I really need to find the time to go and learn what DAO is. But if anyone could do a ELI5 would be great.
Coined as Decentralized autonomous organization, they are decentralized applications whose main function is to handle fund disbursement. They work more or less as any other treasury but in a more transparent and automated way.
What further separates them from the traditional treasury is that they are essentially a piece of code that runs on blockchain networks, like Ethereum, Cardano, Solana etc. It makes DAOs a lot different from traditional organisations and businesses from an economic and regulation sense.
Let’s take an example DAO and how it operates. There is no defined template of a DAO yet so I’ll use this open source code written in solidity as an example https://github.com/blockchainsllc/DAO/blob/develop/DAO.sol
This can be called a decentralized application or a smart contract. It defines an Interface which can be used to instantiate a DAO contract. The first few constants define the regulatory parameters. The most interesting part is the proposal array. It holds all the proposals submitted by the proposal creator that specifies an amount which is to be paid to the proposal recipient if it gets approved. Approval is done by DAO stakeholder by casting votes.
From a freelancer’s perspective this can be a bidding platform where gig workers can place their proposals and get paid once the work is done. A very transparent and seamless experience as compared to existing freelance marketplaces.
A DAO isn't necessarily an "application"; it's more of a concept, an idea.
There are a bunch of tools/applications that facilitate the operation of a DAO. I wrote a blog post about this: https://blog.juicebox.money/dao-tooling-101/
In the case of the JuiceboxDAO, I contributed funds (ETH) to the DAO treasury (bank account), and in return I got $JBX (a token that lives on Ethereum). I have about 40,000 JBX tokens. With these token, I can: - use it to vote on proposals. - "burn it" in exchange for some ETH back (but probably not get my original investment - sell it somewhere else (an automated market maker like Uniswap)
Oddly enough I've already been wanting to set something like this up -- my equivalent is running a regular business but with a pretty intense profit share scheme
Honestly it sounds perfect except these gas fees. Can someone clarify am I right in thinking it's prohibitively expensive to create any of these tokens/shares/votes/whatever because of fees? Assuming you're broke as hell and missed the original crypto train
Maybe I'll pop back when it's web3.1
Thanks for stating it this way, makes a lot more sense now. Your example and blog post cleared a lot of doubts !
Picture a corporation, but instead of a board and CEO the shareholders vote on what to do directly. I'm sure someone more knowledgeable than I could come up with a better analogy.
They seem to be functionally identical to a Board of Directors or how a co-operative might run.
Though as I understand, with potentially a very large number voters in ever-changing cloaked identities (as voting right tokens could be continuously bought & sold).
Today, in the real world - DAO’s are an LLC coordinating on Discord, or Zoom, or other common communication tools.
That DAO coordination happens fully in cyberspace is promoted as a unique differentiator to how businesses run today.
In my experience, the key unique characteristic of DAOs are that you may not know who you’re doing business with.
This is going to turn out to be important the first time a DAO gets significantly scammed. Someone's going to take the money and run, or otherwise violate the "contract" that the DAO thought it was "enforcing", and... there won't be anything to do. There won't be any way to fix it. The smart contract doesn't handle the edge case of having to hire a lawyer on its own behalf.
I mean, just to take this particular mostly-harmless situation as an example: that membership in the Blender Development Fund presumably includes some amount of official input into how the money gets spent. What if the DAO has specific desires or expectations, and Blender simply chooses to ignore them?
This already happened, and they hard forked the Ethereum blockchain to revert the hack.
https://www.coindesk.com/tech/2016/07/20/ethereum-executes-b...
Badger DAO got scammed for 120 million USD last week and I doubt they were the first.
But even if a DAO does everything right, technically, they're still subject to the problem of having to trust entities in the real world (e.g. "whoever on the Blender foundation gave them the address to pay") to behave the way they promise (e.g. "actually hand them an address under the control of the Blender Foundation"). It's trivially easy in this world to just cheat.
And in the real world, with real people on both sides of the transaction, that's addressed in the courts. And it works, and fraud as a proportion of our economy is quite small. But that protection doesn't extend to anonymous smart contracts.
In American law, corporations are people. American Courts will give a very high leeway to respecting whatever corporate bylaws dictate. Including being governed by code.
It’s very easy to register a Delaware LLC which states that it’s board decisions are whatever output a smart contract spits out.
Yes, but you still need people. The point was more than anonymous funders have no standing to sue. You're right you could have a conventional corporation fund itself with a DAO, but you're still trusting that corporation with your anonymous cash and if they take it and run you're SOL.
At the end of the day unless you're willing to put a signature containing your legal name as a human being down on a contract written on paper[1] the law isn't going to protect you. And if you are willing to do that, a "DAO" doesn't bring much to the table that, say, a plain old trust or LLC doesn't.
[1] Not actual signatures, not actual paper, but a real human being.
DAOs can also be built to support fund disbursal through a m-of-n multisig - ie, a certain number of members have to vote on a transaction.
It's also possible to do things like create NFTs and setup recurring revenue from them to go back to the DAO which distributes them to their members.
Side note - in WY, DAOs have some degree of legal standing now (IANAL): https://www.wyoleg.gov/Legislation/2021/SF0038