Hello There.
Lets engage in a bit of trendspotting for today.
2020 was about DeFi.
2021 was about NFTs (aka weird JPEGS. Have a look here).
Ok, sweeping preamble statement made. Moving on…
What is a DAO? I am going to copy paste some stuff here, because its been written better than I could have - here. To quote:
A decentralized autonomous organization (DAO) is an entity with no central leadership. Decisions get made from the bottom-up, governed by a community organized around a specific set of rules enforced on a blockchain.
DAOs are internet-native organizations collectively owned and managed by their members. They have built-in treasuries that are only accessible with the approval of their members. Decisions are made via proposals the group votes on during a specified period.
A DAO works without hierarchical management and can have a large number of purposes. Freelancer networks where contracts pool their funds to pay for software subscriptions, charitable organizations where members approve donations and venture capital firms owned by a group are all possible with these organizations.
Effectively, DAO = DeFi Infra + NFT business models + ingenious people.
Now, you may ask me, why do I think DAOs are a big deal. It has to do with the way we are changing as a society. And should you want to read a very telling commentary on where we are headed couched in science fiction, may I recommend Hao JingFeng’s Vagabond. It’s an amazing, amazing book.
Anyway, from being a sleepy “internet currency” that no one cared about and mostly lampooned on such shows as The Good Wife, Crypto has come a long way. It’s no longer a technology or a currency - it’s effectively an Internet Economy. I would say it is the only internet native economy we have seen. Think about it for a moment. Revenue is earned in Ether, a community makes key decisions, transactions are made via coded smart contracts, balance-sheets and assets are controlled via multi-sigs, value is abstracted into tokens.
IMO, DAOs are the native corporations of the Internet-native economy. They are not incorporated in Mauritius, Cayman, Lichtenstein or Cyprus - they are resident in reddit pages, discord servers and blockchains.
What does a corporation do? At a very high level, it pools capital, makes decisions about putting the capital to work, and captures value. DAOs look like cooperatives but the underlying scale, impact and mechanism will likely see them rival the fortune 500 companies in the medium term.
This is where you look at me up and down looking for signs of what exactly I have smoked.
Bear with me.
The internet-native economy is largely based on IP - it can be content, it can be questionable JPEGS but at a general level, it is about knowledge and that knowledge either has takers or not. The knowledge that has people willing to pay for it flourishes, others languish in the online equivalent of purgatory.
if you Look a DAOs from this lense, we find that there is a DAO for pretty much anything. You want to collect NFTs - FlamingoDAO. You want to Socialize - there is FWB. E-sports, Music, Building Software, Media - pretty much any kind of collaboration you could do online has a DAO associated with it. There is even a DAO for PE investments.
And this movement has been so fast it was almost blink-and-you-miss-it in its nature. So, as I write this in October 2021, Fingerprints and Flamingo are on their way to be billion dollar DAOs, Bright Moments sold millions worth of NFTs in <30 minutes, Rabbithole, Forefront, and FWB are becoming the premier on-ramps for the next wave of active contributors in crypto.
And then there is NounsDAO - I don’t have a clue what it does. If you do know, can you educate me? It literally has a WTF in the URL.
Today, there are more than 100 DAOs managing over $10B in assets. Ten Billion Dollars!!??
Now, smarter VC money is already flowing in here. Multiple top tier VC funds have invested in these DAOs and I think they’ll end up becoming some of the best performers in their portfolios over the next decade.
Before we go further, let’s examine the building blocks of a DAO.
There is a dedicated comms channel. In some cases it is a discord server, in some cases its a Telegram group.
There is a treasury. Most Community DAOs collects valuable NFTs (blue chip monkey JPEGS anyone) and store them in some form of a multi-sig. Most DAOs start as a bunch of friends fooling around. Then it acquires critical mass and starts growing.
There is a Token. Once the DAO becomes “cool”, people want in. At this point, many Community DAOs issue an ERC-20 token as a way to filter membership and create some level of exclusivity. So, a membership can cost anywhere from a few dollars worth of ETH to a few millions.
