The original picture for those who started these DAOs was, to begin with a small community and a shared token representing the membership and voting rights. Once the tokens were exposed to the decentralized exchanges -where anyone can add liquidity to any token- a new value was given to the token. This attracted a new breed of community members, who, aside from seeing the value of a community-driven execution towards a mission, see their investment grow with it.

The DAOs learned this and took advantage of this new dynamic, raising capital for the organization's coffers by issuing membership tokens. This, in itself, resembles too much what shareholders and company shares look like.

Tokenomics is no different from a cap table structure. It is just more flexible and malleable since no securities laws are involved.

Where are we now?

In this article, I discuss the evolution of some of these organizations' governance models. You can see how fast they are evolving. Most of them are moving towards a centralized decision-making flow. Does that sound familiar?

This is what is going on today. Most of these organizations, after having several thousands of members involved in the decision-making, have seen the slow pace and sluggish movement on execution. Inherently, humans are communication beings. We are connected, and we work very well in groups. But our communication is linear; that is, one person to another -or more- is linear in time. So, the fastest way to get a group on consensus is determined by the fastest way to have everyone on the same page. The smaller the group, the easier it is to make this happen.

When more people are in the decision-making group, new dynamics enter into play. For example, subject matter expertise is significant. If a decision is made on a matter that requires more specific knowledge, you will need to bring all the groups to the same page by upgrading their knowledge on such matters. This is hard and slow.

Some DAOs have resorted to splitting governance based on the subject matter, thus limiting the groups to members closer to being on the same page before making decisions. This includes core governance. Core team decision-making needs expertise and organization knowledge, including its history and context, with which not everyone is up to speed. This leads to a central core team that never relinquishes its control. Does that sound familiar again?

When I looked at the old chats on the Discord servers, the mantra was much different from what it is today. In the early days, you would read philosophy-centric statements about how power and decisions must be shared and distributed among the community's stakeholders. Blockchain-based technologies would enable this.

Today, all these DAOs are governed by a legal entity on the backend where the core team sits—and gets paid—and the rest of the community is relinquished to non-core matter decision-making. If you look at the proposals voted by the different DAOs, they have evolved from core matters to ancillary and orbiting matters. No one discusses leadership or matters related to leadership. The dust has settled. Now to work.

Now that the stakes are higher—the coffers hold large sums of money—the investors backing the community want to lower their investment risks. You know the risk if you are a Web3 believer and have invested money in this experiment. When you are a VC and have locked a chunk of your last fund on this community, you want to ensure there are guardrails to its survival.

What is the point of a DAO if it’s not at risk of disappearing at any minute based on a community decision?

Core teams are now retreating to their towers and overseeing the community movements. They take votes on the matters that can tamper with the status quo and let other matters fester to get the community focused on other things. Does that sound familiar?

Wrong incentive

If all this sounds familiar, then you are in the wrong DAO. Get out and move on. The centralized nature of money has corrupted the very fabric of its mission. Now, the mission of this DAO is to protect the investment and ensure the monetary value of the DAO goes up.

The DAOs are now expected to launch a token for governance. Furthermore, they are expected to have a governance model based on proposals voted on-chain. These proposals will be executed on smart contracts, removing intermediaries and dependencies. But first, these organizations are bound to a vision and a mission.

Remember, DAO is not always the answer to a problem. In some situations, a traditional business entity might solve the problem better than a community-driven organization.

When you see a DAO that has been tainted by centralized investment money, you can see some of the following symptoms:

1. The core team becomes more “established”.

2. The coffers are controlled with more scrutiny.

3. The decision-making becomes more procedural, slower decision-making, and more control over what proposals come through.

4. Finally, you see yourself looking at the token price on the market more than the Discord conversations about governance.

When that happens, you know that the core team and the DAO's ultimate goal is no longer the mission but the means to the mission. This is when things get complicated, and politics runs amok.

When everyone is aligned, enthusiasm is funneled to execution. But things get ugly when the core team's goals depart from the community's. Some DAOs split governance into groups to address these misalignments, as each group can now worry about a piece of the puzzle rather than working with the whole picture.

How real decentralization looks like

Those communities born from the pure nature of solving a problem are the most successful ones—and probably the most resilient. Mission-driven teams are all looking in the same direction and focusing on the same agenda. Some good examples are ENS, Juicebox, and Links.

Before looking inside of the community, I would encourage to check the Tokenomics of the DAO. These tell a story better than any manifesto or bylaws.

The first signs of healthy decentralization start with high voting activity on the Snapshot, plus periodic voting on the governing rules.

Other good signs of a good decentralized community are solid financial transparency and communication with the members. Having clear sight of what is on the chests of the organization and being able to see that through the block explorers tools—like Dune—is also a good practice for decentralized organizations.

Similarly, when a DAO runs economics through a legal entity, the entity's financials are usually disclosed in the same form as the on-chain financials. Some DAOs require a legal structure that forces them to create a legal entity. Note that this is not a bad sign. There are well-established models of good DAOs that run legal entities where the directors are the same as the core team. However, the bylaws establish a bind between the entity’s activities and those resolutions voted on by the DAO.

On the community side, no community is perfect. As humans, we move back and forth with our own convictions. Sometimes, we find small pockets of activism or interest groups that try to sway the vote in their direction. These are not ominous signs of a DAO but good signs. You want to see a balance between the different extremes of the community represented, allowing a healthy conversation. These DAOs are usually the most resilient as they have a balanced approach to voting.

Finally, the community's engagement is also another good sign. When a community has a high engagement index and a lot of activity on its communication channels, it’s a sign of interaction and work. Online members and monthly active users are good metrics to watch when joining a DAO.

Conclusion

Beware of the DAOs that sell you the decentralized story before the objective. DAOs are another tool for accomplishing a mission, but not the best one in most cases.

When the DAO's community management seems a bit pushy, beware of hidden agendas or parallel tracks you might not be aware of. DAOs that defend the community and embrace activism and change have leadership willing to relinquish control for the sake of the DAO.

The general belief of blockchain is that it involves cryptocurrencies. While not far from wrong, it also enables a new set of functionalities we are starting to discover.

The reality is that despite the ubiquity of mobile devices, there are only two operative systems out there that control our lives on mobile devices. Android and iOS. These two systems are backed and run by giant corporations (Google and Apple) bound to their shareholders. At the same time, while keeping ethics within their mission, overriding those remains possible and usual.

https://twitter.com/joaxap/status/1560609998782095360

Blockchain-based features allow decoupling of the dependency of the end user from the corporations' systems. Enables de delegation of processing and storage to public ecosystems that already run profitably without the need for the market. These ecosystems have no other intentions but to keep the platform alive and running smoothly.

Your web3 wallets

Operative Systems will incorporate web3 into their internal logic through a native EVM -and perhaps other chains- wallet system. The user can create these wallets -as many as the user would like.

These wallets enable you, the user, to handle all web3 matters as if they are your accounts to leverage the web3 capabilities on your phone.

