Investing in the People, A DAO Model for Solopreneurs
This post is the fifth instalment of my 8-week series of research about the failing economic system, solopreneurship trend, blockchain, and Solana Pay.
This research wouldn’t have been possible without the support of Superteam UK so follow them on X.
If you miss the previous posts:
Week 1: The Mighty Have Fallen
Week 2: A Society Without Jobs
Week 3: Solopreneurship as the Modern Form of Distributism Where Decentralisation is Supported by Technology
Week 4: Solana Pay Aiding Solopreneurs in Tackling the PPP Challenges
Hello,
This article will be a shorter one. Consolidating the previous articles about the late-stage capitalism symptoms, the injustice suffered by the workers, and solopreneurs who could benefit from Solana Pay, I combine the ideas into a DAO proposal that resembles the “guild” or the network of solopreneurs, instead of a centralised one. Also, since this is more about sharing a business idea based on the corroboration in previous articles, there are no data infographics as the concept and the interactions within the DAO are presented in diagrams.
Why a DAO?
DAO is preferred as the form of the organisation here because we want it to be in the autarky area, while still maintaining a collaborative potential with other DAOs. In a way, each DAO is the “household” of a decentralised world in distributism, and each solopreneur is also a household within a DAO.
Despite the business model being capable of being run in a centralised organisation, for instance, a marketplace of investors and solopreneurs, there is a lack of sense of ownership if it is done that way. The investors or the solopreneurs may not have a say in the type of projects to be funded, the investment schemes, and so on. We have seen many freelancers or gig economy platforms take a huge cut of a solopreneur’s revenue.
The diagram that shows the DAO flow is as follows.
The combination comprising the ecosystem of solopreneurs with a growth mindset and financial potential for investment results in a DAO where the solopreneurs and investors can interact.
The community building is a multi-avenue work. Solopreneurs are spread across social media and platforms. For instance, in my community-building activities, I garner friends from my network through podcast series, writing platforms, and offline meetups and communities.
On those avenues, I spread the news about this DAO, which is currently in the Discord form since the tech stack has yet to arrive.
The members can become investors if they see special projects fit, such as seeing another solopreneur being a wellness coach. The members might not be interested yet in purchasing the products (goods or services) offered by this coach, or sometimes the price point is quite high.
Therefore, some of the use cases of investment made by other members in the DAO are:
1/Crowdfunding for business expansion.
Some solopreneurs might have a specific business model that requires them to raise capital in advance, such as a vegan artisan baker who wants to launch a new recipe that requires them to use a specific type of oven, which is not yet acquired. The baker is strapped for money, so the way they raise the capital is not just by selling their baked goods as it could accumulate slowly. Rather, raising in a crowdfunding scheme of the members within the DAO is an appropriate step.
Since the DAO members can reside anywhere in the world, the baker might not be able to thank the investors by sending them free bread. The baker can give back to the community by offering digital products, such as free e-book recipes, coaching services such as free baking tutorial videos, or staking their native tokens later as validators.
In future development, a more rigorous flow can be put in place so that crowdfunding has an immediate consequence. However, to grow as a community, I believe that human beings are good and just. Therefore, rather than imposing a strict mechanism of crowdfunding payback, we can allow the recipients to propel the community forward in any way they can.
2/ Price points are too high or services are irrelevant, but the members are committed to seeing the solopreneurs grow.
This is similar to investing in a business that we want to feel good about but we don’t necessarily interact with the products. For instance, there are ETFs or mutual funds in ESG companies. Despite not interacting directly with the products or services of the underlying firms in those funds, investors sometimes want to put some money in them for various purposes. For instance, they are on board with the idea of ESG investing.
The spirit of this DAO is “investing in the people, not just in the companies”. Solopreneurs who are basically the same as their companies can receive investment from these investors provided that their business attracts them. Therefore, the DAO leads by example that solopreneurs, not just start-ups or established companies, can also receive investment.
An investor’s participation is rewarded in the form of the DAO native tokens.
Investing in the people, not just in the companies.
Other Types of Investment If I Don’t Have the Money Yet
Of course, you can still help, that’s the essence of distributism. You can still participate in the economy with other types of support. For example, if a solopreneur is a merchant looking for potential buyers, and you happen to know people who fit the description of the ideal clients or buyers for this solopreneur, you can connect them.
This is covered in the diagram above which shows the “referral scheme” property of the investment type.
Your participation is also rewarded in the form of the DAO native tokens.
The solopreneurs are encouraged to accept Solana Pay. The payment module can be integrated into the DAO in a web embed or other forms so that the international remittance of USDC helps alleviate the PPP problem that has been covered in the previous article.
Partnerships with on- and off-ramp providers will be sought to increase the ease of access, especially for those living in restrictive countries for crypto onboarding and those who are less tech-savvy and need assistance.
