The Current State Of DAOs

With every passing week, acknowledgement of and interest in the concept of Decentralized Autonomous Organizations (or DAOs) becomes more and more prevalent, both in and out of the web3 sphere.

This is not without reason, as the exciting implications of and limitless potential inherent to the concept of DAOs are clear and evident to those who have spent a decent amount of time learning about them.

The collaboration of loosely-knit communities, regardless of geographical distance and other such factors has been demonstrably successful already over the internet. Now add in an organizational structure and tools specifically geared towards this form of cooperation and you have something that could arguably change the very future of how we work, organize and build together.

DAOs Are Growing Explosively

Since the launch of the first Ethereum DAO in 2016, the 2020s mark a renaissance in DAO experimentation in both use cases and structures to increase resiliency and scalability. Two years ago, there were only $10 million invested in DAOs in total, and approximately 200 people working in DAOs.

Today, there are over two million people working in DAOs, a ten-thousand fold increase, and a staggering $8.5 billion invested in DAOs globally.

Investors from both crypto-native and traditional funds have also invested aggressively in the DAO space, pouring over $430M into early-stage DAO startups in just the last year. Meanwhile, investment DAOs themselves have found themselves managing tremendous pools of capital, with Founders Fund and Peter Thiel-backed BitDAO boasting $2.5B in assets under management.

Although it can be said that the growth of DAOs till now has been astonishing, even the most conservative growth projections indicate that DAOs’ collective treasuries will exceed $2 trillion by 2025. Projections and predictions notwithstanding, a closer look into the current DAO sphere and climate will give us less nebulous reasons to be excited about their future.

Modern DAO infrastructure and tooling capabilities have allowed an incredible amount of variety when it comes to currently functioning and thriving DAOs, to the extent that they can currently be broadly defined into certain broad classifications.

Types of DAOs

To better understand the different kinds of DAOs that operate today, it is helpful to split them up into categories, and with each category we’ll have a currently operating and successful example organization that can be examined to better comprehend how such DAOs work.

Venture DAOs:

Venture DAOs are, like many forms of DAO, largely governed by their community. Arguably the most important use of the DAO concept, Venture DAOs by design integrate transparency and meritocracy into their function, replacing the role of a leader or decision maker with community voting and consensus among the community.

A prime example of a Venture DAO is the cleverly named ‘The LAO’, which operates on the Ethereum network. The LAO is a member-directed venture capital fund organized in the United States, with an aim to be compliant with U.S law. The LAO has funded over 30 projects on the Ethereum network by enabling its members to pool capital to invest, and ultimately getting the returns of those investments back to the members.

Social DAOs:

Social DAOs are essentially social networking platforms which exist in the crypto space. Think along the lines of facebook or twitter, but with a form of digitally augmented democracy, wherein all members can share their opinions.

Perhaps one of the most prominent and well known social DAOs is the ‘Bored Ape Yacht Club’, or BAYC. By purchasing a Bored Ape NFT you gain access to an exclusive discord channel and shared digital canvas where you can socialize and network with other Bored Ape NFT owners, as well as being invited to exclusive events.

NFT DAOs:

Also known as collector DAOs, this form of DAO allows investors to organize together and invest collectively to purchase NFTs, similar to the concept of an index fund. 

A well known example of this type of DAO is Flamingo, the members of which pooled their money to buy a ‘cryptopunk’ NFT worth 605 ETH, which at the date of purchase was the equivalent of $761,889.

Protocol DAOs:

Protocol DAOs are organizations wherein the governance is enacted by token holders using their tokens to vote on and enact changes to the protocol.

Uniswap is one such DAO, and is a leading decentralized crypto exchange that runs on the Ethereum blockchain.

Grant and Charity DAOs:

In this form of DAO, communities contribute money to a shared pool which is then used to fund various projects, often philanthropic in nature. By operating in this manner, grant DAOs can also strategically deploy capital assets throughout the web3 ecosystem.

One such organization is The Big Green DAO, which is a first-of-its-kind experiment to radically reconceive and restructure grant-making, disrupting embedded power structures by putting nonprofits in the driver’s seat.

Others:

There are some DAOs which don’t fall under these broad categories, which shouldn’t be surprising since the DAO structure is so versatile that it is possible to be incredibly innovative in the kind of company you choose to organize, and how you do so.

One such example of creative usage of this organizational method is the Decentraland DAO, a unique mix of a homeowners association and a city planning committee, wherein every member has voting power based on how much of the virtual property they own. 

Conclusion – The Bear markets effects:

Despite the devastation of the recent bear market on the entire crypto space, DAOs, while not entirely unaffected, are still flourishing. More new DAOs pop up by the day, and although global DAO investment has fallen from the $10 billion that we saw in early 2022, today it is still at $8.5 billion, an incredible amount that is now once again beginning to rise.

In the last week of June alone, DAOs saw a $1.1 billion increase in their combined total treasuries.

Bear or bull, DAOs are an organizational structure based on concepts that will survive the test of time.

If this tailored list of currently booming and thriving DAOs is not convincing enough, then all that is needed is to wait, because while trends can go up or down, and fads always fade into the annals of history, systems that have merit become firmly entrenched in the public eye exactly because they are meritorious.

The current state of DAOs may be prosperous, but their potential in the future far outstrips anything that has been seen so far.

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