State of the DAOs #4: The Future of DAOs
You're reading State of the DAOs, the high-signal low-noise newsletter for understanding DAOs.
gm frens. Welcome to DAO life!
This week we take a look into the future of DAOs and the role they are going to play in onboarding the next one billion people into crypto. DAOs face a number of challenges as we journey forward, but we are confident that in the near future self-sovereign work will flourish and that DAOs will mobilize the social layer to catalyze positive change.
Next, we share the TL;DR on the best ecosystem takes and thought pieces published in the past few weeks, 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.
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The Future of DAOs
DAOs are here to stay and the future is promising and bright. I see a future where self-sovereign work is the norm and digital communities mobilize to provide economic stability to their members. Rather than relying on the Web2 day jobs many of us were forced to tolerate in the corporate world, we will be able to achieve financial stability by participating in the communities we already enjoy and are involved with.
Over the course of the next five years this type of self-sovereign work arrangement will feel less and less obscure and more like the way things should have always been, it will no longer be weird. The normal 9-5 corporate job workers will become the weird ones while decentralized work goes mainstream.
While the future is indeed bright, DAOs have several challenges they will need to overcome:
U.S. legislation will likely get worse before it gets better.
The crypto community will need to step up and make sure our voices are represented in politics to ensure common sense legislation is being created that enhances, not hinders, innovation in this space.
Regulation on DAOs and how to structure a DAO remains a mystery.
Spending time this week at decentralcon in Miami, it becomes very clear that the legal status and business structure of DAOs is top of mind for many in this industry. We will need to be careful to make sure that we can formalize DAOs as a legitimate business entity without sacrificing decentralization. If we don’t, we will just become corporations that operate on the blockchain. Gross.
Worker compensation and governance will need to stabilize.
Many of us work in DAOs because we are passionate about decentralization and believe in the idea of self-sovereign work. Our conviction is what drives us.
Unfortunately, conviction does not pay the bills. Community leaders and decision makers in DAOs will need to really think through what a compensation strategy looks in the context of decentralized work and how to assign value to work being done.
These challenges are not trivial and will require all of us to remain engaged and focus on building, and building fast. We can show the world a new way of work, but to do so effectively will require us to become more engaged with the regular world far more than we have been up until now.
We wanted to go mainstream and now we are. Time to do the work to push mass adoption.
At this moment, the crypto community and the Web2 community are isolated in bubbles. This will need to change if we want DAOs to become a normal part of everyday work. We can no longer operate as the shadowy super coders we are perceived to be. Instead, we will need to step out into the limelight and lead the way on educating the masses about DAOs and more broadly Web3 and DeFi.
How do we do this?
NFTs were the trojan horse that got pop culture icons and sports athletes into crypto. DAOs will be the trojan horse that gets the everyday worker into crypto.
One reason the crypto industry has remained rather obscure to the outer world is because DeFi is incredibly complicated for those who are just getting started. For many, the upfront research and set up needed to start interacting with Dapps overwhelms the average user. NFTs on the other hand make sense to a lot of people and seem more accessible. I believe DAOs will have this same effect and many new DeFi users will be onboarded through DAOs.
DAOs and NFTs have created this unique intersection that has really solidified the industry, because to dabble with NFTs or work in DAOs you need to get familiar with crypto. For example, to work in a DAO you might need to buy governance tokens or purchase an NFT for community membership. To do that you need to set up a wallet and load up on some ETH. You might also need to use a decentralized exchange like Uniswap to buy some of those governance tokens. After a few seemingly mundane tasks required to get started with DAOs and NFTs, the average user suddenly becomes DeFi savvy out of necessity. This is how we will bridge others into crypto and onboard a billion people into DAOs.
Decentralized work will become the norm.
There are many ways DAOs have already shaped the way we work and will continue to do so in the future. If you want to dive deeper into this subject I highly recommend reading the Bankless HQ article on the Future of Work written by David Hoffman. In the article, David explains how the rise of DO’s (digital organizations) will operate in the decentralized future. He goes onto say BanklessDAO is a culture DO, which makes a lot of sense. It is definitely worth a read.
While we can only speculate on what DAOs will face in the future there are four key trends I believe will occur rapidly over the next five years.
