A quick google search of the term ‘DAO’ will net you the following definition:
Whilst this is a good starting point, there’s a distinct lack of depth to this definition. Instead, let’s take a deeper look at what a DAO actually is
Origins
The first publication to use the term ‘DAO’ is an article by Werner Dilger, where he explores the concept of multi-agent, self-sustaining systems.
Several years passed before the next development towards what we know as a DAO today; the concept of a Decentralized Autonomous Corporation (DAC), used by early crypto adopters and mainly pioneered by Vitalik and Larimer through their roles at crypto publications at the time.
In 2013, Daniel Larimer wrote a fairly comprehensive article on DACs which you should absolutely read. It is interesting to see the formation of ‘crypto culture’ through these old articles from prevalent figures in cryptocurrency. It’s also funny to reflect on their predictions and theories with the hindsight we now have!
For me, the most relevant quote is this:
‘Unfortunately, the enthusiasm for DACs has led many people to jump the gun and start calling things a DAC that clearly are not’
This quote has aged like wine given the backdrop of the modern-day. There are new projects bubbling to the forefront of Twitter every week with ‘DAO’ as a suffix in their name, but in practice, very little of their protocol is ‘DAO-like’.
Wumkin’s note - Given this article was being written in late January, this comment was much more accurate at the time :p
Anyway, back to the topic at hand :p
Both Buterin and Larimer agreed on the general definition of a DAC -
1 ‘[A corporate governance form] where there is a concept of shares […] which are purchaseable and tradeable in some fashion, and those shares potentially entitle their holders to continual receipts based on the DAC’s success’.
This definition somewhat coincides with what we recognise as a DAO today, in terms of the ability to purchase ‘stock’ and become a stakeholder. The pair gave a tangible feel to the concept, that allowed the community to pick up the term, and run with it.
It is however clear to see the much more corporate mindset of the time. A DAC is basically just a crypto company, with stocks and dividends paid out to shareholders.
In an alternate universe, we are all eagerly awaiting Curve’s quarterly earnings reports.
2014 rolled around, and Vitalik wrote a notable article, pretty much putting the nail in the DAC coffin, and giving the term ‘DAO’ alot of attention.
However, it would still be some years before the first DAOs began to form and run…
Early DAOs
Some consider Bitcoin to be the first DAO, however by modern definitions it falls short of earning this title, namely in the ‘O’ of DAO.
In this section, I will briefly explore some of the most important DAOs to date, and give a short overview of each.
The DAO
The first prevalent example of a DAO was ‘The DAO’, which is infamous for a hack in which $60 million worth of ETH was stolen in 2016. This resulted in a hard fork, creating Ethereum and Ethereum Classic.
The DAO raised $150 million in ETH during its token sale, making it the most high-profile project on Ethereum at the time, and not by a small margin!
Its intended purpose was to act as an investor-operated VC firm, allowing members to vote on what projects to fund with the DAO’s capital. This is a fairly common theme with DAOs today. For example, most OHM forks eventually pivoted into becoming ‘decentralised funds’ and investing the treasury into whatever the 2 whales of the DAO wanted.
Wumkin’s note - again, a byproduct of this article being written in January. I haven’t heard the term OHM fork in a good couple of months
Despite the hack, The DAO was a highly innovative idea that has aged excellently. It is fair to say the majority of DAOs today stand on the shoulders of The DAO’s innovation.
In the short term after the hack, projects like Aragon kept the spirit of DAOs alive and prevented the concept from shrinking into obscurity and history.
Click here for a deeper dive into The DAO
Similarly to DeFi summer in 2020, you could consider 2019 the equivalent for DAOs. Let’s have a look at some of the most important players:
Moloch whose fingers are ten armies!
Enter February 14th 2019, and the god of child sacrifice gets his very own DAO. Lovely! As I briefly describe Moloch DAO, you will find it is very easy to draw parallels to the cult-like energy surrounding OlympusDAO/TempleDAO.
Wumkin’s note - More OHM!
I will also tentatively propose the theory that degens are more likely to be in a cult than the average person. You heard it here first.
