How to share the wisdom and profits of top DeFi players? This is AladdinDAO's solution

Written by: Hu Tao

2020 belonged to DeFi, 2021 belonged to NFTs, and 2022 will belong to community DAOs.

Although the cryptocurrency market has recently shown some volatility, the venture capital and private equity activities in this field seem unaffected. According to Bloomberg, data provider PitchBook's analysis shows that venture capital and private equity funds have invested a total of $17 billion in crypto companies so far in 2021.

In contrast, the entire year of 2020 saw only $307 million, and just $295 million in 2019, which means that the investment scale attracted by the crypto industry in 2021 has far exceeded the combined total of 2019 and 2020.

Moreover, there have been several large-scale VC investment transactions in the DeFi vertical recently, such as:

1. DeFi derivatives exchange dYdX raised $65 million in a Series C funding round co-led by a16z and Polychain;
2. DeFi trading protocol Balancer Labs achieved funding diversification in a $24.5 million round led by Blockchain Capital.

Since the explosive growth of DeFi began in the summer of 2020, billions of dollars have flowed into DeFi for yield farming, but many have encountered various issues, such as ordinary people being unable to participate in investments.

Additionally, investors—even some of the wealthiest individuals on the planet (like NBA Dallas Mavericks owner Mark Cuban)—can easily be misled by misinformation. Their voices may also add to the noise, exacerbating information asymmetry in the market and leaving ordinary investors more confused.

What if there were a community in reality: true DeFi experts filtering out quality investment targets from the dazzling array of projects, allowing community members to grow together and reap substantial rewards? Wouldn't that be wonderful?—Now, this community has come before us, and it is AladdinDAO.

1. AladdinDAO = DeFi Infrastructure + NFT Business Model + Creative People

Crypto is not just a technology; it is an internet-native economy. Income is tracked in ETH, key decisions are made through community governance, transactions are executed on-chain via smart contracts, treasury is controlled by multi-signature, and value is captured by tokens. DAOs are the native organizational structure of these cryptocurrency economies.

Today, "everything can be a DAO," including collecting NFTs, socializing, building software, esports, musicians, media, education, and funding public goods.

Last week, the decentralized autonomous organization AladdinDAO (which will launch liquidity mining on September 10) live-streamed the Boule committee election on YouTube, allowing the crypto community to feel the immense potential and advantages of DAOs.

The list of candidates announced by AladdinDAO is impressive, including Zapper advisor and DeFi veteran DeFi Dad, UMA engineer Chris Mar, Dragonfly Capital investment team member Lawrence Diao, Alameda Research member Brian TK Lee, Cobo wallet and F2Pool founder Shen Yu, Digital Renaissance Foundation managing director Cao Yin, dForce CEO Yang Mindao, and nearly 25 other DeFi veterans, venture capital members, or associations. They will help AladdinDAO identify the most promising DeFi projects and allow AladdinDAO community members to enjoy the rewards of its liquidity mining program.

Recently, renowned investor Alex Pack, Zapper advisor, and DeFi veteran DeFi Dad convened and organized the second AladdinDAO community meeting titled "Finding the DeFi Experts in Your Heart," which attracted many industry "big names."

Attendees included Polychain partner Niraj Pant, Dragonfly Capital's Ashwin Ramachandran, Vfat, UMA's Chris Maree, Multicoin analyst HC, Hashed partner Ryan Kim, Block Mr. Super Jun, HECO head Leo, Incuba Capital's Ruby, and CoinX's Wang Xi, among nearly 20 other DeFi veterans, venture capital members, or associations.

Dragonfly mining fund head Ashwin Ramachandran stated at the meeting: "It's important to understand the difference between degen and non-degen thinking. AladdinDAO focuses more on long-term farming. For non-degen pools, a deeper approach is needed to evaluate the team.

The AladdinDAO team is strong. We will assess their participation time in the community, whether these individuals intend to participate long-term, what the long-term vision of the project is, whether this is a token we want to accumulate over time, what the cash flow associated with the token is, what a sustainable model looks like, and what emergency plans exist. All these different aspects with a more adventurous spirit are crucial for evaluating whether we participate in a project.

Participating in a product form should maintain a long-term mindset. If we indeed adopt a long-term perspective, I believe we will be less concerned about the initial yield we see on the project and more focused on accumulating tokens and supporting the project from its early stages. This is especially true for projects where liquidity is a significant factor.

The deeper their liquidity pools, the more they contribute to pricing power, and the more they can benefit aggregators and determine whether people are willing to trade directly with these platforms. These are all ways we evaluate projects."

