The DAO (“dow”) was invented to make it easier for people to direct their time, talent and treasure towards a shared mission.
This innovation reflects humans’ desire to continuously improve how we coordinate for impact.
Hundreds of years ago, the corporation unleashed capitalism by limiting investors’ liability. Last century, the 501(c)3 tax code enabled a nonprofit to operate with subsidized public funding. But both of these entities are beholden to a nation-state. People across borders encounter friction when trying to combine forces.
DAOs make it much easier to quickly scale your impact globally.
The initials stand for Decentralized Autonomous Organization. But let’s not worry about defining these words. No two DAOs are identical in their definition of decentralization or autonomy. Nobody even knows what these words really mean in the context of a DAO.
What matters is what you can do with a DAO.
The fact is, DAOs enable humans to coordinate in ways that have never been possible before.
This article is a primer for the social impact sector. We’ll start with why: five compelling reasons to create a DAO. Along with these, I’ll provide six examples of DAOs that are doing good right now. We’ll close with a short list of popular products that people are using today to create DAOs.
Why would you create a DAO?
You should only start a DAO if it would serve your mission better than more conventional organizational entities like a 501(c)3 nonprofit, LLC, B corp, or C corp.
In some cases, a DAO could serve your interests better than these other entities.
But don’t think of this as an either-or; a DAO could provide rocket fuel for your existing mission.
Below are five reasons that make sense for starting a DAO today.
Keep in mind that, like the Internet in 1992, the DAO is brand new and barely understood. New applications are emerging every day!
1. You want to start something quickly.
Because DAOs are Internet-based, word spreads fast globally, bringing lots of talent and capital to a shared cause.
In truth, a DAO can be as simple as a group chat with a bank account. You can make it more complex, but you really only need two functions:
A way to coordinate actions.
A way to pool and share assets.
People are establishing DAOs to make an impact right away.
Constitution DAO was created to purchase a first edition United States Constitution and make it permanently accessible to the American public. Graham Novak discovered the United States Constitution was for sale only seven days before its auction at Sotheby’s. He quickly launched a DAO and received nearly $50 million in donations from 17,000 people, with a median donation size of $200.
Graham used DAO technology to accomplish all of this in a single week. And it’s worth noting that over 2,000 of Constitution DAO’s members had never used crypto before this. (Source)
2. You plan to scale globally.
Because they exist online, DAOs equalize the geographic distance between all members of the organization.
With a DAO, hierarchies break down. People from every corner of the globe are doing work that motivates them, together.
A group of mostly Americans founded Developer DAO in 2021 with the mission to educate software engineers on how to write code for the blockchain. The founders have since faded into the background, making room for members everywhere to assume leadership positions. Contributors are treated equally, compensated based on their level of skill and effort whether they live in England, India, Canada, or Colombia.
It’s unimaginable that foreign workers could drive the impact of a US-based nonprofit. But in an Internet-based organization, nobody is foreign.
This truly puts DAOs in a league of their own.
3. Your Community Wants To Share Ownership of Valuable Assets
Let’s review the core functions of a DAO:
DAOs make it easier for people to organize and coordinate actions online.
DAOs make it easier to pool and share resources.
Therefore, DAOs make it easy for people to coordinate the ownership of valuable assets.
This is PleasrDAO’s mission: to pool members’ resources to purchase digital assets and share in the financial upside if/when the assets appreciate in value.
Although PleasrDAO is an investment club, their model is transferable to not-for-profit causes. Here are some possible extensions of this model:
A group of neighbors purchase a plot of land to protect it from commercial development.
A historical society’s members pitch in to renovate a historical building which has fallen out of line with municipal code and is at risk of being closed or demolished.
The tenants in an apartment building pool resources to buy the real estate and become owners of a co-op.
The fans of a basketball team buy the team from an owner who wants to sell the team and relocate it to a different city.
All of these things are possible without a DAO.
DAOs just make it easier.
4. Your mission unites people everywhere.
Many things unite people everywhere. Japanese anime. Italian pasta. American movies.
Democracy. Conserving the natural world. Ending child abuse. Protecting endangered species.
If your mission is universal, it makes sense to build a global organization with minimal friction.
On the eve of Russia’s invasion into Ukraine, Alona Shovshenko felt compelled to defend her country’s democracy. She created UkraineDAO and raised over $7 million from 3,000 people in five days to help her country resist the Russian invasion. Alona united people all over the world who believe in democracy, and many more who fear Russian aggression. (Read more about UkraineDAO here.)
So far, my examples have centered on DAOs that succeeded at mobilizing people very quickly.
DAOs can also advance their mission steadily over time. Bankless DAO’s mission is to onboard one billion people into web3. This is going to take years!
Since its founding in May 2021, Bankless DAO has attracted thousands of professionals who want to transition their careers into working in blockchain technology. People from all walks of life and corners of the globe are inspired by the idea of working together to build new technology: educators, investment bankers, attorneys, software engineers, economists and other highly skilled professionals working in every time zone.
5. You want to crowdsource information.
Many DAOs are incentivizing the provision of valuable information with cryptocurrency rewards.
BioDAO is a global biotech community who is coordinating scientists outside of biotech hotspots like Boston or Paris to double the number of life saving therapeutics available to patients over the next 10 years. Talent DAO is a community of organizational scientists, strategists, and researchers building the world's first decentralized, community-reviewed publication for the social sciences.
At Bankless Consulting, we have helped several clients figure out how to leverage DAOs to crowdsource information for the greater good, including:
Filmmakers who want to crowdsource information from historians, journalists, and regular citizens to fact-check a television series about Ukraine in the 21st century.
A doctor who wants to incentivize the crowdsourcing of truthful information in critical industries such as healthcare and public policy.
How to quickly create a DAO
There are countless ways to build a DAO, and no right way to do it. The design decisions you make should be based on your mission and the way you want to work with people to achieve that mission.
DAO technology is maturing quickly; it is much easier to launch and manage a DAO than it was a year ago.
Here’s a list of common DAO functions along with a product that is popular among DAO builders right now.
Shared community treasury - Safe
Community chat tool - Discord
Community message board - Discourse
Project management - Notion
Voting - Snapshot
Legal entity - Aragon
This list is in no way exhaustive. With the pace of technological change, I’m certain it will become outdated soon.
But… the current problems with DAOs
DAOs are not perfect. Before they become the new standard for nonprofit causes, there are some kinks to work out.
DAOs face regulatory risks. The nation-state hasn’t quite wrapped its head around the concept of an organization existing on the Internet with no physical location.
DAOs face governance challenges. They can be inefficient. Democracy is messy. Human coordination is hard!
That said, people who are no smarter than you are successfully leveraging DAOs to bring rocket fuel to their cause.
You can too.
If you’re interested in forming a DAO, I’d be happy to chat with you and help you determine the best path to take. Send me a note or book time on my calendar.