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The Future of DAOs: Tooling, Standards, and Management

Where will DAOs go next?

When DAOs, or decentralized autonomous organizations, entered the cultural lexicon in 2015, they were theoretical. No one had yet created one.

Fast forward to 2022 and they are, in many ways, the organizing principle of Web3. Decentralized and autonomous, with their own governance procedures and voting structures, DAOs are the entities that make Web3 go.

From 1 token-1 vote to delegated, role-based, and tiered token-based voting, they now come with a custom toolkit of roles, “access” levels, and more. And they’re only just starting to evolve.

“The DAO trend right now is about where NFTs were in 2020,” says Ozymandius, Co-founder and CPO of Open Forest Protocol (OFP). “Which means we are only starting to scratch the surface of customizations and functionality.”

But where are DAOs going as Web3 blockchain platforms, like NEAR, begin onboarding the masses? To get an idea of the future DAO landscape, the NEAR Foundation turned to a number of NEAR community members who are doing pioneering work with DAOs to find out.

Balancing creativity with coordination

To unleash the next wave of DAOs, Sputnik, Astro, and other NEAR-based launchpads will be vital.

The code that is Sputnik, the original DAO-creation machine, with its customization features was built with developers in mind. Sputnik allows for the funding of bounties on-chain, communication amongst DAOs, Council Structures for roles within a DAO (each with its own unique set of permissions), embedded Social $Tokens, on-chain polling of participants, and more. Sputnik’s feature set will only continue to grow in the future with the V3 release.

“Sputnik V2 is completely underrated with the level of customizations and permissions possible,” says Ozymandius. “From when Illia [Polosukhin, NEAR Protocol co-founder] initially presented it to a group of us in May of 2021, my first thought was: ‘Holy shit, you are going to be able to put the European Union on Sputnik V2’. I hope in next 6 months to a year that we start to see more sophisticated DAO customizations using Sputnik V2 and when Sputnik V3 comes out.”

Astro, on the other hand, is very plug-and-play — a more simplified DAO launchpad. OFP’s Ozymandias recommends Astro for those who want to creatively experiment with DAOs, which will help them flourish.

“More than anything, we need some creativity and R & D,” says Ozymandius. People who are looking to see what’s creatively possible instead of just making a product.

While great engines of creativity, DAOs can also be difficult to coordinate. To counter this, Ozymandius believes there will be more pooling of resources for coordinated purchases or acquisition, collective bonding of assets for treasury build-up, or collective pooling of assets for service offerings (LP DAOs, Data/Analytics DAOs), etc.

“I also think we are going to see them become more hierarchical to balance the most committed members versus the general community member,” Ozymandius says. “I also think we will see more care in the design of who can propose legislation to a DAO and vote on such legislation.”

Beyond the technical innovations, there is something more organic at work — more human. Tracey Bowen, Founder of H.E.R. DAO, a womxn-led developer DAO championing innovation and diversity, believes that in the future groups will probably be able to call themselves a DAO without ‘in-chain’ markers like a wallet or voting mechanisms.

“I see that shifting into people organizing themselves in a way which is more reflective of their actual goals,” says Bowen. “I’m actually in favor of relaxing the emphasis on automation and concentrating more on human expression in terms of organization being more fluid.”

In the last six months, DAOs have entered the cultural vernacular, with thought pieces appearing regularly in business publications like Forbes, Bloomberg, and others . More concretely, people have seen them far away from the Web3 world. In late 2021, ConstitutionDAO hit the headlines when it tried to collectively buy a copy of the U.S. Constitution.

As AstroDAO’s Jordan Gray notes, people are starting to understand the overall idea of DAOs, and the logistics of starting or participating in one. This curiosity will pave the way for the future of decentralized organizations.

“This opens up more questions that I don’t think anybody has answers to yet because there’s a lot of discovery happening,” says Gray. “That’s also the Web3 space in general: we are wayfinding. We have ideas on the ways these things can work, and we try them out. Sometimes it’s successful and we repeat. Sometimes it’s a failure and we course correct, figure out what went wrong, and how things could go better.”

Upgrades to DAO tooling & operations

DAOs will have more clear cut archetypes, with tools and systems to help run them. They will be legal entities, companies, and non-profits. They will also be one-off use cases, and often a type of community building, like a group of friends doing stuff together with a shared wallet.

“This would be accompanied by more clear legal precedents with regard to DAOs and trial-and-error-based learnings that set general guidelines for how they operate,” says Open Forest Protocol’s Rim Berjack.

Berjack, who has worked with DAOs for several years on a technical level, is keen on developing tooling, complimentary communication channels and platforms, and software or services for DAO treasury management.
“I’ve been noticing kernels of these tools emerging as we witness DAOs of great scale learn how to create formal systems and establish best practices, often evolving into a complex organism of hundreds of contributors,” she says. “I foresee the business of DAO tooling and management becoming an industry in itself as more projects that launch as DAOs or later become one bloom into multi-billion dollar enterprises.”

Chloe Lewis, Founder of Marma J Foundation, a Web3 platform for social good, also believes tooling will be vital. In general, tooling focused on treasury and asset management, or which gives DAOs legal frameworks to become fully incorporated entities. This will make Web3 more interactive with Web2 and the physical world.