Consensys partner Thomas Rush explained why he favors AladdinDAO.

He stated that AladdinDAO democratizes the investment process, with liquidity guided by dozens of members investing in different pools, and the investment process is completely transparent. This is what sets it apart from other projects and is one of the reasons he is interested in DAO projects. Transparency and democratization are the core values of decentralization.

DeFi Dad added: "The goal of AladdinDAO is to create a tool, a tool that helps newcomers to DeFi participate in this field.

You can think of it as an agreement among communities aimed at bringing the best investment opportunities to the community, and those selected as Boule members clearly possess more professional abilities to identify good projects. The projects they recommend are evidently more likely to yield lasting and stable returns. Investors can also learn from their experiences while participating in community discussions, learning how to identify good projects."

Vfat mentioned that AladdinDAO is significant for those without a technical background, as those who can read contracts will help those who cannot, leading to a more comprehensive judgment of projects.

Alex Pack remarked: "I think describing AladdinDAO as an investment information-sharing club is very apt. This club consists of a diverse group of experienced experts from different fields as Boule members, while another part consists of investors who are qualified to vote for Boule members, forming a democratic model.

We know that innovation often occurs in a republican parliamentary representative system. Over time, Boule members may grow to hundreds or even thousands, and their responsibilities will be further subdivided, with some focusing on strategic development, some on project research, and some on decision-making, etc.

I believe this direction is absolutely at the forefront of the DeFi industry and community development, and AladdinDAO is part of it."

It is no exaggeration to say that no traditional VC can conduct an election campaign similar to AladdinDAO. So—

2. What does AladdinDAO aim to do?

The answer is simple: invest in DeFi projects with smart people!

AladdinDAO is a decentralized network aimed at leveraging collective power and crowd wisdom to discover investment value, making investment transactions no longer just the privilege of VC capitalists.

AladdinDAO has a group of world-class DeFi experts known as "AladdinDAO Boule," who will identify, analyze, and determine the highest quality and most promising DeFi projects, which will then be presented to community members. In this model, the information asymmetry problem in traditional VC investments can be better addressed, while also further optimizing asset allocation in the entire DeFi industry.

When it comes to "decentralization," people may have a stereotype of it being chaotic, but in fact, DAOs are highly efficient organizations with clearly defined roles and functions. AladdinDAO has four roles:

1. Talent Hunter

AladdinDAO was initially supported by a group of "industry veterans" in DeFi, who are the first talent hunters within this decentralized autonomous organization.

Talent hunters can recommend potential Boule candidates to AladdinDAO, but each talent hunter can invite a maximum of 5 Boule members (including themselves, which is very important, as it means talent hunters can ultimately earn the highest rewards within the organization). If the Boule members they recommend perform well in DeFi projects, the "talent hunter rewards" will be higher.

2. Boule Members

Boule members are top DeFi experts, with 80% nominated by the first batch of talent hunters and 20% directly recommended by the AladdinDAO community (as shown below). All nominated Boule members must be elected by the AladdinDAO community through a decentralized governance voting process. Top Boule members will also have a promotion pathway to become talent hunters (ranked by cumulative contributions over the past six months).

Boule members are the most critical role in AladdinDAO. They are responsible for selecting quality DeFi projects, earning profits from the projects themselves, and also earning ALD token rewards by participating in the decentralized autonomous organization. There are two scenarios in which they can earn ALD token rewards:

1. The projects they support become high-performing pools;
2. The projects they reject turn into underperforming pools.

3. Strategy Developer

Strategy developers are mainly responsible for integrating liquidity mining programs into the platform and writing strategy contracts. They can earn ALD token rewards and a portion of mining rewards.

4. DAO Members

DAO members have no entry barriers; anyone can become a member of AladdinDAO, and every AladdinDAO community member can participate in project investments and earn returns through liquidity mining.

Based on these four roles, AladdinDAO has built a three-sided market (as shown below), which includes:

1. DeFi Projects
2. Decentralized Autonomous Organization (DAO)
3. Users/Farmers participating in yield farming (DAO members)

In this three-sided market, AladdinDAO's Boule members will select the most profitable DeFi projects for users/farmers (DAO members) eager to engage in yield farming. In return, they can earn AladdinDAO's governance token ALD, while DeFi projects can gain liquidity from Aladdin community members, ultimately achieving a "triple win."

With this unique mechanism design, AladdinDAO has the potential to extend its reach to a trillion-dollar market scale—catering to all potential DeFi market participants, each with different goals, incentives, cost structures, and levels of knowledge.