NFTs become your proof of work
The traditional hiring process is broken. That is nothing new. People have been complaining about the recruitment process for years. You all know how it is. You spend an hour inputting all your information into some third party system, only to do the exact same activity again in another system hosted by the company you are applying to. This is Web2: Fragmented systems that fail to communicate with each other. And so, you are stuck dealing with it.
Not the case in Web3.
Your decentralized identity will be the universal access point to your digital resume. Your digital resume will be an NFT and your on-chain activity will reflect your job experience. Soon traditional organizations will adopt NFT’s as mechanisms to document and capture work performance and key milestones about your career. As you progress throughout your career you will accumulate NFTs which reflect your knowledge, skills, and abilities within a particular domain. Pretty cool.
While there are not many examples of NFT resumes in traditional organizations yet, there are signals that this is inevitable. For example, recruiters in Web2 have already been thinking about the implications of NFTs in recruiting and Microsoft is minting an NFT to celebrate the release of Windows 11. Somewhere at Microsoft, there is an engineering team who got an NFT because of a major product release they were responsible for. That NFT is a bullet item on your digital resume. While these ideas are still maturing, there are already many opportunities to begin building your digital resume within Web3 and who knows, you may be submitting an NFT for your next job application.
DAOs mobilize as networks of activists
DAOs will become the social layer that catalyzes positive political and institutional change. Community networks will mobilize to combat government censorship and decentralize citizenship and even tackle climate change. This is already happening and will only accelerate within the next five years.
For example, PAC DAO is an activism group focused on raising awareness and educating people about crypto. Their group is leveraging the DAO structure to mobilize quickly and spread awareness at a global level. CitizenDAO is focused on pursuing the UN sustainable development goals and KlimaDAO is trying to use DAOs and blockchain protocols to incentivize carbon neutrality. We are still very early, but already there are groups leveraging DAOs for activism.
All traditional political parties will eventually become DAOs. They will be used as vehicles for campaign funds which will provide greater transparency about politicians and who is paying them. This will make it much easier for citizens to decide whether to vote for them or not. What will be interesting to see is if campaign funding forms around communities (DAOs) or around a single person through the use of social tokens and fractionalized ownership.
Lobbying and advocating for a certain political ideal or group will effectively be represented as staking NFTs to a DAO you support. Voting for leaders will operate in an environment I’d like to think of as permissionless politics. The future of politics won’t be about politicking, it will be about community building and DAOs will create a way for us to create structural change without requiring a long legislation process. Successful politicians in the future will be focused on nurturing their communities and protecting the software protocols (see protocol politicians) they care about.
DAOs become the vehicle for the creator economy to flourish
DAOs make it possible for communities to operate as decentralized hubs of commerce. NFTs create a way to verify ownership in that community and enjoy its benefits. This has been a major unlock for the music industry where traditionally musicians have either been underpaid or forced to sign one-sided deals with production studios to sell their record label.
DAOs change all of this and NFTs enable fractionalized ownership of the music you listen to and the artist you choose to support. Musicians will create their own tokens representing ownership into that community. A band's social token community will represent their 1000 true fans.
Your favorite music band will be a DAO. And they might pay you to be their Bard.
One platform in this space I’m very excited about is Royal.io which is a platform for musicians and fans to come together in creative ways. The beauty of Web3 aligns the incentives of the creator and the user, which could not be more true with the Royal platform. Eventually, platforms like Royal will be ubiquitous and you will be able to own a sliver of your favorite song in the form of the artist's social token.
Dark DAOs will continue to be a concern
Digital organizations should be decentralized. Most of us would agree on that. However, with decentralization there is more uncertainty on who is making decisions since there is no central decision maker who oversees the process as a whole.
Many DAOs rely on governance tokens to make decisions and often voting power is per token not per person. The obvious implications of this is the influence of whales and bad actors on voting decisions. If a contentious proposal is up for a vote, a bad actor with enough tokens could sway the vote in a direction counter to the community's wishes.
Dealing with bad actors and voter manipulation will be something DAOs have to solve for. This will require novel thinking and innovation in the voting protocols and governance structures that we use to make decisions and come to consensus. I suspect we will see protocols developed that verify identity in a decentralized way (Proof of Humanity comes to mind) and more use of things like quadratic voting to combat some of the inadequacies of the current voting mechanisms being used.
DAOs will need to navigate regulatory waters and help legislators define what it means for DAOs to operate as a legitimate business entity.
DAOs need to figure out worker compensation and create economic stability for contributors.
