Deconstructing DAOs: A Beginner’s Guide

Breaking down the Web3 phenomenon for newbies.

The simplest way to describe a DAO is to think of it as a community that pools capital together and shares it. They essentially have similar aims as traditional companies: to organise and gear a group of people towards a common mission and aim to generate wealth. However, the difference lies in the fact that they are decentralised–there are no formal appointed leaders and are instead community-driven, thus driving towards creating fluid ecosystems. Such a system promotes active learning within the community and enables self-prompted participation from members of the DAO, with each day and change encouraging conversations that are typically foreign in company set-ups. Cooper Turley summarised them best: “they are a commitment to share value with a community, regardless of whether they are comprised of a Telegram group with 10 members and 1 ETH or a DeFi protocol with 10,000+ token holders”.

There is no one true definition for a DAO, simply because they are so versatile and distinctive in nature, wherein each DAO differs and diverges from a given definition based on their established community and goals. The traits that characterise a DAO cannot be viewed as binary, wherein classifying a DAO as decentralised cannot be limited to a simple “yes” or “no” but instead requires a scale of the degree to which it is or isn’t.

1. Grants DAOs are considered the non-profits of web3, with communities donating funds and using a DAO to vote and decide on how the capital should be allocated and distributed to contributors in the form of governance proposals. They work towards advancing a broader ecosystem and opening up projects and pathways to those new to web3.
2. Service DAOs are geared towards exploring and discovering the future talent for projects, providing a range of services that can be compared to ones offered by a consulting firm: governance, creative, treasury management, legal and everything that lies in between.
3. Protocol DAOs build and provide platforms that transform power from the core team to web3 contributors in general, enabling a new way for projects to issue tokens in the market. In other words, they provide the framework for platforms to issue a token that was owned and operated by its respective community.
4. Investment DAOs essentially are communities that pool together their capital and collectively invest in web3 projects and tokens that provide the highest scope of return. A notable trait of web3 that accelerates the performance of investment DAOs is the low barriers of entry, allowing any group of people, regardless of their capital and strength, to invest in early-stage projects.
5. Social DAOs prioritise social capital over financial capital. These are the communities where individuals connect with others with shared interests and goals, and promotes healthy connections and networking in the web3 world, with the ultimate aim of creating a successful digital business.
6. Media DAOs advocate for those who consume content–they are the content creators in the DAO universe, consistently delivering in mediums ranging from streams to articles on everything web3 related.
7. Collector DAOs aim to collect a selection of non-fungible tokens (NFTs) that they believe will provide long-term value financially. They act as curators, ensuring that platforms and artists can establish their projects’ longevity and providing them support along the way.
8. Creator DAOs are more individual-oriented, posing as fan clubs of web3. They allow the community to connect more directly to a single creator and provide opportunities for them to access more exclusive content and interaction. The more enthusiastic fans can also actively be engaged in an organisation that supports their preferred creators.

DAOs: Absorbing the Internet (The Generalist)

As previously mentioned, it is very difficult to establish a clear-cut system to classify and constrain DAOs to one set definition or parameters. Many DAOs can be classed as two or more of the categories, and some may not conform to any of the above. The above framework, though insightful, is solely a simple framework that allows one to wrap their head around a new concept that has undoubtedly taken the world by storm. Additionally, The Generalist’s guide on the DAOs: Absorbing the Internet provides a more comprehensive look into how DAOs holistically work and everything associated with it.

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• Anas: twitter.com/ananasbrb
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• Zayaan: twitter.com/thenftpenguin
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Thank You

Thank you for getting involved early in the Arts DAO journey. We are dedicating every moment we have to building and being part of the evolution of blockchain technology, the NFT space and art more generally. We look forward to meeting with you either in one of our real life events or elsewhere in the metaverse!