Decentralization is one of the key characteristics of any crypto project and nowhere is that more apparent than with DAOs.Decentralized Autonomous Organizations, to give them their correct name, are collectives of like-minded individuals that work without barriers or bureaucracy to achieve a common goal.
The crypto industry has given birth to hundreds of DAOs centered around various projects, such as governing a decentralized application or protocol, creating and managing investment opportunities, advocating and raising money for good causes, and producing media and creative content.
DAOs can be structured in various different ways depending on the organization’s goals, but they’re all based around the shared idea that decisions are made by the community through a democratic vote. To participate in DAOs, members acquire native tokens that function like a cryptocurrency and grant the holders voting rights, with the weight of each vote proportional to how many tokens that person holds.
DAOs also make use of smart contracts that guarantee full transparency around the decision making process. Smart contracts make DAOs democratic by design, guaranteeing that each member’s voice will be heard. Within a DAO, every member is free to make proposals regarding what should be done next, other members are free to critique those ideas, and then the community gets to vote on whether or not it will be adopted.
It was through this democratic structure that two of the world’s biggest and most successful DAOs,Merit Circle andYield Guild Games, recently came to an agreement that forestalled a potentially dangerous legal battle between them. Merit Circle and YGG are DAOs in the play-to-earn gaming business, and operate by buying NFTs required to play games for profit and renting them out to the most promising players. They had originally agreed to enter into a partnership that saw YGG make a big investment in Merit Circle. However, a member of the Merit Circle DAO later submitted a proposal,called MIP-13, to back out of the partnership, arguing that YGG provided a “lack of value” and is actually a “top competitor”.
The proposal attracted a lot of support, but YGG responded by pointing out that MIP-13 would go against the legal agreement between the two DAOs, and threatened to take legal action if it were passed by Merit Circle’s community. Rather than go down a very uncertain path that might lead to an unprecedented legal battle, Merit Circle insteadpassed a counter proposalthat saw it buy out YGG’s fund allocation. In doing so, itended the partnershipand provided YGG with a ten-times return on its original investment.
The outcome was viewed as a win-win for both parties and has been held up as a proof that DAOs do actually work. Following lengthy debate, Merit Circle was able to come to a democratic compromise that best served its interests and avoided wasting money on expensive lawyers. DAOs are meant to come to sensible decisions and that’s exactly what Merit Circle did.
Promoting Real Democracy
There has been some criticism of DAOs because of the way the voting weight system works. Detractors say there’spotential for abuseby “whales” who amass a large number of tokens in order to gain a disproportionate amount of voting power and make decisions that go against the majority view. It’s a logical view but recent developments suggest that these fears may be overblown.
A good example is the healthy debate that ensued following arecent proposalbyDecentraland DAOto allocate $1 million worth of MANA tokens from its treasury as incentives for Decentral Games’ USDC-ICE liquidity pool.
Decentral Games is a highly influential play-to-earn gaming platform within theDecentralandmetaverse that accounts for more than 60% of its weekly active users. The proposal sought the $1 million grant to sustain the value of the ICE Poker platform’s native token ICE ahead of the launch of its eagerly awaited sit-and-go tournament format.
As one of the largest grants ever proposed to Decentraland DAO, the vote was closely watched as an example of DAO governance in practice. There was a great deal of debate on the matter with many users arguing both for and against the proposal. Finally, it wasapprovedby a fairly narrow majority, with 56% of votes for and 44% against.
Notably, the result strengthens the argument that DAOs really do result in democratic decision making. A total of 6,162,990 voting points assigned by 151 individual voters supported the proposal, compared to 4,952,747 voting points from 40 voters who were against it. Clearly, while some whales wanted to reject the proposal, the overwhelming consensus of Decentraland’s community was enough to win the day.
Freedom to do Fulfilling Work
Some argue that the benefits of DAOs extend beyond simple democratic decision making. Because the processes of DAOs are automated, it frees up contributors to spend their time on higher-value activities as opposed to mundane tasks.
That’s important, because arecent studyby Gallup shows that as much as 85% of today’s global workforce is disengaged while at work. The opposite is true in DAOs, where members are by nature highly committed to achieving the community’s shared goals. Within DAOs, members have far greater freedom to devote their energies to the projects that truly resonate with them.
This idea was exemplified recently by a new DAO calledEarthFund, which has justannouncedthe launch of its “DAO-as-a-Service” platform to make it easier for people to raise funding for charity and other good causes. EarthFund is a DAO community that also acts as an umbrella organization for other DAOs, or sub-DAOs, that exist to raise money for good causes, with the ultimate objective being to build a better world for everyone.
The success of DAOs in raising money for good causes has gotten a lot of attention in the past, with the likes of UkraineDAO successfullyraising millionsto help people affected by the war in Ukraine, and ConstitutionDAO alsomaking headlinesfor its advocacy.
With the launch of EarthFund’s DAO-as-a-Service platform, it has suddenly become much easier for anyone to launch a DAO to raise funds for issues of global concern. Previously, creating a DAO has always required the help of developers skilled in the Solidity smart contract programming language. What with Solidity developers being few and far between, that made it difficult for many individuals and organizations to get started.