Validation

One of the reasons you can pay with your card in stores without anything else but a piece of plastic is what that card brings with it. That card means you have an account with funds you opened by identifying yourself to the bank to prove you are not a crook -KYC. Of course, the store doesn't necessarily need to know who you are, just the card information to accept the payment—still, your identity leaks in this process.

Web3 can validate your wallet without the need to share your information around to prove it. However, in the process, a validator needs to stamp this validation checking your identity. So, in the case of the phone, it is your carrier.

Some carriers can provide optional validation of these wallets following the ERC-725 standard, enabling the wallet to be somewhat "KYC'ed" by the operator. A validated wallet has a lot of value towards your identity online. For example, today, you delegate your OS and browser your credentials. With the validated wallet, you no longer trust your OS's credentials storage but on a heavily complex mathematical algorithm -which is the basis of the blockchain.

Recovery

One of the biggest fears of using web3 wallets is that if you lose your key, you lose your wallet. Understandably, this customer experience can be very daunting. The fact that you can lose everything by losing your key -or passphrase- is a thought that can deter anyone from wanting to use it.

When you create a web3 wallet on your phone, you get asked if you want a recovery mechanism with some trusted peers. Your phone will send a piece of your key to those of your choice, i.e., your family members. If you ever need to recover your wallet -phone lost or stolen- then it would be as simple as a quick request to these peers, plus a piece you would have kept -a passphrase, for example.

Your pictures and videos

When you take pictures with your phone, these pictures sit on your storage and can be copied and used without your consent. Web3 enables a new paradigm that helps you as a creator to control your pictures, as you would do with your information.

When taking a picture with your phone, the OS will automatically mint an NFT of that picture. This token will record the picture and your ownership of it.

Why is this relevant? Well, imagine you share this picture with some friends on a social network or via text message. The OS of their phones will check if the picture has the correct "permissions" to be shown. For instance, you can share pictures that expire in time. The consumers of the picture will have a limited amount of time to see it -hours, days, weeks, and even months.

You can also withdraw permissions from a picture or video, allowing it to disappear from the devices that have it. All this by calling a method of the NFT smart contract via web3.

Another benefit of these tokens is that you can choose to charge for the commercial use of the picture. The OS consuming the picture can now trace if the picture is used for commercial purposes and charge for its viewing. The OS can charge the advertiser or the person who wants to see the picture.

Selling your pictures is now easier than ever. You can mark pictures for sale, which will automatically appear on marketplaces that track these NFTs.

Your music player and collections

Web3 music scene is growing. This new paradigm enables creators, so they don't need intermediaries and complex infrastructures to make music.

People like @coopahtroopa are at the forefront of this new wave in music. Their vision is to enable a world where creators and listeners share the benefits of music creation.

https://twitter.com/Cooopahtroopa/status/1555610752026718209?s=20&t=3TYGTBmm9OkqilesiA97JA

One good example is Heds App. A curator that mints NFTs of tapes where he curates music. As well as this NFT of a song.

Some creators choose to fund their projects by selling a small portion of the royalties via NFTs. However, when done in scale, you can choose to mint or buy the NFT of a song or album and get royalties every time the music plays.

The players are web3 integrated, which means that the subscription model we are so used to today is gone. You will pay as you consume the music. The payments will be reasonably small. Removing intermediaries out of the way makes the music cost vanish and ensures profits arrive to the creator and NFT holders. A fee for playing will also go to the services that enable the streaming.

We are now consumers and beneficiaries of the music we love.

Your apps

One of the most significant features of a web3 phone is that the dapps can now be on your phone. The decentralized apps can connect to your phone's wallets directly and enable a seamless experience for you.

When buying in-app features, you won't need to pay through the stores but directly from your wallet.

Game builders now directly connect with you without intermediaries that cut 30% of your payments.

Gaming

The web3 gaming world is still in its infancy, but installing a web3 game on your phone will connect with your wallet and leverage your assets. For instance, you may want to use that avatar NFT you bought that you love so much or equip your player with that weapon you earned in the other game.

Some games have their currency. Sandbox has SAND, for example. This currency is a cryptocurrency you can exchange on any decentralized exchange like Uniswap or Sushiswap. You don't need to purchase cards for your game in stores or online. Instead, directly on your phone's wallet, you can exchange some of your money for the game's currency and use it.

Your finances

If we are talking about crypto, we need to talk about finances. Today we depend on banking apps to handle our finances. Deposits, payments, loans, and everything depend on an intermediary. Web3 will remove this burden.

When we create a web3 account on our phone, we are virtually creating a deposit account -for free. This account can have money in it. You can have multiple currencies on your wallet and use them to pay with your phone. New NFC and QR code standards will enable payments with crypto in stores and online.

With your phone integrated into web3, you don't need to access banks anymore to be able to invest, save or get loans. The web3 financial system is evolving quickly, and all the financial products you seek from a bank, you can also obtain from DeFi -Decentralized Finance- services.

Your bills and dues

Having the web3 account integrated into your OS means that the usage and notifications appear directly on your user experience rather than on app notifications. So, for example, when a payment is due on a service -like Netflix- your phone can request your approval to make this payment happen.

Since the web3 account is bound to the blockchain, you have access to all the transactions with your account since you opened it. Any PFM -Personal Finances Manager- can plug in -with your permission- and give you nice graphs and insights on your spending habits.

Your banking

Since your phone can connect directly to the web3 world, you won't need banks or intermediaries to access financial products like loans, investments, or savings. Instead, you can find all those on respectable DeFi -decentralized finances- apps that can handle your burdens.

While still in their inception, some already manage billions in assets and can be very powerful. This industry will need to learn how to operate with regulators and governments to whom we did delegate the power to protect us.

Conclusion

We don't know yet what the future is going to bring us. But the hints are all over the place. The blockchain paradigm is bringing the new expansion of interoperability and standards faster than any other technology before.

Solana is pushing hard to get manufacturers to start including web3 hardware-friendly components on the new phones, so the integrations will only depend on the developers from that moment. This stack includes a protocol to connect phone's wallets with dapps and a dapp open store.

It will be hard to imagine how carriers and major subsidizers of the phone hardware you use today can let these new stacks disintermediate them from the transactions with the users. Google might find it a threat to their revenue model with the store, and Apple can have some concerns about the fact you no longer need their Apple Card.

Today, the current code repositories enabling this vision have no more than six developers working on it. It indicates that it is still a Lab project, not a mass adoption project.

There is an exciting twist on this project. Solana sees the power of DAOs as an ultimate driver to keep the momentum for this project, so they are launching a Saga NFT membership token to this community. They claim this will be the way to decide on new features or the project's direction. While I firmly believe that DAO models might be more efficient for certain aspects of our lives, this one strikes me as an engagement tool more than anything else.

The beginning of a new work era

Now that our brains have learned how to change work paradigms, Web3 has arrived to shift the workforce paradigm 180 degrees. Remote office work has opened the gate to a new breed of workers, and employers are looking at jobs from an entirely different perspective. 

The new paradigm has a two-angle approach. First is the upside angle; in the current landscape, participating in your company's success has meant having complex vesting equity packages and a bonus tied to the corporation's performance for the lower workforce tier. 

