One of the most unique and groundbreaking movements in the blockchain/cryptocurrency space is the rise of Decentralized Autonomous Organizations, commonly known as “DAOs”. With over a million DAO members and over 180 DAOs across the cryptoverse (representing an incomplete count at that!), this newfangled organizational structure is seemingly here to stay, and with good reason.
At their most basic level, DAOs are entities with no centralized leadership which use a set of rules hard-coded on a blockchain to enable members to participate in decision-making processes from the bottom up. DAOs may not have to be strictly confined to the blockchain space, but nevertheless, DAOs have been embraced wholeheartedly by blockchain crowds and the unique elements of these organizational structures are able to tangibly change the way members live their lives — or, more specifically, how they work.
Readers of The Iconist who are interested in getting more involved in the crypto community might be curious about DAOs. What are the defining features of a DAO? What advantages do they offer? How can we go about starting new DAOs, or joining existing ones?
The primary DAO of the ICON community is ICON DAO. They support a large number of activities for the ICON project, including software development, business development and investment. There are also other, smaller DAOs in ICON too, such Balanced DAO, ICONbet DAO or Piconbello DAO, which are more focused in their area of interest. If you’re interested in learning more about or joining any DAO in the ICON project, the best way to do so is just to reach out to them directly.
In order to best explain about DAOs and how they are created, we interviewed Danielle King from ICON DAO. We also looked outside of the ICON community for a shining example of a grassroots-led organization and interviewed Above Average Joe from Bankless DAO, a community focused on popularizing decentralized finance services. Bankless DAO is not affiliated with ICON in any way, but is a good model to base the formation of a new DAO on as they have been quite successful.
What is a DAO?
Let’s start with a definition. According to King, “A DAO, in essence, is a collection of people with shared interests pooling resources together and making decisions based on consensus to achieve a particular shared goal.”
She also explained some key elements of all DAOs: “You need people with a shared interest. You need a way to formulate consensus among all the people of your organization — OMM and Balanced use on-chain voting, for example. You also need a treasury for the DAO to cover things like revenue and how it’s generated and allocated.”
“You also need a platform for communication to help everyone communicate in a timely and efficient manner,” King stressed. “Businesspeople will often tell you DAOs are inefficient because achieving consensus is not timely. The popular opinion is that it’s better to have someone at the top of the hierarchy to make a quick decision. But no! If you have a well-oiled machine, it won’t take that much time.” She cited ICON-based DeFi project Balanced as a good example of smooth communication, with their method of quickly and efficiently proposing and voting on new decisions.
A deeper dive into the definition of a DAO
With the above in mind, DAO members may interact in a limitless number of ways to form each DAOs’ unique governance and organizational models, resulting in a wide variety of expressions of these basic principles. To draw a parallel, while there are a large number of democratic nations in the world, each has completely different and unique governmental bodies and processes. No two nations or DAOs are ever alike, and some may be vastly different.
ICON DAO, for example, is a collection of around 100 people who work for a group of community and startup-focused companies — Lecle, Community Alliance Network, Impact Collective and Vingle — all co-founded by ICON DAO founder Changseong Ho. This model can be very convenient in a country like South Korea, where government scrutiny of cryptocurrency projects is at an all-time high, as it lets ICON DAO members be legally taxed and paid.
Bankless DAO, on the other hand, was built from the ground up by actions within the 1,500-member community of the popular Bankless blog and podcast series. They have their own token ($BANK), with which community members are paid for their contributions. The community launched with a $BANK airdrop, after which the show-hosts stayed hands-off and let the community take it from there.
The most defining aspects that most DAOs share, therefore, might be more granularly defined.
“The ability of a node in the system to be removed from the system without the failure of the system would be one of the best descriptions I’ve heard for the decentralized aspect of an organization like this,” Joe said. “For example, if we were to have a failure of the Grants Committee, Bankless DAO would not systemically fail. The ability to bounce back and be resilient to these sorts of failures is one of the defining aspects of what a DAO is, in my opinion.”
There may also be a shared cultural aspect: “The development of an organization when there is no protocol as a central focus or mission generally lends itself toward a DAO being a place of shared culture,” Joe said. “If the culture is not shared, then the DAO begins to fragment. That alignment of culture is what transcends most monetary incentives when it comes to getting things done, as long as basic monetary needs are met.”
King even draws parallels that show how a number of non-blockchain cultural movements can also be seen as DAOs in a sense. “In the most basic sense of the definition, a DAO is just a decentralized autonomous organization of any kind. That’s your grassroots movement, even social movements like Black Lives Matter. Whenever all decisions are made by a community, everything that governs whatever the interest is, as long as there’s a group of people that can form consensus for the important decisions, that’s a DAO.”
