You're reading State of the DAOs, the high-signal low-noise newsletter for understanding DAOs.

State of the DAOs curates high-quality content from the DAO ecosystem and delivers it to you in an easily accessible form.

You might be curious about joining a DAO, have already jumped in but feel overwhelmed, or you might even be an active, engaged member of multiple DAOs.

Wherever you are on your journey, State of the DAOs cuts through the noise and is your TL;DR for getting started, leveling up, and staying up to date on the world of DAOs.

Author: BanklessDAO Writers Guild (scottyk, frogmonkee, siddhearta, William M Peaster)

This is the official newsletter of the Bankless DAO.

WTF are DAOs?

Authors: frogmonkee & William M Peaster

Decentralized Autonomous Organizations (DAOs) are digitally native communities that center around a shared mission. DAOs are:

  • Decentralized, because they’re community-owned, grassroots-driven, and loosely organized (in contrast to a hierarchical, tightly-structured centralized org like a bureaucratic agency or company).
  • Autonomous, because their shared rules and shared treasuries are encoded and automatically enforced on the Ethereum blockchain.
  • Organizations, because they’re groups of people that associate and coordinate around specific purposes.

Accordingly, DAOs are a new internet-native way for communities to efficiently and securely coordinate funds and labor. DAOs are simply units of coordination. Any group of individuals can create a DAO to execute their mission with minimal barriers to entry, whether that be to buy and manage a basketball team, create a decentralized Blackrock, or offer services to other DAOs.

Emboldened by a growing sense of collective empowerment, the DAO ecosystem has been surging with activity lately as more and more people discover how these orgs are pointing to new horizons of work in the 21st century.

As a testament to this surge, today DAO treasuries bear ~$7B worth of assets under management (AUM) and somewhere in the ballpark of 1M members, respectively speaking. That’s on the heels of the DAO ecosystem having just turned 5 years old!

“DAOs are here today. DAOs are a worldwide trend & an emerging part of the Ethereum ecosystem. It’s happening! DAOs are already enabling dense P2P networks of value exchange & participation.” DAOs: The New Coordination Frontier

The crypto industry as a whole is still a ways off from DAOs actualizing their full potential. The original conception of a DAO was code at the center, and humans at the periphery. A DAO is a smart-contract or system of smart-contracts on Ethereum that are autonomous because they have no human dependencies; they operate as autonomous software on Ethereum.

Projects like Uniswap and Compound that start as autonomous protocols and turn into DAOs embody this ethos, but most DAOs lack sufficient tooling to move their decision-making and execution from the social layer to on-chain. But that hasn’t stopped the massive wave of DAOs that embed the values of decentralization and permissionless execution at the social layer.

How DAOs Operate

In traditional organizations, decision-making happens through top-down hierarchy, with a small group of executives dictating each macro-level decision. DAOs operate through a bottoms-up flow, where decisions are made through community consensus and rely on the perspectives of peers.

This does not mean that every person is necessarily involved with every single decision, but rather that decision-making happens within concentric rings, starting from “soft consensus” and moving towards “hard consensus.”

  • Soft Consensus: Achieved through some implicit signal of preference depending on the scope of impact. (🔊 > 🔉 The crowd that yells louder than others to signal preference)
  • Hard Consensus: Achieved through a collectively accepted signaling mechanism. (🗳️ Turning in a ballot to cast your vote)

DAOs need a combination of soft and hard consensus unless they want to get bogged with bureaucracy (only hard) or divisiveness (only soft). In fact, consensus mechanisms can have both “softness” and “hardness” both.

DAO vs Traditional Organizations

In a traditional organization, ABC Incorporated develops a marketing plan. It was drafted by ABC Inc.’s Product Marketing Manager with some input from other departments. It then goes to the VP of Marketing for edits and finally up to the executive suite for a final approval. Upon approval from the higher ups, the VP will coordinate with his/her team to execute on the plan.

XYZ DAO also has a marketing plan. It was voluntarily drafted by two people, one with a couple months of product marketing experience and the other with 25 years in marketing. It was then proposed on a public forum with a dedicated Discord channel for discussions. At this stage, members with a variety of backgrounds, some in marketing and some not, all participated with criticisms, suggestions, dissent, and support.

The final step is to redraft the original proposal until there is majority support before moving on to a snapshot for tokenholders to vote on.

🔑Insight: Same outcome, completely different process. One that empowers individual members to act with the support of their peers.

DAOs and the Future of Work

Catalyzed by COVID-19, the labor markets have been subject to what economists are calling The Great Resignation. The main takeaway (aside from retail workers being treated like 💩 - again) is that the change to remote work has changed how employees view when, where, and why they work.