The Upside approach

When a company wants to share success with its employees, it has to create a stock option program. This process involves a vesting period and massive amounts of lawyer work hours to get it right and consequently protect employees from unwanted taxes. 

Before the IPO, the company stocks aren’t liquid, which means the employees are basically stuck with worthless paper. This liquid compensation depends on an exit, whether a sale or a public offering; otherwise, the employees have a piece of paper holding no value. Some private companies offer liquidity events to let stock option holders cash out some options; however, these are rare and limited.    Web3 has brought a new compensation mechanism that removes the line between cash, which pays bills and holds upside potential. These two merge into a token: an ERC-20 token- it's that simple. 

You may ask, 'How can an ERC-20 token be both upside and liquid for the employee?'- and the answer is that DAOs have been experimenting with this model for a few years already. They have been running their operations on a native DAO token that can be liquid on decentralized exchanges and gain value as the DAO grows and solidifies. 

Incorporating this token into the traditional workforce model would be like paying gig economy workers with a company token. This token can then be exchanged for cash or held for future exchange if the token gains value with time. If the company is successful and brings utility to the token, then the upside and the compensation are combined in one payment model. The gig worker will have the choice to cash enough to pay bills, alongside saving tokens for future upside. 

This model's flexibility is evident, though there are also drawbacks to be addressed. For starters, our current tax system doesn't currently support it. But as with every shift of models, tax models evolve, just as they did for the working-from-home model. 

Employer-employee relationship

Web3 has deconstructed the employer and employee relationship entirely; DAOs don't hire in the traditional sense of hiring. Instead, they publicly list all the tasks and projects that need to be completed. There is a marketplace between the organization and the contributors where tasks are assigned and payments disbursed in real-time. The workforce chooses what to work on and how much to charge. 

In this new world, we can imagine employers not having a workforce of fixed employees but one consisting of many contributors at every level lending their top skills. Some of these could be pitching in managerial expertise, others serving as individual contributors, and the majority just contributors using their time to tackle one of the organization's challenges. 

In this contemporary work environment, contributors can choose when and what to work on. In addition, they can design a career path of learning and projections based on skills and the upside. 

In the traditional sense, this paradigm means a very high churn rate in the workforce. But DAOs today have been focusing on retention, only to discover that they need to focus on improved onboarding instead. This is the key to having a healthy pipeline of contributors looking to participate in the company's success; employees can choose to stay as regular contributors or not have the company on their roster of contributions. 

This shift will allow HR teams to work towards community management rather than operational processes. For example, the new workforce doesn't need an HR team to address complaints in the workplace but rather a team that can help with improving culture and task distribution. 

Work regulations

There won't be significant directional changes here; the work regulations, unions, and other models will evolve like any other aspect. However, since the organization's compensation for tasks and payments can vary, the risks of underpayments, compensation inflation, and other economic risks will be the same.

Conclusion

In a decade from today, when this model is battle-tested, taxes adapted, and corporations on board, we will see this new form of the workforce as the standard. 

The private and public companies will be issuing tokens to pay compensation, alongside adding utility to them to augment their overall value. Companies will manage their capital in the form of this token and liquidity provided by CDBC and stable coins. IRS will start accepting taxes in the form of CBDC. The workforce won't have job contracts but a relationship of contribution with the different companies- a dynamic much closer to freelancing. 

Contributors will have career growth based on the contributions made. These will be in the form of NFTs issued by the company; our LinkedIn will be auto-filled by our Web3 wallets where these NFTs sit.   

Seniority will be measured much differently, and titles won't matter. Instead, we will see a new breed of performance measurements, value addition, and reliability. These will be standard metrics to measure one's job qualifications to access specific challenges in an organization they want to contribute to. 

Let’s not forget to address a key concern: what happens with the health coverage plans? 

The shift of paradigm affects these matters too. The beauty of Web3 programmable money, a.k.a. tokens, is that the workforce can demand that the compensation includes some subsidy for a health care plan. Companies will manage the coverage in a way where the work done is tied to the payments, and the fees are included or subtracted from the wallet directly. Contributors will pay their health care plans based on someone's contributions and not someone's employer. 

Web3 is indeed a new paradigm, already creating a stadium full of ideas and projects that will reshape how we organize and operate. For starters, it will bring about new employment, governance, and business models.

When the DAO concept appeared in 2014 with MakerDAO, suddenly, things that were mere chimera out of Techno-fiction stories were becoming a reality.

However, what is not going to change is how the economy works. We are still using payment mechanisms that were with us thousands of years ago. We still have financial products that haven't changed in centuries. The world’s sovereign debts, corporate bonds, and stock markets won't go away in favor of DAOs, decentralized financial products, or blockchains. On the contrary, they will most likely be upgraded and revamped with these new technologies.

Eventually, this new technology stack will replace old systems, but it might only replicate the current business model, not fundamentally change or improve it..

This begs the question, how will we connect both worlds?

Today, a decentralized autonomous organization that needs to provide payment for standard services (i.e., pay taxes) has to do two or more steps to exchange its tokens into a currency that is accepted by banks and government entities.

There is a need for a new protocol that can enable all these organizations to leverage the TradFi, web3 speak for the traditional financial systems.

This protocol needs to connect these blockchain-based applications seamlessly with the fiat currency payment networks. It needs a set of smart contracts that would execute instructions outside of the blockchain-centered ecosystem back to the financial system.

These smart contracts would enable simple use cases like paying to a bank account or issuing a debit card sent to your home. Instead of having complex APIs, this protocol will take advantage of the flourishing new standards on the blockchain and enable an interdisciplinary and interoperable set of services via tokens and smart contracts.

Mirroring the traditional system

If we want the web3 world to interact with the financial system, we must make blockchains aware of it. We can do this via oracles and triggers. Chainlink is an oracle network that securely enables access to real-world data and off-chain computation.

We can connect a bank account to a smart contract using oracles, allowing the decentralized code to know what the account balance is. The same logic applies when linking to other services, like credit card transactions and bill payments. For example, smart contracts can trigger the financial system to initiate or dispute a card transaction.

An issue with linking to legacy financial systems is that an intermediary can intercept vulnerable code as it moves between systems. For example, an attacker can manipulate the balance between the financial system and the blockchain code.

We need to have a more robust mirroring model, less prone to attacks to avoid this issue. In addition, we need to make a hybrid model with the financial system to enable the blockchain to directly access the source of truth.

Banks running blockchain nodes

One option would be to have the actors in the current financial system run nodes on the blockchain with particular adaptations to have the EVM on those nodes interface directly with their systems.

This particular node would enable smart contract access to the banking system’s information, securely connecting it to the blockchain. This information ranges from transaction information to balances and even FX prices. Moreover, it can be done in real-time when needed, where the smart contract can request (pull) this information rather than the node pushing to it.

Now that the information is available to the blockchain contracts, your distributed code can interact with this particular set of contracts to retrieve the information needed.

What about data privacy and security?

Security experts will sweat and swear by reading this statement. By definition, anything in web3 is not private. Blockchain-based technology stores the code and its state on the blockchain, where anyone can access it and read it. We cannot keep the account information in the blockchain because it would represent a security breach.

