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DAOs Part 4: Types of DAOs

There are numerous types of DAOs and understanding the forms they can take will also inform your project.  Here are some of the most important and common ones which have evolved over the last few years:

  • DeFi DAOs
  • Grant DAOs
  • Social DAOs
  • Collector DAOs
  • Venture DAOs, also called Investment  DAOs)
  • Media DAOs
  • Social Media DAOs
  • Entertainment DAOs
  • Club DAOs

 

Defi DAOs

Protocol or AMM (automated market maker) DAOs use smart contract protocols, typically to bring decentralized financial services such as token, coin, and NFT exchanges, swaps, and DeFi platforms to market, although today finance is not the only sector setting up exchanges.

Examples: 

MakerDAO is a decentralized finance (DeFi) project built on the Ethereum blockchain that facilitates decentralized lending. Like Ethereum, MakerDAO is directed by a foundation, which operates with a number of structural elements that draw from the DAO model, with holders of the MakerDAO governance token (MKR) participating in decentralized decision-making.

Other protocol DAOs include SushiSwap, UniSwap, and Compound Protocols. These DEXs (decentralized exchanges) serve as crypto exchange aggregators, meaning they are constantly searching for market liquidity from a bunch of different DEXs. 

When you buy into a DEX’s native governance token, you get to participate in staking to earn rewards in the form of the native token. 

In this way, traders can receive lower token swap rates than they could get using just one single DEX, and the DEXs in turn rely on liquidity pools (LPs) funded by users who are rewarded if they add money to the LP.   

Grant DAOs

One of the earliest use cases of DAOs is to allocate Grants, another form of DeFi.

In a Grant DAO, the community donates funds into a grant pool and collectively votes on allocating and distributing the funds. The purpose of these DAOs is to fund innovative new projects with organizations submitting funding applications. 

Grant-based DAOs are practical examples that decentralized communities are more flexible in funding distribution than the more traditional institutions.

Examples: 

AAVE Protocol is one of the most well-known DAOs using the Grants infrastructure to nurture and build its community of DeFi projects. 

Aave is built around a lending pool ecosystem, which means that users can either lend their own funds or borrow from the lending pools instead. A benefit is that community members are constantly encouraged to view and vote on the projects they believe most deserve funding.

As mentioned early, Aave is currently the top-ranking DeFi lending protocol with over $15 billion TVL (total value locked). If you want to use it to lend money, the protocol issues (mints) ERC-20 Tokens in a 1:1 ratio to deposited assets to give users a steady, compounded interest rate. Moreover, Aave has flash loans in which both borrowing and repayment have to transpire within the same transaction block.

Aave’s has a second governance token LEND (ETHLend), which is used for both fee reductions and voting on Aave Improvement Proposals (AIPs). The latter can even be conducted if LEND tokens are locked in as collateral.

Developers can experiment and combine new DeFi uses with these flash loans, which are suited for the purpose. 

Gitcoin, another project, focuses more on the collective membership financing other types of projects.

Social DAOs

Though most DAOs have their own distinct community, some are explicitly built to focus on a particular objective, such as preserving arts and culture or other projects aligned with the community’s values. Here are some examples of the top ones: 

Friends with Benefits DAO (FWB) is focused on Web3 and the future of culture has 2,000 members, based on Discord, where its members cooperate in chat rooms.

Seed Club is a type of community-based accelerator mechanics that  “helps creators, communities and brands launch and grow social tokens and earn a percentage of their tokens in exchange”. The project is supported by The LAO, the open-source group to create legal contracts on DAOs.

Collector DAOs 

Some DAOs have formed to invest in NFTs or other collectibles. 

Example: PleasrDAO, a group of dozens of crypto artists, entrepreneurs, and investors that was formed to bid on works by high-profile digital artists. The group has voted to invest millions in individual projects, including $5.5 million for the “Stay Free” NFT minted by fugitive National Security Agency whistleblower Edward Snowden, $4 million for an NFT of the original “Doge” image—the mascot of the cryptocurrency Elon Musk promotes in tweets and $4 million on the Wu-Tang Clan album “Once Upon a Time in Shaolin”. 

Once they are purchased, these works become the property of the DAO members, who can manage them as they see fit. They can vote to exhibit them somewhere, break them into 1,000 NFTs and sell the pieces to the public, or simply keep them locked away in a physical or virtual vault. 

In a classic DAO model, collector DAOs record decisions “on-chain,” as they are made a system of token-based voting.

Theoretically, anyone can start a DAO to fund and house a collection of rare cars or bid on Russian yachts seized by the government by pooling their funds, with each member owning their fair share.

The uniqueness of Pleasr offers lies in its dedication to the arts, and engagement with that community. As a typical DAO, it doesn’t have a central governing authority and network protocols are decided through open voting systems.

Venture or Investor DAOs

This type of DAO is designed to democratize investing. These DAOs often raise hundreds of millions of dollars thanks to the rising demand for owning an attractive portfolio that people otherwise would not be able to invest in.

Given the theory that traditional investment firms are elitist and non-inclusive, investment DAOs are transparent and can be more inclusive – often open to anyone, anywhere, at any time by fractionalizing rare assets. 

Let’s say you don’t have enough money to invest in an entire NBA team. 

Fan-governed TheKrause House identifies itself as “a community of hoop fanatics just crazy enough to buy an NBA team.”  Its DAO is dedicated to basketball fans who share the dream of acquiring or launching the first fan-governed NBA basketball team, instead of yet another billionaire owner.

 A DAO called LinksDAO even raised $10.5 million to buy and develop a golf course by selling club memberships in the form of non-fungible tokens (NFTs). The project is now sold out.

Media & Social Media DAOs and web3

Traditional media follow a top-down structure, hopefully squeezing profits out to investors mostly from advertising revenues, which turns the audience into the product.

Media DAOs restructure this idea by allowing content to be driven by the community and rewarding content creators in the native token. Advertisers may be entirely removed from the equation.

Examples: 

Bankless produced information for people curious about DeFi, using media, learning channels, culture, and more. 

Similarly, ForeFront is developing a crypto education hub for community members, evolved around a marketplace of social media DAOs, who are now forming around this model. 

Media DAOs are the ultimate incubator for content creators, who are rewarded with native tokens for the content they produce, turning creators into owners of their own content.

Entertainment DAOs

Entertainment DAOs (or decentralized entertainment) is another facet that has been embraced by super-active art communities.

BAYC (Bored Ape Yacht Club), the beloved Ape NFT project, has been developing its roadmap to include a DAO launch, complete with a native governance token. Members will vote on the creative decisions the collective executes, expanding an already enormous $500 billion-dollar project. The ultimate reward would be bringing a new DeFi use case to BAYC with the possibility of a thriving token economy.

Club DAOs 

A DAO called Syndicate takes advantage of a legal loophole allowing up to 100 members in an investment club to pool their resources, without filing with the SEC. 

They formed a service for any group of investors up to 99 investors to instantly turn an ethereum wallet into a DAO for less than $300. 

Think of Syndicate-created DAOs as “Web 3 Investment Clubs” that vote and tracks holdings on the blockchain. In under a week after the January 2022 launch, 200 DAOs had signed up.

Next: How to get started: Questions to answer before creating your DAO whitepaper

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