There is consensus based Governance. Decisions are made collectively and while votes may be a formality, the social aspect of them is the web3.0 equivalent of Bigg Boss. It’s usually a ton of fun to see who voted, how they voted.
On-chain Cash Flow. Fun chat with friends starts delivering sustainable returns. Nascent today but the trend is irreversible. Most common way so far is to release new NFTs and sell them. More on this here.
DAOs are growing like Fungi. Because the primary point isn’t the money. And a lot has to do with the lockdowns and the last 18 months and the seclusion nearly all of us have to deal with, but I don’t see this going away when things open up. Unlike traditional startups, the initial purpose of most DAOs isn’t to maximize shareholder value. It’s about the vibes man!
But, the funny thing is, these vibes are proving to be extremely valuable. Many DAOs are sitting on treasuries worth millions. Yes, millions. Others have 100mn$+ market caps. Don’t believe me? Check this out.
So, where do DAOs go from here? There are a few emerging business models.
Collect membership fees - Self explanatory. Once you are cool, you can charge cover for entry. As the DAO treasury grows and membership demand increases, the tokens also start becoming really valuable.
Collect Blue-chip NFTs - pool money, buy stuff one person on their own couldn’t, speculate.A good example of this is PleasrDAO, one of the largest NFT Collector DAOs which recently announced a similar liquidity strategy for Doge NFT.
NFT Drops - allow me to illustrate this with a tweet.
Yesterday @BoredApeYC sold +$100M worth of NFTs. and also airdropped +$100M in value to their community. The market cap for #BAYC well exceeds that of most traditional media companies. If you are looking at what the future of web3 media media companies looks like, this is it.Another one of my favorite drops recently was a collab between Arihz2 (an anonymous Brazilian computer scientist / NFT artist) and FingerprintsDAO (one of the leading collector DAOs for smart contracts as art). The drop was called Avid Lines and in the first 30 days, it’s done almost $10M in trading volume.
Create Own Media that sells - If you have an NFT collection, you effectively own an art collection. some of them can be made very valuable by building hype. Imagine Banksy releasing an NFT for his art. That would be valuable by itself. The imagine relatively unknown creatives going viral on the internet - not as immediately valuable, but can be pricey if there is enough demand. Lastly, think of a collaboration. Like a nice short story like Rome Sweet Rome3 being turned into a full novel and being read by Michael Caine, Benedict Cumberbatch, Liam Neeson and Stephen Fry. I’ll pay for that in a heartbeat. Best Example of this till date is Club Top Shot. Hell, UTA, one of the largest talent agencies signed up Larva Labs to represent them in such decidedly old world creative pursuits like video games, film, TV.
Now, this post barely scratched the surface of what is likely going to be a Cambrian Explosion on the Web 3.0. 2022 will be the year of the DAO. Plan Accordingly.
As always, I look forward to hearing from you. If you liked this post, pls feel free to share this or subscribe to this newsletter using the links below. I try to write a 1000-2000 word essay once a week.
Some would want to make a distinction between regular DAOs and community DAOs. I ask - whats the difference. So I will use the term DAO for all of them.
Here’s how it worked:
Minters chose an Autoglyph to use as the base input for the generative algorithm
Autoglyph holders could whitelist their Autoglyphs to receive 10% of primary sales for mints that used their Autoglyph as the base input
The generative algorithm combined the base Autoglyph input with Arihz’s randomization code and the output was a remix called Avid Lines. Check out more below from the tweet below.
Autoglyphs are about to become income-generating assets. The first artistic collab of @FingerprintsDAO with Arihz, the creator of @framergence and @pulsquares uses Glyphs as generators and shares revenue with the owners. Why is this relevant? 1/Avid Lines has minted its genesis piece, generated from Autoglyph #433 Autoglyph owners may now whitelist their pieces (signature only, no transfer required) Learn more: https://t.co/tcDCKhGHr9 Public mint begins: July 28, 2021 @ 11AM CT/4PM UTC https://t.co/iA8VMgeunCAvid Lines @AvidLines
Read it. Yesterday.