It is understood that not every investor is willing to dip into crypto stablecoins as a payment method immediately. Moreover, solopreneurs might feel reluctant to jump into accepting Solana Pay on their platforms. Therefore, we incentivise the solopreneurs’ conversion to accepting Solana Pay with more free training courses, such as business and mindset coaching or other practical kinds of training like bookkeeping and social media engagement.
P2P Lending Scheme
In the future iteration of the DAO, it is possible to introduce P2P lending instead of crowdfunding. This is to attract more investors who want to see their investment generate yields.
To assess the borrowers’ eligibility, an internal credit score can be built that also factors in the Solana Pay utilisation or other things benefitting the DAO, such as the “crowdfunding give back” above.
A better credit score means the borrowers are eligible for a better repayment scheme, such as a lower interest rate or access to other financial supports.
Moreover, for the lenders, there are at least 2 schemes I propose in this essay:
1/ internal lenders — members of the DAO
2/ external lenders — they are from outside the DAO
They can opt-in to become a member by buying and lending in the native tokens, which can provide some benefits, such as:
- Better APY rate
- Better match with the borrowers
The DAO Governance
As for the governance, a DAO member can cast their vote by staking a native or SOL token for many things, such as the referral scheme, investment scheme, the business categories to be accepted in the DAO, and the partner networks to be accepted by the community.
For the MVP, Discord is the first platform for voting. However, for future iteration, a proper governance system is important to scale up.
I mention about futarchy above. My writing about how it works can be found here:
Next on, about validators.
In a proper decentralised permissioned ecosystem, validators can play a role in ensuring the revenue of a solopreneur is sufficient to repay the loan. It reduces the risk of default because the payment is made directly from their Solana wallets.
The validators can stake their tokens to run the smart contracts that confirm the revenue target is met by the borrowers.
A validator is allowed a lower staking fee if they have participated in other community-building activities, such as offering free coaching services.
In a community where members contribute their skills to advance the others, the participation is rewarded with the DAO native tokens.
DAO Treasury Management
A DAO must have its own treasury. How this DAO can make money for the treasury can be done as follows.
I wrote an article about the similarities between DAO and Catholicism [1]. So, yeah, the similarities are there if we’re looking at the governance style and the treasury.
Summarising the well-researched points of this paper [2], this DAO treasury can benefit from asset diversification.
- DAO treasury dominated by its native tokens possesses a risk of low liquidity and high volatility
- Instead of relying heavily on the native tokens, this DAO should place a greater proportion on USDC and SOL as the stablecoin and L1 token, respectively
- This is especially true if the native tokens are not liquid enough in exchanges’ order books or do not have high trading volume
How the treasury grows in value is explained as follows:
1/ DAO treasury receives a cut of the fees from crowdfunding
2/ In P2P lending, the treasury receives a percentage of APY (the numbers are for illustration purpose only)
Growing the treasury can also take place in yield-bearing activities both in web2 or web3 products, such as:
- Investing in the risk-free rate such as T-bill or tokenised T-bills
- Investing in RWA tokens
- Yield-farming (this is a high-risk activity, hence, risk assessment should be more rigorous)
The optimisation can follow the modern portfolio optimisation theory from Markowitz.
Notes:
So, how’s this DAO compared to a credit union?
Taken from this reference [3], a credit union originates in Germany in the mid-19th century. It is a non-profit financial cooperative set up by members who share a common bond for their mutual benefit. Credit unions are similar to building societies in that they are owned by the members who can vote to determine how the organisation runs (mostly it’s only to elect the board of directors). A credit union focuses on community banking services rather than on profit and return to the members.
Therefore, in a way, the DAO is similar to a credit union in that it houses members with a common bond of being solopreneurs (and in the future, more investors). However, the DAO must also survive as an organisation. Seeking profit from the DAO treasury returns is encouraged.
That’s the discussion for this post.
Fun fact: the name “Berdaya” comes from my native language, Indonesian, which means “empowered”. That’s the mission of this DAO, in the hope of empowering more solopreneurs to achieve the freedom that they seek.
“Berdaya” means empowered.
If you are a solopreneur, an investor, or simply know someone who might benefit from joining this DAO, feel free to join the Discord server or extend the invite link below.
If this proposal sparks your interest and you want to discuss it further with me, join the Discord, leave comments below, or reach out to me on the following:
✅ Me on X
Until then,
References
[1] S. Langit, ‘Catholic Church and DAO’, Medium. Accessed: Mar. 07, 2024. [Online]. Available: https://medium.com/@sekarl/catholic-church-and-dao-7a30eccd84b2
[2] B. Schellinger, I. Fiedler, and F. Steinmetz, ‘How Are You DAOing? The State of DAO Treasuries’, SSRN Journal, 2023, doi: 10.2139/ssrn.4604968.
[3] How Money Works: The Facts Visually Explained, First. Dorling Kindersley Limited, 2017.
