Bards Lost in The Metaverse Episode 27 - Decentralized Autonomous Organisations
In this week's episode, Andy and Sharn delved into the topic of Decentralised Autonomous Organisations (DAOs). They explored what DAOs are, their unique features, and the advantages and limitations they present. The hosts discussed how DAOs are reshaping traditional business models and the potential they hold for decentralization and community governance.
But first, the news:
In Web3 and tech new this week:
Bit late to the party with this new (cause we aren’t recording and releasing in the same week), but, in a major bank failure, United States regulators seized the assets of Silicon Valley Bank on Friday 10th March, after depositors began withdrawing funds en masse due to concerns over the lender's financial health. The collapse, the biggest in the US since 2008, caused financial regulators around the world to race to contain the fallout and shore up confidence in the global financial system. The bank's business focused heavily on US technology startups, and its collapse reportedly left some tech chief executives scrambling to change banks and explore options for paying staff. Despite the guarantee of all deposits, the full effect of the lender's implosion on the startup scene may not be apparent for some time
In happier tech news, OpenAI released GPT-4 on 15th March, for paying users of Chat-GPT Plus. The new image and text understanding AI model is the latest milestone in scaling up deep learning and is available, and developers can sign up for a waitlist to access the API. GPT-4 has already been adopted by several companies, including Stripe, Duolingo, Morgan Stanley, and Khan Academy. Apparently GPT-4 has actually been hiding in plain sight, as Microsoft confirmed on 15th March that Bing Chat, its chatbot tech co-developed with OpenAI, is running on GPT-4. GPT-4 is said to be a huge step forward on previous versions with it performing at a "human level" on various professional and academic benchmarks. For example, GPT-4 passes a simulated legal bar exam with a score around the top 10% of test takers; in contrast, GPT-3.5’s score was around the bottom 10%.
Moving now to the world of Publishing:
Draft 2 Digital announced on March 14th that its D2D Print service is now open to all authors and small presses. This next-generation print-on-demand solution allows for easy conversion of eBooks to print books, offers dozens of professional layout templates, and simplifies the setup and distribution of print books worldwide. Additionally, D2D Print's cover converter feature saves authors time and money by automatically turning their ebook cover image into a full wraparound print cover. Recent industry data suggests that print format is preferred three to four times more by readers than digital, making this broader Print on Demand (POD) service a valuable addition to D2D's offerings for authors, allowing them to fully and easily capitalize on the print market.
In a bid to address environmental concerns within the book industry, The BookPeople, a not-for-profit association that has been an advocate for books, bookshops and readers for nearly a century, has released a Sustainability Paper titled ‘Towards a Sustainable Bookselling Future’. The report identifies key areas of concern for booksellers, such as embedded carbon in products, packaging, shipping, and on-the-ground operations. It also makes recommendations for immediate action, including greater efforts for different sectors of the book industry and various industry bodies to work together to set and communicate targets for meaningful change. The release of this report is timely, given that the pulp and paper industry is the world’s fourth-largest energy-consuming industry, accounting for around 5% of the world’s total industrial energy consumption. Link to check out the report will be in our show notes.
And that my friends, was news with Sharn.
Sharn and Andy then kicked off the main topic of DAOs:
What is a DAO
A decentralized autonomous organization (DAO) is an emerging form of legal structure that has no central governing body and whose members share a common goal to act in the best interest of the entity. Popularized through cryptocurrency enthusiasts and blockchain technology, DAOs are used to make decisions in a bottom-up management approach.
Understanding Decentralized Autonomous Organizations (DAOs)
So as we have discussed before one of the major features of Crypto currencies is that they are decentralized. This means they are not controlled by a single institution like a government or central bank, but instead are divided among a variety of computers, networks, and nodes. Inspired by the decentralization of cryptocurrencies, a group of developers came up with the idea for a decentralized autonomous organization, or DAO, in 2016.
How DAOs Work
DAOs rely heavily on smart contracts which we have talked about before. These logically coded agreements dictate decision-making based on underlying activity on a blockchain. Similarly the voting process for DAOs is posted on a blockchain. Users or DAO members must often select between mutually-exclusive options. Voting power is often distributed across users based on the number of tokens they hold. 1 token equals 1 vote vs 100 tokens equals 100 votes. More tokens, more of a say in the vote.
