Year of the DAO: 2022; a summary of the SXSW conversation.

Behind the scenes on the DAO life with Flex, Jihad, Kinjal & Cooper.

DAOs are a new way to share value as a community using blockchain technology. DAOs leverage web3 technology and rapidly evolving governance and incentive systems instead of a traditional top-down hierarchical structure.

DAOs aim to disrupt the music industry, real estate, media, product, and more. It’s Q2 2022 - and I’ve got insights for you from thought leaders who are revolutionizing how we work together on the internet.

Define the DAO Life

A DAO is essentially an online community that leverages #web3 primitives we've grown to love - NFT's, tokens and DeFi, which gives those communities superpowers. - Flex

DAO stands for decentralized autonomous organization. Each each of those words, give construct to a DAO. So decentralized, really speaking to the fact that it's community oriented, autonomous talks more to the #web3 primitives that we use, and organization, think of it as a new form of corporation. - Kinjal

TL;DR - it's a group chat with a shared bank account. - Coopa

DAOs as a means to organize & manage investments

DAOs are relatively easy, cheap, and quick to set up. They are less intensive than going through the regulatory environment that we have in the United States for setting up a fund, paperwork and the amount of capital you need just to be a venture investor. This makes it more accessible.

DAOs provide organizations the ability to create a community of investors; the ability to work with one another to support founders. It moves away from working in siloed relationships that we see traditionally between Limited Partners and General Partners.

DAOs are enabled with the superpowers of crypto, more broadly, with the ease of capital formation, and then the ease of capital allocation.

In context, the fact that DAOs are able to send money without having to go through any centralized party for the $50 million raised for Ukraine DAO shows how powerful the possibilities are for DeFi in a community. The power of capital formation and allocation when applied to a specific non-investing goal is super powerful.

Ukraine has received $57 million in cryptocurrency donations to aid its defense against Russia, according to blockchain tracker Elliptic. The New York Times and others have called that amount "a drop in the bucket in the context of the conflict," but it is no small amount in any context, and it is $57 million Ukraine is happy to receive. -
Ukraine has received $57 million in cryptocurrency donations to aid its defense against Russia, according to blockchain tracker Elliptic. The New York Times and others have called that amount "a drop in the bucket in the context of the conflict," but it is no small amount in any context, and it is $57 million Ukraine is happy to receive. -

DAOs to assemble teams with aligned interests

One of the emerging attributes within DAOs is to see people building software, there's people marketing, and philanthropic events popping up all over the world - all simply because we are crypto fans and community with a common interest.

DAOs not only leverage hard skills and soft skills, but attain goals and milestones that are really difficult to achieve by yourself. Through a DAO, people from all over the world with aligned incentives make it a lot easier to get this done. DAOs are represented by NFTs/tokens. NFT holders are doctors, lawyers, accountants, marketeers & entrepreneurs.

The NFTs & Tokens are symbolic to this commonality and a common thread - a shared dream that makes it really easy to get up and running.

Flex shares it was effective to allow people to set up guardrails and on-ramps, and ensure that they feel the autonomy and permission to go do things with their friends and with fellow basketball fans at KrauseHouseDAO.

Lifecycle of a DAO contributor

Not all DAOs are made equal.

As crypto native companies, they differ from getting a job at a traditional company. The the way you work for one DAO versus another is very different when compared to traditional companies.

When starting out as a contributor, you experience a bounty system. Bounties help you build credibility through small tasks - like take notes at a meeting, attend a zoom call or similar entry level activities. During this time, you seize an opportunity to step into a larger project, which helps you gain traction leading to a leadership role within the DAO. As a core contributor, you showcase reliability and can move into a full-time role.

A fluid on-boarding experience brings with it extra social capital as you progress from a freelancer-type mentality to a contributor. DAOs typically do not hire on day one with a full-time salary.

As Kinjal describes, DAO present an opt-in culture, allowing you to contribute in whatever way makes sense. On the flip side, work is not free, DAOs should be able to compensate.

DAOs are discovering compensation models;

Kinjal shares insights on psychological and legal roadblocks gained through her experience at Syndicate. She explains the need to align with regulatory compliance when compensating contributors with a DAO. The Komorebi Collective, an Investment DAO is intentionally small and volunteer-focused and aims to create a compensation model that is scalable. The pathway to get paid is designed not to break any regulatory boundaries, while operating under the rules put forward by the SEC.

Today, DAOs pay contributors with fluid equity - tokens & ownership. For the right project, the upside is exponential, DAO contributors earn in NFTs that eventually lead to full-time salaries in $USDC with rewards.

For DAO leaders, the bet is to take a salary in DAO tokens, and a mindset to make the community successful for members. The liquid equity is important in contrast with the traditional startup world - DAO token liquidity has an exponential upside.

In the traditional market, it’s a lengthy process to sell equity - from steps that involve identifying market value, finding a buyer, selling rights as per equity agreement & more. With tokens, you can create a liquidity pool, sell for $eth, $btc or whatever you need.

As it stands, at the start of Q2 2022, DAO leaders with contributors are experimenting to identify compliant payment methods and compensation models that can be scaled. These discussions are held in open forums to acquire more contributors and help define a framework for compensation in DAOs.

Flex highlights that it is possible to gain ownership without a financial investment. DAOs enable ownership through task based contributions.

For example, The Krause House community members have earned tokens by completing tasks as simple as editing podcast episodes, or YouTube channels, all the way up to doing full fledged financial reports. Teams that do due diligence for teams overseas and leagues overseas, places like Greece, Turkey, Australia, to look for majority ownership positions over there. And almost all of the autonomous teams that are working right now are paid exclusively in $Krause.

