DAO: Decentralized. Autonomous. Organization.
“The whole phrase is a misnomer. They’re not decentralized, not autonomous and they are not organizations,” Monsterplay blockchain consultancy founder David Freuden tells Magazine.
Freuden co-authored a 51-page report on DAOs in May 2020 in an attempt to help realize their potential. “We need DAOs,” he explains. “The idea of ‘shareholder first’ is only a 1980s/1990s concept. Companies became about profits, not products.”
He foresaw big things for DAOs and much has changed nearly two years later. By the end of 2021, DAOs had more than 1.6 million participants, up from just 13,000 at the start of the previous year. In 2021, the US state of Wyoming legislated for legal recognition of DAOs and the Marshall Islands. In 2022, Australia is considering doing the same.
Yeah, but what is a DAO?
In short, a DAO is a governance model popularized in the decentralized finance sector where members buy (or are rewarded with) governance tokens to vote on how the DAO operates and spends its money. “DAOs were born from DeFi as an investment vehicle. So, you can’t separate a DAO from tokenomics,” says Freuden.
DAOs are usually built around a mission which can be a promise or a social cause but usually still involves a desire for profits. “If you can’t answer the why the DAO won’t be sustainable,” he says. And, “if you don’t have tokenomics, it’s a co-op, not a DAO.”
DAOs come in a range of types that now include operating system DAOs, protocol DAOs, investment DAOs, grant DAOs, service DAOs, social DAOs, collector DAOs and media DAOs.
The idea that people could be galvanized around a good cause was very attractive to Freuden. The crypto world comprises “speculators or builders,” so “crypto needs a DAO for the builders.”
But, one problem is that mismatched expectations among speculators and builders — or both — cause endless but, sometimes creative, friction.
How do you DAO?
Productivity coordination organisms
For DAOs, the idea is…