The past year has been one big growth spurt for DAOs (decentralized autonomous organizations), but not everyone in the space is convinced that they are formed well or in a way that guarantees success.
Before we get into it, it’s important to know that DAOs are community-led entities with no central leadership. Decisions are made by members of the group who vote on governance proposals in an automated and decentralized manner.
It could be as big as running a decentralized exchange like Uniswap or as small as a group of friends pooling funds for parties or holidays.
Many are political or mission-driven, but all exist for a purpose, Decent Labs CEO Parker McCurley told Marketingwithanoy.
Currently, according to data on DeepDAO, there are more than 1.7 million governance token holders in nearly 5,000 DAO organizations. Across the organizations, more than $10 billion has been wrapped up in DAO treasuries, up $552.4 million month over month, the data shows.
While the total treasury is higher this month, it has fallen from a November 2021 peak of $13.2 billion.
But what happens when the hype wears off? People stop voting, treasuries can wither and desert, dead communities turn into ‘DAO graveyards’.
“I wouldn’t call DAOs more frothy than tech startups,” McCurley said. “I think it’s identical to startups. There are a lot of great concepts that don’t fit well with the product market, and for some reason they don’t scale and achieve long-term success.”
To prevent this from happening, there needs to be a restructuring of the way community members view — and shape — DAOs, Imran Khan, a core contributor for the DAO and web3 accelerator Alliance, told Marketingwithanoy.
Building with a purpose
“DAOs that are launched must have a product in mind,” Khan said. “Without a product and a team behind it, it will be difficult to be self-sufficient.”