DAOs are a “buzzy” term that many projects use to describe themselves. There is no perfect way to define a DAO and that makes them ambiguous and susceptible to misinterpretation.
Here are common definitions used to describe DAOs.
DAO is a "decentralized autonomous organization"--i.e., a smart contract-based unincorporated association of individuals, entities, associations and/or other persons or groups of persons, which defers certain aspects of the governance, structure, operations, and other capabilities to the consensus mechanisms, computations, and data storage and transactions of such smart contract’s code and underlying permission-less blockchain.
The simplest way to define a DAO
a group that combines smart contracts with non traditional forms of member incentives to reach consensus decision making in order to create a coordinated crypto community.
Think of it like a virtual company, club or a community that is controlled by its members, who can make decisions and vote on proposals through a decentralized voting system. The rules and decisions of the DAO are encoded in smart contracts and can be programmed to automatically execute certain actions based on the outcome of the voting. It is a coordination game.
Why are definitions important when DAO’ing? They aren’t… a DAO is defined by the mission established by the founding team or community.
There is no “one size fits all” approach to DAO’s, but it typically consists of 3 components.
Governance - how decisions are incentivized, made and executed. Typically enacted as an off-chain temperature check combined with an on-chain voting quorum.
Treasury - shared resources of the DAO. Can be NFTs, Fungible Tokens, Stablecoins, and its own native token. Typically stored in a gnosis safe app or in a custom smart contract treasury. Some treasuries are programmable like Juicebox (JBX) DAO.
Community - the established mission or purpose by members of the DAO, how members interact with each other, the culture of the group, the process for consensus decision making. THE MOST IMPORTANT PART OF ANY DAO.
The most successful DAOs are established for a specific and identifiable purpose. The purpose can vary across a wide spectrum
For example the Social DAO “Nouns” is established as an experiment in bootstrapping identity, community, governance and a treasury that is shared by all Noun NFT holders.
Some DAOs are setup to for a single purpose and will disband after that purpose is accomplished. For example, Constitution DAO was setup to simply raise funds and bid on an auction for one of the original copies of the US Constitution. Their effort was defeated at auction and they subsequently issued refunds to members and disbanded.
There are a number of different DAO types that are currently operating and the classification comes down to a few main categories:
NFT collector
Grants
Social Impact
Investment / Venture
Media
Product
Protocol
Service
Social / Culture / Community
There are a number of tools a prospective DAO contributor can use to understand the current DAO landscape, contributors and the connections across different communities.
These analytic tools typically provide valuable information on the governance, treasury and community contribution of DAOs. These tools also help DAO communities coordinate their efforts effectively and provide potential investors or contributors key insights into the inner workings of each DAO.
Becoming a contributor is an important part of understanding the nuances of each DAO community. Some allow public access and do not token gate their proposal forums and others only allow you to participate in governance if you own the token (ERC 721 or 20).
The best way to do this is to join each DAOs individual discord and interact with their contributors, check out their proposal forums and join their governance meetings.
Most DAOs are fluid organizations with a close knit “core” group that attends every town hall, kick starts initiatives and in general keeps the rest of the community moving toward action items.
Some DAOs even set aside “grant” funds for prospective builders to use their tooling or protocols. These grant based DAOs are the best way to get introduced to DAO ecosystems.
You can hop into the Gitcoin ecosystem and get funded by their new grants protocol
Successful DAOs are all about coordination and creating a strong sense of community. DAO members take the same concept of a top down organization and create a model that scales the organization horizontally, leaving decision making and control to a protocol specified within code.
Potential contributors should look past the façade of every NFT or DEFI community calling themselves a DAO and get to the root of where the incentives lie.
This requires digging into the 3 components (Governance, Treasury, Community) and understanding the purpose or mission of the DAO.
The easiest way to describe a DAO is a chat room with a shared treasury.