DAOpulse #2: Capital DAO — What’s in their wallet?
DeepDAO introduces the first ever aggregation of all coins and tokens used by DAOs * Are DAOs investing wisely? * In the DAO galaxy, ETH is King * LEND leads DeFi tokens * Also in this issue: a note on governance risk and how you can analyze it on DeepDAO.io
DAOs Growing Up
This week we took a look at the wallet contents of the DAOs that we have integrated into DeepDao.io (73 and growing!) Not only did we find a whopping $41.6M USD AUM, but digging a bit deeper revealed some very interesting patterns. Buckle up 👩🏿🚀🚀
Popularity
The most popular tokens just by sheer number of DAOs that hold them is, in order: ETH, DAI, USDC, WETH, and ANT. Unsurprisingly, Ethereum is king when it comes to DAO holdings. As the core system upon which all the DAOs we currently track run, the holding of Ethereum by the DAOs makes perfect sense. Within this list, aside from ANT and ETH the other three tokens are more or less stablecoins pegged to Ethereum or USD. Anecdotally, we have seen when a DAO begins to accrue significant value, discussions begin around offsetting the volatility risk of their token by both diversifying and investing into more stable tokens. Additionally, the opportunity to gain interest on their holdings makes investment in some of these popular tokens sensible.
Take a look at the top 15 tokens by number of DAOs using them:
Value — Don’t pray for the roadmap you want, buy it!
Switching gears into looking at where the money is concentrated, we see almost $13M USD (31.6% of the total) being held by four DAOs invested in LEND (Aave’s token), over $10M USD (24%) in ANT (Aragon’s network token) across 13 separate DAOs and $4M USD (9.6%) in DMG (albeit, 100% of this is held by DXdao). Those three tokens represent 65% of the total value of the holdings (and the top 10 of the 48 tokens we saw held 98.4%).
Considering these popular choices, both LEND and DMG offer revenue generating opportunities with DMG having the added bonus of allowing influence (via governance) as well. For those 13 DAOs holding ANT (which grants the holder influence in Aragon development) we can imagine them leveraging their ownership as an insurance policy for maintaining control of the platform upon which their DAOs function. Don’t pray for the roadmap you want, buy it!
Influence: a revolution in finance and governance
Rounding out our dive for now is the interesting gem that of the top 10 tokens being held by our DAOs, not only do we have the stablecoin/interest earning types (LEND, WETH, ETH, USDC, DAI, USDT), but also a handful of influence granting and revenue sharing tokens (ANT, DMG, DXD, ANJ).
The power these tokens provide on top of their monetary value (which is partly driven by their utility) is a revolution in finance and governance. No longer is ownership represented by shares (re: stock) that hold a monetary value while allowing for only abstracted governance through proxy voting. Instead they allow direct, real, immediate and ongoing influence in systems as they develop. Asset and fate control over an organization by the shareholders was never so tangible as with DAOs and the smart money of cryptocurrency.
In closing, DAOs appear to be making strategic choices with their treasuries. Investing in ways that either produce additional income or increase control (and with DMG, a little of both) while diversifying into less volatile assets shows a strategic eye towards a big picture view of self-preservation: don’t run out of money, control your environment, and use your resources wisely… at least that’s how we see it.
Governance and its Risks
Last week’s big news in DeFi was the YFI protocol. Kerman Kohli published a great explainer on youtube and we recommend spending 13:23 minutes to view it.
In an accompanying post Kerman outlined the risks a protocol like YFI poses to its holders. One of these risks is Governance Risk (see the highlighted, 5th bullet point) and this is where DeepDAO comes in.
Analyzing and understanding governance, and enabling people to make smart DAO decisions based on data is our core mission. While our product is still developing and expanding, DeepDAO.io already features extensive information on DAO governance.
There are several ways to analyze governance risks. The immediate one we’re exploring centers around a specific question: Is the DAO (or its community) managing an asset in a truly decentralized manner, or is power concentrated at the hands of a few?
When you select a DAO on DeepDAO.io and look at the Members section (for 👹 Moloch and DAOstack, with Aragon governance coming soon) you get a list of the members sorted by their voting power. If you see that a small percentage of the members hold a large percentage of power, you know control lies with them. If you trust them, great. If you don’t, it’s probably better to stay away.
When we speak in relative terms such as “small” or “large” percentage, what do we mean? These are vague terms. For this we have the Indices tab, in which we measure the distribution of power by using known and accepted indices of economic equality distribution, and voting power distribution.
Another measure of a decentralized governance is the level of activity the DAO members engage in. If you look at the Proposals tab you can see how many proposals were created, and how many voters participated in the process.
By providing these different ways of looking at the data, DeepDAO opens up the closed box of governance and lays it out in the open for everyone to understand and evaluate.
Moloch DAO from the prism of DAO Governance
Casually throwing around terms like “distribution of power” and “decentralization” may sound abstract, so let’s look at an example. 👹 Moloch is one of the most well known in the ecosystem. It was launched in February 2019 in order to support Ethereum’s development. It currently holds 3,244 ETH and has seen contributions of a total of 7,712 ETH in its lifetime (as you can see on DeepDAO’s Moloch Top Level tab).
Looking at Moloch DAOs Members list you see that the top shareholder, and therefore the top holder of voting power has no less than 19.5%. The 2nd address has close to 10%, and the 3rd almost 4%. Nobody else holds more than 2%.
So Moloch DAO is centralized, right? Well, not so fast (#1). When you look at the number of times the top three shareholders voted you get a surprising number: zero. That’s right, they never voted on any of the DAO’s 129 proposals. They never used their power!
Looking at Moloch’s history, the top two shareholders are Vitalik Buterin and Joe Lubin, two of Ethereum’s founders. They put the money in Moloch in order to push the platform forward, and let the community manage the funds. They were willing and eager to take the risk and see what happens.
So Moloch is decentralized, right?
Not so fast (#2). When you sort the Members tab by number of proposals created you see that one address created 86 proposals. That’s 2/3rds of the DAO proposals by one address! If you want to create a proposal it looks like you might have to go through him / her. That’s not good, right?
So Moloch is crazy centralized, isn’t it?
Not so fast (#3). The Moloch protocol calls for a member to sponsor a proposal before it goes through the process of voting. So yes, there is a narrow gate for submitting proposals, but this is only one parameter of governance.
To summarize our point, DAO governance is complex, with each DAO configured in its own bespoke way and it will only become more nuanced as the pace of innovation in the ecosystem continues to accelerate. DeepDAO can not give you a guarantee that a DAO, or a community’s governance is risk free, but it can help you make an informed decision.
DeepDAO is helping the data community: Messari uses our work (again!)
We do this because we love it, and it looks like there is demand. Last week Mason Nystrom and @Messari, one of the top crypto research firms used some of our data for a thorough review of @Aragon, the largest DAO platform to date. Thanks Messari!
Our site: https://deepdao.io
Twitter: https://twitter.com/DeepDAO_io
DAOpulse #2 was written by Ivan Sucharski (Capital DAO — What’s in their wallet?) and Eyal Eithcowich (Governance and its Risks), and edited by Ivan Sucharski and Daniel Bar.
