check in with my frens on Discord. I had been intimate with these others for three months and almost forgot what it was like to be intimate at home. I had left my wife with four children and had gone to live in the metaverse. Despite the warmth of family fires, the utter joy of happy children floating through the pine scent in our living room, the soft, warm buzz of holiday bliss, I wanted to be at a desk on a computer. And that’s when I knew for sure that something wasn’t right.
I began to think about where I had come to in three short months and realized that my life was unbalanced and unstable. I understood that the creativity that had allowed me to thrive was drying up, that I didn’t look forward to getting on Discord as much as I used to, that I was emotionally and spiritually tired, that what I was doing was unsustainable. I was burned out. I still loved all the work and all the people, but I realized the pace wasn’t sustainable for high-level output, for creative and thoughtful work.
Scaling Down but Building Up
After spending a few months deeply immersed, obsessed really, with DAOs, it was clearly time to do some building at home. I’m now finding a better balance between DAOlife and FAMILYlife, the creativity is returning, and the cadence, the rhythmic heartbeat of a happy home, is steadily strengthening.
Ask my wife or kids and they’ll say the balance is still not great, but I’m more present and happy at home. Rather than 16 hours, it’s more like 10-12 hours at the keys. I often type with one hand as I hold my six-month-old son in the other. And this seems to be a good pace for now. It’s not ideal, as there isn’t a lot of time for just relaxing with a jazz album or new book. I still haven’t returned to yoga or meditation or journaling, but there is time for chess with my son, sprints around the backyard with the kids, and hikes in the woods with our expansive tribe.
As I get better at saying ‘no’ and setting boundaries, I’ll settle into a sustainable rhythm that allows for a family life crafted with loving attention while maintaining productivity and creativity in DAOs. I’ve talked to many people about what full-time DAOlife is like, and there’s no better way to spend your work life. But just remember you have a life outside of DAOs. And you need that too.
I still love you so much DAOs, and I plan to spend the rest of my life growing with you. But for now, I’ll focus more on the DAOs I call home rather than thinking about where else I’m going. I’ll still poke around your edges, but I don’t have time to wander as much, to wonder as much, to get lost in your metaversal forests. And that’s ok. The springs at which I’ve made camp are so nourishing, and I’m just going to settle in here for a bit while I lean back into my other life.
My wife just started a Facebook group for artists who are part of her alumni network. They are sharing ideas and learning about each other, assisting to make each other’s work better for a nominal fee, and talking about how to collaborate and use their networks to help support the work and the collective effort. And they are wondering how to get paid in a more equitable and sustainable manner. Whenever she tells me what she’s doing, I’m like, ‘wenDAO’? She rolls her eyes ever so gently, but also gives me a small corner smile. I know she’ll eventually ask me to help her build a DAO, and until then I’ll continue to learn and grow with you. We’re still figuring out how to DAO, but as long as we continue caring about not just what we’re doing but how we’re doing it, I’m certain that the State of the DAOs will just keep getting better and better.
Actions steps
📖 Read Scaling DAOs Won’t Be Easy: Five Major Challenges to Overcome by The Defiant
⛏️ Dig into Beginnings of the In-DAO-strial Revolution by Jake and Stake
🎧 Listen ETHDenver 2022 is Scaling Vibes with Andrew Yang, Erik Voorhees, Kevin Owocki
🙏 Sponsor: Parcel - Simplifying payouts for DAOs.
DAOs at a Glance
Hand-picked articles to understand the current state of the DAO ecosystem
A DAO Is More Exciting As An Idea Than In Reality
Author: David G.W. Birch
Using some examples of history to guide readers, David Birch details his perspective regarding why the theoretical applications of DAOs may fall short of expectations in practice. In 2008, the online community of MyFootballClub acquired Ebbsfleet United for £635,000. They hosted their first vote, which decided who should pick the roster, and responsibility was left in the hands of the manager (Liam Daish). Ebbsfleet won the FA Trophy just months after the takeover. However, after this early success, member interest in the club quickly waned, which had the effect of recentralizing the decision-making process and defeating the purpose of a DAO. Eventually, it decided to disband.
With the renewed enthusiasm of online organization, are DAO members set to repeat history? A more efficient financial system based on tokens that can flow more easily has appealing characteristics, but communities will have to be careful regarding how they balance engagement and centralization.
DAO The Way Part 6
Author: xuanling11.eth
DAO The Way is an eleven-part series that chronicles xuanling11.eth’s journey learning about DAOs. Part 6 of this series focuses on the advantages and disadvantages of DAOs compared to traditional companies.
