My apologies if this post has a certain lack of coherence. My week’s been phenomenally busy and I haven’t had as much time to write as I would’ve liked. If you’re still confused about DAOs after reading this, feel free to reach out to me or join our Discord to ask me or others far smarter than me. I’m positive we’ll be able to get your questions answered!
Goooooood morning! I hope you’ve all had yet another wonderful week and are enjoying the start of the holiday months and the impending doom…of 2021. 2022 is still gonna happen. I hope.
Anyways, despite the time of year for vacations and holidays, Web3 still has yet to take one for itself. Over the last week, an organization known as the Constitution DAO tried (and sadly failed) to buy one of 13 remaining copies of the original 500 prints of the United States Constitution. They raised about $40 million worth of Ether in a massive crowd-fund.
Keep in mind, that all came together in a week.
In all honesty, this is perfect timing for me. I was already planning on writing about DAOs this week and had no clue this was going to happen. So, instead of using my typical format of higher-level commentary on a concept, let’s do a deep dive into a very relevant cultural movement that happened this week.
Oh also!
We’ve been added to Readsom.com! I’ve had the pleasure to get to know the founder and curator of the site and she graciously asked if she could add CryptoCurious to the site. Of course I said yes! It would mean the world to me if you took a minute or two before reading this and gave a review on the site. Positive or negative, I don’t mind. You can find it at readsom.com/newsletter/crypto-curious!
(This isn’t sponsored, by the way. Just two founders wanting to grow their businesses :D)
What is a DAO?
The acronym “DAO” is short for Decentralized Autonomous Organization. DAOs aren’t always automated, but they are decentralized organizations that are really only possible in a Web3 context.
DAOs are primarily made up of smart contracts (which we talked about last week) that govern things like voting, membership qualifications, and almost all the other essentials that a typical corporation or LLC needs to operate.
A good example of this is another relatively new DAO called the Developer DAO. This DAO exists to help connect Web3 developers and bring more people into the Web3 ecosystem. The DAO is governed not by shareholders and a controlling CEO or board of directors, but by the members.
To join D_D initially, you had to mint an Ethereum NFT called a ‘Dev’, join the Discord server, and connect your Metamask wallet to verify ownership. I was lucky and able to get in early enough to buy one of these 8000 tokens (I’m dev #5884!) before they were all minted and I’m now proudly a member!
How governance works here is all wallets that own one of these Devs get one vote for proposals. A snapshot is taken of the current block on the Ethereum blockchain and all wallets that own a dev on that block get voting power. If the majority of wallets vote ‘yes’, the proposal passes. If the majority vote ‘no’, it doesn’t pass.
Most DAOs operate on this basic structure. Excluding the NFT; most use fungible tokens (also known as ERC20s). The Constitution DAO was/is very much like this as well. To gain membership, you would contribute to the DAO treasury (just a wallet run by the DAO) and receive some tokens known as the $PEOPLE token.
The idea was that the DAO would try to win the auction at Sotheby’s this past Thursday and, if successful, all the owners of the $PEOPLE token would vote on what to do with it.
At a high level, this is basically what a DAO does. A group of people come together for a united cause and (literally) vote with their wallets on what the organization will do. It’s 100% the most Web3 native concept that’s been come up with to date. An organization without centralized leadership to worry about.
Is that all?
Pretty much, tbh. DAOs are a fairly simple concept to grasp. Groups of like-minded people coming together to create something incredible. Now, I want to give you some more IRL examples of how the DAO structure can work.
DAOs: Beyond the Theory
We’ve already explored the basics of the Developer and Constitution DAOs but what else is there? Are there any more? What do they do?
First, those are fantastic questions. Second, you have no idea what you’re in for. With DAOs like Flamingo, Maker, Genesis, ENS, and so many more, we already have so many vital bases covered.
Flamingo (flamingodao.xyz) is a DAO that collects and trades NFT assets. Their mission as an org is to support the NFT ecosystem by buying, collecting, and trading NFTs. In a way, they act almost as an NFT hedge fund, just…without all the corruption. All transaction decisions are made by the popular vote.
Maker (makerdao.com) is very similar to other companies such as Circle (USDC) and Tether (USDT). They developed and maintain a stablecoin called DAI. The goal is to create the most trusted decentralized stablecoin in the world.
A stablecoin is a kind of cryptocurrency that has its value pegged to another asset. In this case, DAI is pegged to the US dollar.
The DAO (what I call the Genesis DAO) was the subject of a nasty hack that drained their reserves due to a smart contract bug. Before that, they were meant to be a decentralized venture capital fund run by the investors and not a general partner (as most VCs are). I can’t find too much information on their fate, but they seem to be defunct. They aimed to be a hub to fund new Ethereum projects.
ENS, short for Ethereum Name Service, (ens.domains) is one of the newest entrants to the DAO pack but has been around for a long time. If you’ve ever seen someone on Twitter with a .eth name, that’s from ENS. ENS is very similar to DNS, the internet protocol that allows domain names to connect to IP addresses. The difference for ENS is the domain connects to the owner’s wallet.
ENS domains are purchased as NFTs and are used as valid wallet addresses to make Ethereum transactions. So, instead of sending ETH to a long and complex hex address (mine is 0xe4e1487dBbEC9Fc7e6a363A37b71A9672dAD358c), you simply enter an ENS domain (I don’t have one yet because of gas, but Vitalik Buterin’s is vitalik.eth) and it works!
I do have a Solana equivalent, however! It’s lucaswalters.sol if you wanna help support me :)
So what?
DAOs are a new beast. They technically have no legal structure and don’t exist in the eyes of the government. But they do exist in the eyes of their members, investors, and customers. They’re a brand new way to get people together to do cool new things, like buy the freaking US Constitution. Even if that didn’t work.
Personally, I think the invention of DAOs is going to be as important and controversial as when Cornelius Vanderbilt used corporations to fundamentally change American life. We don’t know what is to come, but I think it’s a bright future.
What would you do?
If you could start a DAO to do anything in the world, what would you do?
I would create a DAO with the specific purpose of raising billions of dollars and buying out AMC to take it private. Not super original (that has to go to Constitution DAO), but probably the most 2021 idea ever.
Let me know what your answers are in the comments on the post on Substack, by replying to this email, or joining our Discord server! I can’t wait to hear the crazy ideas y’all come up with.
And with that, have a fantastic weekend!