What is a DAO and why does it matter?

November 2, 2021

Decentralized Autonomous Organizations (DAOs for short) are popping up throughout the web3 community. Put simply, “a DAO is an internet community with a shared bank account,” says @coopahtroopa, a web3 investor, builder of Friends With Benefits and several otherpopular DAOs.

“A small group of people come together to form a chat group, and then they decide to pull capital together, using an Ethereum wallet,” @coopahtroopa says. From there, they decide how to fund their DAO’s mission collectively" typically using a voting system based off of ERC-20 tokens (see Slingshot for example).

It’s important to understand that DAO is a broad term than encompasses a huge number of different types of groups and business. Two DAOs can be significantly different, but still both be under DAO structures, similar to how two LLCs can operate in very different businesses.

It’s important to understand that DAO is a broad term than encompasses a huge number of different types of groups and business. Two collectives can be vastly different, but still both be DAOs.

Among the early DAO formations during this boom-market, they largely organize into into 1 of 2 buckets:

  • Those that manage open source, blockchain-backed projects.
  • Those that make investments, typically in a cryptocurrency like ETH.

Here are a few examples of well-known DAOs:

  • The HerStory DAO collects and funds projects by Black women and non-binary artists.
  • The Komorebi Collective DAO funds women and non-binary crypto founders.
  • The MetaCartel Venture DAO is a for-profit business that invests in early stage decentralized applications.
  • The NeptuneDAO is an investment club that specifically focuses on yield maximization by acting as a liquidity provider for DeFi protocols.
  • The Friends with Benefits DAO is an exclusive social club which you pay to enter.
  • The PleasrDAO is an investment club where they invest in internet memes and cultural assets

The way that the Ethereum foundation describes DAOs:

  • Member-owned communities without centralized leadership.
  • A safe way to collaborate with internet strangers.
  • A safe place to commit funds to a specific cause.

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