DAO Track Research: The Origin, Evolution, and Future of DAOs

Author: echo_z

2021 was a year of rapid development for DAOs. From PleasrDAO's swift crowdfunding to purchase a well-known NFT, to a16z's investment in the pan-enthusiastic cultural community FWB DAO, a series of landmark events witnessed the evolution and vibrancy of this new organizational form.

The scope of DAOs initially focused on governance of DeFi projects, but has now expanded to various fields such as investment, crowdfunding, and interest communities, showing a trend where everything can be a DAO. Messari's 2021 year-end report even suggested that "if the theme of 2020 was DeFi, and the theme of 2021 was NFTs, then the theme of 2022 will be DAOs."

The popularity of DAOs undoubtedly breaks through people's original understanding of organizational forms, but what exactly is being reformed is still not clearly defined. Different people have different views on the essence and definition of DAOs. For example, Messari considers a DAO to be "an online fluid community, with assets managed by community contributors."

Bankless views a DAO as "a digital-native community built around a common mission," while a16z believes a DAO is "a network-native global group that shares resources, builds products, and works together around common goals." These definitions all emphasize that DAOs are "cooperative communities," but there is no consensus on core elements such as cooperation models and asset management methods.

In today's context where the concept of DAO has been generalized, it might be better to clarify the original context and connotation of this term. By doing so, we can discover how much misunderstanding we have about DAOs. The usage of the term DAO has actually deviated from its original meaning, but comparing such changes can help us better understand the essence of DAOs and the reasons for their rapid rise.

1. A Brief History, Definition, and Classification of DAOs

1.1 Brief History: The Early Definitions by Vitalik and BM

The three core terms of DAO are: Decentralized Autonomous Organization. "Decentralized" and "Organization" are relatively easy to understand; decentralization is the fundamental principle of blockchain, and distributed systems ensure the openness of the network. However, "Autonomous" is often overlooked.

In Chinese, DAO is often translated as "decentralized autonomous organization," where "autonomous" is easily understood as self-governance, but the original English expression actually means "automatically self-driven, without human intervention." Upon closer examination, none of the DAOs we discuss today, such as PleasrDAO, FWB DAO, or People DAO, seem to operate "automatically"; they are primarily governed by humans, with token distribution executed via blockchain.

However, in the genesis phase of DAOs, "Autonomous" was a very important concept, and the loss of this concept reflects the Web3 users' demand for "human governance."

The earliest discussions related to the concept of DAO came from the legendary figure in the blockchain space, BM (Dan Larimer). In 2013, BM compared the mechanism of Bitshares to a "DAC" (Decentralized Autonomous Corporation) when explaining it to people.

He summarized that the core of DAC is "having its own blockchain to exchange DAC shares (i.e., tokens)," and it must not rely on "any individual, company, or organization to own value," "cannot have private keys," and "cannot depend on any legal contracts."

DAC was BM's original creation. Although the definition is not entirely clear, it is worth noting that DAC is used to describe a complete product like Bitshares, viewing the product as a company that no longer relies on human management, embodying a clear Autonomous connotation.

Later, Vitalik borrowed and slightly adjusted this term, starting to use the concept of "DAO" in the Ethereum Foundation blog, believing that DAC is a subset of DAO, where DAC is profit-oriented, while DAO is not limited to this. Besides that, Vitalik and BM's understanding is generally aligned, with Vitalik defining DAO at a more abstract level.

According to Vitalik's definition, the core distinction of DAO and related concepts lies in whether it has internal capital and whether it is primarily autonomous or primarily governed by humans. Vitalik believes that the quadrant of DAO is: primarily autonomous, secondarily human-governed, with internal capital.

The presence of internal capital is mainly used to distinguish DAO from DA (Decentralized Applications), the latter representing systems like BitTorrent, which only have decentralization features but lack a corresponding incentive system. This point aligns with our current understanding of DAO, where assets are a core element.

