𧱠Let's build a DAO
Hi there,
Welcome to the ninth issue of Web3 Insider - Your newsletter for all things Web3 and the Metaverse.
Today with Heidi Klumâs CryptoPunk, RTFKTâs and Nikeâs latest NFT airdrop, the first NFT project in a Super Bowl commercial, the real identity of the Bored Ape Yacht Club founders and one of the craziest robberies in history.
Have fun reading!
âïž Writing of the Week
How to build a DAO
In the second article of our DAO series, we explore what building blocks are needed to set up a DAO. The five building blocks are Mission, Community, Treasury, Governance and Ownership. Let's jump right in!
Mission
The first step is to define a clear mission for the DAO.
The mission should be framed from the perspective of DAO members and supporters, and should give each stakeholder a strong north star as to where the journey is headed.
The following questions can help in finding the mission.
Why does this DAO exist?
What challenge are we solving with this DAO?
What is the goal of this DAO?
Then, in addition to the name of the DAO, it is important to introduce the leadership team. This team's main task is to communicate the DAO's mission again and again and to constantly check whether the DAO is on the right track. To do this, it helps to develop a short-term action plan and a long-term roadmap.
Community
The second step is probably also the hardest: establishing a community.
You have to ask yourself what type of DAO you want to build. A larger and more open DAO with thousands of people or a smaller and more exclusive DAO with a few dozen people. Deciding which type makes sense depends on the mission of the DAO. For example, Collector DAOs (smaller and more exclusive) and Media DAOs (larger and more open) differ greatly in membership.
After that, it's about the initial building of the core community - we call it Minimum Viable Community (MVC).
Whatâs needed to establish a vibrant and sustainable community? A strong Community Market Fit (CMF). Behind this is the question of whether the mission of the DAO fits the intended target market.
The question of which channels the DAO will operate through needs to be answered. In addition to Twitter for external communication, there is no getting around Discord. The instant messaging platform Discord originates in the gaming sector and has emerged as the number one community platform for Web3 projects in recent months. To give the DAO community a protected space, access to the Discord server (or to parts of the Discord server) can be restricted for members only with tools like Collab.Land. To do this, Collab.Land connects to the DAO member's wallet to check if it holds a membership NFT or the DAO token. If this is the case, access is granted.
A central community hub is essential for the management and further development of the DAO as well as for the cultivation of a community feeling. In addition, it is worth considering using the Web3 publishing website Mirror to communicate regular updates to the outside world.
Once a community is established and thriving, itâs important to develop a participation framework with clear tasks, roles and rewards.
Lastly, a few important lines from Chris Cantino on the hype word community.
Community is one of the most overused and misunderstood terms of 2022.
Itâs not a gathering of people with common interests. Itâs isnât a number.
There are group chats with 50 members creating more value than Discords with 50k members.
Community only exists when members are bonded over an exchange of value.
When people find their places in communities, they may literally value their membership as priceless.
But the goal is not to create that value - itâs to empower others to.
đ°Â Treasury
The community treasury is the DAO's shared bank account.
The treasury is essential to achieving the DAO's mission, as it holds the necessary financial assets. In general, the allocation of these funds is managed through the decentralized governance of the DAO.
In order to be able to invest at all, the treasury must first be funded. To put it simply, there are three ways to do this:
Release Membership NFT: To become a member of LinksDAO, itâs necessary to hold one of the two Membership NFTs in the wallet.
Issue DAO tokens: To become a member of Friends with Benefits DAO, itâs necessary to hold 75 FWB tokens in the wallet.
Collect investor money: Some DAOs like Uniswap have raised capital from venture firms like Andreessen Horowitz and Paradigm to fund their mission.
Once capital has been raised from the community, it is crucial to manage, diversify and invest it. A typical treasury composition includes the native DAO token, major cryptocurrencies like Ethereum, stablecoins and fiat currencies for transactions with the 'old world'.
There are several options to ensure continuous funding of the DAO. Conceivable options include funding through secondary sales fees of membership NFTs (âroyaltiesâ), paid services and annual membership fees.
There are various tools available to assist with the DAO token setup (Coinvise), community treasury management (Gnosis Safe, Parcel) and governance (Snapshot).
Governance
Governance is at the heart of the DAO.
The DAO thrives on discussions, ideas, proposals and voting by members to advance its mission. Therefore, participation in DAO governance is civic duty for all members.