When a smart contract state changes, this is recorded on the blockchain as a transaction. The blockchain needs to record the new state, recording it for future interactions. Specific to Ethereum based chains, the smart contract's state and its code reside in the same place. On other chains like Solana, the data sits differently than the code. But even then, the data is on the blockchain, accessible to everyone.

This change of state is why executing smart contracts incurs gas fees. A transaction is incorporated into the blockchain to record this state change. Gas needs to be paid to the nodes to process this record. Not all functions incur gas fees. These are “read” functions that don't change the state of the contract, such as the ERC-20 token function balanceOf() which gives you the token balance of a specific wallet address.

These read only function calls can be used to retrieve the account information safely, because they cannot change the contract's state.

Welcome

First and foremost, we need to bring a protection layer to authenticate whoever accesses this system. We cannot display a bank account balance to the world, at least not in the traditional financial system.

Using ERC-721 tokens -or NFTs- we can provide an earmark to which wallets could have permission to access this system. This NFT can be minted by the bank and transferred to the wallet that needs access. In addition, this NFT can be limited and non-transferable, avoiding having someone transfer the token out to another wallet.

When the smart contract executes the function, it checks the NFT balance of this wallet. If it sees the proper NFT, it can proceed with the rest of the logic. If not, it returns a grace error, better known in the HTTP world as a 403, explaining that this wallet doesn't have access.

This will only act as a "restricted list" model, where only those wallets with this specific token can access via this method, but it doesn't differentiate between the wallets.

To represent identity, the bank should have a relation of wallets and bank accounts sitting on their systems. The bank account owner can link its web3 wallet to its bank account, and receive an NFT token to prove it.

Then, the smart contract queries the bank system asking for the bank account balance connected to the wallet that initiated the call.

This model ensures that only a specific wallet can ask for the balance of a particular bank account and not other wallets.

What if another protocol requests this balance?

In the web3 world, power resides on building automated logic that makes these processes seamless. With this model, we ask the wallet holder to execute the function on the smart contract every time, which creates usability issues. There might be instances where an authorized third-party protocol makes this inquiry.

If a protocol tries to execute the function, it will receive an error response of “restricted access” because it doesn't have the NFT, nor is the wallet inquiring for the balance the correct one.

The bank can issue a specific NFT token to solve this case, allowing this protocol to access the smart contract function.

But the identity piece still makes it hard. When the foreign protocol inquires about a wallet's bank account balance, somehow, we need to make sure the account holder authorizes it.

Here is where a not-so-known standard ERC-725 comes in handy. This protocol enables a "claims" model where the foreign protocol can obtain a claim from the wallet that states "its permission" to access the linked bank account's balance. This claim can be revoked at any time and allows the foreign protocol to call the function safely.

If the address calling the function is different from the address of whom we want to know the balance, then a claim must exist. This claim must be issued by the bank account's linked wallet and validated. The bank can act as the validator of this claim since it issued it in the first place.

Conclusion

Slowly, as web3 gets better defined and blockchain technologies mature, we will see more interactions between this new world and the traditional monetary world.

The more integrations and interactions that become available, the easier it will be for a day to day use of web3 in our lives. However, even when web3 gains enough critical mass of services to become independent of the traditional financial system, there will still be more to interconnect. Anyone can port the example in this article to more industries.

What if you want to change the ticket? You may want to try to do so through the airline's website, but oops, 'This reservation is made through a third party website, please contact this website to make any changes to this reservation.'

You are limited to using your OTA's website to do reservation changes and, even worse, seat changes. Sometimes you won't even be able to do so, even by calling the airline.

This inefficiency exists because the integrations between platforms are tedious, cumbersome, and hard to maintain. Moreover, every time one of the many players that have a role in your reservation evolves, the others have to catch up and invest in upgrading their integration.

Thanks to Web2, it is possible to make online reservations for airplane tickets. Overall, it has been one of the significant benefits of making this process entirely digital. But in this never ending, evolving world, things need to change. Web3 is here to help.

Web3 changes everything

Web3 is a new paradigm of digital logic based on blockchain technology. Blockchain-focused technologies enforce a new way of doing things, as follows:

• All data has to be immutable and stored in the chain.

• All programs have to be immutable and stored in the chain.

• Running a program over a specific data set needs the data owner's permission.

All these enforcements happen via cryptographic mechanisms that render it impossible to have a third party execute one of these programs on your information without your wallet's permission.

So based on this, how would the travel industry leverage the Web3 paradigm to make things better?

The role of NFTs

Reading around Twitter, you must have found plenty of references to what an NFT is. It refers to the non-fungible token standard, created as ERC-721 in the Ethereum ecosystem.

The Ethereum network is the most prolific level-1 network to run smart contracts today. Most of the NFT collections get minted in this chain. In addition, the most significant development community works on this chain, making it the most advanced in terms of resources, libraries, and knowledge base.

The purpose of the NFT is to earmark an asset (digital or physical) to a wallet with certainty. This earmarking happens by "minting" a token that cannot be duplicated but can be transferred. As you can see, this token resembles an airplane ticket reservation.

But as with many other tokens in Ethereum (and the other chains), these are governed by smart contracts, which in the end, are just pieces of software we can mold to our needs.

Reservations as NFTs

Well, the title describes it very precisely. What if we minted a token every time we booked a trip? This token would include all of the reservation information, and it would be minted directly to our wallet.

The OTA now integrates with our Web3 wallet (Metamask) that interacts with this token. So if the OTA needs to check the reservation information, it would ask for our permission.

Here is the first significant shift between Web2 and Web3. The access to the booking reservation now sits in the wallet.

Now that the reservation is in our wallet, in a standardized form of token, we can access our booking to other organizations. Overall, it opens the market to a new breed of services that couldn't have existed before.

Changing a reservation

If we ask the airline (or any organization with the power to change that airline's reservation) to change our ticket, it would first ask for access to the token.

The airline can now access the token information and provide the services needed for the booking—no need to identify oneself. Having the token in your wallet is enough.

When the reservation is changed, the permission for the token gets revoked automatically.

Airport check-in

The whole point of the airport check-in is to identify yourself as the rightful person to board the plane and to check the luggage going with you to the destination.

In this case, you would identify your wallet, and the agent or machine would gather the token information to compare it to your identification.

This identification would issue a claim on your token in the ERC-725 format. This claim confirms that you are the rightful owner of the ticket, so this NFT is enough to let you in. In addition, the claim can hold some identification information—your wallet would be the portal to access this information.

At the airplane gate, you would again permit the machine or agent to access the NFT and claim the information to revalidate your identity before boarding the plane.

Why would this be better?

First, this model enables a fully digital experience for the consumer. All the steps here are no different than on Web2:

1. Book a reservation online

2. Receive tickets (in the form of NFT)

3. Check in at the airport with NFT

4. Board airplane with NFT

If you replace booking boarding passes with NFTs, you will have the same customer experience, as both are QR codes.

The difference resides in the ownership piece. The wallet holder always grants the information access. The customer is conscious of when and why their booking and personal information has been accessed.

