🤝 WTF are DAOs?
Hi there,
Welcome to the fourth issue of Web3 Insider - Your newsletter for all things Web3 and the Metaverse.
This week with H&M, Samsung, Mario Götze, Lamborghini, Serena Williams and the Australian Open. Yes, the first week of 2022 was (once again) a wild one in the NFT space.
Have fun reading!
✍️ Writing of the Week
WTF are DAOs?
DAO is the acronym for Decentralized Autonomous Organization. In today's article, we'll explore what that means.
First, my definition of DAOs:
DAOs are internet-native communities that collaborate on a common mission based on a shared set of rules and transparent decision-making processes.
Important keywords are: internet-native, shared rules, transparent decision-making processes and common mission. You could also say DAOs are the coordination layer in Web3.
Why is it important that we take a closer look at DAOs? Because there are currently more than $10B assets under management in DAOs and they are being called the 'startups of the future' by some.
DAOs range from a 10-member Telegram group with one Ether in its treasury to huge DeFi protocols like Uniswap with more than 275.000 members and a valuation of $3B. Uniswap is an open-source protocol for trading (swapping) ERC20 tokens (cryptocurrencies) on the Ethereum blockchain. In addition, you can provide liquidity for the pools yourself and thus earn a share of the transaction fee.
How do DAOs work?
The backbone of a DAO are its smart contracts (a ‘smart contract’ is simply a program that runs on the Ethereum blockchain). These define the rules of the organization and hold its treasury. The underlying smart contracts cannot be changed by anyone except the DAO itself.
No one can initiate spending from the DAO treasury without community approval. To do this, DAO members submit proposals, which are then voted on via governance tokens. This means that DAOs make decisions collectively and actions (payments, code changes, etc.) are automatically initiated if the vote is successful. The impact a DAO member has in a vote usually depends on the number of governance tokens he or she owns. More governance tokens thus means more power within the DAO. The outcome of the vote depends on the level of participation (minimum participation rate) and the voting behavior (majority vote).
What are the advantages of DAOs?
Transparency - voting, funding decisions and other actions are viewable by anyone.
Global - members across the world can contribute, giving DAOs lower barriers to entry than companies.
Collaborative - DAO members are much more likely to contribute because they have an active say in how their invested money is spent.
Autonomous - DAOs set new milestones for operating efficiently.
100% Digital - DAOs can be set up quickly and cost-effectively.
Are there also problems with DAOs?
Absolutely!
Flat Hierarchy - by not having a clear authority figure, or chain of command, decentralized organizations are slower to operate as decisions take longer to make.
Power - in some DAOs, those who hold the most governance tokens call the shots, so decision-making power may be distributed to only a few individuals
Legality - the legal status of DAOs is unclear in many respects. There are initial approaches (Wyoming, Switzerland, etc.), but no nation-state has issued clear regulations on the legal status of DAOs so far. In addition, there is a risk that many tokens could fall under 'securities regulation' in the USA, which would be associated with a wide range of obligations.
There are DAOs for everything
ConstitutionDAO tried to auction an original copy of the US Constitution at Sotheby's and failed. However, the governance token $PEOPLE has reached meme status and has a market cap of more than 400.000.000 € as of today.
PleasrDAO is an exclusive community that buys culturally significant NFT artwork and collectibles.
ENS DAO manages the ENS protocol and thus the .eth domains.
LinksDAO wants to build the world's best golf club and has already raised more than $10 million for this mission with its Membership-NFTs.
Krause House wants to take over and manage an NBA team.
That's it for the first introduction to 'DAOs'. I hope it helped for a basic understanding and I'm looking forward to your feedback. Now it's time to join a DAO and participate!
My three principles for buying NFTs. (Link)
WTF is Web3? (Link)
My favorite Web3 sources: Twitter and Podcasts
🗞️ News of the Week
Mario Götze (⚽️) and Serena Williams (🎾) are the latest celebrities to make their mark in the NFT space. While Serena greets the Twitter world with a 'good morning', Mario Götze buys himself a .eth domain and a Smol Brains NFT (odd choice).
The largest NFT marketplace OpenSea raises $300.000.000 from reputable investors and is now valued at $13 billion. The context to the ironic tweet is that despite a massive cash cushion, OpenSea is having major problems with customer support and traffic on its website.
Samsung announced an NFT platform for its 2022 TV models and presence in the Decentraland Metaverse at its CES show in Las Vegas. Samsung’s Metaverse presence 837X is a fully immersive experience, featuring quests and live music events.
H&M is releasing a store in the Metaverse ... or perhaps not. The announcement went through the press earlier this week and turned out to be false. The video shown was merely a concept and as of today has not been implemented. Maybe that's for the best - the concept is terrible in my opinion (escalators in the Metaverse).
The Australian Open (🎾) releases its first NFT drop and brings the tennis court to Decentraland. Each of the 6776 NFTs corresponds to a specific section on the court. Match winners are assigned to the corresponding NFT when hitting on a section. One of the most creative NFT implementations yet, cool!
Lamborghini's have meme status in the crypto space, as many crypto millionaires buy Lamborghini's. The automaker has been teasing its first NFT drop 'NFTPRO' for a few days now.
Web3 investor 1confirmation has published a report on '2021 NFT - Year in Review'. Worth reading!
💬 Quote of the Week
Early days of Web2: “these apps have users, but will they ever make money?”
Early days of Web3: “these apps make money, but will they ever have users?”
- Matt Huang, Co-Founder Paradigm (Web3 VC)
There's a lot of truth to this quote from Matt. It shows how important it is to build a community in Web3.
My article on the Minimal Viable Community (MVC) fits in with this.
💭 Question of the Week
What question in the Web3 context would you like to have an answer to?
(Feel free to reply to this email)
Have an inspiring weekend!
See you in the Metaverse 🌌
Timo
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