📓 Snapshot | DAOs - The Future Of Work

An Introduction To Decentralized Autonomous Organizations · 2 min read

Jan 29, 2022

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This is a quick snapshot of the Super Simple post on DAOs.

The full version summarizes 2 episodes of The Superteam Podcast on DAOs and 3 complementary articles by The Token Dispatch, Ethereum.org, and Apollo Capital. To go deeper on the topic, I highly recommend you check out the original post. It builds a solid foundation and its only a 5 minute read!

In case you have already read the full summary, this snapshot will serve as a great recap so you can really cement the new concepts.

As always, plenty is plagiarized and paraphrased. Even quotes. Some lines are lifted directly from the transcript.

All credit goes to The Superteam Podcast, The Token Dispatch, Ethereum.org and Apollo Capital for putting out this content for free. Links to all source content and more information can be found at the end.

Read Time: 2 minutes
Prerequisites: Tokens, Ethereum, Smart Contracts
(Need a refresher? Start with the basics here)

DAOs - The Future Of Work

Foundation: What Is A DAO

DAO = Decentralized Autonomous Organization

DAOs are a new way for humans to organize. A disruptive digital business structure for building companies, enabled by blockchain and tokens.

They allow for greater transparency and better alignment of stakeholder interests than current coordination mechanisms like corporations.

Let’s break down each element of a DAO.

Decentralized

Like a “reddit group with a bank account”

Flat structure, not hierarchical
No typical management or board of directors
All coordination is online. A discord server can be a company
Global participation
Everything meaningful is voted on, usually democratically
Investing in the DAO grants tokens, which come with voting rights

Autonomous

A DAO = People + Smart Contracts

Created under a predefined set of transparent rules. Like a constitution
These rules are code i.e. smart contracts on the blockchain
This includes operational workflows, governance system, and incentive structures
Iterative: Changing rules is possible, it just requires votes from everyone

This makes the DAO autonomous i.e. able to self-govern. Thanks to smart contracts, it doesn’t require resorting to external arbiters, like the legal system. Code is law.

Organization

Code = Trust

With DAOs you don’t need to trust anyone else in the group, just the DAO’s code, which is 100% transparent and verifiable by anyone.

People can collectively manage funds, work together and make decisions without even ever needing to share their real name.

This opens up so many new opportunities for global collaboration and coordination.

Furthermore, DAO transactions and interactions with other protocols or individuals are all recorded on the blockchain. They preserve a complete history.

DAOs are like tech-enabled worker cooperatives, adapted for the 21st century.

Why We Need DAOs?

The old ways of organization don’t work in 4 ways -

1 - Misaligned labor incentives

Employees want to make more, the company want to pay less
Employees are the company’s margin

2 - Barriers to access

Recruiting, onboarding, exiting are all long drawn out

3 - Bureaucracy

Slow decision making, hierarchical structure, lots of middle managers

4 - No ownership

Wages don’t make wealth. Contributors should capture value.

In the past 20 years, tech companies did attempt to solve some of these problems by granting equity and ESOPS.

While that model has been successful, it has been constrained by geography and legacy financial infrastructure among other factors.

Enter DAOs — A New Paradigm

DAOs aim to fix these issues

Aligned incentives
- DAO exists to serve members, not necessarily customers
Flexibility
- Easy to join, easy to leave. Work like a lion. Rest when you want
Autonomy
- Fewer middlemen. Flat structure. Your role is determined by your expertise and contributions.
Ownership
- Get rewarded for the upside of your own work

Types of DAOs

DAOs have evolved well beyond just a pot of funds with pseudonymous people voting on what to do with them.

DAOs can be of various types including for-profit, non-profits, investor groups, trader groups, developer teams, NFT or art collector groups, social groups and many more.

Some popular examples of DAOs include

Service DAOs
- Eg. RaidGuild, a Web3 product development and design agency
Social DAOs
- Eg. Friends With Benefits, a social club that raised $10M in funding
Venture DAOs
- Eg. Metacartel, making investments into decentralized applications

Two Watershed Moments

Two DAOs formed 5 years apart amassed massive media attention and raised awareness about DAOs

The DAO

The first DAO, simply called ‘The DAO’ was formed in 2016. The goal was to build a VC firm without leaders. It ended in disaster.

It raised $150 million very quickly but got hacked and lost $50 million. The Ethereum blockchain was controversially reset to restore the stolen tokens.

ConstitutionDAO

In 2021, ConstitutionDAO raised $47 million to purchase one of the 13 original copies of the US Constitution from Sotheby’s. Donors got voting rights on what to do with the artifact. Ultimately, ConstitutionDAO lost the bid.

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If you are totally new to the topic of DAOs, reading just the snapshot can a bit feel like this:

I get it. The original post will fix this for you, and its only 5 minutes. Check it out:

📔 Super Simple Summary📔 - DAOs

Meanwhile, let’s keep up the journey down the Web 3.0 rabbit hole.

Also check out the Appendix below, which includes sources, additional readings and footnotes.

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Appendix

Full Summary