The DAO and its Challenges.

Preface

It may seem to my old readers that the journalling of my adventures in Web3, has been on a heavy back burner.

Where journalling is concerned, that would be correct. However, Solana has occupied more of my energy than ever before.

I’ll sum up a bit of what work I’ve been up to (outside of leaving the UK to settle in an Asian University/city).

1. Landed an opportunity as a paid contributor. I conducted analysis for an NFT archive. Good fun, lasted until their treasury eventually ran dry!
2. Started up a DAO managed Fund with my co-founders. Having reached a size where we could emulate VCs in the space at a much smaller scale, we rebranded as exactly that, a VC.
   Perhaps the most demanding/rewarding initiative I have ever taken a swing at.
3. Became a Collab Manager for one of my favourite projects in the space, co-host a podcast every week with their founder.

And that skips over a hell of a lot.

Anyways, I’m keen to touch on my experience with the 2nd point, so let’s begin there.

The DAO, its Pros and Cons.

The acronym “DAO” stand for Decentralised Autonomous Organisation.

They are community run entities with no central decision making.

All foundational rules/practises are agreed by members, and enforced (where applicable) by code.

New decisions undertaken above the foundation layer are undertaken by a combination of proposal drafting & community voting again enforced by smart contracts.

So now the cons.

The Cons

Bureaucracy

Here’s where I’ve seen a lot of DAO’s fuck up.

Although members may have equally weighted voting power, the propensity for a small ‘bureaucracy’ to emerge, with enough sway within the community to overrule votes, is pretty astonishing.

For many DAOs with an ‘equal stake’ structure, it’s still the OG founders who call the shots.

In practice, I have not found a DAO where this has not happened, as there is a limit to how much integrity can be locked into smart contracts.

But there’s also another common fuck up, this time from the ground up.

Stagnation

What happens if the quota for votes can never be reached?
Members that are busy/uninterested/disillusioned/discouraged etc, may stall proposals from being passed.

Here’s how:

DAO proposals are passed using smart contracts.

These may require a predetermined minimum amount of signatures to consider transactions.

This is called a quorum.

Once the quorum is met, the Support Level is the next factor to consider.

The Support is the threshold of “Yes” votes needed to enact whatever proposal has passed the quorum.

Since even the topic of managing membership of a DAO is a proposal (quite an important one) , it follows that a proposal to deal with inactive members (remove them) must also meet the quorum and support.

Funds can literally find themselves frozen in an inaccessible wallet due to a minimum amount of members going AWOL.

Making choice of members of prime importance.

A lite version of this issue (more prevalent in Trading DAO Funds) is the ‘vote lag’ I like to call:

Jet Lag

Web3 combines people from all around the world, and timezones can understandably hold up urgent proposals that require immediate action.

Missing a trade for example.

The DAO structure is suited for well-prepped trades/investments and pretty horrible for for time sensitive swing, volatility or just simple short term trading.

If a treasury requires action to be taken fast to secure a partnership amid competition, a DAO does no favours where speed is concerned.

These some of the general limits of the DAO learned the hard way.

That said I thought I’d cover some of the benefits of operating as a DAO rather than a single entity.

Here cometh:

The Pros

Gravity

Try approaching the most anticipated opportunities as a singleton.
A WL/pre-mint allocation or just some advice.

A DAO, or rather a VC asking for a fat allocation/some advice?

-It stands out.
-Validates founders and their creation, since they are attracting VC attention.
-Inclines them to treat you with a respect that only VC ‘smart money’ deserves.

Clout/Personal Brand

It’s difficult to get big on CT without providing value or founding a project. This is because the majority of the market are consumers, and so a qualifying method for a growth in your brand/clout on twitter is owning a project/DAO.

1. Clout => Network
2. Network =>Wealth

The Strength of the Pack.

We all have strengths and weaknesses, and often, leaning into our strengths is comfortable.

Addressing individual weaknesses is something that can be cheat-coded, by tailoring roles within a DAO to suit respective strengths.

Information gathering, collaboration forging, trend/opportunity spotting, chart reading/execution, people management/communication…

No point learning a new skill that can be done better by someone else who shares your vision. Rather, I’ve found it’s better to refine that one skill, that only you can do well, until it’s an indispensable feature of your pack.

A Quick Story to End on.

I heard a terrifying story told by Patrick Bet David.

It’s the Story of a The General.

There once was a man who aspired to be a great general.
But he never did it.
He went from military school, to training.
And from training to war.
But gave up on becoming a general.

At the Gates of Heaven the man asked,
“May I speak to the Greatest General… and learn from his story?

A voice replied the following.

There once was a man who aspired to be a general.
From military school, to training, from training to war.
He mastered competence by risking his time.
He mastered charisma by risking his name.
He mastered courage by risking his life.
Not only did he die a general, he died the greatest general to ever live.

The man visibly trembled with anguish and croaked out,

“… it could have been —! ”

God replied to the man.

“It could have been you.”