NFTs are the trojan horse that will get the everyday worker into crypto.
Traditional organizations will use NFTs as digital resumes. We are already doing this within the Web3 community but the idea will go mainstream.
Music NFTs and fractionalized ownership will bring musicians and fans closer together than ever before.
DAOs will need to further decentralize voting protocols and create mechanisms that are resistant to bad actors and whales.
The road ahead for DAOs is promising, but not without its challenges. I am confident we will build innovative solutions that solve these tough problems. No one said it would be easy pioneering the future of work, but it is certainly exciting.
Let the era of self-sovereign work begin.
🙏 Sponsor: Yearn Finance- DeFi made Simple.
DAOs at a Glance
Hand-picked articles to understand the current state of the DAO ecosystem
Demonstrating their passion for Web3, the largest investors in the space, a16z, have curated a must-bookmark body of readings for anyone looking to understand, build, or otherwise get involved. They view DAOs as a promising new governance model built around transparency and inclusion. Being that we’re still early in this organizational philosophy, their multimedia compilation is likely to evolve, but currently it’s structured as follows:
Definitions & Foundations: What does “decentralization” mean & why is it important? The likes of Vitalik Buterin, Chris Dixon & more provide their perspectives. Do you find the Web3 jargon to be a bit overwhelming? The canon has some glossaries to help. Exemplifying Flamingo DAO buttressed by academic insights, the legal ramifications of decentralized, autonomous groups are explored as well
Overviews & Guides: Next, interested parties can leverage their expanded lexicon to dig deeper into how this new organizational form intersects with crypto, NFTs and the creator economy
Applications: This list of writings covers the DAO's likely evolution. Here you can read about how decentralized smart contracts can underpin the communities, careers and creations of tomorrow
Stories & Journeys: While this form of governance is nascent, many pioneers share their experiences as innovative creators
How-to's & Getting Started: If you’re looking to join a DAO, these articles provide the basics for beginners
Mechanics & more: Decentralized and autonomous coordination requires a balance of social, financial and philosophical motivations. Dig into this section to learn about treasury management, voting and the tools under development which seek to alleviate the pain points in these emerging structures
Author: Eliot Couvat
DAOs are onboarding many people into the crypto/Web3 revolution. The success of DAOs, however, often hinges on the talent it attracts. Below are three skillsets that are important for DAO-curious persons:
Attitude: It’s not enough to just introduce yourself and say that you’re going to contribute to a DAO. DAOs may be open to everyone, but if you want to have a significant impact in the DAO, if you want to be in a position of substance, you have to show that you want to be there. An attitude that promotes discussion and innovation, that shows gratitude for others, and that engenders active involvement in voting decisions and community-building is key to being a positive member of a DAO.
Proactive: You will also need to be proactive in your involvement. Candidates for a DAO should find where they want to work within the DAO. Stand out in that subset of the DAO by getting involved in any way you feasibly can, and then working hard.
Self-Learner: Curiosity and an eagerness to learn are integral traits for a DAO’s community to be successful. The Web3 space is evolving every day, staying abreast of new developments and technologies, and not waiting for someone to explain them to you, make you a prime candidate for a DAO.
These talents and skills will help you in your quest to join the revolution.
humanDAO is a social impact DAO and is setting out to create a public good. Their goal is to lift millions of people out of poverty while creating a sustainable revenue stream for the members of the DAO. More than 2 billion people survive on less than $5 a day - humanDAO will empower these people with tools to capture the new opportunities in the digital economy. humanDAO is facilitating options outside local economies, connecting traditionally underserved communities to new opportunities in the metaverse.
The humanDAO helps under-served communities by offering economic opportunities in four core areas:
Wages: humanDAO will leverage either P2E or any new emerging business model to provide income through gig and job opportunities in the metaverse and beyond
Education: humanDAO will incentivize learning about crypto and web3. They will create learning modules that require engagement to learn effectively.
Feed: humanDAO will utilize a portion of the revenue stream to provide meals through partnerships with organizations such as United Nations World Food Programme (WFP)
Fund: humanDAO will use the treasury of the DAO to do microlending to fund projects by the underserved and for the underserved. Any member of the DAO will be able to submit proposals, and successful proposals voted on by the DAO will be funded.
humanDAO’s initial focus will be on the Play to Earn (P2E) economy. P2E models can offer a chance for people to earn 2x-10x that they do with traditional work opportunities. humanDAO will buy assets (NFT’s/ Tokens) required to play these P2E games and lend them to people who cannot afford to purchase these assets. humanDAO is already lending hundreds of digital assets to its community of over 15,000 gamers. In return, humanDAO will take a small portion of the earnings, creating a win-win situation for everyone in the DAO.
