Bootstrapping DAOs

Decentralized teams and organizations can explore wealth creation and value transfer using new crypto mechanisms and primitives.

Decentralized autonomous organizations, or DAOs, are digital entities that live on blockchain networks (Ethereum, Polygon, Solana, BSC, Bitcoin). They are like Reddit communities with bank accounts. DAOs often manage a treasury or pool of capital, and DAO members are responsible for allocating their treasury resources.

Growing and scaling a DAO requires capital, and DAOs require capital to pay team and community members for developing software, marketing its products, building a community, and so on. Funded DAOs increase the probability of success and decrease project risks.

So how does an aspiring DAO or startups go about bootstrapping their projects without relying on traditional venture capital? The answer lies in the tokenization of DAO’s creative assets. The answer lies in the non-fungible token (NFT) drops.

How do token drops help your DAO? With NFT drops, your goal is to convince others to see value in your project so you can generate revenue from the sale of your tokens.

To make token drops work, you need two things: a sense of mission and a strategy for minting tokens. The mission helps motivate your community, and the strategy gives you the how-to to generate wealth using crypto.

In this blog post, I will explore some of the best practices for bootstrapping DAOs.

If you are working on something interesting, why aren’t you telling everyone about it? DAOs should celebrate their wins and show the world what they’ve done.

Organizations have to fight the urge to operate in stealth mode. Some people don’t think they have something interesting to share. But for DAOs, you are not just building something for yourself, and you are creating something that other people will use. And the more people who know about it, the more people can use it.

If your goal is to build a community around your work, each additional person who knows and talks about you becomes your ambassador, collaborator, and fan.

Every minute you spend on the project is a creative act that can be captured and stored on the blockchain. If you share your project updates, you are helping your DAO grow your community.

As a DAO, you can spotlight your milestones or accomplishments.

Let token holders participate in governance

Once a DAO is formed, it needs a system of governance or decision-making.

Traditional companies operate top-down, whereby leaders delegate tasks to employees or contractors. DAOs are different, and DAO members can take on project tasks without a central leadership and vote on decisions using their tokens.

In traditional organizations, governance systems tend toward centralization. But this has costs: If one person or small group controls resources, they will also control how the organization is run. In extreme cases, they can end up owning everything. The obvious solution is to decentralize governance among all the stakeholders of an organization or community. DAOs accomplish this by encoding voting rules using smart contracts.

In a DAO, the people who own tokens can participate in voting on the organization’s direction. Token holders get to vote with their crypto wallets. Software like Snapshot allows DAO token holders to vote on important issues using consensus-based decision-making mechanisms. If token holders don’t like how the DAO runs, they can liquidate their tokens and take their money elsewhere. Or they can use their tokens to change things with proposals and community voting.

Drop NFTs to bootstrap your DAO

DAOs will transform traditional VC-first fundraising models. Traditional companies often rely on venture capital to exchange equity for capital. Modern organizations rely on the exchange of tokens for capital.

At 🪶 Phoenix Team, we believe DAOs should be self-sufficient and adopt new crypto primitives to bootstrap projects. We also believe that NFT drops are an ideal way to accomplish this. These token drops are used to reward collaborators who contributed to the DAO, and here’s how it could work. A DAO releases tokens to “celebrate a win.” The number of tokens dropped in the community depends on the project’s maturity. Typically, smaller projects issue fewer tokens, while larger projects can drop more tokens.

We are a team with one primary objective: to help you and your DAO generate money! If you are interested in bootstrapping your DAO, reach out to us.

Originally published at phoenixteam.io on October 4, 2021.