The distinction between autonomy and human governance is the key here. Autonomy is relative to human behavior; the extreme form of autonomy is AI, which has no human intervention at all. DAO is primarily autonomous with secondary human governance to ensure the organization operates; if human governance becomes more prevalent, the organization will lose its Autonomous aspect and become a DO, i.e., Decentralized Organizations.

Under this definition, Vitalik and BM's basic understanding is consistent: the world's first DAO is Bitcoin, because Bitcoin has internal asset distribution, primarily operates through blockchain code automatically, and occasionally requires human intervention for decision-making.

Comparing the early definitions of Vitalik and BM with our current usage habits, it is evident that the DAOs we refer to today do not strictly demand their Autonomous connotation. The DAOs we discuss now often detach from specific products and refer to a shared community, where "human governance" is inevitably an important part rather than a supplementary one, leaning more towards what Vitalik described as decentralized organizations (DO).

Two comparisons can further highlight this change.

Vitalik mentioned an interesting point using Bitcoin as an example: Bitcoin is closer to a DAO most of the time, but during the 2013 fork incident, it resembled a DO more: at that time, due to code version upgrades, some miners did not upgrade, resulting in two chains, and ultimately, the community decided to revert to the original version.

If we consider this event today, we might think of it as a typical DAO governance case, while at that time, Vitalik would have viewed it as reflecting Bitcoin's lack of Autonomy.

BM specifically pointed out that China's Babit claims to have a member DAC, but this is clearly a misuse of DAC, as Babit centrally screens its members. Centralized screening—doesn't that sound familiar? Isn't this exactly the membership admission threshold that FWB DAO is praised for? However, today, it seems no one would accuse FWB DAO of not being a DAO.

In the early definitions, DAO had a strong connotation of removing human will, emphasizing that projects operate automatically based on code rules. However, as time has progressed, the Autonomous aspect of DAOs has weakened, gradually becoming DO. When did this transformation occur?

The discussions between Vitalik and BM took place around 2013-2014, and the first well-known project that implemented the concept was The DAO in 2016. Besides sparking discussions about blockchain values due to a hacker attack, another significance of The DAO may be that it initiated the shift of the DAO concept from pointing to complete products to pointing to human-governed organizations.

The core operational mechanism of The DAO was to crowdfund ETH through smart contracts and exchange DAO tokens, granting participants voting rights. Once the voting passed, tokens would be automatically allocated for investment through smart contracts. The distinction of The DAO from past DAO concepts is that it introduced a voting process reliant on human actions, but the similarity is that the voting results would still be automatically executed on smart contracts, retaining the essence of Autonomy.

As time progressed, the human governance aspect in DAOs became a retained project, but whether the decision results are automatically executed is no longer a necessary condition—referencing PleasrDAO and ConstitutionDAO, bidding for NFTs and the U.S. Constitution copy are all human actions, and the projects cannot rely on any code for automatic execution. The increasingly weakened Automation in DAOs has become mainstream today, but it is in such an environment that DAOs have begun to acquire new meanings and vitality.

1.2 Definition: Current Usage Habits and Core Elements

From the strict definition of DAO to its current generalized usage, the most core change is that what people typically recognize as DAO now includes increasingly more "human governance," while the meaning of self-governance has weakened.

From a fundamentalist perspective, today's DAOs are essentially DOs. However, as customs evolve, we might as well accept the term DAO, absorbing its initial connotation while examining the principles behind the emergence of current projects to abstract a new definition.

Most DAOs that have emerged in the past two years have arisen from the need for people to collaborate on certain tasks. For example, PleasrDAO initially aimed to gather funds to purchase an NFT, FWB DAO was created to connect people with shared interests, and Curve DAO was established to collectively decide on LP pool yield rates. The interaction and joint decision-making among people are common reasons for the emergence of these DAOs.

Another necessary condition is blockchain technology, which allows people to achieve automatic accounting and distribution of the organization, equivalent to having a shareholding mechanism. Thus, an operational entity that realizes automatic capital distribution through blockchain has been born.

