Do you remember the first time you ever heard the word “DAO”? Maybe your green-pilled web3 friend was trying to sell you the idea, or you saw it in a tweet during the bull market. We’ve surely all gone through the process of diving into a rabbit hole around this nascent vision. Naturally, this discovery leads us to wonder, “should my project be a DAO?” Understanding the layers of what makes a DAO a DAO can help us comprehend the various opportunities and obstacles of organizing as one.
Hello, from The DAO Kit!
Welcome to our second conversation with the DAO Kit crew, if you missed our first one on “Coopetition in DAOs ', check it out here. Who are we? This post was written by @victoriakimse based on our recent Twitter Spaces discussion in a series co-organized by a group of DAO tool builders: @wonderverse_xyz, @guildxyz, @SnapshotLabs, @otterspace_xyz, @utopialabs_, @coordinape, and @clarityteams. At our core, we believe in interoperability and collaboration. We decided to refer to our collaboration as ‘The DAO Kit,’ capturing the idea that DAOs can compose their toolset by combining our products rather than reaching for an all-in-one solution.
What makes a DAO a DAO?
DAOs are often defined not by what they are at this moment but by what they aspire to be. Aspirational values revolve around distributed power, ownership, and transparency. It is the idea that no central body is dictating and operating an entire group. DAOs, we envision, are on the horizon and we are continuously defining it by working toward that future.
But where did it all start? Formally, a “DAO” spells out to be a “Decentralized Autonomous Organization.” The initial inception of the concept is most commonly attributed to a group of developers, Stephan Tual, Simon Jentzsch, and Christoph Jentzsch. A DAO, as they described in 2016, is an organization formed on top of the Ethereum blockchain with smart contracts to execute and make decisions autonomously. A smart contract is a “collection of code (its functions) and data (its state) that resides at a specific address on the Ethereum blockchain.” (Ethereum Org)
The measure of how much an organization operates via these smart contracts, still to this day, is heavily used to delineate Decentralized Autonomous Organizations. A tangible example of this is organizations that utilize a multi-signature wallet, a wallet composed of smart contracts to enable multiple ownership, and those who may decide to use a hot wallet with a singular owner.
As we examine how far these DAOs are technically on-chain and autonomous, it is essential to additionally question the culture and values of the people applying these technologies. For example, on-chain voting still has a lot of opportunities for improvement. Today, on-chain votes replicate Web2-like voting, where a single token equates to a single vote. In other words, being “on-chain” is not always synonymous with embodying the cultural values of what it means to be a DAO.
Navigating the idea of a DAO means challenging our technical boundaries and the values that make up our culture. En, the Head of Community from Wonderverse, prefers to define a DAO as a “Democratic Asynchronous Organization”, claiming that these words are a much better descriptor of what we’re trying to achieve in the web3 space. Essentially, that is an entity structure where our opinions feel valued, there are no authoritarian CEOs backed by a board of directors who make decisions, and there is space for work to be done wherever and whenever.
Should my project be a DAO?
The evaluation of whether your project should be a DAO should begin with questioning your goals and objectives. As you can imagine, forming a DAO has both technical and cultural implications. There are a few tactical questions that may help guide your decisions.
Do your project goals have emergent outcomes?
In this scenario, your project does not require a hard set of expectations and your community will likely act as agents of change. You can continue to iterate and decide on what success means for you. Your project would thrive in an environment where lots of experimentation is encouraged. You could leverage consensus-based decision-making and channel ambiguity as inspiration. This type of project may be suited as a DAO.
Do your project goals have deliberate outcomes?
These are the types of projects that require strict rules and expected outcomes. Projects like these require an environment where decisions are made quickly, and processes are streamlined. In this case, forming as a DAO may not necessarily be best suited for your project.
In short, your project doesn’t need to be a DAO; your project's goals can help you understand whether it may be best suited for one.
Conclusion
It’s been over a year since we witnessed the Cambrian explosion of DAOs. Since then, we’ve continued to understand better what it means and what it takes to become a DAO. We’ve rigorously been working on improving the technologies that become the backbone of DAO functions while simultaneously evolving our values and cultural practices. Being a DAO means becoming comfortable with sitting in this gray. It means resisting the urge to adopt definitions and rules imposed upon us and letting the community come to its own understanding in an autonomous and decentralized fashion. At this stage DAOs, their structures, best practices, and successes are still changing rapidly. It may take a few years until there is a universally adopted definition of what DAOs are. Those comfortable with this process will be best equipped to see their project to fruition as a DAO.
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