More importantly, AladdinDAO creates a virtuous cycle in this three-sided market:

1. The more "smart people" in the decentralized organization, the better the investment decisions made;
2. The better the investment decisions, the more quality DeFi projects and liquidity the platform can attract;
3. The higher the quality of projects and liquidity attracted by the platform, the greater the value that the platform token ALD can capture;
4. The greater the value captured by the ALD token, the more talent will be attracted to and settle in the community;
5. The more talent there is, the larger the scale of Boule members and DAO members will be;
6. The larger the scale of Boule members and DAO members, the more "smart people" there will be among them;
7. The more "smart people" in the decentralized organization, the better the investment decisions made;

…

So, how are high-yield DeFi projects selected and provided to the community?

In fact, anyone can submit a proposal for listing a DeFi project on the AladdinDAO platform. AladdinDAO will go through a very careful evaluation process to list it and vote on the most profitable projects before presenting them to DAO members.

Once a listing proposal is submitted, the DAO will review the relevant projects. As long as one Boule member recommends the project proposal, it will enter the voting process. It is worth mentioning that each Boule member has only 4 votes per month (which can be cast as either for or against), so they need to carefully consider whom to vote for, casting their limited votes for the projects they believe have the most potential.

For liquidity mining projects that can be listed on AladdinDAO, they must meet at least one of the following conditions:

1. More than 50% of Boule members participate in the vote, and the majority vote is "in favor";
2. The proportion of "in favor" votes must exceed the proportion of "against" votes by at least 20%.

If Boule members strongly disagree with a liquidity mining project being listed, they can request ALD token holders to vote. If the following two conditions are met, the relevant liquidity mining project will not be able to be listed smoothly:

1. More than 20% of circulating token holders participate in the vote;
2. Among the circulating token holders who participate in the vote, more than 51% oppose the project listing.

You might ask, if Boule members select high-yield DeFi projects, why share them with the community? Can't they just mine directly and earn profits themselves?

In reality, AladdinDAO has designed a powerful mining mechanism. As long as Boule members select the most profitable DeFi projects and share them with all AladdinDAO DAO members in the community, they will receive more rewards—these "extra" rewards come from the ALD tokens generated by liquidity mining projects through the Aladdin protocol.

Next, let's take a look at the three unique mining mechanisms of AladdinDAO:

1. Proof of Talent: Talent hunters compete to recommend the best DeFi talents (Boule members) to AladdinDAO, and they can earn rewards based on the overall performance of the recommended members;
2. Proof of Brain Power: Boule members compete with each other to find the most profitable liquidity mining projects for the AladdinDAO community. Boule members' rewards come from two aspects: one is the mining yield from the liquidity pool, and the other is the returns generated by the Aladdin community;
3. Proof of Liquidity: Any user/farmer (DAO member) participating in liquidity mining can enjoy one-stop services while earning rewards based on their contribution to the platform's liquidity.

AladdinDAO will also evaluate and rank the yield rates of DeFi projects during each yield period (epoch), ensuring that Boule members continuously research new quality projects rather than resting on their laurels with existing projects. Boule members with higher yield rankings have the opportunity to be promoted to talent hunters, while those with lower rankings may face elimination.

Frankly speaking, AladdinDAO resembles a kind of "social experiment." This decentralized organization "ingeniously" utilizes talent mechanisms and reward mechanisms to encourage Boule members to compete with each other, continuously bringing the best yielding DeFi projects to the community.

At the same time, this design also incentivizes Boule members to responsibly, independently, and with high conviction select DeFi projects, meaning that only those Boule members with the best judgment will receive the most rewards.

To invite more community users to contribute and share in AladdinDAO's success, they recently launched Boule Plus, a new type of community member. These community members can vote with ALDPLUS tokens to have minority voting rights and have priority to join the next Boule committee election.

ALDPLUS tokens represent the voting rights and reward rights of Boule Plus members. Users can stake 5,000 ALD native tokens to obtain ALDPLUS (ALD can be redeemed at any time, but redemption will affect subsequent voting reward distribution).

Voting in favor of outstanding pools or voting against underperforming pools using ALDPLUS tokens allows voters to share in a 2% token supply reward pool, and even incorrect votes will not incur any losses.

Boule Plus is actually an attempt by AladdinDAO to make this DAO community as inclusive as possible, aiming to involve the entire community without affecting previous designs.

In short, ALDPLUS is a token that generates floating bond yields to demonstrate the brainpower of community members. The higher the brainpower, the higher the APY.

