Together, we can DAO big things.

How individuals are forming ant-like colonies in Web3.

People around the web are banding together under a shared goal. It’s the hot new wave in the cryptoverse making its way into meatspace. 

And it has a boring name. 

This week, we look into Decentralized Autonomous Organizations.

I’ve broken into four parts, and made some really distracting and RAM heavy GIFs:

1. DAOS. What the heck are they? Why should we care? 

2. Quick history of DAOs

3. A new wave of DAOs

4. A DAO a Dozen: A look into all kinds of different DAOs

5. Where can DAOs go from here?

1. DAOs. What the heck are they? 

Let's begin like every wedding speech, with a definition. Hmm, well,  DAO isn't actually in the dictionary just yet. So then… 

DAOs stand for Decentralized Autonomous Organizations. 

Let’s work backwards to understand what that means.  They’re Organizations that act Autonomously, through a Decentralized network. They are kinda like any normal organization, but they aren’t operated by humans. Instead, they carry out duties and functions via smart contracts (i.e. pieces of computer code, remember from Ep 1?). And because the rules are embedded into the blockchain, you don’t have managers, middlemen or bureaucracies. In a nutshell, they’re self governing entities that exist to achieve a shared goal. 

But that’s not to say there aren’t people involved in DAOs (this nutshell isn’t allergic to humans!). Well, for the time being. (As far as I know?!). Currently, DAOs are first created with a set of rules determined by humans, which are encoded and enacted by these smart contracts. 

OK so we have the framework. But what do they dooooo? Why should we care? 

Right now, DAOs are typically used to fund projects and make group decisions. Sort of like a crowdfunding granting agency. And because it’s decentralized, the DAO must decide which projects to fund based on a consensus from its members ( i.e. token holders). But the interesting part is that these tokens can be exchanged for value.  So members are incentivized to fund projects and collaborate in ways that will lead to the success of the DAO itself, and drive value.  As a token holder, you have the ability to submit proposals to the DAO, vote on proposals and reap any benefit that comes to the DAO. Like Kickstarters, or any crowdfunding model. But in this case, you’re an owner too.

One way to think of them is like a “subreddit group with a bank account” and some governance rules”,  explains Aaron Wright on Modern Finance. With DAOs you can tap into the “collective energy of people online who are interested in a particular topic”. Whereas before, with Web1 and Web2 tools, you could only share information and discuss a topic. Now with Web3 and the blockchain, you can take actions together with a vote and a fund. Just imagine the r/WallStreetBets DAO. Ha. Madness. 

I personally like to imagine DAOs as an ant colony. Similar to a hive, there is no sovereign rule. Common worker ants wear the pants. And the actions and duties are essentially programmed into worker ants like a smart contract. Each ant acts altruistically for the betterment of the hive as a whole. I guess it’s no coincidence that one of the first DAOs created, back in 2016, Aragon, uses the token symbol ANT.

Side note. Just like how ant colonies are predominantly non-reproductive females (i.e. worker ants), DAOs are basically made up of male geeks. The DAO space (and crypto as a whole) is in desperate need of some biodiversity in order for the ecosystem to flourish. Wisdom of crowds only is really wise if you have diversity. Hence part of my motivation to get more people interested in DAOs. I won’t get into it here, but DAOs face many challenges, beyond diversity and the fact that most members are “overwhelmingly white, male, middle class, western, nerds”. 

OK ants and DAOs. Just as there are different colonies of ants, there are of course different DAOs. Each with their own raison d'etre.

I don’t know where to begin this overview…. so we’ll start from the beginning.

2. A quick history of DAOs

Our story begins with one of the first* DAOs created:  “The DAO”. Not the most riveting name.  But it does have a compelling backstory that literally split Ethereum and flipped the ideology of blockchain ‘mutability and censorship’ on its head. 

[*though, I think you could argue Bitcoin is in itself a DAO? Hot topic. As well as Dash and many other coins, before even the term DAO was coined. Hehe.]

