The State of the DAO: Rise, Fall, and Rise

The last few weeks have seen some major failures in the area of DAO and distributed governance. They’ve also marked a revival of energy for DAO technology, with new initiatives that seem to pick up where the failures left a gap. 

As presented in my DAO Case Study Research last July and October, most of the DAO experiments were unsuccessful, so this list includes just 3 very recent failures.

Recent disappointments:

Presenting the revivals

The collapse of the Genesis DAO has been a long time coming, and in fact, it can hardly be called a failure. DAOstack created the Genesis DAO on its Alchemy platform as a sandbox and experiment in DAO functionality. The Genesis community was hugely active and drew a highly-skilled and well-versed group of participants from around the globe. As a result of the Genesis project, more than twenty new DAOs were launched on the Alchemy platform. Hundreds of people tried out the technology in numerous “dHacks” and a couple of dozen “DAOfest” events took place worldwide. A large knowledge base was created at www.daolandscape.today through the efforts of Genesis DAO and dGov participants. 

However, the demise of the DAO was inevitable from the beginning, as the Genesis community in general had major differences of opinion and objectives than those of DAOstack. It seemed the community never really accepted the status of Genesis Alpha as a sandbox, and there were dreams of being self-funded that simply didn’t align with the commercial goals of the DAO. 

The mission of the Genesis DAO included support and promotion of DAOstack, but not all of the participants felt that DAOstack’s direction was aligned with their own concepts of what a DAO was about. While a few people (including myself) spoke openly about this misalignment, most of them kept their opinions to themselves, in the interest of improving their reputation (REP) and acquiring ongoing funding from DAOstack. In other words, the financial incentive caused people to withhold their true opinions and exploit the system. 

DAOstack, for its part, put resources into the Genesis Alchemy project, but did not seem to take feedback well. I do not have any inside information about this, but honestly, why would DAOstack take these people’s opinions? Only 1 self-sustaining DAO (dOrg) emerged from a year’s work and something to the tune of $150,000 in budget. 

The DAOfest explosion is one of the great successes and great failures of the Genesis Alpha, and it resonates with some of the previous criticism of DAO funding distribution in DASH. Basically, the problem is that people love events and meetups, and they love getting paid to put on events in their local communities. They love it so much that a tremendous amount of money ends up going towards events that don’t have tangible outcomes, and even if they do, there is generally nobody accountable for maintaining the community of event organizers.

The great thing about community events is that they bring in more DAO participants. The problem with community events is that they bring in more DAO participants. These new participants want to fund… more events! In other words, event-creation has a snowball effect inside a DAO of generating voters who will channel more funds towards more events. In the case of the Genesis Alpha, these events quickly drained the budget. This is an important warning for anyone who wants to create a DAO. Most current DAO functionality does not include buckets for budgeting, so it’s important to recognize this potential pitfall.

The major failure of DAOs today is lack of functionality. DAO technology on Ethereum today allows a sophisticated multi-sig scheme (voting of a majority for release of funds) and/or automatic implementation of on-chain code upgrades (voting rather than forking code). These are both great functionalities, but they lack creation of social fabric or even a shared mission for the DAO. This shortcoming was pointed out both in the DigixDAO post and in the document posted by the outgoing Genesis DAO community managers. 

Despite these disappointments, the community is showing resilience, and the initial failures have given birth to new and more appropriate uses of DAO technology. NectarDAO is leveraging what the technology does best: distribution of funds. NectarDAO is fulfilling on its promise to let the community manage their own funds using DAOstack. 

Again, I have no inside information but this seems a better direction for DAOstack than continuing to support the Genesis DAO. While I’m sad to see the end of the Genesis DAO community, this is a major step forward for DAOstack: moving from a sandbox to a beta user. 

Attending this year’s dGov Council was a disappointment for me. Last year, the Council was sold out at 60 participants, and this year we barely scraped 30. Given how amazing last year’s council meeting was, it was a major failure. The dGov Council meetings go deeper than any other medium in the industry, and it’s a shame more people did not attend.

However, the community itself stepped up to the challenge. We created a weekly meeting (Wednesdays at 2 pm CET, in case you’re interested) to keep the conversation going, and to increase momentum. One of the participants said he would be creating another dGov Council meeting in Barcelona in the coming months. 

Similarly, the Genesis DAO community is looking into self-funding and continuing the weekly meetings without the paid facilitators. 

The community resilience is extremely encouraging. Despite a first round of difficulties, it’s clear that the vision of distributed governance 

As mentioned above, the NectarDAO has launched on DAOstack at the start of 2020. NectarDAO has more active members and a larger budget than any previous DAO on DAOstac. The DAP members have proven their excitement and involvement in DAO participation. Over the last year, the NectarDAO participants have successfully used the Kleros technology to choose the tokens to list on the Diversifi exchange, and now they will be using DAOstack to decide what to do with their budget. 

NectarDAO’s core team has done a thorough job of researching DAOs and DAOstack, and developing best practices for the launch. Their website and blog provide fantastic guidance for the community. The initial work of the NectarDAO is of much higher quality than seen in previous DAOs. Proposals are more sophisticated, the mission is clearer and the participants are vetted.  For the existing DAO tech, this launch represents a major step forward. 

The Joinseeds and Telos communities are developing the HyphaDAO, which is the first generalized DAO technology to be developed outside of Ethereum (to my knowledge, correct me if I’m wrong).

Hypha takes a very different approach than other DAO technologies to date. The approach is specifically designed to support the people working in the SEEDS community, and in some ways their platform resembles a freelancing platform more than a governance platform. The focus of the platform is on defining the jobs that need to be done in the community, posting those jobs (roles) and accepting applicants for doing the work. Approval for funds happens after the person has performed the job. 

HyphaDAO is in early alpha stages. To date, the work has been done mostly by volunteers. The quality of the team is outstanding, with the lead team members coming from the Digital Life Collective. The team  has a strong bias for rewarding everyone for time contributed. I recently was awarded SEEDS tokens for a few hours I had spent advising the team. (A similar bias exists in the Commons Stack community. Suddenly you find yourself “praised” just for being a decent human being.)

In any case, it’s certainly exiting to see DAO tech develop beyond Ethereum and onto other smart contract blockchains. 

While we’ve seen some major setbacks in DAOtech during 2019 and the start of 2020, the community remains vibrant. Rather than being discouraged, the failures seemed to fuel renewed commitments and wider participation.

It seems that some of the people who were satisfied to watch and wait have felt called to participate actively, and that several of the new DAO structures are better designed for collaboration than the prior generation of technologies.