The theory behind this practice is users who are more monetarily invested in the DAO are incentivized to act in good faith. Imagine a user who owns 25% overall voting power. This user can participate in bad acts; however, by doing so, the user will jeopardize the value of their 25% holding. Which definitely never happens in normal businesses…..
For example DAOs often have treasuries that house tokens that can be issued in exchange for fiat. Members of the DAO can vote on how to use those funds; for example, some DAOs with the intention of acquiring rare NFTs can vote on whether to relinquish treasury funds in exchange for assets.
Benefits of DAOs
There are several reasons why an entity or collective group of individuals may want to pursue a DAO structure. Some of the benefits of this form of management include:
Decentralization. Decisions impacting the organization are made by a collection of individuals as opposed to a central authority that is often vastly outnumbered by their peers. Instead of relying on the actions of one individual (CEO) or a small collection of individuals (Board of Directors), a DAO can decentralize authority across a vastly larger range of users.
Participation. Individuals within an entity may feel more empowered and connected to the entity when they have a direct say and voting power on all matters. These individuals may not have strong voting power, but a DAO encourages token holders to cast votes, burn tokens, or use their tokens in ways they think is best for the entity.
Publicity. Within a DAO, votes are cast via blockchain and made publicly viewable. This requires users to act in ways they feel is best, as their vote and their decisions will be made publicly viewable. This incentivizes actions that will benefit voters' reputations and discourage acts against the community.
Community. The concept of a DAO encourages people from all over the world to seamlessly come together to build a single vision. With just an internet connection, token holders can interact with other owners wherever they may live.
Limitations of DAOs
But of course not everything is perfect regarding DAO’s. There are severe consequences to improperly setting up or maintaining a DAO. Here are some limitations to the DAO structure.
Speed. If a public company is guided by a CEO, a single vote may be needed to decide a specific action or course for the company to take. With a DAO, every user is given an opportunity to vote. This requires a much longer voting period, especially considering time zones and prioritizes outside of the DAO. Although i believe a time limit can be put on the vote.
Education. Similar to the issue of speed, a DAO has the responsibility of educating a lot more people in regards to pending entity activity. A single CEO is much easier to keep across of company developments, while token holders of a DAO may have ranging educational backgrounds, understanding of initiatives, incentives, or accessibility to resources. A common challenge of DAOs is that while they bring a diverse set of people together, that diverse set of people must learn how to grow, strategize, and communicate as a single unit. There is a big skill set difference between workers, middle management, and Executive/C suite staff.
Inefficiency. Partially summarizing the first two bullets, DAOs run a major risk of being inefficient. Because of the time needed to administrative educate voters, communicate initiatives, explain strategies, and onboard new members, it is easy for a DAO to spend much more time discussing change than implementing it. A DAO may get bogged down in trivial, administrative tasks due to the nature of needing to coordinate much more individuals. And we all know people who LOVE to major in the minors.
Security. An issue facing all digital platforms for blockchain resources is security. A DAO requires significant technical expertise to implement; without it, there may be invalidity to how votes are cast or decisions made. Trust may be broken and users leave the entity if they can't rely on the structure of the entity. Even through the use of multi-sig or cold wallets, DAOs can be exploited, treasury reserves stolen, and vaults emptied.
Some of the biggest DAO’s in Town
The largest DAO: Uniswap (UNI)
$UNI market cap: $6.2 billion
Treasury: $2 billion
Participation rate: 1.6%
Top token holder share: 22.8%
Uniswap (UNI) is the #1 decentralized exchange (DEX) in the cryptosphere in terms of trading volume. Next to that, Uniswap is also the top-ranked DAO by the amount held in treasury.
The Uniswap DAO was created in September 2020, with over 1 billion $UNI distributed among the DEX’s development team, community members, investors and advisors. Today, the Uniwap DAO has over 300,000 members who can vote over its billion-dollar treasury, governance protocols, listed tokens, exchange fees and more with their $UNI tokens. For context, one recent vote that took place was whether Uniswap should deploy to the Ethereum L2 solution Polygon.
One of the standout features of the Uniswap DAO is that UNI holders can also delegate their votes to other users. This feature comes in handy in a situation where you feel like another member is more qualified to decide on a given proposal.
Exclusive DAO: Friends With Benefits Pro (FWB)
$FWB market cap: N/A (55 million fully diluted)
Treasury: $18.26 million
Participation rate: 22.7%
Top token holder share: 14.5%
Friends With Benefits (FWB) is a private discord server, unlike most DAO servers that are still open to people who don’t hold tokens. Friends With Benefit’s raison d'etre is to create a social network where the top Web 3.0 influencers congregate to create and share ideas and content.
