[AUTHOR’S NOTE - Decentralization is a good thing.  The evolution of DAOs is a good thing.  Collective human behavior and decision making is evolving at a rapid pace and is positively correlated to the rate of Web 3.0 innovations.]

Macro Themes 

  1. 2022 is the year of the DAO and will see an explosion of “communities with bank accounts.”
  2. Most protocols will transition to a DAO structure in order to decentralize against legal and regulatory risk
  3. DAOs are at a very early stage, with near term investable opportunities through fund of funds approach, treasury management-focused protocols with active strategies, collector communities, and infrastructure feature and work coordination protocols.
  4. Infrastructure DAOs do not present attractive investment opportunities, but feature focused DAOs may (KYC, etc.).
  5. Tokenized DAO infrastructure (ANT, DAOStack) have lagged behind but that may be changing as bounty coordination (Gitcoin, Layer3) and work contribution support accelerate, and new tooling features take hold (Gnosis).
  6. DAO treasuries are accumulating and are ineffectively deployed, providing a cash flow and yield opportunity for well managed treasury token holders (Llama).
  7. Co-opting culture makers early in the process in order to have ground floor seats as communities grow.
  8. Social communities are building a digital layer around real world protocols and bridging into traditional fintech and banking services, and the legal system is far from keeping up.  However, there is inherently decentralized protection.

Types & Considerations

1. Decentralized DeFi Tokens - There is a premium associated with decentralized (DAO) tokens evidenced by the active rotation of capital and tokens away from China, to the US, then to non US/EU based tokens and trading.  Investing in blue chip tokens on 30-90 day time horizons that will receive capital flight?  Invest in blue chip governance/decentralized tokens outside of US/EU?  Most, if not all, DeFi protocols will convert to DAO tokens and where will this concentration and premium congregate?

2. Social Clubs and Communities - The DAO evolution started in DeFi and is evolving through NFTs and now social clubs.  Supporting communities early from the ground floor will be key as DAO proliferation accelerates and draws revenue participation through coordination of work.

Social clubs and networks will drive network on network effects by driving participant reputation, DAO coordination, and serve as onramps into crypto.- Friends with Benefits raised $10M under a Treasury Diversification Proposal (similar to Sushi, Badger DAO, Lido, Seed Club).

3. Bounty and Guild Platforms - Coordination of work will be the value driver heading into 2022.  DAOs that draw revenue from coordination of work through bounty programs and shape the work environment through benefits offerings will remove friction to the DAO employment model will create significant cash flow opportunities. 

4. OrgTech = Composability + Interoperability – DAOs will continue to proliferate and create significant noise across ecosystems, creating a friendsy of coordination and confusion.  This will force adoption and drive governance and utility token volatility, as well as treasury volumes.

Fantastic12 / itsOrg (see DAOBase) - Released a simplified DAO Launcher that lets anyone launch a DAOstack DAO in under 1 minute.

5. Treasury Management – Outsized and latent DAO treasuries will begin to allocate and perform as communities and protocols put them to work.  This will provide an opportunity to take DAO positions and lever cash flow returns through participating in a DAO’s treasury allocation voting.  The lack of treasury management protocols provide an opportunity for new entrants for incumbents to grab land (Gnosis, Llama).

6. Infrastructure DAOs (operating systems) – Infrastructure DAO tokens underperform (Aragon), but if/when they have a voice or governance access to the DAOs they support, there will be exponential network value.  For example, Aragon on L1 does not control underlying DAOs, so if UNI uses Aragon, ANT would not trade there.  The Relationship between AUM of Aragon is not correlated to the price of ANT.  As protocols come to the center with respect to compliance, DAOs that boast compliance features (KYC/AML/reputation) will become exponentially valuable to the extent these cross communities and chains.  Compare this to governance as capital - as a network becomes more valuable, the governance becomes more valuable - Fees/protocol revenues (does not get distributed to fee holders, can quite clearly see).

7. Integrating to the real world – Forward thinking jurisdictions are developing DAO-specific legal regimes, which are a step in the right direction albeit ineffective in the early stages.  As DAOs continue to integrate into real world use cases, step up adoption will rapidly accelerate the use case as a challenger to the corporate form in the next 5 years.

Select References 


*Note, this does not constitute legal, accounting, or tax advice of any kind and should not be relied upon as such.  Opinions are my own and are for discussion purposes only.  This does not represent the views of Decentral Park Capital or its affiliates. 

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