Furthermore, the airline—via the travel platform—and the OTA use one standard for the booking tokens. Other organizations can now use this standard to augment the customer experience.

What does this new standard enable?

If the bookings all come as tokens, your wallet is the central point for your travel arrangements.

Imagine how easy it would be for American Express or any other white-glove concierge service to access and help you manage your travel with your consent.

Imagine how easy it would be to account for your total travel costs since everything is in your wallet.

Finally, imagine how easy it would be to have an app that can show you the itinerary and different travel options with your consent instead of Google reading your emails to show you the same information. It is all seamless with the token approach.

Why ownership matters

In this shift from Web2 to Web3, your booking and personal information no longer sits in the OTA's database. It sits on your token. Airlines inevitably hold your information as there are laws around passenger identification. But we will see the identity space also move to Web3 soon.

When you own your information, the OTAs can no longer lurke your information or hold you hostage on their tool. You have control of access and your information.

The OTA can focus on what they are good at: helping book your travels. Period. No need to store lengths of information to fulfill their mission. They can just help you get your travel token minted appropriately.

Why standards matter

Aside from the control of access and where the information sits, the other major paradigm shift is the standards applied.

The internet didn't become mainstream until some major standards were adopted—namely, TCP/IP and URLs. These two things alone helped standardize access to the network, which helped people build tools and browsers at a much faster pace.

Web3 helps drastically abstract the business logic of digital assets. This standardization enables businesses to focus on their true mission, leaving technology and digital assets to the blockchain and the customers' wallets.

Conclusion

I have oversimplified a travel-based protocol within a small use case. Obviously, the travel industry cannot be summarized in what I have described in this article, but the power of Web3 can be. If we, in 1500 words, have been able to describe how travel booking could be ported to Web3, imagine how fast we could explore other use cases. It's a matter of finding the first use case and pushing forward.

After all, we never thought we could have a QR code directly issued to our phones from our couch at home, without having to talk to anyone, and then board a plane using that code.

Death Valley is the moment of truth for a startup. It is the gap between the “idea of a business model” and the revenue generation from the product, when expenses are high and cash is limited. It’s when the company has to hire the team, build the product, and launch it. It is when they need to show that there is a product market fit and there are potential revenues and profits coming in the future. The company must carefully manage limited startup capital from Angel investors and show enough promise to attract institutional investment, aka Venture Capital. They need to cross Death Valley before they run out of cash.

DAOs have a Death Valley, too.

For DAOs, this moment happens at the very beginning of the DAO setup. This is when the core team needs to rally a community and get everyone to work on the mission and vision of the organization.

If you have a core team with a good reputation or an early member who has a big influence network on Twitter or in other DAOs, the outreach of the DAO can go viral quickly. Otherwise, the DAO remains in a latent stage where the core team is doing all the work to get the mission up and running. Death Valley for DAOs is about cash and community.

Community driven productivity

An amazing thing that happens in a DAO that doesn’t happen in a corporation or a web2 environment is that random people just arrive and offer their skills to help, just for the sake of the vision and the community around it. This is the biggest asset DAOs have today versus companies or institutions from the web2 world.

As the community grows, contributors rally around the mission and start collaborating. Groups are spawned in Discord channels and productivity is going through the roof at the beginning. There will be significant community involvement once a Discord server reaches a healthy critical mass, about 5-10k members.

Typically Discord servers have a high churn of users. A lot of the Discord “explorers” are just looking for the next new token to invest in. They can distract from your mission and vision, and only stay for the hype of the token they will get on the airdrop.

Others will relate to your vision and will want to stick around and contribute. Those are the people that will be more involved in building the organization, creating processes, and getting things running.

Tokenomics

Once the DAO has some momentum, it is time to launch the Token. The core team will pick the smart contract to be used, and will deploy it on a multisig wallet to maintain transparency, security, and the trust of the community.

This is a tokenomics example of a DAO building a technology product:

his token is then airdropped to the community based on the criteria predefined when the DAO was formed. This is a crucial point of the DAO creation, as it is another criteria people use to decide whether they want to join the DAO or not. The Tokenomics reflect how the core team is thinking about the DAO, the community, and its compensation model.

The community is savvy on these aspects and they understand the underlying messages of what is valued by the core team. A bad choice here and you won’t see any traction in your DAO.

For example, if you have a tokenomics where 51% of the tokens go back to the core team, obviously Decentralization is not going to be priority.

If you see a percentage of the tokens reserved for investors, it means that there are special interests behind the DAO -whales, VCs, you name it. Investors may have short term goals of profiting that conflict with the long term goals of the community. If they get a large slice of the pie, they will have a disproportionate sway in voting on proposals and can steer the DAO into short term thinking. That is the problem with the corporate world now.

Another thing to consider is the proposal threshold. This is the amount of tokens you need to have in order to propose something for on-chain voting -or even for off-chain voting. Recently, DAOs are (avoiding to share this and leave the proposal process in a more informal forum like their Discord.

Finally, you will need to take a look at the  portion assigned as DAO reserve. This reserve will be used for both operating costs and future airdrops, so it is for future proofing and resiliency against long term risks.

Beware if there is any portion allocated to provide liquidity in exchanges. While this is a novel idea and helps bring value to the token once distributed, it also provides a very quick exit for the larger token holders, aka rug pull. If you see something like this in the tokenomics, check if the core team and investors have any form of lock period to exchange their tokens. A lock period, or vesting period aligns the long term interests of the team with the community. If there is no lock period, don’t even get in this DAO, the risk is too high!

Governance

Now that the token has been launched, the governance model kicks in. The core team has to arrive at consensus with the community and has less power to make decisions on the spot.

In this article we describe some of the most advanced models of DAO governance.

From here, it’s just like an engine that has been started successfully and needs a few revolutions to get warmed up and provide throughput. Rounds of proposals and voting expose and validate the true intentions of the community and the core team.

Are VCs getting into this?

The answer is yes. The way VCs are investing in DAOs is by either injecting capital early on, when the DAO is being created, especially on technology products that need a big push to start, or when the airdrop is happening.

Examples of early stage VC investments include the  Wonderverse capital raise or Friends with Benefits.

Some DAOs issue a token to raise capital. They use tools like mirror.xyz or Juicebox  which allow users to exchange ETH for the DAO’s Token. This capital is raised towards a reserve based on the tokenomics described above.

Some funds like a16z take a position in these raises and can end up holding a large percentage of a DAOs token. As an example, a16z holds a big position in Uniswap as well as other protocols. They are trying to mitigate this concentration of voting power by assigning delegates which will theoretically decentralize their influence on these protocols.

How is this currently done?

When you have information uploaded to FacebookMeta, this information is stored in a private database controlled by Meta. This information, by some of the most restrictive data regulations (like GDPR in Europe or CCPA in California) does belong to you, and you can exercise legal powers on your information, such as demanding that this information be deleted or corrected.

The issue is that your information, while on the private database, cannot be controlled or monitored for proper custody and use. You don’t control whether Meta is doing the right thing with this information or if they are protecting it from hackers adequately.