Despite the stress, the pandemic put on the average working-class individual, the repeated furloughs, remote work, and quarantine requirements gave people the chance to live their lives. To spend time with family, cook new and exciting meals, go on long walks, and pick up new hobbies. The pandemic reminded everyone that there was a world outside of work. And in the digital age of work, is it any surprise that people want their lifestyle to determine their work, not their work to determine their lifestyle?

DAOs represent this shift in thinking. People in DAOs work at their own leisure, whether that’s five hours a week or fifty, at one DAO or three. In fact, the majority of contributors within a DAO are part-time, which inverts the usual model found in traditional organizations. And guess what? Shit still gets done.

Need more money? Work more. Need more time? Work less.

It doesn’t stop there. The future of work doesn’t mean only working your own hours, but it also reflects the meaning behind that work. DAOs are digitally native communities that center around a shared mission. That mission isn’t marketing fluff. Unlike incorporated companies that have financial obligations to shareholders, DAOs can activate around a more diverse set of goals that are not necessarily financially motivated. Combine meaningful missions with flexible working hours and people find themselves wanting to contribute, rather than being compelled to contribute.

How to Get Started

A helpful mental model to use is that while startups source talent, by way of job boards, interviews, and a robust hiring pipeline, DAOs crowdsource talent from their community. People self-organize into niches based on what excites them and collectively begin to explore those ideas collectively. It is the DAO’s responsibility to enable new entrants to contribute and execute their ideas.

In some cases, DAOs are gated by token requirements, but most are open for anyone to join. In most cases, the entry point is usually a Discord server, where 99% of activity and conversation occur. From there, each DAO has its own onboarding flows. (This is a problem space for most DAOs. Onboarding is often chaotic, but we’re starting to see best practices emerge.) For example:

An easy way to plug into a DAO is to attend their regular community calls or other beginner-friendly meetings. Feel free to join Bankless DAO’s weekly community call every Friday at 11am EDT or peek at the Beginner-Friendly Calendar below!

Actions steps

📖 Read The Ultimate DAO Report by Bankless DAO x Gitcoin DAO

🙋 Join the Bankless DAO Discord to see how you can help us help the world go bankless!

🎧 Listen along to any regular DAO calls that may interest you

DAOs at a Glance

Hand-picked articles to understand the current state of the DAO ecosystem

Composable Membership and its Role in Generating Social Capital

Author: Andrew Hong

Exploring ways that communities move away from simple token-based membership, Andrew Hong identifies three key factors in creating composable memberships with the goal of creating long-term social capital:

  1. Access is discovery, permissions are responsibility, status is weight.
  2. In Web3, services will form around membership, rather than membership around services (Web2).
  3. Designing membership systems that improve ownership of decisions and build in allowances for trust, experimentation and flexibility within a community.

In the near future, composable memberships will not only shape communities, but also the ecosystems and platforms those communities operate in as well.

Organization Legos: The State of DAO Tooling

Author: Nichanan Kesonpat

This comprehensive article by Nichanan Kesonpat presents a deep dive into organizational design and the growing suite of web3 native tools available to enable large-scale human coordination. In it, she presents three main challenges all DAOs face, whether they are protocol, investment, community, or even NFT DAOs:

  1. How to lower the barrier to meaningful contribution.
  2. How to maintain operational efficiency as they decentralize.
  3. How to coordinate decision-making at scale.

In order to meet these challenges, she then explores each category of tools available today, including— contribution management, compensation, decision making, treasury, analytics, and DAO frameworks.

Sushi and the Founding Murder

Author: Mario Gabriele

The fascinating story behind SushiSwap. Part manhunt, part trial by media, and part murder, the full saga covers:

  • The mark. Uniswap’s remarkable innovation, and critical vulnerabilities.
  • The plan. How and why Sushi was founded.
  • The heist. Chef Nomi’s ingenious maneuver to bring liquidity to the new exchange.
  • The murder. A founder on the lam, and how DAOs mete out justice.
  • The aftermath. The establishment of a headless organization.
  • The future. Where does Sushi go from here?

DAOs: The New Coordination Frontier

Authors: Kevin Owocki, frogmonkee, paulapivat

A first of its kind, GitcoinDAO and BanklessDAO partnered together to create this comprehensive survey of people who work for DAOs in order to help us understand how DAOs can coordinate better for long-term strategy. Here are some of the key takeaways:

  • DAO creators are a global cohort, though a vast majority of the 422 surveyed reside in China and the United States.
  • DAOs are incredibly easy to spin up with over 200 represented. Contrast this to corporations that require articles of incorporation, legal expertise, and approval.
  • Of the 223 DAOs surveyed, BanklessDAO, GitcoinDAO, Index Coop, DAOSquare, and dOrg were heavily represented.
  • DAOs were diversified between NFTs, social, investments, protocols, services, and grants.
  • A majority of responders were between 20-40 years old and skewed 80% male.

