Our previous article discussed what DAOs are, their incredible growth over the last two years, and the key challenges DAOs face. In this article, we’ll explain different types and categories of DAO, followed by real examples and steps to take if you want to launch your own DAO.
Ready? Let’s dive in.
Many DAOs started as investment clubs, but today there are various DAO models based on functions, stretching from grantmaking and networking to functional and driving social impact.
According to the World Economic Forum, the DAO landscape can be segmented into nine categories based on objectives (generative, associative, ad hoc) and means (activity, value transfer, social).
The advantage of DAOs is that they’re very fluid and flexible, so it’s not a surprise new types of DAOs are constantly emerging. However, to provide some clarity, here’s an overview of the most common DAO models:
Protocol DAOs (or Governance DAOs)
A protocol DAO is specifically designed to govern a decentralized protocol such as a borrow/lending platform, decentralized exchange, or another type of dApp. Opposite to enabling a small team of developers to make all the crucial decisions, protocol DAOs bring more equality and give a platform to each individual in the collective. This way, all members can decide on the development of the project. Governance tokens grant owners/users voting rights, following the rule: more tokens = more voting power.
Example of Protocol DAO:
The DeFi protocol Uniswap provides liquidity for exchanging ERC-20 tokens on the Ethereum blockchain. In September 2020, Uniswap issued 1 billion Uniswap tokens, a governance token, to empower its community members to alter protocol elements. With the launch of UNI tokens, it became possible for community members to help define certain aspects of protocol strategy. All members who hold governance tokens can submit or vote on proposals and introduce new features to the community.
Investment and collector DAOs let people pool their capital to invest in specific assets. They range from venture investments in things like DeFi protocols or NFTs to increasingly ambitious efforts, such as professional sports franchises. Similar to other forms of crypto crowdfunding, these DAOs offer a fast and simple means of capital formation compared to complex legal setups associated with a typical venture capital fund. These funds are also more transparent than traditional venture funds since members can audit all transactions on-chain.
Example of Investment DAO:
PleasrDAO is a collective of artists, DeFi leaders, NFT collectors, and crypto influencers that collect culturally significant NFTs with a charitable twist. PleasrDAO members paid $ 525 000 to purchase pplpleasr’s Uniswap V3 NFT, an animated Uniswap promotional video. Since their creation, PleasrDAO has spent $4 million on an NFT of the image that inspired Dogecoin, $5.5 million on Edward Snowden’s Stay Free NFT, and $4 million on an unreleased Wu-Tang Clan album.
Even though all DAOs have a strong social aspect, social DAOs intend to unite like-minded people in online communities coordinated around a token. Think of it like the next generation of social media platforms, but unlike Tik Tok, Facebook, and Instagram, members are the ones who make the rules, benefits, and features. As with most DAOs, social DAOs also have unique entry criteria, such as owning a specific NFT or tokens.
Example of Social DAO:
Friends With Benefits and its $FWB token is probably the most popular social DAO today. Members must apply and buy a certain amount of FWB tokens to access a community of artists and creatives. Members of FWB made a dynamic community where they share insights and host events or exclusive parties. Since its humble beginnings as a social experiment in September 2020, FWB has grown to nearly 2 000 members, and its community has become a powerful creative force in Web3.
Grants (or Philanthropic DAOs)
Grant or philosophy DAOs pool capital to make a social impact but without expecting a financial return. Built on transparency and integrity, they’re a great example of how blockchain can also be a platform for connecting people who want to help anyone in need without worrying that their financial support could end up in the wrong hands or direction they’re not aware of.
Example of Philanthropy DAO:
One of the greatest things about DAOs is their speed and agility. They can organize and execute their objective in a matter of days! UkraineDAO raised over $3 million in ETH to support the Ukrainian Army in less than a week. Coordinated by members of PleasrDAO, Trippy Labs, and Russian art collective Pussy Riot, UkraineDAO uses the ENS domain, ukrainedao.eth, to send donations to Ukrainian soldiers, and support the Ukrainian organization, Come Back Alive.
Media DAOs are changing how content producers and consumers engage with media. Rather than relying on advertising-based revenue models, these DAOs use token incentives to reward producers and consumers for their time with an ownership stake.
Example of Media DAO:
The idea of decentralized media dates back to 2013 with the “Let’s Talk Bitcoin” podcast. Today a leading example is BanklessDAO, an Ethereum-focused media outlet that produces a popular podcast and newsletter. Recently, the Bankless team airdropped the BANK token to its audience. With BANK acquired, readers can take an active role in the media outlet and earn additional BANK by producing content, research, graphic design, article translations, marketing services, and voting on key decisions.
Service DAOs look like online talent agencies that bring strangers together worldwide to build products and services. Contributors typically receive governance tokens that convey ownership in the DAO.
Example of service DAO:
Most service DAOs, like Raid Guild, focus on bringing talent together to build the crypto ecosystem. Their clients consist of other crypto projects and protocols that need everything from product management and software development to graphic design and marketing.
Special purpose DAOs (SPADs)
DAOs that are launched with a mission to pool together funds to achieve only one specific goal are called special purpose DAOs.
Example of Special purpose DAO:
One of the most famous DAOs in this category is the ConstitutionDAO, formed in November 2021 to acquire one of the 13 remaining original printed copies of the US Constitution at a Sotheby’s auction. They raised $47 million worth of ETH from 17,437 motivated contributors in under a week! Sotheby’s did not allow DAOs to bid directly, so ConstitutionDAO teamed up with a crypto exchange to convert its ether to dollars. They also created Endaoment, a non-profit, to make bids on the DAO’s behalf. Unfortunately, in the end, the DAO didn’t make the final bid. However, as this case study illustrates, the larger message here is that DAOs can enable communities to achieve a shared goal quickly.
What’s Next for DAOs: From Exploring Their Potential To Making Them a Standard
Although DAOs are nascent, their advantages are already undisputable. DAOs can achieve greater transparency, trust, adaptability, and speed than traditional corporations. They’re an ideal environment where like-minded people can unite in a shared mission and achieve goals often unattainable to individuals due to financial or legal limitations. We believe DAOs could become the key organizational model for Web3, reinventing how we govern, invest, work, create, socialize, donate, and build.
The possibilities are endless. Now it’s up to us to take it to the next level.