The programs that manage your information are private and its source code not accessible. If you’d like to know what Meta is really doing with your information, you won’t know, unless you work at the company and have access to its source code... Or maybe just sometimes.

How is it done in Web3?

The paradigm difference with web3 is that the information you upload to a web3 application (whether private data or public data) will be stored in the blockchain. This means that from the moment it is in the blockchain (a public repository of information), the custody of the information is delegated to a decentralized set of nodes that run the blockchain.

This, by definition, means that no one node can alter or erase this information, as the blockchain is immutable and persists over time so long there are nodes to maintain the chain.

In regards to the control, you have delegated control of this information to a smart contract. Smart contracts are a set of program code lines that are stored as well in the blockchain, which makes them immutable and its source code publicly available.

You can see any smart contract source code in the blockchain. So you can audit it and make sure that it does what it advertise to do.

Now we can see the difference, can’t we?

Web2: private controlled code (that can change any time at the will of the company that owns it) manages your data in a private controlled database (that, again, can be changed at any time at the will of the company that owns it).

On Web3, you are storing the information on a public record with a decentralized control, which makes the tampering virtually impossible. Furthermore, the programs that manage such information are also immutable and its source code stored in the same public record, making it auditable at any time.

See it? way different approach.

Why does this matter?

In the end, as a consumer, you want to have an application that performs its purpose and gives you what you are asking for.

For instance, in a To-Do app, you want to have your tasks available at any time, take notes on tasks that need more information, be able to close those tasks you have completed, etc.

Both web2 and web3 can give you the same experience and usability. Both worlds can deliver this information to you and enable you to binge work on your task list without any issues. You don’t need web3 for absolutely everything in your life, just as we don’t need web2 for everything.

But, what happens if you want to have your To-Do list to coordinate with your calendar? Ha, good luck with that. Unless you have done an extensive research on to-do apps and you have chosen the right one, you are stuck with your tasks in one app, and your calendar reminders in another app. Then you have to use things like Zapier, which can bridge data between the walled gardens of those apps.

Here is where web3 makes things more appealing.

Imagine those tasks were actually tokens managed by a smart contract. Those tasks would follow one of the blockchain standards (ERC20, ERC1155 or ERC721 to start with). These tokens (your tasks) can be accessed by any other app you grant permissions to with your wallet. Since these tokens follow a standard, the calendar app won’t need to do anything different to handle these tasks and can incorporate them into your calendar instantly.

Now things get interesting. What if I choose another app to manage my tasks because I like their UI/UX and community better than the one I am currently using?

In web3, it would mean you transfer permission on your tokens from one smart contract to another smart contract (to-do app). Voi-la, as simple as that. No cumbersome “import-export” processes between incompatible to-do apps that make things hard because they don’t want you to change to another app.

So, my tasks are in my wallet? or in the blockchain?

Good question. Unlike how the concept reads, you don’t have your information in your wallet. Your information is stored in the blockchain. Your wallet acts as a gatekeeper to the ownership of that information. Your wallet is the key to show that those tokens in the blockchain are yours. Whether it is tasks, coins, or NFTs, what determines its ownership is your wallet.

Hence the importance of not losing your wallet.

If you lose your wallet, those tokens are not lost. But they are no longer usable or claimable by anyone else. A caveat: some smart contracts contain “protections” or “back doors” to recover your tokens, but this a security vulnerability, that might not be worth the risks. I am not going to bore you with the nuances of smart contracts, but you can audit the code before using it.

Conclusion

What I am trying to convey in this small read is the true benefit of the web3 paradigm of user data. At their core, these chain based programs and storage models are designed to keep everything transparent and accessible to the owner of the information.

The businesses running on this new paradigm will no longer be able to force their information custody or management practices without your consent and knowledge (literally, they cannot). They will need to build different profit models, perhaps based on creating a win-win relationship with their users, rather than exploiting our data, with little regard for our well-being. For example, Meta could focus on connecting people, rather than managing people’s behavior. Google might focus on putting every bit of information within the reach of your fingers, rather than selling every bit of your information.

Furthermore, I have found more resources to help understand the tool universe that web3 is bringing to the equation.

But in this post, I am going to dissect and describe the different governance models of several DAOs.

Note: the governance of a DAO is as fluid as the DAO itself. Because of its decentralized nature, a DAO can vote one day to shift its governance processes, changing the whole mantra in one sweep.

The scope of this study is within these DAOs:

• Constitution DAO

• ENS

• FWB

• Juicebox

I am not going to comment on what each DAO does or their missions. This article is purely focused on their governance process and model. I invite you to dive into their websites and Discords to get a sense of what is that they do.

Constitution DAO

This project might be the easiest to dissect, since there was no governance after all. The project was initiated by a core team that rallied up a lot of people to buy a copy of the US Constitution. During the week long process, there was a lot of discussion on Discord, but nothing up for voting. The goal was to push a governance model once the bid was won.

I wanted to list this one here to clear all of the myths about this organization. While it was born to become a DAO, it never reached that stage. They issued $PEOPLE tokens that eventually would give voting rights to the token holders, but that didn’t happen -or at least up until the group was dismantled.

In the context of DAOs, this never became one.

Its worth noting that upon dissolution, the community decided to keep the remainder of the balance locked in the Juicebox smart contract, as a reserve backing the $PEOPLE tokens that remain in circulation. Quite a novel idea. A token backed by ETH.

nnnnicholas.eth, a core member at Juicebox, describes this phenomena as an ultrasound memecoin. Waiting for his post on this.

ENS

The governance decentralization for this DAO started with the famous airdrop and call for delegates. An ENS token was given for each .eth domain a person had registered. This airdrop got attention in social media circles because some people received a large amount of tokens.

The governing process for ENS happens with a three layer model:

• Discourse of proposals

• Delegates voting off-chain

• On-chain voting

Most of the proposals are born either on the forum or on the Discord. Later on, they get proposed for voting on Discord.

The first proposal voted was to define a constitution for the DAO. This constitution would help govern the decisions to be proposed and give guidelines to the proposals.

Out of all the DAOs studied here, this is the only one that has such a traditional framework (constitution to frame the proposals).

This DAO has three different type of proposals that can be launched:

• Executable Proposal: involve smart contract execution by the wallets controlled by the DAO.

• Social Proposal: change things that don’t need on-chain involvement, such as fee changes or petitions to root holders.

• Constitution Amendment: as the name indicates, are changes proposed to the DAO constitution.

The proposals can be divided into the four work streams that the DAO has:

• Meta governance: governance discussions and modifications.

• Community: community related proposals.

• ENS Ecosystem: promote ENS adoption and build a thriving ecosystem.

• Public Good: as it name describes, proposals for the good of the public.

Each group has a set of five stewards that are basically the operators of the group. They take care of:

1. Managing operational tasks related to the administration of a working group;

2. Maintaining a description that sets forth the focus and intent of the working group;

3. Developing working group goals for the Term and providing a clear road map for achieving those goals, to be published in the ENS governance forum within the first 30 days of a Term;

4. Approving the creation and dissolution of sub-groups or workstreams within a working group to undertake work and/or carry out specific projects or tasks;

5. Requesting working group funds from the DAO; and

6. Approving and making funding available to sub-groups, workstreams, or contributors within a working group.

They are the ones that move proposals forward to ask for funding. They are responsible to get these proposals moved forward according to the governance process as Collective Proposals.