The DAO was launched at the end of April, 2016 as a venture capital fund. In a few weeks, it quickly raised about $150 million in Ether (the Ethereum value token), a staggering ~15% of the total supply of Ether. The DAO’s main objective was to invest in various crypto related projects that proposed to support the blockchain ecosystem, and would eventually turn profit for The DAO.

In May, TechCrunch raved about The DAO “as a paradigm shift in the very idea of economic organization… it offers complete transparency, total shareholder control, unprecedented flexibility, and autonomous governance”.  This success didn’t last long though. 

Less than two months later, on June 17th, hackers managed to find a loophole in the code and siphoned off 3.6 million ETH, the equivalent of about $70 million at the time (or in today’s prices at ~$2000 an ETH, about $7 billion). Can you say D’oh?! That’s a lot of dao.

In case you weren’t wondering about the splitting of Ethereum... In order to reverse this hack, or at least to some extent, the Ethereum community proposed forking Ethereum in two. Big controversy in the crypto community. The blockchain is supposed to be immutable and censorship-resistant, right? In response to rumoured forking, the hackers tried to bribe ETH miners, and offered them a collective reward of 100 bitcoin and 1 million ether in order to thwart the forking vote process.  But after much debate, Ethereum split. And on the new version of Ethereum, the one that most of us know today, the hack never happened. Ethereum Classic on the other hand still has a record of the heist on its blockchain. 

3. The birth of a new wave of DAOs

Jill Carlson @jillruthcarlson

DAOs getting the same kinda attention I saw around NFTs 6 months ago. Watch this space 👀

Over the last few months, we’ve seen a lot of media attention on NFTs. And many believe that DAOs are next big thing to hit. As Not Boring describes it

DAOs sit a level above NFTs -- DAOs can own NFTs and create NFTs, plus do a whole lot of other non-NFT things -- and have more transformative potential than NFTs. An NFT is a piece of digital media; a DAO could be a whole media company.

Today, the spirit of The DAO lives on, in various other DAOs. And many of which are doing just that: buying NFTs, creating NFTs, or doing things completely outside the space. Some directly, some indirectly. One of which is The LAO, a slightly more imaginative name than The DAO, but its intentions were similar: a DAO to support the blockchain ecosystem. It gets even more fun, where you have the LAO, which is a DAO, supporting other DAOs like Flamingo. 

DAOs (or any projects for that matter) pitch the LAO for funding. If it succeeds, so does the LAO. 

To get an idea, here’s Flamingo’s proposal:

Flamingo aims to develop a strong foothold in this emerging ecosystem, bringing together the "hive mind" of a DAO to the world of NFTs. Flamingo will give its Members the ability to develop and deploy NFT-focused investment strategies. Purchasing NFTs with Ether or some other base digital assets pursuant to the terms outlined in these FAQs.

Once purchased, Flamingo could evolve in a number of different directions. Members will have the right and ability to factionalize its NFT holdings. Any purchased NFTs can be lent, held, displayed in a digital art gallery, or used as collateral in other DeFi platforms. The direction is up to the Members.FT-focused DAO that aims to explore emerging investment opportunities for ownable, blockchain-based assets. NFTs are not just cat pictures. They encompass digital art, collectibles, and in-game assets and other tangible assets. These new forms of digital property are poised to play an increasing role in helping to create, monetize, and incentivize online digital content.

Flamingo essentially functions like an investment fund for NFTs. And maybe you’ve heard the name, when earlier this year they dropped $762,000 on this rare “Alien” cryptopunk NFT: 

With only nine unique Alien punks in existence, inside the CryptoPunk universe, they’re seen as the Holy Grail in the NFT space.  You’ve probably seen these cryptopunks on Twitter. Many celebs are dawning them as their profile pic. Even Jay-Z is sporting one now.

And in case you’re wondering why someone (or I guess I should say, 100 people collectively) would pay over three quarters of a million dollars for what others would see as a jpeg, here’s how one Flamingo member, Chris Furlong, describes it: 

There’s a great passion within our membership about the importance of Cryptopunks. We place a value on NFTs with historical significance and want to be good stewards of items we hold in our collection. There’s also a hedge with punks because they are priced in ETH, have the longest historical sales record, and ultimately serve as a store of value. Some may laugh, but we believe punks are just as much a store of value as bitcoin is. This purchase is a reflection of our long term bullish sentiment on the entire crypto space.