In fact, somewhat controversially, complete decentralization might not even have to be among the most defining aspects, according to some ongoing debates in Bankless DAO. “There have been quite a few arguments about whether or not everyone should be participating in everything, or if it should be delegated as a matter of course. That tends to lend itself toward more centralization, which is why it’s contentious. But, when a DAO gets to a certain size, it’s impossible for any one person to be aware of everything that is happening, and we’ve crossed that threshold recently,” Joe said.
What are the benefits of being in a DAO?
Participating in a DAO offers some obvious benefits. Gone is the heavy-handed boss always hovering over your every move. Community members are treated equally, and everyone has a shared sense of duty.
“I like being a part of ICON DAO because we can all propose our own ideas and vote on them. Through that, you get situations where new incentives like Optimus can be born,” King said. “I love that we have a culture where every idea is valid. In DAOs, that’s the major selling point. Everyone can contribute.”
But there may also be more contentious advantages that operate in a greyer area. “The freedom of restriction from jurisdictional borders of nation states is a major advantage,” Joe said. “This is somewhat controversial because the individuals may still be under the nation state even though the organization itself is separate from it.”
Other benefits include the shared objectives and ethics of the DAO community not being beholden to market, taxation or investor pressures the same way that a traditional company might. For example, it would be much harder for market forces to bully a DAO into doing something immoral just to keep profits up.
“By getting out from underneath this gatekeeping, the innovations of our era such as the internet and cryptocurrency are given true breeding grounds to thrive and cultivate new coordination mechanisms for the societies of tomorrow,” Joe said. “We are pioneers of what it means to coordinate using these new mechanisms to the best of our collective potential. When we blaze that path forward without the baggage of the old rent-seeking system, we are able to optimize our culture tomorrow in a way that is not possible in the current paradigm of our generation.”
Best practices for forming a DAO
Joe was a Bankless community member when that first $BANK airdrop hit. As such, he was around to see some of the things that worked well, and what was not as popularly received in the formation of the DAO.
One of the smartest moves in his opinion was how Bankless DAO founders took zero percent token allocation at launch. “By handing it over to the community entirely, they gave one of the fairest launch options that there was available,” he said.
One of the missteps he cites was when the founders made an immediate proposal to vest 25% of total supply for the LLC as a gratitude vote. He suggested that waiting a few weeks or months for the DAO to develop might have resulted in a more thoughtfully attributed token allocation. He stressed that the net result was non-problematic, however.
Along with fellow Bankless DAO founding community member Forgmonkee, Joe helped organize Bankless DAO’s governance model based on inspiration from holacracy and permaculture. From these models, they drew the best techniques and systems for creating a net-positive sum ecosystem, then crowdsourced ideas from the community for how the governance model could be further developed and improved.
“This sort of community knowledge approach to identify the best of what governance can be created the cultural basis for our development of government and growth. A systems design mindset like this goes beyond whether an individual item is a net positive and begins looking at the different functions it performs within the overall ecosystem and finds ways to leverage those functions in multiple ways to provide multiple yields out of the single source of input — which is one of the things that permaculture likes to focus on,” Joe said.
The basic idea is to incentivize social interactions that have truly meaningful value adds at every step of the process.
“When one is trying to establish a culture, we reject things that are cannibalistic in nature. So, short-term value adds that would cannibalize our listening community in order to create gains for core members are seen as toxic,” Joe said. “By leveraging relationships that are positive for both the organization and the individual participants, we create systems that, as they are used, reinforce the resilience and robustness of the individual. Which is kind of the end game of DAOs.”
A model for the masses
Joe stresses that the DAO model can work for everyone. It can be hard to come to grips with at first, but the rewards are worth it.
“Most people are starting from a society that has worked in a centralized manner for their entire lives. The Prussian-style education system is designed to create good assembly line workers as mass production for an industrial revolution,” Joe said.
“Now that we’re in an internet era, rote processes can be automated and it’s time to access our human and cultural understanding. In those places, everyone has something to add — it’s just a matter of retraining the mindset from one in which you are told what to do and what to think, and you stay in those borders very comfortably, into a mindset where the initiative is allowed to be seized and the opportunity and desire to go after it is all that is required in order to begin action. It is both empowering and intimidating for that kind of transition to happen, but once that step is taken there is no going back because it unlocks so much for the individual.“
“DAOs are the antithesis to corporations in that they unlock those capabilities rather than suppress them. That’s why I see DAOs as the 21st century corporations — when companies die, they’ll turn into DAOs.”