Moloch DAO’s inspiration can be traced to a 2014 blog post that discusses the poem ‘Howl’ by Allen Ginsberg. The post explores the barriers humans encounter during attempts to coordinate in a mutually beneficial capacity. (Something that OlympusDAO took to another level in 2021).
It is an Ethereum community funding initiative that was designed to fund public projects, and attempt to solve the age-old economic problem of the lack of funding for public goods. Gitcoin grants would be the most prominent example of this today. Its design was similar to The DAO, however, there are two key differences:
Firstly, the Ragequitting feature. Ragequitting allows members to liquidate their shares in the event they disagree with a proposal and returns them the equivalent value in ETH. Ragequitting was a massive innovation that is still prevalent today in protocols.
Secondly, funds are withdrawn instantly upon Ragequitting.
So, what made Moloch DAO so important?
The answer is its simplicity. Moloch DAO’s founders set out to deploy the minimum possible on-chain functionality for the DAO, in order to focus on offline coordination as a solution to problems. This philosophy ensured the security of deposited funds, unlike in the case of The DAO in 2016.
Moloch DAO’s simple framework has inspired hundreds of other DAOs and forks, notably including Raid Guild, Orochi, and MetaCartel
I highly recommend reading the Moloch DAO’s whitepaper. It’s one of the most layman-friendly whitepapers I’ve ever read, and is actually not boring!
Eventually, Moloch DAO created Moloch v2, allowing their operations to extend to becoming an investment fund - seeing a theme with these DAOs yet?
el cartel de la meta
After a failed membership application to Moloch DAO, Pet3rpan was asked ‘why don't you just fork it?’
So he did.
The MetaCartel group had been a ‘thing’ since October 2018, when a group of builders converged at an Ethereum developers conference in San Francisco in order to work on meta transactions.
Sounds nerdy, right?
Despite the meta transactions issue being solved by another group in January 2019, MetaCartel continued to keep in touch with each other because of the community feel in the group.
In early 2019 MetaCartel was focused on innovating in UX and crypto use-cases on the Ethereum application layer, and had plans to launch a DApp incubator.
These plans evolved into what would be the first fork of Moloch DAO; MetaCartel DAO. Similarly to Moloch DAO, they would provide grants to projects in the ecosystem, however, they focused on projects that would push the envelope in terms of use-cases and business models.
Over time the DAO raised over 1100 ETH which was distributed to 13+ projects, notably including Orochi DAO and DAOHaus. However, there were doubts surrounding the sustainability of a project that relied on the goodwill of members who wouldn’t necessarily benefit from the growth of the projects that received grants.
In order to bring the DAO forward, in February 2020 MetaCartel Ventures was launched, a ‘for-profit investment DAO coupled with a legal entity’.
Time and time again, the natural state for DAO’s has shown to be VC-type funds that invest in early-stage projects.
It is important however not to just conflate an investment type DAO with a VC; a DAO is a crypto-native organisation, and in general will have greater insight into early-stage crypto projects than traditional VCs, allowing them to in theory operate more efficiently, unlike the more ‘spray and pray’ tactic sometimes seen by VCs in the space.
Overall, MetaCartel Ventures was a pioneer of the ‘Investment DAO’, and laid the groundwork for this type of protocol to exist in the present.
The current situation - written in July 2022
This section was a somewhat half-baked conclusion with allusions to Olympus as a new iteration of the DAO, and some discussion of modern service DAOs like Bankless consulting.
I think that now, I’ll let the reader explore these themes, and keep this article as a cute little summary of the journey of the DAO. (Or maybe write a part 2 :p)
The current landscape for DAOs is somewhat dire; alot of protocols are dead or dying, with either burnout or a lack of voting as the root cause. I think the lack of foundational infrastructure within most DAOs has slowly percolated into major issues for them, with most orgs being unable to handle said problems.
I am however hopeful for the future of the DAO - it is a concept that can be endlessly iterated on and improved, so given a long-term view of things, it is a certainty that we will see new and exciting versions of DAOs for many years to come within the crypto sphere.
To finish off, I think jon put it best with this tweet;
DAOs are in a valley of despair.
But soon they will find themselves with a rope and a torch, clambering their way upwards.
https://blog.ethereum.org/2014/05/06/daos-dacs-das-and-more-an-incomplete-terminology-guide/