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In a recent piece, I discussed how the stability of the crypto market is partially due to regulatory clarity and the increasing importance of traditional finance players. However, amidst the ongoing discussions about Bitcoin ETFs, the role of institutions, AI’s aspirations in blockchain, and the escalating yet ambiguous regulatory environment, DAOs have somewhat faded into the background.
Even before the last bull market, DAOs emerged as a popular avenue for blockchain-based organizations to eliminate centralized leadership by transitioning into member-owned communities managed through decentralized systems using smart contracts. This structure provided a way for projects to engage in decentralized fundraising, offering voting rights and key decision-making power to the participants in the funding process. As the crypto market surged twelve-fold between early 2020 and late 2021, investor interest in the blockchain sector grew, with many venture capitalists opting to invest in tokens rather than equity in web3 startups.
The World Economic Forum even highlighted the potential of DAOs as the “business structures of the future,” labeling them as the “natural entity of web3.” Now, as the crypto industry experiences growth in both retail and institutional activities, and showcases innovations in areas like DeFi and tokenized real-world assets, it’s worth pondering the future role of DAOs.
Looking ahead, despite facing uncertain legal status as full-fledged business entities, DAOs continue to expand their reach beyond lending protocols, exchanges, funding mechanisms, and gaming platforms. They now play a role in community-building, fostering collaborations, and driving innovation.
For instance, social DAOs like Friends With Benefits focus on community engagement, creativity, and networking by providing members with exclusive access to events and gatherings, both online and offline. These platforms also serve as hubs for developers, artists, and content creators to collaborate and find inspiration.
The appeal of the DAO model is also growing among memecoin and NFT projects with large and dedicated followings. An example is the memecoin project Dogelon Mars, inspired by Elon Musk, which recently transitioned to a DAO after receiving a significant anonymous donation. The community was given the power to decide how to utilize the funds, and they chose to burn an equivalent amount of the donation in the $ELON token to enhance its scarcity.
Strong and engaged communities make NFT, web3, and gaming projects ideal candidates for DAO structures. While still rooted in blockchain technology, some DAOs are exploring new ways to interact with the world beyond web3.
Projects like VitaDAO, a community-owned collective, focus on funding research into longevity to enhance people’s quality of life. Members holding VITA tokens can propose and select specific research initiatives for the DAO to support, contributing to governance decisions with the goal of advancing the fight against age-related diseases.
As blockchain technology continues to evolve and find new applications, we can anticipate more use cases for DAOs as organizations strive to empower their communities and give them a voice.
Similar to other aspects of the crypto and blockchain industry, DAOs offer distinct advantages and challenges. Their success hinges on how they navigate community relations, regulatory uncertainties, and execute their vision effectively.
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