Ever since a group of chronically online crypto enthusiasts tried to buy a copy of the US Constitution in a high-profile bidding war, DAOs (Decentralized Autonomous Organizations) have been at the forefront of discussion in the web3 world. How do they differ from companies, you wonder? DAOs have been praised for their ability to give a voice to everyone in a community by involving them in decision-making and recording those decisions on the blockchain in a transparent, immutable manner. But the utopian vision some people have of DAOs today seems far removed from reality.
This week on chain reactionthe sure naira podcast on all things web3, we spoke with Alexander Taub, CEO and co-founder of the DAO tooling platform Upstream. Upstream started as an online community for professionals to connect with each other during the pandemic and revolved around providing mechanisms to manage DAOs as the blockchain-based communities took off during crypto’s bull run in 2021.
You can listen to the full episode below:
While some see DAOs as an all-inclusive solution, Taub argues that there are a few use cases for the structure that make sense these days, while others aren’t as obvious. Taub cited investment clubs, where people pool money to buy digital assets, and NFT projects looking to give back to their communities as some of the most intuitive use cases for DAOs.
“DAOs, blockchain – it’s programmable money. It really is what it is. So you can program money to do what you want it to do. Not everything, not every community, needs money. When I see cute pictures of my dog want to share with other people who want to share cute pictures with their dog, I don’t necessarily need money there,” Taub said.
Taub attributed the DAO’s popularity to the fact that many DAO’s have enabled members to make money in new ways, a view that makes sense in light of his example of investment clubs. But in terms of democratizing decision-making, Taub said it’s up to each individual DAO whether it will really work any differently than a centralized corporate entity.
“I think a lot of people look at the word DAO, and they think the ‘D’ stands for democracy. And it just isn’t [the case]. People don’t sit in a circle singing Kumbaya and think, ‘Oh, we’re all going to do this together.’ It can happen, and it does… But that’s like saying there’s only one way to start a business or launch a project or product,” Taub said.
DAOs, like corporations, have unique shareholder voting structures, Taub said. The fact that many DAOs strive to give their members an equal vote does not mean that they are all effective in achieving that goal, especially when many of them offer voting rights based on the number of tokens each member holds.
“If you want it to be a democracy, fine. If you want it to be a dictatorship, people shouldn’t join your DAO if they don’t like your dictatorship,” Taub said.