Chris goes on to speculate how NFTs and the metaverse will playout in the coming decade: 

In 2030, the metaverse will be more fluid, interoperable both between online worlds and the real world. Digital objects will appear in houses, you will move freely online. Everything will become blended, and if done correctly it will feel natural. By allowing ourselves to expand the definition of space, which today is governed by the physics of the concrete to one that includes digital realms, we can perhaps reconcile the dichotomy we struggling with where information moves at the speed of light, but our bodies and senses are rooted in the same speed as our ancestors.

OK. We’re getting off topic. But I want to put a little NODE here, as I’m interested in diving more into NFTs and the Metaverse in future posts. Particularly, how NFTs can play a part in the physical world.

It’s maybe also worth mentioning that many of these DAOs (like Flamingo or Neptune) cap their membership at 100 members. And even if you wanted to join, you’d need about 60 ETH (or about $120,000 USD). 

But there are hundreds more, across all fields of the cryptoverse and beyond. Some much more approachable. 

And, just like Bitcoin, I suppose you could make the argument that any decentralized blockchain project is a DAO. But here’s just a handful of interesting ones at a glance... 

4. A DAO a Dozen

A look into DAOs of all shapes and sizes

Let’s get right to it. In no particular order. With brief notes.

First, you have your finance DAOs like… 

MakerDAO - allows for lending and borrowing, and developed its own stablecoin DAI. Plus, it acts as an incubator for crypto startups. 

Balancer - an automated portfolio manager. 

Yearn.Finance - allows for optimized earnings on crypto assets through lending and trading services. 

You can also throw in Aave, UniSwap, SushiSwap. The list goes on. 

Then you have your DAOs for DAOs…

These ones are kinda like the grandaddy of them all, The DAO. Who aim to support other DAOs:

Aragon - A DAO and framework for creating and supporting your own DAO

DAOstack - An open-source project for advancing the technology and adoption of decentralized governance. Interesting read on how it’s using Holographic Consensus to solve a common problem in DAOs; having a non-hierarchical collective vote and agree upon every single action poses scalability issues. 

You have Art and NFTs DAOs… 

On top of Flamingo, you have many others like:

PleasrDAO: “a group of peeps that aim to plz” through purchasing @pplpleasr NFTs

Squiggle DAO: a DAO in support of Generative Blockchain Art (placing a NODE here; will need to one day explore this)

And everything in between DAOs … 

Rocket - provides loans using NFTs as collateral. 

MetaFactory - a fashion label DAO, which creates incentives for designers and fashionistas or as their Twitter puts it: digiphysical culture factory for the metaverse |  composable merch platform for decentralized communities.

Many online communities are forming their own DAOs, particularly on forums and private chat servers like Discord, which use crypto-tokens to give you access to the server and thus DAO governance. One of which I’m a member of: Friends With Benefits. I’ll let them explain it: 

︎What is Friends With Benefits?

Friends With Benefits is a private discord server. A group chat full of our favorite thinkers and creators. You can think of FWB like any other social network, it's a space that has value because of the content and ideas the users of that social network create and share.

The thing that makes Friends With Benefits different is that in order to be a part of Friends With Benefits you must own at least 60 $FWB cryptocurrency tokens.

︎ Why is that exciting or interesting?

Because it means that everyone who is a part of the community is literally invested in the community's success.

As the community becomes more appealing, and more people want to join Friends With Benefits there will be more demand for $FWB tokens which will drive the price of $FWB up and make the existing $FWB holders (community members) wealthier.

4. Where doth DAOs go from here? 

From human DAOs to AI DAOs and back.

The further down the rabbit hole you go, defining what is and what isn’t a DAO gets more blurry. Especially with new shitcoins popping up every day. A few months ago I came across a token on reddit, I’ll call Nic Cage Coin --  I can’t recall the name, and I can’t find it anymore; maybe it was a rugpull? But just to give you an idea of the silliness, there are MULTIPLE Nicholas Cage coins out there, each with their own tokenomics and use cases.

