DAOs Untangled

Journey of a Beginner to Minimum Viable Participation.

In the world of DAOs, the TTC (Time to Contribution) matters the most. Just as software products have a user churn (the user stops using the product and is no longer a customer), DAOs have a massive seven-day contributor churn. Let’s face it. DAOs are biassed and disproportionately benefit self-starters. In this edition, we talk about how DAOs can be made sense of, how to get started and what you can expect as you browse through the world of DAOs. We have already discussed why you will probably be working for a DAO in a couple of years.

Traditional companies give you skin in the game only through equity. With DAOs, you’ve fluid ownership for people adding value to the DAO. Transparency is also essential after fluid ownership. You know what’s happening to your treasury, and you feel more involved in these decisions. But coming back to our original question, how to get started?

We love how zakk.eth describes how even the DAO organizers get surprised when things work the way they were supposed to.

DAOs are incomplete without a community.

The first thing you need to understand is that DAOs are only as strong as their community. When we say community, we don’t mean size. Size is irrelevant. We mean compactness. How close-knit are the community folks, how much value match, vision overlap, and alignment do they carry? This also means that your first order of business should be to identify the core people in the community. Usually, the first hire is a chief Community Officer for anyone establishing a DAO.

Sometimes it may be a group of people referred to as a core team or sometimes as an organizing committee. This community could be anywhere. It could be a Whatsapp group, a Discourse forum, and the most common one is a Discord Community. Sometimes, communities are potent right from day 1. For example, our DAOLens community is just around 25 hand-picked most of whom the people the founding team personally invited, and everyone already feels at home.

99% Lurkers, 1% workers

Ask anyone who spends their time in a DAO, and you’ll realize they are of either the lurker camp who are just folks consuming and the contributors who are the folks adding value. To become a lurker, all you need to do is hit the join Discord button and accept the server rules. Today 99% of the work in the DAO is mainly done by 1% of the members. These members disproportionately benefit by getting all the rewards since they are also doing all the work in an unsaturated DAO environment. Contributing actively gets a bit tricky, but it can be managed. You need to follow a few simple steps.

Step 0: What are the ways to contribute to a DAO?

Broadly, you can contribute in two ways.

1. The first is where you hunt for a gig or bounty without getting involved in the community, complete the task at hand, submit the work and get paid automatically because the system is trustless (run by a code that automatically approves the payment) as soon as the conditions are met. At DAOLens, we also surface a lot of these gigs that get updated every day with plans around automating this in the next couple of months.
2. The second and slightly slow but massively rewarding process is when you join the Discord, get the hang of the community, internalize the hive’s problem, help where there is a need, and propose new ideas that the community votes on. You get rewarded for any work you do in this case as well. One of the missions at DAOLens is also enabling a contributor to be a successful contributor as they build their reputation capital.

Step 1: Identify the DAO category that interests you

Understand that there are different types of DAOs. Some DAOs are a bunch of developers coming together to work on problems the developer community faces. Other DAO could be a bunch of investors coming together to pool in resources and make investments. Sometimes DAOs are companies much like traditional organizations exist, building tools, products and processes except that they are people organized as a DAO. Some DAOs could be a bunch of NFT enthusiasts pooling in their funds and hive intelligence to decide on which NFT has the most potential, often taking the shape of what is also known as Art Collectives. Most of these metaverse companies where the Fortune 500 purchase virtual lands one after the other are themselves a DAO. They threw away the private key to their founding smart contract, and everything today is controlled via a DAO. Other times, DAOs could exist because they believe in a common cause or want to support someone they like, and this often takes the shape of fan communities but with a treasury. DAOs can spring off many other core ideas such as Insurance Providers, Environmental Enthusiasts, Real-Estate related Initiatives, Trust Funds, Crowdfunding projects, Nomad Communities, Media entertainment etc. We will be covering all types of DAOs in a separate post.

Step 2: Browse the DAOs in your preferred category

Discover the DAO where you will belong. There are any number of DAOs, and if you rush into joining the first one you come across, you will never find yourself contributing in a meaningful and financially satisfying way. If you’re a contributor, it should smell like an opportunity to you because, if anything, the number of DAOs will boom, and the early adopters will have massive gains to make. These gains are not just financial. The Web3 community is so close-knit and small that the reputation capital will do you probably more good than the financial capital.

Today, no repository exists that does even a half-baked job helping discover DAOs. At DAOLens, that is part of what we are working towards by surfacing contributor experience, the founding team behind the DAO, DAO sentiment exposure, guidance around getting into a DAO or earning at one, social insights, etc. amongst many others. One of our core mission statements is to simplify stuff around what does the DAO do, how to get in and how to get involved?

Step 3: Get ready to enter the DAO

Now that you have picked which DAO you want to spend time in, you need to figure out if the DAO is gated. By gated, we mean that some DAOs only allow members who have skin in the game to enter the community. Maybe certain community areas are open to everyone, but governance and your right to exercise your vote on the affairs concerning the DAO are often restricted. DAOs like FWB will only let you enter if you have a certain number of $FWB tokens that can keep changing from time to time. So you need to buy the right kind of token from wherever the token is listed. This information is usually available on DAOLens and definitely on the DAO’s website. When you buy a token, it will get added to your wallet. That’s it. Assuming that you have Metamask, for example (which is one of the most widely adopted wallets and supported by almost all DAOs), when you enter the Discord, you may be asked to verify by signing from your wallet that you have the required number of tokens. How this verification is done technically is slightly out of the scope of this article, but one of the most common ways is a tool like Collab.land or a tool that almost works the same way. Now, if you have heard these terminologies for the first time, hold on just a bit.