Combining Vitalik's insights from 2014 and current usage habits, Chain Tea House summarizes DAO as a new type of human cooperation model, with core elements including:

• Having internal capital to incentivize participants' behavior through profit distribution, ensuring the organization operates

• Having a certain degree of autonomy, meaning the ability for automatic decision-making and execution that does not rely on human will and actions

• Having a certain degree of human governance, and the human governance model is decentralized, meaning all members have a way to participate in decision-making

There is no doubt that incentivizing participants through internal capital is the cornerstone for ensuring that participants act in favor of the organization's development.

The latter two points summarize the evolution of DAOs. Compared to Vitalik's 2014 definition, the ratio of autonomy to human governance is more flexible here, treating autonomy as a necessary parameter greater than 0 rather than the primary component. In actual DAO cases, the autonomous part is usually reflected in the automatic distribution of tokens on the blockchain, such as crowdfunding ETH to exchange for project tokens, ensuring immutability.

Regardless, a certain degree of autonomy is essential; otherwise, it becomes entirely human governance. In Vitalik's definition, even DOs rely on blockchain; perhaps he believes that organizations without any autonomy cannot achieve true decentralization.

Many people assume that DAOs are organizations built on blockchain, but from a more essential perspective, the core is organizational autonomy; blockchain is merely a means of achieving autonomy, and there may be new ways in the future. Conversely, if blockchain devolves into a form of project speculation and loses its connotation of autonomy, it also deviates from the original meaning of DAO.

The discussion about human governance arises from recent DAO practices. In early definitions, the human governance aspect was marginal, with few models to speak of, but now, human governance is an important part of many DAOs and has given rise to various cooperation models, making it necessary to define the concept of human governance.

Human governance encompasses two layers of meaning: decision-making and actions.

Regarding decision-making, it is worth discussing whether the current DAOs, which are organizations built around people, consider human voting decisions as a form of organizational autonomy? Our stance is negative.

Although The DAO also had a voting process, the investment project decisions were within the scope of the rules, not external decisions. In contrast, many current DAOs allow for almost limitless expansion of decision-making scope, enabling the initiation of new projects or even determining the organization's development direction. These cannot be defined within the organizational rules and are essentially external human will.

Thus, the core distinction between human governance and autonomy is that human governance can break through the rules. If the scope of voting decisions falls within clearly defined rules, it can be considered autonomy; if it lies outside the rules, it is human governance. This also determines that the evolution of DAOs under human governance will be extremely complex and rapid, with different DAOs exhibiting unique human governance models.

The behavioral aspect is easier to understand; for example, the actions of DAO participants in bidding require human completion and cannot be executed automatically by code. Therefore, the definition of human governance is "discussing and deciding on organizational development by humans outside the initial rules, and executing all decisions that cannot be automatically executed."

Another issue brought about by human governance is the definition of "decentralization." In the context around 2014, DAOs referred to products built on blockchain, which were inherently decentralized. However, with the introduction of human governance, decentralization is no longer self-evident. Fortunately, when people understand DAOs, they usually compare them with traditional companies, and DAOs typically allow all members to have a certain degree of decision-making power, which is much higher than that of traditional companies.

In a strict sense, not all DAOs are decentralized. For example, FWB has a 15-person review team to screen all membership applications, which has a certain degree of closure, but this characteristic has been accepted by most people. Therefore, in our definition, the human governance model must achieve decentralization in members' participation in decision-making rights, but does not require complete openness.

With this definition, we can more clearly articulate the functions of DAOs: to incentivize participants' behaviors to align with organizational goals through profit distribution and autonomous protection (rather than protection through laws or other conditions), and to achieve collective decision-making among members through a decentralized human governance model, thereby realizing a cooperative organization where members share management rights.

