Web3 has certainly become the umbrella for a series of buzzwords lately. Cryptocurrencies and DeFi (Decentralized Finance) are all the rage, drawing in everyone from corporations and the highest net worth investors to retail traders.
In addition, there are NFTs, GameFi, metaverses etc. amongst the Web3 buzzwords. One thing recently many of our friends find particularly interesting are Decentralised Autonomous Organisations, or DAOs.
What is a DAO?
DAOs are essentially yet another use case for blockchain technology as the pioneers envision a new, decentralized era of the web. A DAO supposedly challenges the traditional top down structure that most traditional companies practice, by giving complete power to its members – every decision from spending to accepting new members is based on votes.
To do so, a DAO relies on a system of transparency, accountability and collaboration. There are many kinds of DAOs – from charities to venture capitals. Once a DAO is established, its fundamental contract (upon which the entire organization is built and governed) can only be altered by a consensus, which means that the organization always works in the best interests of its stakeholders.
Momentum Works will publish our cornerstone Web3 report this month (June), where we will examine more of the various use cases (from Axie Infinity to Decentraland), and connect the dots.
Here, to help digest the concept of DAO a little better, let’s explore some of the larger existing DAOs around the globe:
Uniswap DAO
Perhaps one of the most daily used and accessible DAOs, the Uniswap governance token has revolutionised decentralised exchanges in a very tangible manner. Uniswap is the most popular decentralised exchange by volume and users.
For example, users voted to reduce trading fees for certain transactions, and in turn caused ripples throughout the DeFi community, with many people moving their assets to Uniswap as a result.
Their goal is to improve DeFi governance, and so far, it has been working.
Decentraland DAO
Essentially a homeowners association crossed with city governance, Decentraland’s management system is entirely decentralized and controlled by the votes of its members.
Their votes are proportional to their stake in the metaverse, or in other words, how much ‘land’ they own. One of the many Decentraland features the DAO members can vote on is what wearable items are allowed on the platform.
ConstitutionDAO
Perhaps the most infamous of the DAOs, and one that made headlines across the globe at the end of 2021, ConstitutionDAO raised over US$45 million in ether over just one week through their PEOPLE tokens in order to purchase an original copy of the US constitution. (There are only 13 original copies known to have existed).
To their credit, they did manage to put a bid in at the Sotheby’s auction, however unfortunately lost to a competing (and less decentralized) bid. The organization is now defunct, and their token is no longer in circulation for this purpose, but this is a key example of a DAO with a strong, member-driven goal.
The speed of which the funding was raised rattled many capital allocators, who would have spent months raising money for any investment.
Are we there yet?
We will examine the concept of a DAO and its use cases in more detail in our upcoming Web3 report. However, it is important to note that of the thousands of DAOs out there, most are far from the decentralized ideal we have in mind. Many other DAOs we have examined are strongly centralized, with certain parties essentially dominating the agenda.
There are many interpretations for that, from the simple technological limitations to more sinister scam claims. However, we do think it is a development stage issue – ultimately, DAOs are relatively new and for them to evolve into maturity, it will simply take time and experimentation.
Therefore, it is good to see so many attempts out there, even if most fail.
Ultimately, “what does complete decentralisation mean?” is a question that does not differ much from other questions humans have spent millennia searching for answers to. But now with so many DAOs, and the rapid speed at which we share information, we are evolving and iterating much faster.