To become a full member of Friends with Benefits, you must own at least 75 $FWB (which can be found on Uniswap and other DEXes). At $55 per token at the time of writing, that oh-so exclusive membership will cost you over $4,125. But what else does this full membership buy you? Access to FWB educational resources, lifestyle tips, NFT and trading signals, social events and governance.
Once you cough up the dough to join, you can start to earn $FWB by providing value to the community. This includes posting in Discord, hopping on community calls and hosting events in FWB hubs like New York, London and Los Angeles.
In case you’re curious what types of events you’re missing out on, here are two upcoming ones on the FWB roster:
FWB NYC: Web3 For A Better World: A fireside chat featuring crypto founders that will be discussing the social impact of Web3.
FWB.LDN NON FUNGIBLE DINNER 002: An NFT dinner at the Asian-cuisine restaurant Inamo Covent Garden, where FWB members will get an exclusive sneak peek at promising NFT projects in the works.
Metaverse DAO: Decentraland
$MANA market cap: $4.3 billion
Treasury: $98.4 million
Participation rate: 1.4%
Top token holder share: 7.3%
Decentraland (MANA) is the largest metaverse token by market cap, where users can create, experience and monetize content like land parcels, avatars, virtual clothing and events. Unlike competing metaverse The Sandbox (SAND), Decentraland has a DAO that allows $MANA token holders to govern $LAND auctions, content controls and other features of the virtual world. Take for example the recent proposal to ban the name “Russia” from Decentraland, which was ultimately rejected.
The structure of Decentraland’s DAO is more complex than the other entrants on this list. For one, a DAO member’s voting power is proportional to the amount of $MANA and $LAND (virtual property) they hold. The DAO is also divided into three branches: the community, the Committee and the Security Advisory Board.
While the community simply votes on updates, The Committee’s three members are responsible for enacting changes by signing multi-signature transactions. The Security Advisory Board, on the other hand, makes sure the smart contracts involved are bug-free.
American CryptoFed DAO
This DAO made news headlines by becoming the first to be recognized as a legal entity in the US, thanks to a law passed in the web3-friendly state of Wyoming. It positions itself as a kind of crypto-equivalent to the US Federal Reserve and aims to enable fee-free trading using its own token, known as the Ducat.
BitDAO is a decentralized investment fund backed by PayPal founder Peter Thiel, created to allow anyone to buy a stake in web3 and de-fi startups and initiatives. Token holders have the chance to vote on how managed capital is spread across the projects supported by the fund.
ConstitutionDAO started with the goal of buying a rare copy of the US Constitution. Unfortunately, the DAO never succeeded in purchasing it. However, they did succeed in taking DAOs to the masses. They revealed the community’s true power and the speed at which DAOs can raise money for a cause after raising $42 million in 7 days.
CostitutionDAO was many people’s introduction to DAOs, and the project educated thousands about the Web3 space. Since then, ConstitutionDAO has inspired many other projects, such as Krause House, attempting to buy an NBA franchise.
Mirror DAO has the goal of reinventing publishing for Web3. Publishers can launch crowdfunds, NFTs, and distribute proceeds to contributors.Writers benefit from this model through decentralization, allowing them to get paid on their terms. They also get the added benefit of security through decentralization. Platforms such as Medium control traditionally published content online, while on Mirror, writers have the authority.
One interesting note about Mirror is their token race, which is how new members join the platform. The token race or write race is a weekly showdown between users looking to join Mirror DAO. As the competition commences, members vote on who they think the best writers are, and the top 10 writers get awarded one $WRITE token. The competitors can then redeem this token for membership on the platform.
EarthFund DAO came about to tackle climate change. They operate by pooling money and voting on what projects get the funding. Currently, they have $2.4 million under management with three proposals. Some of their causes are mental health and carbon removal.
Unlike many other DAOs, EarthFund offers a financial incentive to participate in the community. They measure your impact and then redistribute funds to reward your hard work. It’s worth mentioning that there are a few other DAOs focused on climate change, such as KlimaDAO and ClimateDAO.