Essentially, collective ownership through everybody owning the same token. This creates a very strong tie amongst members of the DAO. This thesis of the ownership economy is why #web3 is powerful.

The excitement within the #web3 space is a rewarding relationship between working on what you love and getting paid for it.

Recruiting rebooted with #web3

Contributors start working with four or five different DAOs and narrow them down to two or even double down on a single one. This approach gives them insight into the opportunity, growth trajectory, and give them the luxury to land on one DAO. This “out of the box” approach is a significant advantage over a traditional startup or a corporation.

DAOs are fluid, offering contributors pathways that allow you to drop out or ask for more tokens or ask for USDC.

Unlocking ownership

IRL, we rarely have true ownership. We care for these things: our car, clothes, and house, which have a personal connection to us. DAOs bring ownership to everyday products - from social media to your work. It aligns incentives for you as an owner, user, and contributor.

You can define what this means to you and be rewarded.

Ownership is a large and intense responsibility within a DAO and a powerful idea that has infinite possibilities.

Ownership in the form of contributing to a DAO is brand new - Cooper

Landscape of DAO economics

Kinjal explains DAO economics is categorized into quantitative & qualitative metrics.

Quantitative metrics are analyzed through questions such as:

  • [ ] How many members are in this community?
  • [ ] How long has the DAO been around?
  • [ ] What does revenue look like? If they have revenue?
  • [ ] If they have NFT? Sales?
  • [ ] Or if they have a token?

These questions help you understand if a community is healthy or struggling. The numbers help you identify how value is being generated & how it flows back in value to the DAO token.

Qualitative metrics are analyzed with questions that deliver insight:

  • [ ] How do you value brand?
  • [ ] How do you value culture?
  • [ ] Why is Nike so cool? Why do these institutions have lasting value?
  • [ ] What do we see in the DAO space that has that sort of potential?

For DAO economics, you must understand the quality of the community, quality of content that is being published, individual preferences, and subject matter that excites you. You gain long term value and better results because the DAO economics align with your interests and values.

A community treasury is a powerful principle in DAO economics.

A community treasury is akin to a shared group's bank account with an on-chain wallet address. This is visible to everyone, and token holders are able to dive in and see that things are happening on a day to day basis, which is valuable.

DAOs gain success and increase value through gradually ramping up over months. A DAOs value does not increase because 10,000 people joined on launch, nor does it showcase success besides great optics, which definitely helps.

A hundred active contributors is a what matters most, and miles ahead of most organizations.

FWB embodies the “velocity of friendship” metric that draws from meaningful connections within the DAO and community dwell time because they make meaningful relationships. It's the impact on FWB community members themselves.

DAOs have an extremely high emotional intelligence. DAOs consider the smallest contributor during decision making, and leaders work towards flattening the hierarchy.

Attention - the scarcest resource for a DAO

A known challenge within DAOs is getting contributors to stick around. With all the DAO innovations, contributors participate in multiple DAOs and overestimate their ability to contribute in meaningful ways.

To align and ensure success, contributors should self-evaluate to understand the impact for effort and ability to make a meaningful impact given the flexibility available within DAOs.

DAOs must focus on a good experiences for contributors, and make networks shrink to build long lasting relationships.

DAO tooling & contributor rewards

DAO 1.0 experiences are defined with:

  • a multi-sig wallet on Gnosis safe
  • governance on a platform like snapshot where one token=one vote

We're starting to see more organizational tools to make contributing to a DAO become more fluid and more transparent.

Coordinape is a way for you to put five people into a circle together and say, “Hey, we all did this project together who deserves the most money, everyone votes amongst themselves, and whoever comes out on top gets the highest bounty.”

Kinjal describes Syndicate, a protocol that empowers a wallet into a web3-native investing DAO.

**When to DAO?**DAOs are a great tool and framework to align your values with how your community works. And so if you want to be community oriented, if that's a goal of yours, within the overall mission, a DAO can make a ton of sense.

People from all over the world are able to coordinate capital online, that is uniquely enabled by a DAO, with a shared bank account, with a shared Treasury, it doesn't really matter where you are, you can participate within the DAO.

How to: web2 —> web3 transition?

For a centralized, more traditional organization - you recognize the organization is powered by users - stakeholders that helped you get there, employees that helped you build that product. DAOs present an opportunity to exit to community and distribute ownership across the entire landscape to stakeholders that have helped you get to where you are.

Not all web organizations start as DAOs - many of them turn into DAOs over time.

Many successful DAOs, beyond creators, starts with one or two small figureheads, the people that have the main idea, and are seen as the CEO or leader of this organization. Over time, the responsibility is delegated to community members.

Financialization within DAOs

DAOs are governed with social and cultural capital, which translates to financial capital. DAO leaders have to rethink what financial capital looks like in a world where users get to choose what they want to participate in. The possibility of social and cultural capital translating to a promising reward is a likely outcome.

Conversations with the audience

  • How DAOs shape IRL community experiences -

  • The value of starting a DAO versus being a contributor (in context to a Service DAO)

  • On governance and voting mechanisms - what are the trade-offs in voting mechanisms, the speed and quality of decision making as the size of the DAO increases

  • DAO education as they become mainstream

  • DAOs enabled through progressive decentralization; a progressive process where you're slowly giving ownership to the community in a way that makes sense for your goals in your organization.

  • How to DAO a coffee shop

  • What are the foundation for the artists economy?

  • Brands transitioning into successful DAOs

  • Discord-hating but we need to explore #web3 enabled features

  • The flux & friction of existing DAO governance and structures

DAOs & companies mentioned during the panel discussion:

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