Having learned about what DAOs are, let’s move on to the different types of DAOs, shall we? Be ready for what’s coming in store; there are way too many DAOs! 🥳
There is no limit on the number of DAOs that can exist- just like there can be no limit to the different companies that exist! You can have a DAO for anything- organizing funds, saving the environment, raising awareness, improving the blockchain- you name it, you have it! 😉
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Let’s take you through the broad categories of DAOs that exist currently. ⬇️
There is no real end to the different types of DAOs that can possibly exist. Who knows how many more new types can up in the future!
Social DAOs
As the name suggests, social DAOs aim to unite like-minded individuals in online communities controlled by a token. Entry grants you access to a community of well-known crypto developers, creators, artists, and special events.
Members are motivated to build a meaningful community by organizing around a token, and they are encouraged to contribute knowledge, hold meetups, throw fabulous parties, and so on. 🫂
The leading example of a social DAO is Friends With Benefits. The main aim of the DAO is to give cultural producers the community and Web3 tools they need to gain agency over their work through increasing the accessibility of Web3 concepts and tools, constructing a variety of environments and opportunities that creatively enable participants, and creating instruments, works of art, and goods that demonstrate the possibilities of Web3.
You are getting all the benefits of working with your friends! 😂
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Investment DAOs
An investment DAO is a decentralized organization that collectively makes investments. Anyone who holds the governance token for the investment DAO is eligible to vote.
Hold on, what’s a governance token? 🤔
A governance token is a cryptocurrency that lets its users vote on the administration of a blockchain project. The main aim of governance tokens is to decentralize decision-making and offer holders a voice in managing the project.
Democracy at its finest! 👏
Your power to vote increases as you hold more tokens. Investment DAOs raise money for their treasury by holding token sales, issuing NFTs, and providing services that generate income.
The LAO is a very popular example of an investment DAO!
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Protocol DAOs
Protocol DAOs are primarily concerned with decentralized protocol governance. They use smart contracts to control a decentralized protocol, including exchanges, lending, and other applications.
MakerDao was the first protocol DAO to ever exist!
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How does MakerDao work?
It essentially functions as a peer-to-peer or decentralized organization that focuses on creating technology to make it easier to save, borrow, and lend money, as well as a stable coin on the Ethereum blockchain network. Anyone having ETH (Ether) and a Metamask wallet can take part in lending and borrowing, thanks to the MakerDao crypto protocol! 🚀
Media DAOs
Media DAOs aim to redefine how media consumers and content creators interact. 🧑💻
These DAOs leverage token incentives to compensate producers and consumers for their time with an ownership share in a specific outlet, rather than relying on advertising-based income models.
Media DAOs offer a vital substitute for realigning the interests of readers and producers at a time when many people agree that the current ad-based media economy is broken.
Decrypt is a leading example of a media DAO!
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Collector DAOs
Collector DAOs enable people to aggregate money intending to invest in particular assets. 💵
They vary from increasingly ambitious endeavors like purchasing rare historical documents or even professional sports franchises to venture investments in things like DeFi protocols or NFTs.
SquiggleDAO is an example of an NFT collector DAO that currently owns 275 squiggles!
We weren't kidding when we said you could have a DAO for anything.
One of the 13 original United States Constitutions was sold for $43.2 million in New York in November 2021. This auction made headlines for more than just that it was the highest amount ever paid for a printed document. 🇺🇸
ConstitutionDAO, a digital group that joined together to try to purchase the vital document using cryptocurrency to make it available for public viewing was one of the bidders. Even though they didn't win the auction, their organization's philosophy continues to draw interest.
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Are there any other types of DAOs?
Philanthropy DAOs
Philanthropy DAOs organize around a common goal to bring about a change and advance social responsibility. Various intriguing models are emerging, ranging from the convenience of charitable giving through the use of cryptocurrencies to the creation of innovative and long-lasting giving models.
Big Green DAO is undeniably the most popular example of a philanthropy DAO! 🍃
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Grant DAOs
Grant DAOs are either an alternative organization in the DeFi sector or the philanthropic extension of a larger project. The community members vote on the distribution and allocation of the grant money and contribute money to the grant pool. These DAOs support cutting-edge DeFi initiatives, illuminating how decentralized communities are more flexible with finance than traditional organizations.
Aave Protocol, one of the most popular Grant DAOs, makes use of the grants infrastructure to support and expand its community of DeFi and non-DeFi initiatives.
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Sub DAOs
A Sub DAO is a new type of DAO that consists of a subset of DAO members that are organized to oversee particular tasks, including operations, partnerships, marketing, treasury, and grants. They are minor autonomous organizations operating within a bigger DAO. 👥
Fingerprints DAO is a common example of a sub DAO!
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Why should you consider joining a DAO?
Transparency 🔎
DAOs offer more transparency when compared to conventional organizations. DAOs prevent human error and the unfortunate but frequent exploitation of financial resources. Members can track each transaction's progress, thanks to the DAO's public blockchain balance sheet, which also ensures that the funds are used for the intended purpose.
Efficiency 🤝
DAOs, in their ideal form, can be established more rapidly and efficiently than regular organizations. They can function without the high operating expenses associated with traditional businesses and are open to anyone around the world who are willing to join.
Consider looking at the limitations too!
Crypto hazards 💀
Due to the volatility in cryptocurrency prices, DAOs risk seeing a significant change in the value of the money kept in their treasuries. Additionally, the blockchain software they run has technical weaknesses and is susceptible to hacking and cybersecurity breaches.
Uncertainty of legal status ⚖️
A DAO may be viewed as a general partnership, with each member potentially having unlimited legal liability if something goes wrong, unless it is established as a legally recognized organization, which automatically violates DAO-related ideas to some extent. Contracts are harder to form and enforce when they lack legal standing.
An exception to this is Wyoming, USA, which recognizes DAOs as a legal entity!
Almost there!
DAOs offer various benefits, such as the ability to delegate management to their members, improving scalability for companies, providing global accessibility by removing geographical restrictions, and being a brilliant investment platform. While DAOs might appear like the perfect form of organization in the future, they are still being developed. Most DAOs are still exploring their governance structures to determine how to address unequal voting rights and achieve complete decentralization. Moreover, DAOs will continue to operate in a gray area until lawmakers decide how to regulate them.
Let’s move on to understanding an inseparable component of DAOs, governance!