"Imagine the ultimate marriage of technology, community, capital, ownership and purpose. That is a DAO." - @nanexcool

Ecosystem Takes

🔥 and 🧊 insights from across the DAO ecosystem

DAOs May Be the Future of Work but Don’t Bet on Them Being the Next Big Asset Class

Author: Andrew Thurman

🔑 Insights:

  • DeFi is a bet on the future of finance. NFTs are a bet on the future of ownership. DAOs are bigger - they’re a bet on the future of coordination writ large.
  • Not all DAOs have investible tokens, and some may never issue them
  • Profit-motivated investors cannot fully appreciate DAOs without joining and participating
  • Metrics for a “minimum-viable-community” have yet to standardize and don’t align with traditional investment analytics
  • If you want to invest in a DAO, then invest your time and labor. Not your money.

DAOs Have a Long Way to Go

Author: Daniel Roberts

🔑 Insights:

  • DAOs are chaotic. Most enthusiasts agree that needs to change.
  • People cannot work meaningfully in more than two or three DAOs
  • The appeal of DAOs is that there isn’t a single leader. But that model doesn’t make sense in every case. Many DAOs are just corporations gallivanting as DAOs.

Tokenomics - Three things Creators need to know before making a Social Token for their community

Author: Eliot Couvat

🔑 Insights:

  • It is impossible to bootstrap a community around creators who are willing to accept a social token without a sound tokenomic strategy (tokens + economics)
  • A shared goal(s) and aligned mission are a critical first step. There needs to be a why
  • Token incentivization needs to be thought of in advance. How will you rewards creators? What tools - vesting, bounties, KPIs?
  • Liquidity and stability are important factors. Creators will need to cash out their tokens to make a living. Make it easy.

On Nathan Schneider on the limits of cryptoeconomics

Author: Vitalik Buterin

🔑 Insights:

  • Finance can be viewed as a set of patterns that naturally emerge in many kinds of systems that do not attempt to prevent collusion. Conversely, finance is optimized and structured collusion.
  • The only reason why political and legal systems work is that a lot of hard thinking and work has gone on behind the scenes to insulate the decision-makers from extrinsic incentives and punish them explicitly if they are discovered to be accepting incentives from the outside.
  • Blockchainized should not be equated with financialized. There is plenty of room for blockchain-based systems that do not look like money, and indeed we need more of them.

Get Plugged In

🗓️ State of the DAOs - Beginner Friendly Events

Times in Eastern Standard Time
  • Gitcoin - MC Office Hours - Join Gitcoin's office hours call to see what's going on in the ecosystem and start to see how their DAO operates.
  • DAOhaus - Haus Party - A weekly meeting on Thursday for the DAOHaus community to get together for an open community call.
  • BanklessDAO - Community Call - Just what it sounds like, a community call so that all the different guilds can come together and make sure everyone is on the same page.

🛩️ Event Highlights

  • ETHGlobal - ETHOnline - ETHGlobal's biggest event of the year. Checkout the link for more specifics as there are lots of events going on!
  • BanklessDAO - Permissionless Conference - Tickets just went on sale for one of the biggest DeFi conferences! Over 5,000 people will be attending in total and every two weeks 250 more tickets unlock. Once 250 tickets are purchased, registration closes and you’ll have to wait until the next release. Speaking of the next release, your next chance is on October 1st and prices are currently at $316. Speakers include our very own Ryan Sean Adams and David Hoffman, as well as many others. Join us on Tuesday - Thursday, May 17 - 19, 2022 in sunny Palm Beach, Florida for the event.

💻 Job Opportunities

  1. Interim CTO at Meryt
  2. Founding Blockchain Engineer at Highlight
  3. Community Manager at Aragon
  4. Community Lead at Popcorn
  5. Senior Frontend Web3 Developer at Tracer DAO
  6. Senior Software Programmer at Popcorn

DAO Spotlight: Bankless DAO

BanklessDAO is a decentralized autonomous organization that acts as a steward of the Bankless movement by creating user-friendly onramps for people to discover next-generation financial technologies through education, media, and culture. Going Bankless means adopting blockchain-based technologies that enable wealth creation without relying on the traditional banking system. BanklessDAO envisions a world where those with an internet connection can have access to the tools needed to achieve financial independence.

Building tools, resources, and community.

Creating written media, podcasts, and educational resources.

Empowering individuals and teams to do their best work.

Connecting diverse talent, perspectives, and teams in a collaborative environment.

Driving crypto culture and adoption.

Join the movement. Join BanklessDAO