The Nic Cage Coin kinda worked ( I use past tense, as I believe the project is dead) like a kickstarter campaign, where token holders acted like producers for their own Cage film. The idea being that with all the capital they collect, they would approach Nicholas Cage to make a film (apparently he’s in some deep debt?) Token holders of the Nic Cage Coin would then vote on how to create the film, e.g. who to hire as director and writer, plot lines and script endings, supporting actors, etc. Profits from the film, if any, would return to token holders via smart contracts. ( Something that would be difficult to achieve with just Kickstarter — that is, paying back funders and also forming governance for voting).

So is this a DAO? I really don’t know. But I think it’s worth visiting one of the first instances of DAOs being discussed, by none other than Ethereum’s creator Vitalik Buterin in 2014 (really good blog btw). In it, he defines a DAO as: 

... an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do.

If we run this litmus test on the Nic Cage Coin, then perhaps we shall grant it DAO status. 

In this post, Vitalik also breaks things down nicely in terms of automation and capital: 

Where for DAOs, we have automation at the center, and humans at the edges, with access to internal capital. But the idea of a fully autonomous AI-driven DAO, with internal capital is a VERY interesting one. 

🎵 Are we not men? We are DAO 🎵

In 2016, Trent McConaghy envisioned what an AI DAO could look like using a fictitious AI DAO called “ArtDAO”. I’ve paraphrased and updated for a 2021 audience. He envisaged this before the likes of generative NFT art, like ArtBlocks and EulerBeats.

1. ArtDAO runs an AI art engine to generate a new NFT. Example:  Van Gogh Cats. 

2. It posts those limited edition NFTs for sale onto a marketplace, like OpenSeas

3. It sells the editions. It transfers the proceeds from the buyer to ArtDAO using the built-in cryptocurrency.

4. Repeat! Create more art, sell it, get wealthier.

With popularity of EulerBeats and ArtBlocks, maybe someone or something has already created an AI DAO. But in the near future it looks to be human DAOs are at the forefront.  Could we see more organizations slowly start transferring over to a DAO?  Doubtful Zuckerberg will make the switch, but it’s possible the next big tech company could grow out of a DAO. Putting my rose tinted glasses back on, it would allow for a more democratic and community-oriented development. DAOs are more nimble. And their bottom-up approach offers a paradigm shift. 

Just like the Nic Cage coin, I think we will see more and more individuals who share common enthusiasm join together to build something bigger than the sum of their parts.  

Maybe it will be a new blockbuster movie. Or a fan produced music album, where fans cut the middlemen record labels, promote the art, and reap the benefit of record sales too. Or maybe DAOs will form of just fans who are interested in special rewards, like backstage passes or limited edition merch, in exchange for supporting their favourite artist (It’s happening, see JennyDAO).

Maybe we’ll see classrooms form their own DAO. Or whole school boards. Maybe small charities, or large non-profits.

Maybe it will be flashmobs. Or random acts of kindness groups like the Dollar Collective ;). 

Or just like the Argentine ant, maybe we’ll see smaller DAO colonies join up to form super colonies. 

From choir groups, knitting clubs, and birders…

To steamers, foamers, steampunkers ‘n’ furries …

The more you think about, the more you can see anything forming a DAO. 

Hey, maybe one day the Noodler will grow into a DAO. Fingers crossed.

That’s all for now. See you Noodlers down the next wormhole.

D-Worm

****** ****** ****** ****** ****** ****** ****** ****** ****** ****** ****** ****** 

Extra notes: 

Speaking of growing, if you have friends who are interested in art + technology + crypto, please help with sharing the Noodler. The more readers, the more motivation I’ll have. 

Check out Not Boring’s piece on DAOs - lots of inspiration drawn from there.  

Remember, this is supposed to be interactive. You can comment below to give feedback on which NODE (ie topic) the Noodler should dive into next. 

NODES: 

• Metaverse and NFTs, physical NFTs, and Generative Art

• Collaborative and DAO Art

• What the heck is going on with Friends With Benefits?