3. Where is AladdinDAO's innovation? The Concept!

In traditional VC institutions, investment decisions are made centrally, which is efficient but has obvious drawbacks. In contrast, AladdinDAO aims to create the smartest and most powerful decentralized investment engine, fully leveraging the wisdom of the crowd and continuously "training" this decentralized talent network to organize chaotic investment information.

In fact, blockchain itself is a human capital coordination technology that can create and allocate financial assets globally at the lowest cost, and it has also created many new types of assets that did not exist before.

Most of the DeFi projects we see today are based on value exchange models, abstractly speaking, they are based on algorithms to exchange one asset for another. AladdinDAO introduces innovative investment concepts into DeFi projects based on value exchange models, turning human wisdom and decision-making abilities into a new type of productivity brought into the on-chain world.

Traditional VC investments are structured in a top-down tree structure, where investment decisions are primarily made by a few key individuals. However, in AladdinDAO, it transforms into a flat network structure, where every investment decision is made collectively by community wisdom.

From this perspective, the AladdinDAO token should be the first financial tool and crypto-native asset ever used to measure and trade human investment wisdom. The value of this token reflects the overall level of investment wisdom of the DAO. If you are a creative and smart person, you can join the AladdinDAO community, making the entire decentralized autonomous organization smarter while also earning rewards for sharing your investment wisdom.

So, who are the first "smart people" in the AladdinDAO community? Undoubtedly, they are the most heavyweight investment institutions and investors in the crypto community, including: Polychain Capital, 1kx, Alameda Research, CMS, Digital Currency Group, DeFi Alliance, Multicoin Capital, as well as Robert Leshner, Kain Warwick, Hart Lambur, Ashwin Ramachandran, Alex Pack, and Sharlyn Wu.

Among them, Polychain Capital is a participant in the $65 million financing transaction of DeFi exchange dYdX and a co-lead in the $314 million financing of Solana Labs. Digital Currency Group is the parent company of Grayscale, the world's largest crypto fund, and an early investor in the digital currency exchange Coinbase. Other institutions and investors have considerable recognition and impressive investment "track records" in DeFi and the broader digital currency field.

Polychain Capital partner Niraj Pant believes that investing in the form of a DAO can gather more diverse opinions to create higher value. He believes that in the long run, if all assets in the world are input into DeFi and the entire financial system, the world will operate through DeFi. Naturally, investments will also occur through DeFi and DAOs, which is why we are attracted to join AladdinDAO.

AladdinDAO's core contributor Sharlyn added that decisions in AladdinDAO are made by over 50 experienced DeFi individuals combined with community wisdom, which he believes will be superior to the traditional VC model that relies on 2-3 partners.

4. Will decentralized DAOs replace traditional VC institutions? Very likely!

It is no exaggeration to say that decentralized networks like AladdinDAO bring a new investment paradigm to DeFi and the broader crypto industry, allowing more people to easily access high-quality investment targets and earn returns securely.

For projects eager to raise funds, they need not worry that their investors are "novices" without industry backgrounds; on the contrary, the investors involved are all high-level "smart people." Compared to traditional VCs, this investment paradigm offers greater flexibility and significantly reduces the cumbersome and redundant investment processes within VC institutions.

In the blockchain field, DAOs like AladdinDAO, which have a broader grassroots base, are actually more advantageous than investment decisions made by a few elite individuals.

First, the members within a DAO organization are not just anyone; the entry threshold is relatively high, and most members can understand the feasibility of potential investments because they need to genuinely invest effort to select high-yield projects. Over time, they will gain practical experience in the DeFi field, which is key to a DAO's ability to choose the right investment projects and form effective support for projects.

Second, due to the absence of a hierarchical structure, DAO members have equal rights to choose, speak, and vote, fostering teamwork and enhancing mutual respect. Everyone's opinions and efforts have the opportunity to be showcased.

Investment projects are selected through fair voting, and investment decisions are made in a fair environment. This situation is rarely seen in traditional VCs, where a few partners can decide investment outcomes.

Finally, the saying "many hands make light work" holds true; compared to a few institutions and a handful of investors, the connections, expertise, and additional experiences and opportunities gained within a DAO community are invaluable.

Although the current decentralized DAO model of AladdinDAO is primarily applied in DeFi projects, the future potential is vast, as this model can not only expand to other types of crypto projects but can even extend into traditional industry investment fields.

Decentralized DAOs have taken the first step toward replacing traditional VC institutions. AladdinDAO is like a stepping stone; once this door opens, a broader path lies ahead.