Web 3.0 and DAO are transforming how people can earn money

It is a recent trend where highly skilled talents are all switching into Web 3.0/crypto-related job fields. With such transition ongoing, the boundary of “traditional work” is no longer set in stone. Increasing number of people work in DAO (Decentralized Autonomous Organization), where members are governed by a smart contract and collective decision of token holders. There is no central authority that dictates them, and people are more comfortable with asynchronous work setting.

This shift is unlocking new earning potential for all of the participants in Web 3.0. In addition to getting compensated for traditional type of work people provide, people can earn money for simple daily activities such as playing, learning, participating, writing, and judging. In this article, I will go over different ways to earn money, in the form of “X-to-earn” in Web 3.0.

As illustrated in the above diagram, DAO participants can be broken down into four categories: core contributors, bounty hunters, network contributors, and token holders. Majority of the people belongs to either network contributors or token holders.

Core contributors are comparable to typical employees working for companies. Core contributors earn money through “work-to-earn” mechanism, just like full-time employees. These core contributors are solely focused on 1~2 organizations at a time and are personally motivated to develop these specific projects they are working on, mainly because their economic interests are directly aligned with success of these projects.

Although DAOs technically do not have a “central authority”, I like to think core contributors as the management team, who makes sure the project is progressing in the right direction. At the end of the day, someone has to be accountable and take the lead in ensuring it is headed the right way. In Web 3.0, core contributors can be a small group of people, as software and smart contracts automate and streamline majority of the operations. Even a small number of “key people” can create huge impacts.

Bounty hunters are like contractors or outsourced resources. They are brought in to provide services for a clearly defined scope of work for a fixed period and and receives tokens in exchange. As any other contractor, bounty hunters are functional experts in areas of software development, design, finance, and legal who provide one-time services.

Bounties (job postings) are usually posted publicly on websites or forums. Interview process can become competitive and there is a separate committee or a subset of DAO that chooses the winning bounty-hunter and decides on the amount of rewards.

To increase their negotiating power and be more efficient in winning these “bounties”, bounty-hunters join forces to form their own Service DAOs (i.e. professional services firms), focusing on providing a specific line of service. Well-known examples are Llama (accounting and treasury management) and RaidGuild (design and software development system).

This is perhaps the most relevant and applicable category for majority of web 3.0 participants (including myself). Unlike core contributors and bounty-hunters, this group is relatively a new concept. It is hard to find an equivalent constituent in a traditional corporation structure.

In economics, “network effect” refers to a phenomenon where as the number of users increase in a network, the value of the network itself increases. For example, in Uber, the value of the platform increases as more and more drivers and users join the platform, creating a positive flywheel effect. In Web 2.0, despite contributing to the utility and value of these platforms, these new individuals weren’t rewarded (think of creators in Youtube, influencers in Instagram, and artists in Spotify) in a fair manner. The platform (Google, Youtube, Uber) was raking in all of the profits, making the ecosystem very one-sided. In contrast, in Web 3.0, people will be fairly rewarded for contributions they make through their simple/routine activities — through playing games, learning, creating, writing, and judging.

Play-to-Earn

Play-to-earn is a model in which players earn rewards by playing and achieving certain objectives within a game. In traditional gaming models, in-game items and currencies had no value outside of the game itself; in Web 3.0 games, players are rewarded with tokens that are tradable in exchanges for fiat currencies.

The most representative P2E game is “Axie Infinity”, a game similar to Pokémon, where players breed digital pets battle other monsters and other players. Winners of these matches are awarded with SLP (Small Love Potion), an in-game token (ERC20 token) that can be exchanged for ETH or real cash.

Learn-to-Earn

Learn-to-Earn is a counterintuitive business model where a person is actually compensated for learning something, rather than having to pay to learn something. Crypto protocols frequently subsidize the learning experience to attract more knowledge users in their network, and promote themselves (a great marketing strategy).

