Crypto mania has pushed decentralization into the mainstream, but Bitcoin is only one example of how blockchain can create new structures not controlled by corporations or centralized entities. (Though it’s ubiquitous, plenty of people still don’t even know what blockchain is. If you’re one of them, stop and read an explainer here.)
The latest tech trend is the formation of decentralized autonomous organizations, or DAOs. Artists, charities, and businesses are forming DAOs, but anybody can. Recently the Republic of the Marshall Islands even passed a law giving them the same legal standing as LLCs. There are benefits to starting or joining one, and doing so may be easier than you think.
DAOs are organizations not governed by hierarchies, wherein members can vote on their direction and have a direct say in how they’re run. The organizations are accountable to members and shareholders and, in essence, managers and executives are unnecessary. Members do still have jobs that are based on their skills and the organization’s objectives overall. Small, autonomous groups called “guilds” often form within each DAO and tackle specific goals and problems.
“Very simply, a DAO is a collective. It’s a commune where nobody is in charge, but everyone votes on what the organization will do,” MODA DAO’s Director of Marketing Joan Westenberg told Lifehacker. “It’s a DIY group of people that’s really no different than a co-op, but voting takes place on blockchain.”
As for what you can use a DAO for, Westenberg says the options are pretty expansive: “You can make a DAO of anything. If you wanted to make a bookstore you could make it a DAO organization and have members vote on how the bookstore will be managed with transparency you wouldn’t get in other conventional methods. A DAO can be anything, as long as it’s a decentralized organization that gives its members power to make decisions.”
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A good example is Big Green DAO, which was launched late last year by Kimbal Musk, brother of Elon Musk and member of Tesla’s board. It’s tied to Big Green, an existing food justice charity that made over $9 million in 2019. There’s a lot of money there, and the DAO members get to decide together how it’s used.
“Anyone can organize a DAO and start working with other people,” added Shipyard Software CEO Mark Lurie, who recently registered the Admiral DAO in the Marshall Islands. “The thing that makes it a DAO is if the bylaws are incorporated on blockchain. That’s the difference between a DAO and a normal company. You can get together with a bunch of friends and vote on how you’ll spend your money. You don’t need to be a company.”
Most DAOs have Discord channels, and these are a great place to start and observe a group’s activity to see if its interests and mission align with yours.
“You can join one DAO and ask questions,” says Lurie. “There are some you have to pay with cryptocurrency to get in, but most are free and the community is open to answering questions.”
Let’s go back to Big Green DAO. When you donate to the organization, you get an email with an invitation to join the Discord group. Check out a list of other DAOs on DAOList or DeepDAO to find one that matches up with your personal passions. They might have charters or other documents you can read before joining the Discord or otherwise engaging.
DAOs can be created by anyone with the technical know-how and are generally centered around a common cause, goal, or set of interests (like when ConstitutionDAO made a bid to purchase the U.S. constitution). Having a member with an engineering background who is savvy with blockchain could help you get a DAO off the ground—especially when you’re minting a native cryptocurrency that will allow holders “governance” rights.
“DAOs are run via community governance, where new policies and other actions can be proposed and voted on by all members,” said Beyond Protocol CEO Jonathan Manzi. “Voting power often is tied to a DAO’s native governance token — the more tokens held, the greater your voting power. These tokens are typically traded on the open market, with their value driven by the forces of supply and demand.”
If you’re confused by any of these words, you’re not alone, but the times are changing fast and knowledge is power, so it’s time to learn. We have a cryptocurrency glossary here and an explainer on how to create your own cryptocurrency here.
Just because you can form a DAO doesn’t mean you should. Each state carries different regulations, and it’s important to research different states to make sure the laws are clear.
“Anyone can create one yes, but I’d always advise people to look at the rules and regulations in your territory because they are going to differ,” said Westenberg. “I think Wyoming is the first place in the world to have straightforward, solid guidelines on how to create a DAO. At the moment, anyone can create one. I’d say try to operate in good faith if you’re in a state where regulation will catch on. Be careful of the legalities depending where you’re living.”