Full disclosure: BanklessDAO and humanDAO have formed a partnership to help one billion people go bankless.
Anyone who has spent enough time in a DAO knows that there are certain leaders and caretakers who members trust to stay level-headed during challenging times and who have a sense of how to navigate a true course through changing waters. We call this DAO Leadership Magic. This magic helps to create communities where:
Contributors exhibit a quiet confidence and believe in his or her own ability to lead the community through times of change and disruption.
Contributors become mission-focused and advocate for their community's vision.
Contributors are action and goal-oriented and forward-looking.
An effective Web3 community leader is comfortable operating and making decisions with unknown facts on an opaque playing field. He or she must also be able to mobilize and quickly organize the community when faced with opportunity or risk. Much of successful community leadership involves providing a supporting framework in which community members work and play.
Successful community leaders empower members to contribute in a way that gives the members a sense of purpose and fulfillment. Community leaders can also clearly articulate the ethos and aims of the community, offer support and aid to members new and old, and make sure that the community sees leadership by example that encourages growth and participation.
The most effective community leaders are those who have taken the time to develop lasting relationships with community members, who advocate for the community's missions not only in Discord, but with personal conversations with members, who constantly provide content for the community, who work to flatten barriers to communication and action, who use their network to further the culture of the community, and finally, who help community members become leaders.
Author: Samantha Marin
The BanklessDAO’s own, Samanthaj, sounds a rallying cry that while DAOs are still emergent, they have the potential to be an evolutionary step-change in how humans coordinate. As far back as we can tell, our ancestors gravitated towards hierarchical structures. However, in recent years, technology has unlocked the ability to address many of our forbearers’ shortcomings. Don’t be fooled, coordination is difficult, but decentralization and codification can empower the masses. Here’s how we’re getting started:
DAOs don’t care how old you are or where you’re from. Neither work permits, guardianship, nor mandatory retirement ages exist in Web3 and this fosters diversity of perspective
In the new economy, people are paid & promoted based on quality of output; nothing else.
The golden rule is coded into a DAO’s DNA like a smart contract. Being accountable to the community is a powerful motivator.
It’s not always straightforward though:
Hard work is iterative. Members set up experiments just to see them crumble and then they do it all over again.
There is no playbook, so contributors seek out knowledge on their own and share with peers.
All of this has its pain points, but that banality could be the sacrifice we need to change how we cooperate. Do you want to make history?
🔥 and 🧊 insights from across the DAO ecosystem
Author: Yahya Ahmed
Media DAOs must generate capital in order to be self-sustaining and this can be done using traditional methods like paywalls, advertisements, and sponsored pieces.
Web3 native methods like NFTs, crowdfunding, and token sales are methods that let media DAOs monetize without restricting reach.
NFTs can be utilized to sponsor specific pieces, but they can also be used to align content consumers' incentives with the DAO by giving supporters a financial stake in the project's future success.
Thanks to technology like the blockchain, smart contracts, and digital assets, DAOs are transparent, easily accessible, lack traditional management hierarchies, streamline decision-making, and can quickly pool capital - and these operational efficiencies mean they do not fit into any existing forms of business associations.
Because DAOs lack formal legal recognition, this creates potential liabilities for DAO members and makes it difficult for DAOs to interact with traditional business entities.
American business law gives parties significant leeway to organize their commercial affairs, perhaps paving a way for DAOs to gain limited liability status so they can expand into a wider range of industries.
Author: Amber Group
Decentralized identity (DID) is a critical technological primitive that will drastically unlock the pace of innovation in Web3 by enabling high-value internet economic activity.
Unlike Web2 where users do not own their online identity, a DID is an address on the internet that someone can own and control directly to decide when, with whom, and under what terms they reveal elements of their digital identity.
DIDs can solve authenticity and identity issues within the NFT space, introduce DeFi to mass adoption, and even preserve user reputation across multiple DAOs.
Author: Eliot Couvat
Web2 platforms solve reach, but ownership and monetization of content are lacking. As a result, content creators are underpaid and don't fully capture the value they provide, but we can use tokens to fix that.
