DAO Overview 2021 – DeFiRate

When it comes to exchanging value in a trustless, permissionless fashion, it’s no surprise that governance has long played a crucial role in the development and maintenance of many web3 ecosystems.

As we continue to challenge traditional notions through the advent of innovative systems, it would seem that hierarchical structures are being replaced by Distributed Autonomous Organizations – better known as DAOs.

From a high level, DAOs can be thought of as social coordination mechanisms to solve a common goal. Paired with an on-chain treasury management system responsible for dictating how decisions, funding and upgrades are made, DAOs provide a technical framework to pool funding in a secure fashion.

There are many different types of DAOs, all of which serve as a governance mechanism to ensure that important notions are discussed, proposed and implemented in accordance with the communities best wishes.

Below, you can find some of the key types of DAO that can be found, along with some specific and notable examples of each one.

Protocol DAOs

Protocol DAOs are the most common type of DAO, which is often found behind any major decentralized finance (DeFi) protocol.

These DAOs are used as an ownership and governance mechanism for lending platforms, yield optimizers and more, to maintain and evolve the underlying platform in a fair and decentralized manner.

Some of the most major protocol DAOs include those behind DeFi platforms such as:

  • Uniswap – The largest decentralized exchange on Ethereum. In September 2020, the platform launched their governance system and token, UNI. UNI holders vote or delegate votes which control the protocol’s direction, fees, treasury and more.
  • Aave – A major decentralized lending platform, which enables users to trustlessly lend and borrow major assets. AAVE token holders govern platform decisions such as the addition of new assets and the management of platform parameters, such as collateralization ratios.
  • Maker – One of the original DAOs of the DeFi ecosystem. As the governance mechanism for the famous Dai stablecoin (DAI), Maker utilizes a DAO framework to vote on things like adjusting the DSR interest rate, the Stability Fee, or even triggering an Emergency Shutdown.

In most cases, the more of a protocol’s governance token that a user owns, the more influence they have over platform decisions.

Investment DAOs

Investment DAOs are similar to traditional investment funds that operate with pooled capital. However, rather than a single centralized party calling the shots, investment DAO token holders can vote on what the pool of funds is invested in.

Examples of investments DAOs include:

  • MetaCartel Ventures – A “sub-DAO” under the broader MetaCartel DAO. It is one of the first for-profit DAOs and invests in nascent decentralized applications (DApps). It is also one of the first experiments where non-accredited individuals can have a real say in early-stage investments, which were previously restricted to accredited investors, venture capitalists and angel investors.
  • The LAO – An interesting take on DAOs, The LAO is structured as a member-directed venture capital fund in the US. It is registered as a Delaware limited-liability company (LLC) and compliant with US laws, but carries out its functions via a DApp and smart contracts.

Grants DAOs

Grants DAOs are DAOs designed to fund and foster new ventures or projects, most often within the DeFi space. These grant-focused DAOs usually arise as a philanthropic arm of larger projects within the space, but may also exist on their own.

  • Uniswap Grants – A DAO system that manages disbursement from Uniswap’s UNI Community Treasury. This involves supporting the creation and growth of new projects around the Uniswap and DeFi ecosystem, by funding things such as hackathons and protocol development.
  • Gitcoin – An independent platform that looks to fund developers and builders that are creating open source applications. Donors can browse projects listed on the platform and choose what they would like to fund. The DAO’s governance token is GTC, which will be used to manage its treasury, grants, disputes and more.
  • Moloch – A popular share-based DAO, which has served as the foundational framework for several new DAOs today (including MetaCartel). Moloch was built under the notion of creating a “Minimum Viable DAO” – focusing largely on simplistic code and off-chain decision making. The Moloch DAO focuses on Ethereum development funding through the use of grants, enabling anyone holding Moloch shares to submit a proposal.

Collector DAOs

  • PleasrDAO – A collector DAO that pools funds to purchase collectible items such as NFTs, real-life artwork and music and more. Although PleasrDAO could also be categorized as an investment DAO, the key difference is that it focuses only on art and collectibles – not traditional investment products. PleasrDAO famously purchased the one-of-a-kind album by ‘Once Upon A Time In Shaolin’, by the Wu-Tang Clan, for $4 million, in July 2021.
  • Flamingo – A sub-DAO that sprouted out of The LAO, mentioned above. The Flamingo DAO focuses exclusively on NFTs as investment opportunities, as well as in an effort to support the ever-growing metaverse and NFT sector – which they believe will revolutionize the world of digital ownership.

Social DAOs

Social DAOs can be thought of as the country clubs or the “masterminds” of crypto. To-be members gain entry into a certain social circle by paying a membership fee in the form of purchasing a certain number of the DAO’s tokens.

These social DAOs could take the form of any social circle, which often shares a common interest – it could be knowledgeable investors, it could just be buddies who hang out in a group chat or in real life. The purpose is up to the DAO!

Some notable social DAO’s include:

  • Friends with Benefits – An exclusive social club, which one can only join by owning a certain number of the FWB token. Consisting primarily of web3 artists, operators and enthusiasts, Friends With Benefits DAO members gain exclusive access to token-gated events, mastermind discussions and more. It even has its own gallery an auction platform, for digital collectibles!
  • Bored Ape Yacht Club – A celebrity-studded DAO with an interesting spin – to gain entry into the club, you must own a BAYC NFT. Each of these NFTs is linked to a unique “bored ape” profile picture. Although the actual DAO and governance portion of the project is still in the pipeline, several celebrities have recently purchased BAYC NFTs, so it may be in the public eye for some time. What they will be governing, however, is still up in the air.

Other DAOs

  • Aragon – Aragon is a major platform that is focused on providing DAO tooling, but also is inherently structured as a DAO itself. This means that its ANT token holders vote on how the protocol should upgrade, including the deployment of various phases such as Aragon Court.
  • Saint Fame – The first internet-based fashion house. Their Genesis Shirt was designed by Matt Vernon, leveraging FOMO tactics to influence price redemption through the use of bonding curves.
  • Colony – Provides a distributed platform for community collaboration in which freelancers can do work, make decisions and manage capital in a trustless fashion.
  • DAOstack – An open-source project advancing the technology and adoption of decentralized governance. DAOStack’s first DAO-experiment – GenesisDAO – leverages Holographic consensus to provide token holders with efficient voting mechanisms

What to Expect

As more projects continue to see the value in distributing governance among their community, it’s likely that many new DAOs will be summoned in 2022.

If you or your DAO would like to be added to our list, please contact [email protected]