Few examples of Learn-to-Earn platforms are

• RabbitHole: users are rewarded when they complete specific actions on-chain

• Coinbase/CoinMarketCap: new joiners are awarded with certain amount of cryptocurrency once they watch tutorial videos

• Proof of Learn: the platform facilitates learning in the metaverse with cryptocurrency rewards and collectible NFT credentials earned as on-chain representation of skills advancement

This is a win-win strategy where users learn new skills and earn tokens for it, crypto protocols add knowledgeable users (network effect), and platform providers monetize by facilitating such interactions.

Create-to-Earn

This is perhaps the most familiar mechanism, where digital artists sell their NFT creations, musicians selling their songs, or athletes selling their top moments in a NFT/digital asset format. Create-to-earn has been in existence for a long time, but there are notable differences compared to the earlier “create-to-earn” model:

1. Creating an NFT has become more accessible

2. Platforms to exchange these digital assets/artwork have increased

3. NFT creators are better off as they also earn loyalties in secondary sales

4. For a specific artwork, it is easier to to track provenance

Write-to-Earn

Write-to-Earn is a subset of “create-to-earn”, but I wanted to differentiate in that “create-to-earn” is more about artwork, whereas “write-to-earn” is more about writing. The most notable platform is “Mirror.xyz” where writers can turn their publications into an NFT, which can then be sold at an auction to readers who want to invest in their thoughts, or they can sell their stories to a publication as an NFT.

Judge-to-Earn

Judge-to-Earn is still in the early works, but an interesting concept. Oracles (bridges that connect real-world data from off-chain infrastructure and on-chain environment) are effective when passing on hard information from off-chain infrastructure to on-chain smart contracts. However, human inputs and judgment are needed when dealing with soft information (qualitative information such as ideas and opinions that are not numeric in nature). Below are potential uses cases of “judge-to-earn”:

1. Determining the “true” contribution of a DAO member and corresponding rewards

2. Determining whether an individual or a party has executed their responsibilities on a “best efforts” basis

3. Decentralized justice such as digital courtrooms

4. Credit check for undercollateralized lending where individuals may be brought into provide inputs on quality of borrowers

4. Token Holders: Invest-to-Earn

Token holders are those earning passive income by holding tokens for a certain organization. Whether by staking, voting on certain issues for their DAOs, or being part of an Investment DAO, these token holders earn passive income and have exposure to upside potential.

Although certain DAOs will have stricter entry criteria and higher buy-in, DAOs and Web3 have allowed individuals easier access to income earning opportunities through holding tokens for projects that they support for.

While “X-to-Earn” models are transformative, it will take few years for them to become mainstream and for people to get acquainted with using them. The premise is that Web 3.0 has to be more widely adopted and people have to feel comfortable being part of DAOs, where they don’t have any basic information of other members.

On top of that, there are certain inherent risks that have to be either mitigated or addressed.

• Inequality: DAOs can still lead to same inequality issues, where people with resources are able to contribute more value and get higher rewards

• Cognitive Overload: An individual cannot stay involved actively in multiple DAOs, as there is a limit to processing power and time. This is similar to how an individual cannot be working multiple full-time jobs.

• Lack of Social Factor: DAO’s is trustless and anonymous feature, along with absence of real-life/in-person interactions, may be unpalatable for people, who likes socializing with their colleagues.

However, I am generally positive that Web 3.0 will democratize earning powers that used to be centralized and limited to only few people. Also, as people come up with creative ways to contribute value to existing protocols or projects, the thesis still holds: all value-creating activities will be rewarded in Web 3.0.

(Huge thanks to Ben Schecter, from RabbitHole, for providing inspiration and content from his article published on “the Future”)

*Thanks for reading and any comments or feedback would highly be appreciated! I would love to chat about any topics, so let’s connect through Medium, LinkedIn (https://www.linkedin.com/in/brian-song-433b8495/), or Twitter (@*briancsong)