In order to get proposals to move forward, first the proposal needs to go through a temperature check on the forums and Discord. This temperature check helps gauge the level of enthusiasm of the community towards a proposal. This helps gauge and prioritize the proposals that should move forward to the next phase.

Unlike other DAOs, the temperature check is very informal and only helps guide the sponsor of the proposal whether to move forward with it or not.

Next, if the sponsor decides to move forward based on community feedback, there needs to be a draft proposal presented to the community. This proposal now comes under community scrutiny.

Once this phase is done, the sponsor needs to request that the forum moderators move the draft proposal to an active proposal. This means that the proposal gets uploaded to an off-chain voting site (Snapshot in this case) for community voting. This cycle is 5 days long. Once this is done, the outcome is binding and now the working group needs to execute the proposal.

If the proposal is an Executable Proposal, that is, it needs smart contract execution, it goes through an extra layer of governance. I am not going to go deep, as these are very technical proposals, but long story short:

1. you need to have or get delegated at least 100k ENS votes.

2. you need to execute your proposal against the method propose() of the governance smart contract of the DAO governor.ensdao.eth.

Weaknesses

This model of governance is complex and slow. It reminds me of the old forum times where you needed to build consensus via forum -some of us even remember those BBS-, which is slow and tedious.

Proposal drafting is structured and framed by a constitution, this inherits the good and the bad of the traditional law based system.

There is a very low quorum needed for the proposals to move forward to execution: 1%. This is very low by voting standards and means that a few delegates can actually push proposals forward. That said, there is a strong community that is safeguarding the proposal process, which speaks volumes on this DAO’s community management.

FWB

Here is a good article where the DAO explains how their new governance model will work. Their model has evolved from a simple governance by consensus model (using Discord to share proposals, documents to formalize them, and Snapshot to vote) to a multi-group based model. Each group has an area of expertise and a decision capacity / voting power for that domain.

Their latest move has been back to a centralized consensus model where their focus is on the funnel of proposals allowing more visibility and reach.

First, governing all, there is the Snapshot community voting on the different proposals. This is the sovereign model. The proposals voted favorably will then be taken to execution by the specific team assigned.

But the trick here is how those proposals reach the community. When the funnel of information is a limiting factor -especially on very large projects with lots of proposals- you need to figure out how to make sure each proposal gets its fair share of attention.

FWB has institutionalized an upvote model -a la Reddit- where the community can both propose and upvote those proposals that are relevant to them. This model helps curate those proposals both in content and time -remember, when you do a proposal does matter.

This curation is then treated by a proposals team that helps to draft, organize, and clean the proposals for community review and vote. This helps standardize the format and content of the proposals.

n order to have a forum to contextualize these proposals -or projects- there is a monthly town hall where the teams involved in the curated proposals can explain them. These online meetings also serve as a Q&A and temperature check process for some of these larger proposals.

Finally, the vote takes place. More than 5,000 token holders go to Snapshot, read the proposals, and vote. This can be a daunting task as there may be dozens of proposals at a time.

To mitigate this, FWB is providing some tools to help the community participate such as SMS notifications when proposals get published, side channels on Discord to discuss the content, plus work groups to provide data and metrics on the proposals.

Another route they are incorporating for participation is doing a Discord voting that happens on-chain, so it would be as valid as the Snapshot token based voting.

Weaknesses

This model, while more sophisticated than other models I have seen, takes the effort to centralize the proposal funnel. Before, there was a risk of segmentation by having so many groups, but now influencing what proposals move forward is harder. In this model, you have a centralized team that edits and formats the proposals. This is risky, especially if you don’t disclose how this team is going to be conformed, governed, or what guidelines they will use.

his team might have the power to format a proposal in a way that sways the community vote. Language has many ways to spin something.

Juicebox

This DAO has not yet reached a fully decentralized model. There are token holders that have a very large chunk of the tokens which gives them a very large weight on major decisions.

They have have divided the tasks into workspaces. Each workspace acts as a bucket of tasks that have a specific theme. In some sense this is like the groups division proposed by other DAOs, but in this case, workspaces do not have limited voting scope or a governing body over its tasks. It sits merely to segment the tasks to attack them more properly.

The governance process on Juicebox is very procedural and also centralized. The major difference with other organizations is that they mark their voting process in cycles. These cycles are 14 days apart, and each day of the cycle has its purpose on the process:

During the previous cycle, a set of proposals get discussed at Discord. These emerge from the various chats and soundboarding with members of the core team -and surroundings. The proposals usually get a sponsor from the core team. Those proposals that don’t have a sponsor can still be promoted forward.

Once these are mature enough, they need to be drafted on a specific template:

Once you have a proposal in place, you run it through a Discord channel where a team of community members -you are free to come in and help- would help format the proposal in a workshop environment.

The proposals that have made it to the start of the funding cycle now go through a temperature check. This, as its name indicates, is a way to see if the proposals are welcomed by the community. They get exposed in Discord and discussed.

Once there is enough consensus on the proposals that will go to the Snapshot, the sponsors (usually those with enough tokens to propose at Snapshot) would push the proposal for voting. Once proposals are voted for, the execution happens.

Something to remark: contributors compensations

This DAO compensates the contributions via these governance cycles. That means that you can push a proposal forward towards your compensation. Since you have been involved with a core member when contributing, the core team member would be the sponsor of the proposal.

This compensation can be a one time payment, a trial payout (one or two cycles long, for those who are starting to contribute), or the normal payout proposal. The last one is like a full time salary compensation.

Weaknesses

The major burden of this process is that the core team has to devote a lot of energy to the proposal process. This is inherited from the fact that proposals can only be pushed forward on Snapshot by a threshold of tokens. Juicebox doesn’t have delegation yet, so this process involves at least one of the core team members to sponsor and move forward the proposal. Its a very slow and time consuming process that cripples the scalability of the DAO.

They also don’t have an on-chain voting system, which means the multisig owners might not necessarily follow the decision of the voters.

Conclusion

You have seen three different governance models. These three are different in approach, community and goals, but all of them share a commonality: community votes. Some models are more archaic, like ENS, which resembles a modern democracy with delegates, and some models are more reflective of the new DAO movement, like FWB and Juicebox.

It is too early to discern if these models will be able to handle multi-million person communities -as many DAOs aspire to be- or if they become as clunky and burdensome as the traditional democracies some countries are governed with.

Out of the three letter acronym, O for organization is the only one that has truly been reached. D for decentralization is maturing really fast, but A for autonomous  is lacking. Everything about the process of a DAO (Discord, Snapshot, and Notion) remains manual.

The tools to govern remain pretty much the same as they are in modern democracies; nothing new has been implemented. One would argue the fact that there is more involvement from the community, but I must say that even these numbers, not even reaching 10% of the community, pale in comparison to voting rates in a nation state democracy, reaching 50-60% of population.

This is despite the fact that the proposals are now hashed out through the community, unlike traditional democracies, where proposals are pushed forward by delegates with special interests.

