White Star Capital’s Views on the DAO Economy

White Star Capital
Venture Beyond
Published in
6 min readJun 29, 2021


White Star Capital and DAOs

The strategy of venture capital is evolving beneath our feet at this very moment. The introduction of crypto networks and token-based projects has ushered in a new era for industry-defining businesses.

With the recent launch of our Digital Asset Fund, a dedicated $50 million vehicle created to invest in digital assets and Web3, we’ve expanded White Star Capital’s scope to include digital assets and tokens.

With a global perspective in mind from the inception of White Star Capital’s investment platform, truly global, decentralized networks seemed like a natural progression for us. In line with sharing our views on the digital asset ecosystem, we’ve put together a piece highlighting the fundamentals of decentralized autonomous organizations (DAOs) and where we believe they are headed.

For the newcomer, a DAO can be thought of as a member-owned community created for a specific intent or purpose. More importantly, there is no figurehead, nor a central authority that can unilaterally make decisions on behalf of the broader organization. Building on top of a blockchain network allows for a truly decentralized and transparent environment. Ethereum.org provides a comprehensive primer on DAOs and how they differ from traditional organizations, though as you’ll find throughout this piece, the lines are rapidly blurring.

Just like companies are a collection of legal contracts, DAOs are a collection of smart contracts. Put another way, DAOs are the decentralized equivalent to corporations. Some US jurisdictions are already recognizing DAOs as digital LLCs — more on this in the next section.

Why you should be paying attention

DAOs have seen explosive growth in the last 12 months. Without much fanfare from mainstream media outlets, DAO treasuries have grown to billions of dollars, with the top three DAOs (Uniswap, Compound & Aave) controlling close to $4 billion in assets.

Not only have DAO treasuries built warchests worth billions of dollars, but they are also real businesses generating real cash flows. A few examples of the larger and more prominent DAOs today — MakerDAO, a decentralized bank and stablecoin issuer, and Uniswap, a leading decentralized exchange, are each generating over $100 million of annualized revenue.

Monthly DeFi DAO Revenue

Source: The Block Research, Ethereum ETL, The Graph — as of May 2021.

In addition to the major DAOs in the above chart, we’re seeing the formation of new DAOs to focus on specific communities and platforms — our portfolio company Rally (social token platform), IndexCoop (decentralized crypto asset manager), DuckDAO (decentralized incubator), FlamingoDAO (NFT-focused DAO), Yield Guild Games (blockchain-based game), Friends With Benefits (decentralized social community). The list goes on!

What’s even more fascinating is the transformation of traditional organizations to DAOs furthering the democratization of ownership to a platform’s users. Recent examples include Rarible, Gitcoin, Bankless DAO, and several White Star Capital portfolio companies.

DAOs are dominant in the crypto ecosystem because they create a framework for people with similar goals to organize without the need for formal roles. As a result, DAOs are able to scale their operations much more efficiently than a traditionally governed organization.

A prime example of this dichotomy is the contrast between Coinbase and Uniswap. Both are able to process similar trade volumes — despite the fact that Uniswap was founded 6 years after Coinbase and has a fraction of the people working full-time on the platform. A core team built the original Uniswap product with venture funding and once the platform was live, launched their governance token and put the power in the hands of the users where proposal outcomes can be coded into smart contracts for automatic execution.

A DAO’s main goal is to ensure its own success. They bring a multitude of benefits to their respective platforms: removing central points of failure, aligning users interest, radical transparency, efficient scaling and much more.

As the growth in DAOs continues, so do the complexities of running decentralized organizations with no leader or board member to address certain management level workstreams. A few such examples include the merger between Keep, a protocol to bridge public blockchains and private data, and NuCypher, a privacy blockchain layer, (which was successfully voted on by the communities to move forward) as well as the Curve IP protection proposal (a Curve governance member has submitted a proposal that the project should try to enforce its IP). Not only does the proposal consider whether the IP should be enforced more broadly, but it considers a specific example of Saddle Finance, which the proposer claims has been accused of copying Curve’s code.

DAOs have received little legal analysis or recognition until recently when Wyoming passed its Decentralized Autonomous Organizations Supplement in March 2021. Regulators have been slow to respond because DAOs present a unique problem: who is responsible when something goes wrong? As of July 2021, Wyoming lawmakers will allow DAOs to register as LLCs in the state. Early efforts leave much to be desired but we look forward to the continued iterations and further positive recognition of DAOs.

The future of DAOs as we see it

The proliferation of DAOs opens up a swath of new opportunities to continue to aid in the growth and development of the ecosystem with areas such as DAO formation, treasury management, governance, community, development, ecosystem intelligence and even DAO to DAO collaboration. The DAO ecosystem is large enough to build successful venture-backed businesses.

While this market is in focus for crypto-native funds today, we believe traditional venture capital funds focused on traditional service businesses will need to pay attention to the DAO ecosystem if they plan to stay relevant.

Further to this point, we’ve created a non-exhaustive mapping of the DAO ecosystem, with a few projects straddling multiple categories.

Source: White Star Capital

We see DAOs having control of trillions of dollars in the near future and believe the need for innovation in DAO infrastructure is imperative to that end result.

DAOs, for the most part, have been growing their communities organically but we foresee a not too distant future where DAOs will be competing amongst themselves as well as traditional startups over talent, investors and users. Index Coop, for example, has been formalizing processes around contributor retention, future full-time recruiting and an internship program. Elsewhere, job boards with thousands of opportunities continue to show the growth of the ecosystem and demand for talent.

The beauty of the DAO ecosystem is that it’s mostly an underdeveloped domain. A clean slate. New projects are experimenting with novel systems and building successful communities as a result. The level of innovation is electrifying.

As part of our crypto strategy, White Star Capital is dedicated to backing projects that are enabling a new economy to flourish around DAOs. Apart from backing projects that are committed to transitioning into DAOs, we have also backed companies like Multis, which is building a crypto wallet and banking platform that will allow DAOs to scale their financial resources.

Over the coming years, DAOs will become as familiar to most as large corporations. By the end of this decade, a few will be as familiar to you as Facebook and Google are now.

Call to action!

If you’re currently building or tinkering with an idea related to what we’ve laid out above, we’d love to hear from you! We have backed Rally, Paraswap, Multis and several other unannounced DAO-focused projects and we’re looking forward to allocating more resources and capital to this space. Please reach out via Twitter or email to connect!


If you’re thinking about joining or contributing to a DAO but don’t know where to start, we’d recommend engaging with the DAO’s community on Twitter or Discord and joining their community calls. Don’t hesitate to ask rudimentary questions as most DAO members were there at some point. Once you’ve gotten familiar with the organization, spend more time in subgroups where you add the most value. Over time, new community members will notice your contributions and may even approach you with their rudimentary questions!

Here are several resources we’d recommend checking out:

Joining a DAO

Starting a DAO

About White Star Capital Digital Asset Fund

The Digital Asset Fund is White Star Capital’s dedicated strategy for investing in crypto networks and blockchain-enabled companies at each layer of the tech stack. Our team takes a deeply research-driven approach and applies both a crypto native and traditional VC lens to the sector, to partner with global founders across Seed, Series A, and token rounds. Find out more about us at our website or subscribe to our newsletter.



White Star Capital
Venture Beyond

White Star Capital is an international venture and early growth-stage investment platform. We partner with founders who aspire to scale globally.