DAO-2020. What’s missing?
A year ago, at the Berlin Blockchain Week, I attended the DAO Fest, devoted to decentralized autonomous organizations (DAO). The DAO concept inspired me a lot as the idea of managing a process in a transparent and standardized way perfectly combines all key advantages of the Web 3.0 ideology.
Initially, I didn’t get a full picture of the DAO implementation field. But now I see that this technology can be used almost everywhere to provide democracy and transparency.
DAO is a tool for managing business processes that’s based on a smart contract and basically opens up a possibility for everyone to be involved in decision making.
A year later, I was curious to learn about new developments in the DAO space and figure out why this concept has not yet attracted interest beyond the crypto community. I made an overview of most promising DAO projects, studied the mechanics of DAO operation and proposed a theory about why this concept can’t yet become a breakthrough in the fight for a free internet.
How is the DAO industry developing?
Many blockchain projects are linked to DAO: some are focused on an engine enabling a user to build a DAO in 5 minutes, while others tackle auxiliary tools, such as those resolving the issue of slow blockchain data extraction.
This is an overview of the main projects in the DAO space.
Aragon
Aragon is one of the key projects in the DAO space. It provides an engine facilitating the creation and configuring of a DAO without having to write code. By now, over 1,400 organizations have been launched on Aragon’s engine. The team is actively working on improving the platform. The partnership with TheGraph enabled the optimization the data collection process from the Ethereum blockchain. Aragon Connect, a recently launched framework, enables developers to implement their own interface for a DAO.
Moloch DAO
This is a major DAO project in the Ethereum ecosystem, created for grant distribution. Every member of the organization can propose a project for a grant as long as they deposit 10 ETH to a smart contract, as well as vote for other proposals. One of the project’s key ideas is avoiding unnecessary complexity. A strong community has already formed around Moloch DAO and the project DAOHaus, which aggregates “Moloch DAOs” has been launched.
The LAO
“The venture DAO” is a young organization built on top of the Moloch v2 engine and allowing members to join forces for funding new projects. To join the DAO, a user needs to make a contribution of at least 120 ETH: https://www.thelao.io/contribute. The LAO team describes the projects as a “DAO wrapped in a legally compliant entity”.
KeeperDAO
Given the popularity of DeFi apps, such as Maker, Compound, Uniswap and Kyber, the arrival of a DAO focused on using arbitrage and secure investment comes naturally. KeeperDAO offers all participants an efficient mechanism for large scale arbitrage and liquidation trades on all DeFi protocols.
Colony
Colony is a protocol facilitating the creation and configuration of a DAO for community management. Its features include a built-in task management board and a simple interface.
DAOStack
The DAOStack team contributes a lot to the development of the DAO segment. Its projects include the engine Alchemy for DAO creation, built on Infra and Arc, as well as the forum DAOtalk.
Indeed, quite a few teams are working on popularizing DAO. Covering all of them within the scope of this article is impossible. The most comprehensive list of DAO is available here: Awesome DAOs.
Having completed this overview, I decided to dig deeper into the mechanics of DAO operation to understand the decision making process in organizations employing the DAO model.
Decision-making mechanics in DAO
Working on the overview, I came across the event DAO Hack Month, which featured several online hackathons, including Hack for Freedom and Fork the World. There, I studied DAO operation in more detail, also taking part in the Aragon hackathon and developing my own MediaDAO on its engine.
The Aragon team was able to partially automate the DAO creation process, allowing users to build a customized tool from modules (apps):
And this is how the voting process for DAO members in the native interface looks like:
This classification of organization templates looked especially interesting to me:
The use of templates at the organization creation stage enables automatic configuration of some basic settings, such as voting rules, the use a native token and adding new members to the DAO.
I studied three basic organization types in more detail and made a short description for each of them:
(1) Company standardizes the decision making process by a company’s stakeholders. The weight of a member’s votes is in proportion to the number of tokens in their account.
(2) Membership standardizes the decision making process by members of a community in which the weight of each member’s vote is equal. To participate, a member has to have at least one token in their account.
(3) Reputation standardizes the decision making process by members of a community in which each member’s vote’s weight depends upon their reputation, i.e. the number of tokens in their accounts that cannot be transferred to other members.
As you see, the existing DAO models can differ in minor details but have an overall similar structure: each model is based on using the organization’s token as a means of voting.
What’s with mass adoption?
There is no doubt about the high potential of the DAO concept. Mass adoption of decentralized autonomous organizations will come as a major step in a fight for democracy and fairness in decision making at a global level. But why has this concept failed to appeal to mass audience so far? Why isn’t the DAO Fest gathering hundreds of thousands of enthusiasts?
I think, the weak point of this concept is its high entry threshold. To begin using a DAO, you still need to understand how blockchain works, you need to open an account and learn what a transaction and a signature are.
While trying to use a DAO by Colony, I encountered the following issue:
I didn’t have a sufficient balance in my Metamask account to pay the transaction fee. True, I know what an account in the Ethereum network is and how I can deposit funds to it. But would I deposit funds to my account specifically to use a DAO? Would a person outside of the crypto space learn how it works? Would they be able to install the MetaMask and figure out how to use it?
Most likely, mass adoption of DAO will take off when you no longer need to understand blockchain basics or install a browser extension to take part in decision making. It will happen when you won’t need to buy tokens to take part in a vote, but it will be sufficient to just visit a website on your smartphone and vote for a major decision.
Then — and I’m confident about it — DAOs and their audiences will converge. And what about you?
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