Thank you jonsimmons.eth and nnnnicholas.eth for your help on writing this article.

Purpose: to learn.

A person who never made a mistake never tried anything new.

- Albert Einstein

What better to know about something than getting involved into it.

In the last months we have seen a resurgence on what is currently named “Decentralized Autonomous Organizations”. These are basically purpose driven organizations that are not managed by a small group of people -aka management- but by a large-voting-enabled-community.

Early on, great subject matter experts, like Christ Dixon, tried to make sense on what these DAOs are. Also a16z, a prominent Silicon Valley venture capital, is making a big effort to be up to date to this new trend.

On my personal quest, I decided to come with a clean slate and learn from the inside, what a DAO is; but also,

• How do they get created?

• What do you need to start a DAO?

• Best tools to manage a DAO?

So here are my early notes of what I have learned so far after two months.

The first incursion into DAO happened after reading a tweet about a new Ethereum based smart contract protocol called @juiceboxETH.

As I noted before, DAO was not a foreign concept to me. Up to this point, I thought DAOs were a cute way to get a lot of people to manage NFT collections or to deal with specific DeFi nuances. Never it occurred to me that DAOs would become a new tool in the new generation’s arsenal to accomplish real world missions.

That was up until I met @constitutionDAO. A new DAO using JuiceBox protocol to raise capital to buy a copy of the US Constitution that was going to be auctioned at Sotheby at a whooping starting price of $20,000,000. That is twenty million US dollars.

This was the first DAO I joined at the midst of creation, where I could see the Big Ben happening in real life in front of me. From this DAO, I later joined another DAO -different in form and shape- called Wonderverse. And finally, as late as while I am writing this post, OpenDAO.

Full disclosure: none of these DAOs I mention have a fully decentralized governance model yet. This is a topic for an entire new post.

How do they get created?

All the DAOs I have seen ever since I joined JuiceBox have been created based on a core team of people who decide to get together to accomplish a mission. Usually the missions are very specific and have a high demand of resources -both human and economic.

Usually the core team know each other from the crypto circles or life circles. Most of the core team members are either incumbents on the crypto world from the investment side -hold big amounts of crypto- or crypto developers with knowledge on the crypto world. In some instances, I have seen core teams coming from other communities like the anime community or the comic community, where their intersection with crypto launches them to spawn a new DAO.

I all the DAOs I have participated, the age range of the core team never is over 30. This is a commonality that makes me think that this coordination engine is more suited for new generations than the older ones.

What do you need to start a DAO?

Community.

This is by far the most important driver to get a DAO running. Many DAOs have tried to start with lots of ETH and resources, but die at the moment there is no community traction.

Jesse Walden summarizes this very well on his manifesto for creating a DAO. He proposes a progressive decentralization of the project with very specific steps and metrics to measure each step.

Far from being different than any other startup, DAOs need to start with a strong core team that can rally up other community members around. This is a quality that is not easy and certainly startup founders don’t have -without capital raised- except for a few exceptions.

If you have a core team ready to go and devote free time to the quest, plus a good kernel mission that can help explain the DAO to the community, then you have all you need to start your DAO. No need for capital, just will, good team and perseverance to get the community together.

Best tools to manage a DAO?

The way to coordinate has varied, but lately -within the last months- it all has boiled down to Discord, Notion and JuiceBox or Mirror.

• Discord: Community organization, temperature checks for proposals, town halls. Why not slack? well, its a mix of serendipity and ease of use with large audiences. Discord is much more fluid and easy to use with large audience, it has roles and bots that allow its flexibility to adapt the server to the DAO specific needs.

• Notion: Documentation, wiki, some form of task management, contributors management and proposals drafting. Why not Google Docs? well, if you are asking this is because you haven’t checked out Notion lately ;).

• JuiceBox: When doing the capital raise, this protocol allows to manage the raise and management of capital -via multisig wallet. Why not Mirror? while Mirror UI/UX is much better than JBX, the latter has something that is crucial for the life of a DAO: funding cycles. When you need more capital down the road, you will need to keep issuing tokens, which dilutes your early collaborators, punishing them in some extent. JBX allows to set bonding curves and retroactive payouts to ensure that the early adopters are properly rewarded while the new incomers get what they deserve as well.

• Mirror: Incredible easy to use IPFS posting site with capacity to do some small DAO actions like token issuing -with capital raise-, petite governance models and NFT management. If you are looking to launch a DAO for the first time and don’t want to get too much into the economics of the token -or tokenomics- then I recommend starting with Mirror.

• Snapshot: When the DAO grows, there is a token for voting and there is a governance model with process, this tool helps on the binding of votes process. The tool services as a token gate for voters to cast their ballot on proposed actions by the community. The flow is simple: a member -with enough tokens- would propose something to the community -i.e. issue more tokens- and the community votes proportionally to the tokens they own.

There is a new breed of tools coming up on 2022 that will make the DAO ecosystem thrive even more. Worth mentioning @OrcaProtocol and @Wonder. The former is a new smart contract protocol to help manage DAOs governance better than just proposal + voting. The latter aspires to build a task management tool connected to the DAO tokens and governance, allowing to allot tasks to proposals and payouts automatically, so the work proposed on a voting is scoped, accounted for in the treasury and paid our once done by the community. It includes bounty hunts and pods, which allows to organize teams together around themes or topics -remember, DAOs are not always about building products or tech!

But the most important tool that the core team has to manage the DAO is trust. Without trust the community would feel there is going to be a rug pull and thus, will leave without hesitation.

Building this trust is what made understand that we are living a new era on organizations. The new generations code of conduct, community behavior and collaboration is far more advanced than what current tools allow to proceed.

Notion and Discord may help to ease the management burden, and Snapshot may delegate some responsibility on decision making, but the core of these new models of collaboration is the anonymous trust that bonds these people together.

Sure, tokens and web3 are able to mitigate the faceless connections we have to deal with to make things happen. But without the internet teaching us how to interact with people we don’t know and we haven’t seen yet face to face, these new organizations might not exist today.

Conclusion

Its early in the time of web3. A lot of us are rallying up to the word and hyping it on twitter to make us feel we know more. But the reality, after deep diving into its meaning -and getting my hands dirty collaborating on these projects, is that web3 is bringing so much more than cooler products or decentralized economies.

One of the predictions I have shared before is that DAOs will bring a huge impact on governance models, a new paradigm. So many things on our current -traditional- world lack of good governance and these DAOs, once they mature enough, will be able to handle those challenges better. I am referring to community driven projects like NGOs, cities or even software.

Its not about community consensus models to execute things, its about the way they get together and the mechanisms to regulate this consensus that makes web3 the perfect tool for this governance paradigm evolution.

These new entities are craving of a new set of tools that don’t exist yet, which will spawn a new economy around them. Web3 focused tools are hitting the nail so far. And the cycle will start again.

Linux and Wikipedia have been early experiments of what good can come if there is a good community governance model. DAOs is another evolution on this, leveraging the web3 ecosystem to overcome the trust issue and help disburse the earnings to the community faster and easier.