Final Thoughts from Sharn and Andy on DAO’s
Overall I really like the idea and theory behind DAO's, but I have my concerns with them as well. I think for fundraising and crowdsourcing for a good reason (Climate change or natural disasters etc) they are really good idea. I would much prefer to give money to a DAO and vote where the money is spent and on what projects then throw some cash at a rando knocking on my door.
But the main issue I see is that most of the DAO’s are more like investment funds that are focusing on Crypto. I think that Crypto is still very volatile and I also think as Decentralised and open to all that they are, there is still probably a small amount of people who have the actual vote. You can buy shares in Apple or Microsoft and have close to the same amount of say. Also if I have learnt anything over time most people want to be led and don't want to make decisions, so as good as it sounds giving everyone a vote in reality that's not a good way to do business. Sadly it's not how the world works.
Agree there is potentially great applicability in the not for profit sector. I also like the transparency of votes and decisions.
I definitely have concerns with DAOs but there's a lot of flexibility in how companies set up their smart contracts and governing architecture, so if things are done well, a DAO could work fantastically, but it could easily be implemented poorly and could end in a lot of stalemates and might dampen the company’s growth.
New Segment Alert!
Welcome to the Imagination Gymnasium, a place to get your imagination and creative muscles in shape! Don't worry, no actual physical activity is involved.
So what is the Imagin-asium? It is a weekly workout to make your creative muscles stronger. How does it work?
I will recommend a music track for you.
Find some time alone where you can listen to some music. I personally find I get my best results while going for a walk outside. The fresh air and the gentle movement always puts me in a better space to be creative and also removes me from normal everyday tasks. But do whatever suits you best, and if you are walking outside while listening to music please do it during the day and somewhere safe. I'm not taking the blame if you get mugged or run over!
Listen to the music while in your happy place. The tracks i recommend should usually be readily available music on your music app of choice. but i'll try to put a link to the youtube version in the show notes and on Twitter just in case.
So now you are in your happy place and listening to music. What's next? Follow the instructions in the workout. They are usually pretty simple and ill walk you through the first workout shortly.
Finally Tell me how you went with the workout! I'd love to hear where your imagination took you….. within reason, I still want to be able to sleep at night. Twitter is the best place to get back to us.
Work Out of the week number 1
The first workout of the week is a good one to start you on.
The track for this week is: BT-7274 By Stephen Barton, From the Titanfall 2 Soundtrack.
This is an epic track that goes way too hard for a character theme from a video game, and happens to be one of my favourite pieces of music!
Your workout is as follows:
Find that ‘you’ time mentioned above
Play the track
Imagine what is happening to the protagonist of your story while the music plays.
‘But Andy, I'm not writing a book like you?!’ Don't worry, that's fine. If you are an artist imagine what you would paint, draw, ink, sculpt etc to represent this track. Not an artist either? Then perhaps you are the hero of a story, what would you be doing while this music plays? Are you fighting a dragon with your magic powers? Are you parkour racing across the rooftops of a cyberpunk city to save your bestie from certain doom?
There are no wrong answers here but do your best to imagine every aspect you can. What do you hear, smell and feel in your little short story. What are the colours, temperature and emotions you or your character are going through.
If you are up for the challenge do this several times but change the scenario each time.
And last step, hit me or Bards up on Twitter and let me know what you came up with :)
As always, we have a lot to do and a lot more to learn. Hope you all have fun following along as we improve our understanding and knowledge!
You can find this podcast episode (and all our other episodes) here: https://anchor.fm/invokecreations , or directly on your favourite streaming services.
NOTE: Everything discussed during the podcast is simply our own interpretation of information we come across as we research topics, or is commentary based on our own personal experiences. We highly encourage everyone to conduct their own research into topics of interest as information, especially in the technical space, changes regularly.
Music track featured this week was titled Porcelain Mask and can be viewed/listened to here: https://youtu.be/0QhqXSyo2mI
To check out our latest art and music adventures, make sure you like and subscribe to both our Instagram account https://www.instagram.com/invoke_art/ and Youtube channel https://www.youtube.com/channel/UCPH5KySvBnWgWPXHi_OtTng
Or, if you want to read some musing from Sharn and Andy, or maybe see some random pictures of the two of them where Sharn doesn’t know what to do with her hands, then follow us on Facebook https://www.facebook.com/invokecreations
Or if everything is just too confusing and you can’t remember where all our stuff is, head to our website www.invokecreations.com and it will point you in the right direction.
As always, we’re off to put our bums on seats and do some work, so until next time stay dangerous!