Sunday, 13 March 2022

“You don’t have to be great to start, but you have to start to be great” - Zig Ziglar

I am writing my first IkarisDaily entry today. IkarisDaily is a component of the Ikaris Project. But, what is the Ikaris Project and why am I embarking on it?

My life has been intertwined with business since the very start. From a young age, I was touted to inherit the family business. However, as I approach that phase of my life, I have different plans. Yet, the love for business is still very much present.

I love businesses. I love understanding how they work, learning from their strengths & weaknesses and most of all, I love watching the process of building them. My greatest dream is to erect an institution that benefits and leaves a lasting positive impact on the world. I learned that the most successful businesses are innovators. They change the world by providing new, disruptive products.

In the last few months, I heard about and started researching Non-Fungible Tokens. In the process, I learned about other types of cryptographic tokens, the Web 3.0 movement and the Metaverse. The more I learned, the more my conviction strengthened — these innovations will be revolutionary. I sincerely believe that. And, when you believe in something as strongly as I believe in this, it only makes sense to go all in.

The Ikaris Project is meant to capture my journey as I immerse myself in this space. I plan to document my efforts over the next few years with IkarisDaily entries and to provide value to the space with regular topical articles. Why? Firstly, I fully believe that documenting my journey will benefit many who are starting themselves. It’s nice to have support from someone at the same stage as you are. Secondly, I feel that I can use my content to build a community. A community with which I can interact and learn even more about the space, such as the problems faced. Ultimately, I want to create solutions to those problems and build businesses around those solutions. There is great potential to benefit people in this space and I want to do my part while achieving my greatest dream.

IkarisDaily will be a journal-entry style series in which I will share the ideas and concepts I learned via self-education I engage in daily. I will also share my thoughts and opinions about those concepts.

I have been educating myself in phases, with the primary goal of becoming an NFT investor, using a plan from my favourite NFT Youtuber, Giancarlo buys tokens. I am approaching the end of Stage 1 in Phase 1. Stage 1 is about developing an NFT Thesis. To be able to develop an NFT thesis, I need to have sufficient knowledge to base my thesis on. Due to this, I have been using a16z’s NFT Canon as my source of knowledge. I am nearing the end, so I was unable to document my learnings from most of the content. However, I did take notes, and I’ll publish them in the coming weeks.

Currently, I am halfway through the section on Creator DAOs, Creator Economies and Funding Innovation. The article I started on today is ‘The DAO of DAOs’ by Packy McCormick. Here are some of the things I learned…

DAOs represent a novel way to organise a company. However, while it has clear advantages, a business should not necessarily start as a DAO. This is because it will be difficult to create a great product through a decentralised approach. Instead, a business should transform into a DAO over its life, via a 3 step process.

Step 1: Product-Market Fit

While still finding product-market fit, the company should operate as a traditional startup with a small team. The core team should be making all decisions. Capital can be raised traditionally via Venture Capital firms with the agreement to issue tokens to the VC if the startup is converted into a DAO in the future

Step 2: Community Participation

The team should start experimenting with getting stakeholders involved by inviting community participation. Fees and tokens should be used for this purpose. The core team can experiment by issuing governance tokens to stakeholders and charging fees to users for distribution to contributors.

Step 3: Decentralisation

The company is converted into a DAO, by triggering a smart contract that mints and distributes tokens based on predefined rules. Future development is in the hands of the community, via community votes for projects.

My Views: “I personally like this concept of progressive decentralisation. It’s a viable model to eventually transform into a DAO. For crypto startups in particular, instead of trying to operate in a decentralised way from the start, it would be better to follow this model. They’ll be able to design good products first and decentralise later on. With that said, I do question if decentralisation from the very beginning could have certain benefits. There are definitely weaknesses, like the slow pace that committee decision making brings. However, there is also the inflow of more ideas and perspectives as well as greater eyeballs performing checks and balances. It’s worth considering if the advantages of immediate decentralisation could outweigh the disadvantages. Though, I feel only a real-life experiment can give a conclusive answer to that question”

Firstly, the structure of a DAO ensures that platforms and protocols are aligned with stakeholder interests over time. Secondly, by eliminating information asymmetry and dependence on a core team to create value, DAO tokens are not securities which make them easier to distribute.

With that said, DAOs are ‘fashionable’ now because they are interesting and new. In the future, they will have to prove their competitive advantage against traditional company structures to attract entrepreneurs to set up DAOs around their ideas. Hamilton Helmer lists 7 sources of moats (competitive advantages) from which, the Network Effects are most applicable to DAOs. Network Effects: The value of a service to each user increases as more users join the network. As users are owners, DAO users’ tokens get more valuable as more people join the DAO or use the protocol. Furthermore, as the DAO gets stronger, more people build on top of it, which makes it stronger, thus attracting more users, and so on.

However, DAOs should be careful not to depend on their moats and become complacent. If they take any action that displeases a large part of the community, they will bring their own downfall in the form of a fork.

“I’ve been trying to learn stock investing for almost 2 years. The most important aspect that protects a company’s profits and customer base is its economic moat. For now, DAOs are catching on because they’re the novel thing in the crypto space. But these competitive advantages are going to be the reason that the next Elon Musk or Jeff Bezos decide to create the ‘Tesla DAO’ or ‘Amazon DAO’ instead of the traditional structure. Network Effects is one of the strongest competitive advantages to have, but the more the better. In the coming years, I expect the DAO structure to evolve so as to incorporate more sources of competitive advantages and make it the preferred choice for entrepreneurs”

Today’s article was rather long so it took me a while to read through it. Ideally, I would’ve liked to get through another one or two. There’s always tomorrow though. Talking about tomorrow… It’s going to be Day 1 of my 5-month internship. It’s my first job in business development, so I’m really excited. Rather nervous too though. Anyways, I’ll be reading up again tomorrow which means I’ll be sure to post the IkarisDaily entry as well. Until tomorrow….