🔥 What DAOs enable us to do
Hi there,
Welcome to the 10th issue of Web3 Insider - Your newsletter for all things Web3 and the Metaverse.
Today with RTFKT's latest NFT drop, the Snapchat-like smartphone wallet Rainbow, Twitter's latest tipping feature and JPMorgan in the Metaverse. It was indeed a very quiet week in Web3. Did I miss anything?
🚀 The next few weeks are going to be wild. We'll have exciting guest articles in the newsletter and launch a major project focused on DAOs. Stay tuned!
Have fun reading!
✍️ Writing of the Week
What opportunities do DAOs create?
We live in an era characterized by the massive dominance of a few tech companies and platforms, monopolies that are more powerful than nation states, value generation that primarily ends up with venture capital firms and big banks, network effects that prevent the emergence of new competition, advertising-based business models that foster hatred and polarization, difficulties for creators to monetize their works and access restrictions and censorship especially in authoritarian-run states.
Let's address the core problem of major platforms. Chris Dixon argues that the incentives of big platforms are poorly aligned with those of their users and partners (developers, creators, etc.) once they have established strong network effects. As soon as the platforms reaches the upper end of the S-curve (see graphic), they need to extract data from users and compete with (former) partners to grow further (examples: Facebook vs. Zynga, Apple vs. Epic, Microsoft vs. Netscape).
At the core lies the lack of alignment between the incentives of the platforms and their users and partners. Tangible examples include open source code, crowdfunding campaigns and user-generated content. These things have helped to develop, fund and breathe life into many of the products and services we use today. However, the developers, crowd-funders and creators have rarely benefited. That needs to change. We need to take back power from big platforms to the users. We need to ensure that the solutions of the future are not only developed, funded and filled with life by their users and partners, but also owned by them.
Why has this not happened yet? We simply didn't have the technological foundation to coordinate many small owners and stakeholders with decision-making influence and a shared treasury. This is where DAOs come in.
Maximizing stakeholder value and alignment of incentives
Uniswap is a decentralized cryptocurrency exchange that enables automated transactions between cryptocurrency tokens on the Ethereum blockchain. What's special about Uniswap? Compared to similar cryptocurrency exchanges like Coinbase, Uniswap's users and partners are directly involved in Uniswap's success and have influence on Uniswap's decisions. This is made possible by the Uniswap DAO and the Uniswap governance token $UNI. DAOs are all about maximizing stakeholder value and alignment between the incentives of all stakeholders.
Ownership is essential to reduce wealth inequality.
Unfortunately, labor and wages are not the perfect way to build wealth over the long term. Historically, the people who have profited the most have always been those able to buy assets (stocks, real estate, etc.) - the trends in stock prices and real estate prices over the past decades show a clear picture (capital > labor).
The concept of ownership is a core pillar in Web3 and therefore of DAOs. Millions of people become owners of assets for the first time in Web3 and can thus profit from the increase in value of their assets for the first time. In the case of DAOs, this means owning the DAO token or membership NFT and having full control over it.
Simplicity of raising capital
In addition to alignment of incentives and thus ensuring a shared upside, the simplicity of raising capital through DAOs is another big opportunity.
Capital formation is important because it allows communities (companies, associations, non-profits, etc.) with a shared mission to invest in things that bring them closer to their goal. We have been familiar with crowdfunding campaigns for years through platforms like Kickstarter. What's the problem with traditional crowdfunding? Crowdfunders give money to projects and receive the product or service in the end, but they rarely receive a share in the success of the project. In addition, crowdfunders do not have an effective say and influence on decisions in the project.
DAOs can help here. They are the easiest way to raise large amounts of capital for a common purpose in a short period of time (see ConstitutionDAO) and manage it through democratic decision-making processes. DAO also means that crowdfunders not only contribute their money, but also their time, talents and opinions. You're a customer, an owner and an evangelist all at the same time.
High level of transparency
The third big opportunity DAOs bring is transparency. Many DAOs have a strong open source character and take the public with them on their journey. Communication takes place in public Discord servers (yes, there are also closed Discord rooms) and on Twitter, all transactions of the DAO and its members are tracked on the blockchain, compensation and rewards are automated and based on quantitative metrics, decision proposals and voting behavior can be seen by everyone, etc.
What's next?
The energy and motivation in the DAO space is contagious and the community welcoming and helpful. DAOs may not be the flashiest use case in the Web3 context (that's probably NFTs), but DAOs could be the one with the biggest impact on humanity in the long run.
Today, no one knows how autonomous or decentralized DAOs will be in a few years, what governance approaches will prevail, and what the compensation models will look like, but that DAOs will transform many industries seems inevitable. Community and stakeholder ownership feels like the naturally right model. We just didn't have the technological capabilities to implement it in a scalable way.
Enough talent with sufficient curiosity, passion, inquisitiveness, motivation and will to change can iterate their way to the next big thing. It feels like this thing is DAO's.
DAOs are the organizational model to solve the challenges of the next decades.
The five building blocks to build a DAO.
🗞️ News of the Week
RTFKT has been issuing various challenges to its NFT community for a few days now to unlock the content of its latest NFT drop, MNLTH.
Rainbow is a smartphone wallet for Ethereum with an aesthetic and user-friendly experience (reminiscent of Snapchat). The company behind Rainbow just raised $18 million in its Series A funding round.
More solutions like Rainbow are needed to make the onboarding experience into Web3 easier.
The world's largest stock exchange NYSE may soon start trading NFTs.
Metalink is a curated Discord alternative and promises users fewer scams and thus more security. The Web3 communication platform now collaborates with the NFT marketplace OpenSea for its customer support. After harsh criticism of OpenSea's customer support in recent months, it will be available several hours a day via Metalink.
You can now tip in Ethereum on Twitter.
After JPMorgan awarded the Metaverse a market size of $1 trillion per year, the bank now has its own lounge in the Decentraland Metaverse. Yes, there's a floating picture of CEO Jamie Dimon on the wall.
💬 Quote of the Week
basic supply and demand is confusing for many #nft
So true. Unfortunately, there are an incredible number of garbage NFT projects for which there will never be enough demand. Please be careful out there.
💭 Question of the Week
Have you thought about building a DAO?
Have an inspiring weekend!
See you in the Metaverse 🌌
Timo
PS: Click here to join the Discord.