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1 Concept 💡
DAOs are all the rage. ConstitutionDAO, which raised $45MM+ to buy a copy of the US Constitution, has grabbed most of the headlines but DAOs are a rich and rapidly evolving ecosystem that I believe will re-invent how we organize and work together. It’s important you know the basics so this week, let’s unpack all things DAO! We’ll cover:
WTF is a DAO?!
Use cases & examples
Why you should care
What you should watch out for
WTF is a DAO?!
DAOs are internet communities with a shared bank account and cap table.
- Cooper Turley (@cooopahtroopa)
Let’s break this down word-by-word:
Internet community - DAOs (decentralized autonomous organization) revolve around a group of Internet friends who have a shared mission, whether it’s collecting art, investing, building social capital, or something else. There’s no limit to size and reach (DAOs could be 5 people in a WhatsApp group with 1ETH or 25,000 people in a Discord with 1000ETH) - all that matters is there’s a vibrant and passionate community backing it.
Shared bank account - DAOs pool funds together in a community-owned wallet, which is 1) transparent (anyone can see balance and transaction history) and 2) requires community approval to use funds. Blockchain technology enables both which is why DAOs are now possible to exist.
Shared cap table - DAOs have shared ownership between its community members. Ownership (via tokens) typically correlates to governance rights, which is important because virtually everything a DAO does is voted on by the community.
In many ways, a DAO is the modern, tech-enabled successor to the legacy corporation. Instead of opaque financial statements, decisions made by a few people, and shareholder meetings that no one attends and largely don’t matter, DAOs offer the opposite by putting bank accounts + governance all “on-chain” via smart contracts. Because DAOs unlock the ability for a community to truly work together with shared ownership, I 100% co-opt Mark Cuban when he says DAOs are “the ultimate combination of capitalism and progressivism”.
Use Cases & Examples
OK, now that you understand what a DAO is in theory, how does it work in practice? There’s a wide array of examples to choose from (Cooper’s piece does a fantastic job going deep here), but here are a few ones that helped it click in my head:
PleasrDao’s mission is to “acquire culturally significant pieces”, such as the unreleased album from Wu-Tang Clan. Members pool funds, collectively vote on which pieces to buy, and how to distribute ownership within the community.
Uniswap, a decentralized crypto exchange, is a DAO that enables its members to vote on everything from how to use its community funds to future roadmap.
KrauseHouse is a DAO whose vision is for a community to own a NBA team and vote on things like uniform design, fan experience, and more.
CityDAO is aiming to bring decentralized governance to physical cities, starting with a parcel of land in Wyoming. The community will vote on what happens with the land.
Just with these four examples, you can begin to see this potential at scale. Instead of billionaires having full say over companies, NBA teams, or city governance via behind-the-scenes lobbying of politicians, communities can band together to own and govern them collectively. For example, imagine if there was a RainForestDAO, where a group of 100,000 people bought part of the Amazon rainforest and had collective governance to decide whether they wanted to allow logging. Isn’t that much better than some corrupt politician deciding the fate of our future climate?
Why you should care
Upside - It’s clear DAO’s have huge potential to transform how we organize and we as a collective set of people can accomplish. They also offer personal financial upside: owning a governance token is similar to owning equity in a startup. If the DAO makes it, those tokens can be very valuable later on. For example, FriendsWithBenefits is a social DAO that requires members to own $FWB tokens which gives them, among other things, ability to vote on future direction: $FWB has appreciated ~18X in the past 6 months alone.
Opportunity - DAOs offer the ability for anyone who’s interested in the mission to contribute within the broader collective. And because it’s a mission you care about, it doesn’t feel like a side-hustle, it feels like play! Plus since you’re contributing to something larger than yourself, you enjoy the benefits of its scale and reach. For example, I contributed to the KrauseHouse flightpaper, had a blast, and excerpts I authored got featured in NPR!Surreal and inspiring that excerpts I wrote in the flightpaper (co-authored by the amazing , & ) are in a NPR article 🤯 WAGBAT 🏀,🏀
Another upside of contributing to DAOs is what my friend David Phelps refers to below as composable time. Instead of spending all your time working on one project, you now have the ability to leverage your time to work on 10 projects and level up your impact + reach.the key to fractionalized time is composable time. what that means: — fractionalize your time by doing different tasks for different DAOs — *share* those tasks with dozens of DAOs — now your time is composable: in 1 hr, you've had impact across 40 projects not possible in web2
Jim 🌊 @0xJimwhy: - context switching is painful; you never hit flow - can't own anything; end up doing atomic tasks + following instructions from others - too many discords to keep tabs of - "going above and beyond" each role = working 80 hour weeks
DAOs offer the ability for anyone, no matter your formal experience level, to contribute (check out Layer3 for a list of available opportunities) - it’s a great way to learn the space and contribute towards a mission you care about.
What you should watch out for
Because DAOs are so nascent, there aren’t many regulations or rules that govern them - enter at your own risk. IMO, it’s important to recognize:
Owning governance tokens is not the same as owning equity in any collective assets. For example, buying into the ConstitutionDAO gave members voting rights on what to do with the Constitution, but not fractionalized ownership of the asset. Many DAOs have similar models. Join DAOs for the love of the mission and long-term opportunity upside, not for quick flips.
Decentralized decision making can be tedious and slow. One of the upsides of legacy corporations is a CEO can make a decision and move quickly. On the other hand, DAOs require proposals, discussions and voting - so be prepared for collective (but slower) movement.
To learn more about DAOs, check out the references at the bottom of Cooper’s piece, this epic piece by Mario at the Generalist, or the amazing podcast my friend Chase hosts on the intersection of DAOs + culture. I hope this guide helped you understand what a DAO is and their potential.
Remember: together, we can achieve anything.
Side note: I’d appreciate it if you could share with atleast 1 other person who might like this!
2 Things On Our Mind 🤔
1. Not crypto-related, but Parag Agarwal was announced to be the new Twitter CEO after Jack stepped down. As an Indian-American growing up, the ceiling always felt to be a high-paying employee, but never THE BOSS. As Patrick points out, I hope this inspires a new generation of Indians (and especially Indian women) to recognize that no ambition is too high 🇮🇳🇮🇳. Go get it!
2. The first Balaji / Tim Ferris podcast episode back in March literally blew my mind - and I was over the moon to find out that their second conversation dropped a couple weeks ago. I haven’t listened to it yet (saving it for a plane trip this wknd), but can’t wait - I’m sure it’ll be equally as amazing. Check it out!
Until next week, always be learning