EarthFund’s platform therefore makes the world of DAOs much more open, giving anyone the ability to easily create a democratic movement of like-minded folk. All they have to do then is start focusing their energies and creativity on ways to raise funds and change the world.
A New Way To Invest
DAOs also provide some unique opportunities for emerging projects and the communities that support them. One of the hardest things for any new crypto project is to raise money to get their ideas off the ground. Traditional sources of funding can be very choosy about the projects they back.
This has led to the rise of a number of so-called “launchpads”, which are DAOs that seek to raise money from their communities to fund whatever they believe might become the next big thing in the world of crypto. What’s more they’re incredibly efficient about it too. Since being founded last year,UpLift DAOhas already launched a number of disruptive projects that have made a big impact in various areas within the crypto industry.
The secret to UpLift DAO is it does much more than just raise funding for new projects. It’s a traditional incubator in every sense of the word, helping project founders connect to VCs to raise additional funding, exchanges to launch their tokens on, influencers to get the word out, and legal advisors to help build up a proper business infrastructure and model. UpLift DAO then steers its projects through their initial launch, before helping to accelerate their growth through aggressive marketing campaigns.
This is all done to ensure UpLift DAO members can maximize their return on investment in the projects they back. To encourage people to participate, it also provides lots of community incentives, including bounty, farming and referral programs. In this way, members who help new projects to grow and prosper can earn additional rewards.
To date, UpLift DAO has already helped to kick off a number of exciting projects, includingYouMinter, an NFT-based social network, which raised 450,000 BUSD last December, andNFT4Play, a play-to-earn gaming platform, which landed 200,000 BUSD ahead of its launch.
Fairer Distribution of Wealth
Perhaps the best example of the potential of DAOs is their ability to act as a vehicle for the distribution of wealth.GoodDAOis the governing entity ofGoodDollar, a social responsibility project that aims tobring universal basic income to the masses.
UBI is a utopian idea that was first proposed by Thomas More, the social philosopher, back in the 16th century. The aim of UBI is to provide everyone with a consistent source of income, regardless of their status, wealth or ability to work. While several nations have experimented with the idea of UBI, those initiatives have not had much success. For instance Canada conducted a randomized control study in 2017, providing a basic income to 4,000 families in Ontario for a period of three years. However,the study was terminatedafter just one year following claims that the project disincentivized those families from seeking work.
GoodDAO maintains that there’s a need for a UBI to combat income inequality and the rise of automation, which some studies say couldthreaten as many as 800 million jobswithin the next ten years. The theory is that anything that can be automated probably will eventually be automated, and not everyone will be able to learn other skills to find new employment. As a result, a UBI will be needed, proponents say.
GoodDAO believes the best way to scale UBI is through a blockchain framework. Its vision is to create a world in which everyone has access to basic economic assets, and it believes this can be attained through the creation of financial products that incentivize wealthier people to create wealth for the good of everyone.
As an inclusive project, anyone can create a GoodDollar wallet and start earning Good Dollar tokens. They’ll earn 50 tokens for signing on, as well as a daily payout. To sign up, users must create a video selfie that shows their face to ensure they are a real person.
GoodDollar has two groups of users. Claimers are those who receive UBI without needing to invest anything. All they have to do is check their wallet and hit the “claim” button each day to receive their UBI. To date, over 255,000 claimants have signed up for GoodDollar’s UBI, receiving more than 180 million G$ tokens worth around $20,000. The second group of users are the supporters who believe in the cause and generate income for the protocol by staking through a DeFi mechanism that earns interest in cryptocurrencies. This interest is then passed to the GoodDAO and from there, distributed to claimers each day, with a percentage of the rewards going back to the supporters.
While GoodDollar does not expect to change the world alone, it believes that the project can nurture a healthy ecosystem of both those who want to claim UBI, as well as people and organizations that support its goal. Its economic model offers a fresh approach to wealth creation and redistribution, and hopes to serve as an inspiration for academics, researchers and policy makers who believe in UBI’s ability to enact positive change.
DAOs Are Building A Brighter Future
For now, the DAO movement is still in its infancy and remains experimental. Many questions still remain over the viability of DAOs when it comes to matters of governance and trust. Yet, there are signs that the most organized and democratic DAOs are able to provide answers to these questions and further their pursuit of some very worthwhile goals. From what we’ve seen so far, there’s a lot to like about DAOs and very little criticism of what they’ve achieved so far.
More important is the basic premise of DAOs, which offer regular people a way to participate in ambitious projects, promising investments and further causes that can make a real difference to people’s lives.
For one person acting alone it might be impossible to change the world. But if that person finds a thousand people who feel the same way and gets them organized, the collective power they have is so much greater. With that power, the possibilities of community-led development are magnified to such an extent that they know no bounds. This is the promise of DAOs – to create a future in which people come together to do more fulfilling and impactful work with a much fairer distribution of ownership and rewards.
DAOs can pave the way forward to a utopian future in which everyone gets to have their say as they collectively stride to build a better world.