Focus: Traditional companies focus on customer needs and capturing value by meeting those needs. DAOs tend to focus more on community, thus community growth and engagement are better assessments for value creation.
Compensation: DAOs blur the lines on compensation compared to traditional companies. DAOs are able to employ multiple compensation models to meet the various types of contributions from its members.
Permission: DAOs may function on a permission continuum, some being more like a top-down traditional company, while others are fully permissionless and allow members to contribute freely.
Management: Traditional companies have managers and supervisors to tell you what to do. DAOs rely on the art of delegation and the ability of contributors to choose the role or task they want to fill.
Information and Tools: DAO contributors need access to information and the right tools to be able to make decisions and execute tasks. Traditional companies might gate access to information or require certain job titles to use certain tools. In DAOs, these are open to all.
Data and Metrics: In traditional companies, most data and metrics are reserved for the executive suite. If DAOs are going to succeed, contributors need access to data and quality metrics to guide decision making.
Web3 Creator Onboarding
Author: Coopahtroopa
Coopahtroopa is a Web3 creator who was forged in the fire of DAOs. As an active contributor to numerous DAOs of all types — NFT, DeFi, social DAOs, everyDAOs — he has a lot of experience to share regarding how to get started as a new creator in the Web3 space. Here are some of his tips for how to enter the creator economy:
Influence: Web3 companies are eager to partner with creators, but be warned— creators with large followings can be a target for naysayers.
Reputation: In Web3, reputation is everything. You vote with your tweets. Beware of scammers trying to pay you to post about their projects, you don’t want to mislead your followers. Protect your reputation at all costs and treat everything like it is going on your permanent record.
Invest your time: Maximize the power of your brand by investing the time to discover the projects that will have genuine, long-term impact. Make sure to check out the founders, what they are promising, or if they are only concerned with token pricing.
Ownership > Dollars: If you can choose between being paid in dollars or paid in ownership, choose ownership. If the projects succeeds, you succeed.
Wallet security: Follow best practices with regards to wallet security. Scammers are everywhere. Be careful and never share your private key. Never.
Circle of Trust: This one is important. Ignore the noise and focus on building long-term trust.
Getting Started: A quick win for all creators— use small experiments to find your niche, establish your Web3 identity, and be present in key spaces.
Imposter Syndrome: The Creator Economy is an emerging phenomena, everyone starts out as an imposter. Embrace the ambiguity and rely on some of the principles laid out above.
Rethinking the DAO Contributor Funnel
Author: 0xJustice.eth
Ever wondered what types of contributors a DAO needs? How do the different levels of contributors differ from one another? In his article 0xJustice suggests an approach to DAO’s segmentation, organizational levels, and how to set them using token gating. How the different levels can work together in a DAO contributor funnel, with each level having clear distinction and role. Here is a short summary of what you are going to learn:
What questions do we need to consider when thinking about the organization of a DAO
What levels of contributors are there
Level 1: Users - anyone who uses the products or services of your community. There are no gates to enter, and all are encouraged to participate.
Level 2: Community members - they influence how the community’s products and services are created and disseminated. They are the community's explorers, advocates, and evangelists.
Level 3: Contributors - These individuals have moved beyond just membership to become productive assets of the community. Individuals at this level have shown an investment in the community, and their purview has grown more holistic and macro-oriented.
Level 4: Teams - this is the level of execution. Teams are a community's engine, and their ongoing development will define the efficacy and sustainability of a community's product offering.
Team Leads - These leads are the champions, workstream leaders, project managers, or DRI's of a team. They are not in charge per se, but they are a central and pivotal point of coordination with whom the buck stops.
Token-centered tools and permissions: after the levels and gates are set they need to be practically created. The suggested way to do this is to center every tool and associated permission scheme around token possession. There are different tools to do this like Sobol, Cal.com, Clarity.so, Collab Land and more.
A conclusion on a general approach on how to organize a DAO’s structure
A Free DAO 101 course: Explain Like i'm 5
Author: VoiceDAO
VoiceDAO is helping people navigate the DAO ecosystem with helpful onboarding guides and a DAO jobs board. This free DAO 101 course has everything you need to get started on your DAO journey. Here is a brief overview of everything you will learn in the course:
What are DAOs?
A brief history on DAOs
DAOs vs LLCs
Pros and Cons of DAOs
How to find the perfect DAO for you
Going full time on DAOs
How to create a DAO
How to create a DAO
Leveraging Social Tokens for Digital Reputation
Author: Eliot Couvat
In the future, online identity will be decentralized, and decentralization will enable us to bring our data from one platform to another, resulting in a much better user experience. We will need tools and the interfaces that allow us to manage our data across Web3. We need better wallets.
