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What Do DAOs Actually Do?

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Communities, initiatives, and involvement are all aided by “decentralised autonomous organisations.” However, it’s possible that they overdo it.

Hype drives cryptocurrency, as it does any other speculative asset. The market interacts with Elon Musk’s tweets. China tightens its belt, sending investors fleeing for shelter. Think of ICOs and NFTs as bite-sized initialisms for big concepts.

“DAO,” short for “decentralised autonomous organisation”, is the newest three-letter code term beloved by crypto utopians. A DAO is essentially a crypto-based corporate governance system, a private club where tokens are used to pay for entry. You become a member of the club when you have a specific number of tokens or NFTs, which generally grants you access to a Discord server’s paywalled channel.

Friends with Benefits

DAOs are intended to encourage participation as well. DAO tokens can have real-world monetary worth because of their ability to trade on exchanges. (Friends with Benefits, a well-known “social DAO,” has a token worth around $110; entrance requires 75 tokens.) The concept is that the harder a community works to better itself, the more people want to be a part of it, and the more valuable its tokens become.

This is a good way to organise. Friends with Benefits, in particular, has figured out a way to make it very profitable. However, once everyone is in those secret Discord channels, most DAOs fall under restrictions in terms of what they can really achieve.

Tokens usually treated as voting stock in most DAOs. Instead of majority shareholders, token holders get to select how the group’s crypto is spent.

“DAOs are essentially what you’d get if you founded a company from the ground up, went public on day one, and conducted shareholder votes a lot more frequently,” explains Nathan Baschez, the author. Snapshot, a software that allows DAO members to utilise tokens as votes in a group poll, makes this voting procedure easier. You will receive more votes if you have more tokens.

DAOs become investment collectives

As a result, the majority of large DAOs become investment collectives, investing in NFTs in the hopes of selling them on the secondary market. This is how PleasrDAO, SharkDAO, and FlamingoDAO operate.

A DAO can also be oriented in various ways. Seed Club is a decentralised autonomous organisation (DAO) that provides crypto-curious individuals with a type of boot camp. The Venture DAO of MetaCartel functions similarly to a venture capital company. PartyDAO also developed software for fractionalized NFT bidding. My former firm, Decrypt, is attempting to build a media DAO.

PartyDAO

The possibility of mobilising a community around common financial interests without having to incorporate anything is extremely intriguing. Only time will tell if the SEC shares this concept. However, we should be wary of the present DAO euphoria.

This is due to the fact that DAOs, in their current state, have an almost unfathomably wide scope. It’s worthwhile to try to make sense of the jumble. After everyone has made their way to the paywalled Discord channel, what should a DAO really do? DAOs, according to crypto utopians, are the next businesses, but for the time being, many of them are nothing more than social clubs.

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