“The difficulty lies mostly in the ‘legal wrapper’ that needs to be set up and the regulatory climate ambiguity,” Lewis says. “The Marma J Foundation is setting up a non-profit organization to support in this area, but it isn’t a process that can be done in a purely decentralized way. Once done, though, the foundation can interact with IRL aspects while the DAO interacts with Web3 aspects.”

Organizationally, DAOs could take any number of paths, and there won’t be a one-size-fits-all approach. Some DAOs might remain fiercely decentralized. Others could establish hierarchies, particularly those with large memberships.

“Realistically, I think we’ll see a spectrum of organizational structures depending on the character of the DAO,” says Berjack. “DAOs are a technology, a tool, and i’s a choice to implement familiar structures or entirely innovate new ways of decision making.”

For Illia Polosukhin, Co-founder of the NEAR Protocol, DAOs are a way to open up what he calls the “organization design space.”

“DAOs can program any kind of interaction between people, so we will see more and more new structures of people, compensation mechanics, and permissioned ways of interacting with an entity,” says Polosukhin. “At the same time, we will see more KYC (Know Your Customer), employment laws, and payroll integrations. This will bring existing DAOs closer to familiar company structures.”

“Decentralized doesn’t mean there is no need for coordination and leaders, and that needs to be more integrated into tooling and people’s interactions,” he says. “Making it clear who in the DAO is responsible for what direction of the work, who is contacting people, and how newcomers can onboard and become active members beyond just the onboarding guide in Discord.”

Multi-chain DAO standards

In Web3, each chain has its own approach, culture, tools, and this type of diversity is certainly a strength. But for a multi-chain Web3 future, DAO standards between blockchains will be necessary.

A working group called DAO Star is tackling this issue on NEAR. The goal is to normalize the way decentralized organizations publish information about their activities.

“It’s kind of like RSS for DAOs,” Astro’s Jorday Gray explains. “This is something that Deep DAO and Messari are part of as well. The ways DAOs transmit and publish information about themselves can show up in these aggregators, and it doesn’t matter what chain they’re on. I think that it’s essential to reach some standard point for these communications, so that everybody is interoperable.”

These standards will also be useful as more Web3 activities decentralize. With such standards and cross-chain bridges, DAOs will be able to work together in more seamless ways.

The multi-chain future will also see users participating in DAOs without a direct on-chain account where they function. They will also be able to trigger actions on other chains with tools like Rainbow Bridge.

“DAOs can have members represented by their addresses on other chains and read from the state of that chain, provided by Rainbow Bridge,” Polosukhin explains. “Similarly, a they can form a request to Rainbow Bridge to pass it to the other chain to execute it. This will provide a seamless way to onboard new users into DAOs independent of where the user is coming from.”

Marma J’s Lewis says interactions between DAOs are already quite frequent, albeit occasionally inefficient. “The agreements they have with each other will get much more complex and therefore potentially efficient and beneficial for the communities involved,” Lewis says.

Gray hopes to see core functionality, like aspects of the treasury and governance (voting), broken off from DAOs. Once this happens, then new, creative interfaces and experiences will be built around them, with which it and end users can interface.

“[Imagine] a musician or an artist that wants to up their engagement with a post on Twitter,” says Gray. “They could set up a smart contract that allows a user to link their wallet, link their Twitter account, and if they interact with the posts — retweet, like it, whatever — then they get something: either an NFT or fungible token or even some NEAR.”

And when an artist wants to spend 100 $NEAR on more engagement for new posts, they can put it to a vote in the DAO. Unlike Web2’s ad networks, Web3 would create a closer connection between fans and their favorite artists, musicians, and other creators. The layers between them won’t exist, and fans will be rewarded directly by the artist or DAO.

In the future, a constellation of interfaces could grow around and interact with a primary DAO, like the one envisioned above by Gray. For this to happen, though, the information on interfacing with them must defined more clearly. The problem is that smart contracts, like the ones behind DAOs, don’t really publish interfaces to themselves in a clean way.

“That’s something we’re doing currently with Astro DAO and TenK: for smart contracts to actually have some kind of manifesto about what they’re capable of doing,” Gray explains. “Once published as a JSON or some computer-readable format, then any React app or frontend could look at any smart contract and create an interface user interaction.”

“This will aid a ton with discoverability of contract feature sets, allowing for things like crawlers and searchable indices of smart contracts.”

When DAOs won’t be called DAOs

One day, DAOs will stop referring to themselves as DAOs. They will be, like their Web2 predecessors, just apps — autonomously running investment tools, community-focused organizations, sports teams, ReFi projects, and so much more. You name it and DAOs will be able to do it.

So, when the word “DAO” is no longer attached to an app or project’s name, it could be said that Web3 will have arrived in the mainstream consciousness.

“While the term helps distinguish it from centralized Web2 platforms, once mainstream culture fully grasps the DAO concept, the term will be rendered superfluous,” OFP’s Berjack says.

Polosukhin prefers the term “Digital Cooperative”, believing it gives people a better grasp of how DAOs can organize people in digital realms. “I think the more examples that are successful, the better intuition people will have around what they can do with them,” he says.

“Right now everything is very early and experimental,” adds Berjack. “So, more than anything, I am looking forward to the DAO’s conceptual maturity that will come with time.”

Stay tuned for the second installation of where DAOs will go back. In the meantime, read:

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