The future of wallets will focus on transactions and native tools built around personalization, navigation, interoperability, and integrating social components. Wallets will become more like your email address or LinkedIn than just a bank account. With wallets of the future you will control the data you want to share and the experiences you want to highlight by granting, revoking, and sharing partial access at your discretion.
No wallet today showcases which communities and DAOs people are involved in. With current wallets, users have no easy way to show their tokens to others. Web3 wallets need to optimize for social tokens — creating a dedicated space for them and allowing users to manage them easily.
We need wallets that will:
Find ways to get a full picture of a person's identity while they navigate across ecosystems
Differentiate between 'Purchased Tokens' and the 'Earned Tokens.’
Ecosystem Takes
🔥 and 🧊 insights from across the DAO ecosystem
What the History of Democracy Can Teach Us About Blockchain Governance
Author: Andrew Hall
🔑 Insights:
Participation in DAO governance is low. Decisions are made by a small number of actors, and we lack formal mechanisms to ensure that these decisions are aligned with the interests of the token holders, at large. These challenges are identical to the governance challenges faced by democratic societies in the physical world, and the lessons of democratic governments provide useful insights for improving DAO governance.
Simplify Voting: Referendum-based voting systems rarely succeed as voters will not devote hours each week to studying issues and cast votes. Asking voters to vote on a small set of the most important decisions can increase participation.
Build more robust systems of delegation: more DAOs have begun to build nascent systems of delegation. The next step is to employ tools that track what delegates do.
Make delegates stand for re-election at defined intervals: DAOs should experiment with periodic elections, special elections, different term lengths, compensation structures, and term limits for delegates.
Delegates could appoint managers, like ministers in parliamentary systems, who could take certain operational decisions expertly. Though unelected, these managers are still to be accountable to token holders and can be fired by the elected delegates at any time.
The Time is Now: Web3 Must Make Good on its Promise of Inclusivity
Author: Izzy Howell
🔑 Insights:
Web3 is only beginning its development, but some of the early trends are eerily similar to what’s been observed in legacy markets. This is in opposition to the community’s principles of being welcoming & non-conformant. To live up to expectations, developers must build applications and user-interfaces that appeal to broader audiences.
Between January 2020 and September 2021, 75% of NFT sales went to male artists, while only 5% went to females.
However, 53% of women identify as “crypto-curious”, which compares to 47% in men.
While many early adopters have made fortunes by pledging their early support, it’s important to ensure that newcomers also have a chance at success.
Reversing these early developments is essential if the web3 landscape hopes to be a more diverse and inclusive environment.
A failure to address these issues will make our emergent communities look a lot more like the traditional ones they’re trying to improve.
How DAOs can diversify their treasury
Author: Shreyas Hariharan
🔑 Insights:
DAOs need to diversify their treasuries. While DAO spending is still extremely low relative to what is optimal at the growth stage of many DAOs, spending is increasing. This spending is significant enough to justify having stablecoins in the treasury to cover 2-3 years of operating expenses.
Main reasons for stablecoin diversification are:
To de-risk the treasury. Native tokens are highly volatile, and it is not unusual for tokens to lose 70% of their value.
To be able to manage a predictable budget. It will be difficult for grants committees and working groups to budget for quarterly or yearly expenses if they have to account for native token volatility. This makes working capital forecasting and management challenging.
Flexibility in paying contributors. Governance contributors, grant recipients, and security bounty recipients can have the option to be remunerated partly in stablecoins along with vested native tokens.
Other benefits. Treasuries with stablecoins will have a higher credit rating and potentially get more favorable terms when they borrow using their native tokens as collateral.
There are several ways that DAOs can accumulate stablecoins.
Earn revenue in stablecoins. This is the least controversial way as it does not involve selling native tokens so is non-dilutive.
Sell native tokens for stablecoins. This can be done on decentralised exchanges, by using OTC & market makers, through batch auctions, and through bonding curves.
Form strategic partnerships. DAOs can exchange native tokens for stablecoins with long-term strategic partners. These partners can include VCs, DAOs, and value-additive individuals.
Borrow against the native token. This can be variable rate debt, fixed rate debt, or bond issuance.
Collaborate with stablecoin issuers. Collaborating with stablecoin issuers to accrue a stream of stablecoins is a DeFi native solution to the stablecoin problem.