The critical question that every DAO must ask itself is: what governance rights do we want to hand over to the community? This question cannot be answered in a blanket manner, but depends heavily on the type, size and mission of the DAO.
How does governance work in DAOs in general?
First, a distinction can be made between on-chain governance and off-chain governance. On-chain governance means the voting on a proposal with the DAO token on the blockchain and off-chain governance means the preceding discussions in Discord and other communication channels.
The basic governance flow looks like this:
Community members share their thoughts and ideas on Twitter or in the DAO's Discord server.
A proposal is submitted to determine the relevance of the topic to DAO members
A vote is taken on the proposal in the DAO's official governance portal
The proposal is executed if itâs approved by the community
In the end, it's important not to set up an over-bureaucratic governance process in which less than five percent of DAO members participate. Therefore, it may make sense to give specific governance rights to subgroups of a DAO to localize decisions. Decisions are made where the most knowledge and best expertise is.
"If you want to make the wrong decision, ask everyone."
- Naval Ravikant
Governance must never be thought of without the mission. Naval Ravikant's quote is apt if the DAO's direction of travel is not clear to each and every member.
Well-known tools to manage governance and thus proposals from the community are Tally, Discourse and Boardroom.
Ownership
Ownership of each member is essential to the long-term success of the DAO.
After successfully setting up DAO governance, itâs important to take the right approach to ownership in the DAO and thus access to the DAO.
As mentioned in the Treasury section, we have the option of issuing either a Membership NFT (ERC-721) or a DAO token (ERC20). What factors play a role in the decision?
Especially ERC20 tokens are more often criticized, as it is feared that they could be classified as 'securities' under US regulation in the future. This regulatory uncertainty has been causing headaches for many Web3 projects for some time. Therefore, especially with ERC20 tokens, appropriate advice from lawyers is needed to ensure a legally sound setup. A great tool to create ERC20 tokens is Coinvise.
NFTs (ERC-721) tokens are less criticized for being classified as illegal securities. This makes the legal setup a bit easier. Implementing a DAO membership via NFTs is also easier for many potential DAO members to grasp, since you can, for example, design it like a membership card. In addition, a Membership NFT gives DAO members an identity that they can use as a profile picture or similar. In the end, Membership NFTs are also simply more aesthetically pleasing and more fun than ERC20 tokens.
Itâs also common to regulate access to the DAO via a Membership NFT and at the same time have an ERC20 governance token to participate in voting.
In the end, you have to weigh which ownership setup makes the most sense with respect to the mission of the DAO as well as the legal situation.
If this article has sparked your curiosity about DAOs, please let me know.
Web3 makes the traditional customer acquisition funnel obsolete.
NFTs can be used for so many different things that you're inviting history to make a fool of you if you dismiss them.
đïž News of the Week
RTFKT has sent all CLONE X holders an NFT with the name MNLTH for free. Nobody knows yet what the NFT is all about. However, the NFT is currently being traded for $15.000 on OpenSea. Crazy.
This week, one of the craziest (and most valuable) robberies in history was busted. The thieves stole 3.600.000.000 dollars worth of Bitcoins. Shaan Puri wrote a great summary.
If I'm doing the math right, that's a growth rate of more than 40.000 percent.
BuzzFeed News reporter Katie Notopoulos has revealed the identities of two of the previously pseudonymous founders of the Bored Ape Yacht Club. This is also called 'doxxing' in Web3. Afterwards, a debate has erupted over whether this is ethical. What do you think?
Noun glasses from the Nouns NFT project will show up in a Bud Light Super Bowl LVI commercial. I think it's crazy that 12 months ago almost no one knew what NFTs were and in a few days the first NFT project appears in one of the most expensive advertising slots.
Heidi entered the room.
đŹ Quote of the Week
This Coinbase NFT platform launch has been like the equivalent of a DJ setting up an epic bass drop... for 7 hours.
Coinbase NFT was first announced in October 2021 and was scheduled to launch later that year. There is still no launch date, but Coinbase continues to announce new launch partners daily. I wonder if there's anyone left in the nightclub waiting for the bass drop?
đ Meme of the Week
Yes, that's not a meme. However, I find it funny and it shows that the Bored Ape Yacht Club is much more than a Twitter profile picture. The BAYC is the supreme of the NFT scene.
đ Question of the Week
Do you think Web3 technologies have a positive or negative impact on our society?
Have an inspiring weekend!
See you in the Metaverse đ
Timo
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