Usually, the process involves making a few clicks. In the case of Collab.land, you will see a prompt like this from the bot in the Discord Server. When you click on verify, you’ll be asked to pick a wallet where you hold your assets and then a few confirmations that will act as a signature for you and let the tool read your wallet. This signature can be for various reasons, from reading to staking (screenshot below) to minting, and is a standard process.

Sometimes DAOs need you to hold an NFT before you are allowed to enter the community, and the validation follows the same set of steps as with tokens.

Wallet authentication is how the future products will identify who you are and what you have done. They can be compared with how a social sign-in works like Google, Facebook, or Twitter. However, wallets go way beyond. Wallets can have your on-chain identity, a record of everyone you have interacted with, your closest collaborators, and just one button can surface all the relevant information for any tool to read. There has never been a better way of setting the context for the users, and the tools of the future will see their User Experience getting defined from wallet authentication.

Step 4: Enter the DAO

Entry is usually pretty simple, and many people enter the community before they complete step 3 if they are unsure. However, you can not do anything around governance with most DAOs if you have not completed step 3. Once you enter, you will see a mix of possibilities. DAOs can have very complex structures. Some DAOs brilliantly explain how they are structured and have proper onboarding in place, but most of them will leave you fencing on your own.

Identify how things are organized. Most DAOs do a decent job of managing channels on Discord. For example, Forefront DAO looks something like this. On the left are neatly created categories and you immediately know where to get started.

Step 5: Start earning

DAOs can have very complex structures. Sometimes, DAOs create Sub-DAOs, like pods in traditional organizations, for effective functioning. This is where it starts getting subjective, and the journey will differ for each DAO on its own. An example of a mature structure is how Index Coop is organized.

So coming back to the core question, DAOs value people who have a reputation. That means your first order of business is to build a reputation. How do you do that? Each DAO mostly has a recurring meeting, whether it is weekly or daily. New members who regularly show up to periodic meetings and bring out the extrovert in themselves often start becoming a part of the conversation and get noticed. Your goal at this point should be to earn social equity, specifically in front of the core team members.

Since you’re a beginner, take notes and interact with those speaking the most. Everyone has an edge they bring forth from their experience. If you do things right and talk to anyone who has spent time in the DAO (mostly the core team), they will be able to route you to places where you can find avenues to contribute.

One additional way to build equity is by voting on proposals as you develop some context or at least engaging in governance discussions as much as you can. You could make compelling suggestions or counterarguments so that DAO members understand that you are not just a lurker and start getting taken seriously. The core idea is to give the community a lot before asking for anything. That’s how communities work, and some of the most successful people of this decade will be folks who have mastered community. Help anyone you can, and you’ll get noticed. Suppose you have been following my advice so far. In that case, you will understand that to do this properly, you must stick to just 3–4 DAOs and not 10–20 because DAO communities have a weak signal to noise ratio.

If all this sounds a little subjective to you, then that’s because it is. This is not ideal, but DAOs have come a long way from where they were, and brilliant teams are working on simplifying these processes and painting the picture of a brighter future. At DAOLens, we often compare how a DAO works to how an Open Source project works today. Some core code reviewers have access to making edits to the code. As a community member, if you want to make a pull request and suggest some changes, you have to convince a core code reviewer to accept your changes. DAOs pretty much work on these lines except that instead of code reviewers, you can have different types of people that you can imagine may be involved in decision making.

Where does a proposal fit into all this?

As the DAO community keeps working together, core contributors float proposals based on community discussions. If you have earned enough social equity, you can claim to take care of the proposals and chances are the DAO community will also be okay with that.

How does a proposal convert to payment?

Proposals give directions. The core team often breaks down proposals in to smaller gigs and bounties. As you complete the proposal, you get it reviewed by the core DAO members who have worked on similar aspects in the past. In an ideal scenario, as soon as the community accepts the submission you make, the code should kick in to release the funds for you. However, it is still practically a little distant because we are still pretty early in syncing off-chain and on-chain data.

The reality is the core contributors make the decisions. The role of community is around transparency. Otherwise, decisions with more than 20 people in the decision makes everything slow. People support the vote as long as things have been transparent. So what happens is once the proposal is accepted, members of the DAO who have the power to initiate withdrawal of funds from the treasury can facilitate that you get paid. There is rarely any disparity that will pop up in this step. If the gig came with a reward that is not delivered as promised, there are serious social consequences for the DAO, and contributors start losing trust.

If you’re a little overwhelmed, don’t be :)

There is a learning curve, but the rewards are equally massive. Most DAOs indeed have their way of dealing with things, and there are miles that we all need to cover before we sleep in the world of DAOs. However, one of the most beautiful things about communities is acceptance. Go ahead with the dumbest question you can think of, and there will still be ten people extending their hands to help you understand.

Today for anyone who has no clue about how DAOs work, you may find yourself questioning your abilities. The sad truth is DAOs do need a particular master level wizardry of crypto. However, the good news is that there is a lot of work being done in this direction. People have identified significant problems like context setting, onboarding, payments. Right now, we live in a model with funnels in place for a proposal, packets to cover those opinions. It’s not automated today. DAOs are trying to make it more about value add for a contributor. It shouldn’t be a one-on-one sit down for you to get paid or about sign-offs but more about open and fluid flow.

DAOs, by nature, are so tightly knit that some of the best brains in the world believe why DAOs will be the future of work. In fact, I’ve been speaking personally to over 250 founders about how they are thinking of shaping up their organization, and the unanimous answer is DAOs with a progressive decentralization approach. If you’re interested in getting an in on this community, drop me a message on Twitter, and we will chat. I frequently talk about DAOs anyway, covering the topics on a high level.