DAO Governance Primer: The Initial State
Author: Dane Lund
🔑 Insights:
A system concerning governance is one of the prerequisites that a DAO at genesis has to deal with. One of the challenges in creating these systems is determining power distribution and ways to go about it. Some prefer to grant the bulk of voting capability to early adapters, others permit more active participants to obtain greater voting influence later on in the DAOs development.
Tokenized commands enable smart contracts to be executed, thus sending signals to deliver an outcome. This has an underlying mechanism of governance committed to code, creating the initial state — the “genesis block of the DAO”.
Distinguishing initial states.
DAOs can begin their paths differently, and depends on what route the founding team wishes to take. An initial line of code is required to get going either way,
A blank slate is a difficult road ahead for the community. They have to propose and vote on the bureaucracy that will become their governance system.
Many DAOs prefer to launch with developed initial states. These, like Goldfinch’s DAO, may include detailed proposal frameworks, populated initial governance councils, and presumed voting systems.
Answers to questions regarding distribution of governing power may be quite diverse. Initial plans for token allocation linked together with voting power can drive outcomes.
Blank slate DAOs can have pre-written proposals populate the governance forum as the DAO comes to life. This has the power of nudging behavior: supporters of quadratic voting could be more interested in early DAOs which approve quadratic voting straight off the bat.
DAO Spotlight: KeeperDAO
KeeperDAO is a collective dedicated to transforming MEV into a public good. MEV is everywhere in DeFi. Right now, these ‘on-chain profit opportunities’ from order flow (e.g. trading) are captured by miners and bots, at the expense of users and protocols.
KeeperDAO has built a system that captures this surplus value, and returns it to the users and protocols that created it. MEV can be turned into a positive externality through Keeper’s protocols, and for the first time gives users access to the MEV that their transactions create and allows protocols to increase efficiency across the board. In the wrong hands, this resource could be abused through backroom deals that profit off of the transactions of regular users. That’s why KeeperDAO’s infrastructure is so crucial.
KeeperDAO’s mission is to discover and distribute this value with strong algorithmic guarantees through a community-owned network governed by an open DAO. KeeperDAO aims to turn MEV into a public good that improves efficiency, reduces harm, and protects the network from bad actors through coordination rather than competition.
KeeperDAO offers their own trading product and a suite of protocol-to-protocol integrations that can help DeFi projects with JIT liquidity, AMM LP fee improvement, arbitrage, liquidations, peg-keeping for stablecoins & synthetic assets, oracle MEV, portfolio rebalancing, and much more.
To get involved, check out KeeperDAO job openings at here and tell them BanklessDAO sent you!
To join the community and be a part of making of the movement check out their discord.
For more information, check out their website and follow them on Twitter at @Keeper_DAO.
Get Plugged In
Event Highlights
🏝 BanklessDAO - Permissionless Conference - Tickets just went on sale for one of the biggest DeFi conferences! Over 5,000 people will be attending in total and every two weeks 250 more tickets unlock. Once 250 tickets are purchased, registration closes and you’ll have to wait until the next release. Speaking of the next release, your next chance is on October 1st and prices are currently at $1,113. Speakers include our very own Ryan Sean Adams and David Hoffman, as well as many others. Join us on Tuesday - Thursday, May 17 - 19, 2022 in sunny Palm Beach, Florida for the event.
🧳 Job Opportunities
Get a job in crypto! Do you like solving hard problems, care about building more efficient markets for everybody, and want to work at the frontier of decentralized finance? KeeperDAO is looking for full time contributors, with salaries ranging from $169,000-$722,000. There are positions ranging from engineering, recruiting, product marketing, copywriting, and design. Sound interesting? Sign up for our referral program and go full-time DAO.
Solidity Developer
Sr. Backend Engineer (Python)
Frontend Engineer (React/Typescript)
Technical Recruiter (❌ technical)
PeopleOps Lead (❌ technical)
Marketing Director (❌ technical)
Sr. Copywriter (❌ technical)
Sr. Community Manager (❌ technical)
2D Graphic Designer
Quantitative Analyst
On-chain Data Specialist
🙏Thanks to our sponsor
Parcel
Parcel is a treasury management and payments tool that helps to manage payroll, expenses, grants, airdrops and more for a DAO. Parcel works with over 200 DAOs, including prominent ones like IndexCoop, BanklessDAO, Synthetix, Compound Grants and Aave Grants DAO.
Scaling financial operations for DAOs is a challenge, especially when there are multiple contributors with varying levels of contribution. Parcel helps to get rid of the spreadsheets with contributor management, 1-click mass payouts and automated recurring payouts.
👉 Our website: https://parcel.money/
👉 Join our Discord.
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