What are DAOs and what do they have to do with the creator economy?
Decentralized Autonomous Organizations (DAOs) are communities that operate with shared bank accounts and shared cap tables (which represents who own these organisations). Okay so what does it actually mean and why do we need it? Because at its core, most find it difficult to distinguish between LLCs and DAOs being just digital LLCs.
Imagine a board of directors today, in how many of these do you see the customer or other non-executive members being represented? Probably little to few. DAOs enable members to purchase tokens and have their say or seat at the table. Now some might argue that it basically means that folks with more money can own more tokens and as a result have more say on what happens. The reality however is that large capital allocators or ‘VCs in Web3’ for instance would not necessarily have time to allocate to active governance (participation) in the community and may just relegate their votes to community majorities or decisions of community-voted leaders.There are also various types of governance which implement things like quadratic voting where people have a set amount of votes to vote across a multitude of issues, rather than just have one vote for one issue. This kind of voting in turn enables for minority views to be represented more fairly in the decision making process of a DAO.
The other distinctive piece is liquid ownership. The notion that in DAOs you have an active stake in the success of the DAO further aligns your incentive to carry out work to ensure the success of the DAOs broader vision and your respective task(s). Some of the best categorizations around the types of DAOs come from a friend of CrowdPad’s, and Sherpa at Superteam DAO, Kash Dhanda. A link to the thread if you prefer to read directly:
Ephemeral (aka lasts a short time, Kash tryna stick to the rule of three here) DAOs:
But in essence, what Kash qualifies is the distinction between the duration-based differences of DAOs.
There are also a plethora of types of DAOs just as there are normal companies (Cooperatives, Joint Ventures, Non-Profits etc.), some that are focused on culture, others on service, investment or straight-up to buy the US constitution.
Small segway, but it’s also one of the first times that I feel optimistic about the sustainable growth of the social impact space. Unfortunately, I never really bought in to ESG saints and greenwashing that large banks pride themselves ( except if I needed to land an internship, but that was another time), and having done a lot of work in the non-profit space in the past, I’m fairly familiar with the trajectory of these organisations at scale having worked in non-profits for a couple of years, and the struggles they faced having to align the incentives of large corporates, fit themselves into agendas set by external organizations and so on. I genuinely believe that DAOs could fundamentally change that. How you ask?
Let’s assume that you care about your on-chain reputation (if your linkedin or your stock portfolio were public on the blockchain), and you genuinely cared about social impact, contributing to a social impact focused DAO would be a great signal of what kind of a person you are and the things you are passionate about. And whilst it can just be a matter of allocating capital into a DAO and watching the token appreciate, this time there’s a transparent, community-driven mechanism of tracking impact.
Do tokens ruin everything? Danny Zuckerman is yet another individual who I greatly admire in the crypto space and he had this amazing thread around DAOs and how token incentives will almost certainly foster the efficiencies that we expect a market to facilitate but however in the process of achieving efficiency are we becoming fairly soulless in our approach to community. I mean after all, isn’t that why we all love Web3, the community and jamming out with people globally, just working on things we’re passionate about, or will it just boil down to a purely capital driven business. So I guess, it’s a more fundamental question of will DAOs, the future of work, be the same as work today? Or will it flip work as we know it and make it a scalable, community-driven & productive experience for most?
So, what does all this have to do with the creator economy?
In our previous blog, I addressed how the creator-fan dynamic is changing in Web3. The fundamental notion that ‘fans’ are now to be looked at as community members that are able to contribute to a creator’s journey and subsequently benefit from those contributions, and also for just believing in someone so early on.
When you think of social tokens, you think of individual economies for individual creators. And what that means is that creators can basically choose how to mobilize their communities using their own token distribution mechanisms. Think of it as if you had your own monetary policy as an individual. The questions you ask yourself may include, what kind of community (or DAO) you want to cultivate (i.e ephemeral, enduring or eternal), what kind of incentives do you want to offer your members (monetary or non-monetary, fungible or non-fungibile) and finally, you can also choose how much of your reserves equivalent you want to allocate towards incentivizing community.
So to simplify that, imagine, if I was a musician and I was starting from the ground up, once CrowdPad is live ;), I could basically use my social capital (which again is based purely on my ability to curate community), and allocate some of it to airdrops (giving people a few of your tokens for virtually no cost to them) for instance to incentivize early community growth and traction. I could also go ahead and allocate a certain amount of my tokens to folks carrying out marketing, distribution and finance exercises for me, all whilst avoiding to a large extent the record label or other predatory management outlets that we know today. Take this with a pinch of salt because we presume it will take several experiments for something like this to be executed seamlessly but the point is to place our bets on this future where upcoming artists or entrepreneurs, need not be ‘insiders’ or ‘have the connectz’ but rather can build communities around merit, talent & passion.
So yeah that’s our vision for what the world will look like when creator communities become DAOs at scale, and we would even take that prediction further to believe that more community focused tokens like small clubs (see FWB), meme communities (Web3 9gag anyone?) or even something like Superteam DAO could have their own token and coordination mechanisms on CrowdPad. Web3 Social in that sense is somewhat hinging on Web3 work territory. WAGMI. So excited to build and pioneer novel mechanisms around all of the above with our little rocketship at CrowdPad.