Web3 to DAO – 2
Kyle Chayka wrote in the New Yorker about an example of a DAO: “F.W.B., for instance, is an online community driven by a currency of the same name, which functions as something of a digital V.I.P. lounge for creatives. In order to join, you have to buy the token. Members chat on Discord, participate in physical meetups, and develop projects together, such as a crypto-ticketing app or a new beverage. The result is a kind of decentralized brand identity. Holders vote on ratifying codes of conduct, approving monthly budgets, and collaborating with other companies. Because the blockchain records are transparent, the results of every vote are public.”
Jeff Kauflin with Isabel Contreras write in Forbes: “By using tokens, DAOs can efficiently allow votes, empower profit sharing and, crucially, supply liquidity, as tokens can be bought and sold.”
Binance writes about the basics of how DAOs work:
1. Rules are created via smart contracts through community voting
DAOs operate using smart contracts, and are decentralized and community-led with no central authority. These smart contracts lay the foundational rules of how a DAO is to operate. And these rules cannot be changed unless they’re voted upon by the DAO’s core community members. As decisions to the DAO’s operational workflows, governance system, and incentive structures will need to be voted on in order to take effect, smart contracts are essential to creating a sustainable and autonomous DAO.
2. Users can fund DAO’s growth by purchasing the DAO’s native tokens
Once the rules of the smart contract are written onto the blockchain, the next step is to acquire funding. Since smart contracts require the creation and distribution of internal property like native tokens, which can be used for voting or incentivizing certain activities on the protocol. Individuals or entities interested in participating in the DAO’s growth can purchase the DAO’s native token which are cryptocurrencies tied to certain projects. Token holders are given voting rights proportional to their holdings and are able to own equity in the DAO to help shape the DAO’s future.
3. Receive governance tokens to influence token distribution and treasury management
Once there’s enough funding for a DAO to kick-off, all of its decisions will be made by token holders through a consensus vote. As the DAO’s stakeholders, community members will then work towards the most beneficial outcome for the entire network. Beyond voting rights, members can also work for their DAOs where they can get governance tokens in return, including roles in token distribution and treasury management.
Alexandre Kandelaft discusses how the DAO could revolutionise decision-making in sport: “What if a collective of people could own or at least invest in an organisation and have a say in every decision? Today many sports teams are owned and managed as publicly traded companies so it might be feasible for a group of fans, organised under a DAO, to acquire shares. Teams would have to make a part of their capital available through tokens, created on their own blockchain protocol. Every person buying them would be financially investing in the organisation and the value of each token would be indexed on the club’s financial health. Part of the generated revenues could be stored in a virtual treasury that would serve to further develop the clubs with the development of new projects. The promise of such an initiative is that these tokens would give fans significant advantages (such as club NFTs, membership plans and exclusive promotions) as well as a level of involvement in the daily activities of the organisation that we’ve never seen before.”