Pay your DAOs! How DAOs work and what they represent

There’s no doubt that DAOs (decentralized autonomous organizations) are changing the way people work, organize and participate in their communities.

While these groups may be a bit difficult for the average person to get involved in (for now), they represent a coming paradigm shift for everything from work to politics, culture and more. There are thousands of technologists working to build tools that make these amazing entities more accessible, easier to organize, clearer to navigate and more integrated into existing societal infrastructure, so it’s just a matter of time before they gain mainstream, mass adoption.

Here’s what you need to know about how DAOs work, what they represent and how you can begin seeing them come into your everyday life. 

What is a DAO?

DAOs are basically groups of people who organize around a specific project, goal, organization, cause or really anything else. Their most common use cases today exist in the crypto community, where people interested in participating in blockchain projects can organize, communicate and vote on what they want the community to do.

For instance, most web3 projects have DAOs that vote on community-generated proposals about what that project should do — such as what features it should have, who it should pay for software development, or how it should spend reserves to attract users. From hiring team members to issuing grants, DAOs give the entire communities around projects the opportunity to take an active role in determining how those projects grow and change. 

We are still in the early days, but we’ve also started to see DAOs with unique purposes outside of the development and growth of technical projects. Examples include collectives like the Constitution DAO that attempted to purchase a copy of the original U.S. Constitution, the AssangeDAO that organized to purchase an NFT from Julian Assange and thereby help fund his legal battle, all the way to a thriving ecosystem of climate action and collective good DAOs.

To gain voting power in these groups, members typically earn crypto tokens, and those tokens represent the size of their influence on governance within the DAO, with their voting power commensurate with the percentage of the total supply of tokens. But, other mechanisms are also being used to determine membership in DAOs.

NFTs, for instance, can act as membership cards, and all holders of certain NFTs can gain access to private communication channels, view protected documents and have the right to vote on governance proposals submitted to the DAO. These different tools for enabling DAOs to function give these organizations flexibility to experiment with different democratic approaches. Some can take a shareholder-type model and make voting power a matter of how big a financial stake each member has in the DAO. Others can take a one person, one vote approach. The possibilities are wide open.

How will DAOs be implemented in the real world?

In the future, I expect to see DAOs spinning up to service everything from corporations, political action committees and even cities or homeowners associations (HOA). Imagine if your HOA dues granted you access to private communications channels within your housing development and allowed the community to vote on which flowers to plant or how to allocate resources to maintenance projects.

Instead of the power being centralized in the HOA board of directors, a more democratic solution could exist. Community members could be empowered to take an active role in shaping their environment. For instance, when HOA dues are paid, homeowners would be issued an NFT that would unlock voting, communications and other materials needed to participate. These would remain out of reach for nonmembers, so only people vested in the particular group could participate.

This could also span into the non-profit space, where people donate, and in exchange for their donations are issued a cryptocurrency that correlates with voting power. People who donate a lot would have additional voting power over those who donated a little, allowing them greater influence over which causes get funded and which don’t. 

The D in DAO also stands for democracy

The applications for this technology are truly endless and represent a potentially massive shift for democracy and society in general. Theoretically, this could move all the way into voting for politicians, where every citizen is issued a lifetime NFT that would allow them to vote in elections and participate in a more direct form of democracy.

In the corporate sense, shareholders of public companies could be issued a company crypto currency that correlates to the number of shares they hold. Through governance proposals, shareholders could take an increasingly active role in what corporations do. Imagine if the community of Chevron shareholders were able to vote on how the company discloses environmental impact data.

In an age when many people feel unheard and powerless, DAOs could bring a significant shift in the way organizations of every size operate and how they remain beholden to their users, shareholders and communities. Applications like these are already being tested in countries like Taiwan to a great, positive effect.

It’s just a matter of time before the user experience catches up with the technology, driving mass adoption and bringing this new, better way of organizing people into the mainstream. 

Julien Genestoux is founder and CEO of Unlock Protocol.

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