By creating a token and leveraging Web3 tools, creators can foster a sustainable community, let community members invest in the creator's success, and use tokens as a signaling mechanism (through token voting or market price).
Social tokens allow creators to provide work opportunities to their communities. Fans can receive tokens in exchange for work or capital to help bootstrap the project and then redeem the earned tokens for perks/products or resell them if the projects is successful. This could allow creators to effectively monetize less frequent, high quality projects.
Author: Justine Moore
🔑 Insights: Starting a community is easy, but creating and building a community is hard. So how can you build a vibrant, viable, and valuable community ? Here are five keys:
Start with "why." Not all audiences need or want to become a community. You know your audience needs and wants to become a community if they start building a community without you (IRL meetups, Twitter lists, FB groups).
Focus on quality, not quantity. Communities are most valuable when creators focus on cultivating and curating members who are active and engaged. Engagement matters, not shear numbers.
Invest in onboarding. An engaged onboarding process for new members is crucial to retain these members and to introduce them to other members of the community. Thoughtful onboarding leads to organic community building.
Get your members to buy in. Member buy-in leads to membership retention. Whether done through a social token that provides access to gated channels or exclusive events, or a non-monetary commitment centered around community engagement, buy in is essential to maintaining and building your community.
Find new ways to add value. Figure out why people are joining your community and then reach beyond Discord and Slack to find new ways to engage your communities by leveraging the advantages of different platforms, such as job boards and IRL meetups.
DAO Spotlight: Yearn DAO
Yearn DAO is an emergent and evolving experiment in decentralized collaboration. The DAO is a “collective of contributors” that prioritizes building, equal access, and merit. It’s not the specific procedures or processes that make Yearn governance special, but rather the platform’s organic and enthusiastic community.
The story of Yearn’s DAO begins with the protocol’s founder, Andre Cronje. Cronje built the first Yearn applications as a way to automate and maximize his crypto returns. As the protocol grew, the talented developer released YFI, as a mechanism to coordinate governance over his creation and allow contributors to keep building on yearn even if he left to work on other projects. The YFI launch is often referred to as a fair launch since it was suddenly released and anyone was free to farm YFI for the first weeks, sharing the rewards of its products with its wider community of users. Since the YFI token's release, the Yearn community has become much bigger than Andre Cronje. YFI token holders organically and spontaneously write software, discuss vault strategies, create community resources, and promote Yearn. The YFI token acts as a coordination mechanism for Yearn’s decentralized community, which is incentivized to help develop and manage the protocol with little to no oversight or instruction.
In 2021, Yearn began the transition into a multi-DAO structure, managed by constrained delegation. This approach allows protocol development to not be stiffened by bureaucracy while maintaining a sufficient level of decentralization.
Learn more about the Yearn DAO and how you can contribute by joining their Discord.
Get Plugged In
Calling all web3 builders, developers, and supporters! Gitcoin’s biggest quarterly event, Grants Round 12, is kicking off on December 1st and running through December 16th. Over $2M in total matching funds will be disbursed to eligible grantees during this record-breaking round.
Gitcoin is a community of over 200,000 builders, creators, devs and enthusiasts. Gitcoin has been in this space for a long time, and has collectively generated over $40+ million for digital public goods. They play a pivotal role in helping web3 builders get funded for their building open source and for creating the digital public infrastructure of today and tomorrow.
This holiday season, we hope you join all of us here at BanklessDAO and Gitcoin by taking part in Grants Round 12, and support Bankless Academy or one of the other 1500+ projects that are looking to raise funds during this record-breaking round!
This is a free, long term, data-stewarded directory for DAOs. It's built with diverse community cooperation and participation, which aims to enable greater understanding of the emerging DAO ecosystem, allow for more interDAO communications and awareness, and increase visibility and accessibility of joining a DAO.
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 $316. 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.
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Yearn Finance is an emergent and evolving experiment in decentralized collaboration. It has no papers of incorporation, no headquarters, nor even a list of names and locations for its contributors. Yearn is a team of generous, big hearts. We care deeply for each other, DeFi, and the world. That means Yearn will not merely be a world-changing DeFi protocol, but a blueprint for the next stage of human coordination.
👉 Learn more about the Yearn DAO and how you can contribute by visiting our notion.
👉 Chat with Yearn contributors in our Discord.
👉 For more in-depth information about yearn finance see our documentation.