1.3 Classification: Five Main Types Based on Usage Scenarios

From the functions of DAOs, it can be seen that all organizations requiring human cooperation can be established in the form of DAOs, thus the usage scenarios of DAOs will be extremely broad. By categorizing the main usage scenarios of DAOs, which are people's cooperation goals, Chain Tea House has classified DAOs as follows:

• Project Governance DAOs: Governance communities established based on an independent product, such as CurveDAO in the DeFi field.

• Resource Scheduling DAOs: Raising resources to achieve common goals, such as MetaCartel focusing on Dapp investments, PleasrDAO focusing on NFT collections, ConstitutionDAO crowdfunding to bid for a copy of the U.S. Constitution, and YGG DAO purchasing large gaming NFT assets.

• Cultural Interest DAOs: Users gather around similar cultural interests for social interaction but do not have a single fixed purpose, such as FWB DAO.

2. Typical DAO Projects Overview

2.1 Project Governance DAO: CurveDAO

After the DeFi Summer in 2020, a series of leading DeFi projects like Compound, Aave, and Curve launched governance, pioneering project management through DAOs. CurveDAO is a typical representative, and it has gained attention due to the Convex War brought about by its voting rights.

CurveDAO was created based on the Aragon framework, but unlike the usual one-token-one-vote mechanism, CurveDAO adopts a time-weighted mechanism: CRV holders can lock their CRV to obtain voting tokens (veCRV), which cannot be traded and can only be obtained through locking. The locking period can be from a week to a maximum of four years; the longer the locking time, the greater the voting power, and the weight gradually decreases as the locking period approaches.

The longer the lock-up, the higher the trust in the project. Through this design, Curve allows users who lock their tokens for a long time to gain greater voting weight, addressing the issue of projects being solely guided by large funds.

Voting with veCRV can determine the incentive parameters of mining pools, thus this governance right has a significant profit space. Many DeFi projects incentivize veCRV holders with their own tokens to guide them to vote to enhance their token pool's incentive parameters.

Convex also offers incentives with its token CVX, guiding users to stake CRV on the Convex platform, thereby gaining governance rights over Curve, even reusing the CRV locking mechanism, stipulating that users who lock Convex tokens CVX can vote on Convex, leading to a secondary power struggle on Convex.

Here we see an interesting phenomenon: since CurveDAO is a blockchain-native, open, and unreviewed DAO, anyone willing to hold and lock CRV can participate in governance, leading to a very broad range of participants, and the governance rights of DAO members can even be treated as a commodity to compete for.

The admission threshold for project governance DAOs is generally very low; usually, as long as one holds the project token, they can participate in the DAO, and governance rights will determine the interests of project participants. Therefore, a market for the buying and selling of governance rights may emerge. In contrast, other types of DAOs tend to have a certain degree of closure, and the distribution of governance rights is more fixed.

2.2 Resource Scheduling DAOs

2.2.1 Investment DAO: MetaCartel

MetaCartel is a DAO that invests in early-stage Dapps and has invested in several projects, including Gelato, Rarible, and Pocket Network.

MetaCartel is protected by both smart contracts and legal entities: on one hand, it uses the Moloch V2 smart contract framework, and on the other hand, it has registered as a legal entity. It describes itself as similar to an open-source software project combined with an angel fund. Investment amounts range from $20,000 to $100,000.

The organization is divided into three types of people: the first type is active contributors, mainly responsible for project scouting, due diligence, investment decisions, etc. If these individuals become inactive in the DAO, they may be forced to exit the organization, but they can also choose to leave at any time.

Funds can be redeemed on the blockchain; the second type represents the "official investors" of the legal entity, who do not need to contribute actively like the first type; the third type provides legal, financial, and other services for the DAO, charging fixed fees, and may not necessarily be DAO members.

In summary, MetaCartel consists of two types of people: the first type are blockchain-native DAO members who complete investment tasks primarily relying on blockchain; the second type resembles modern company employees, ensuring the DAO's interaction with the real world in legal and financial matters.

MetaCartel's DAO integrates the genes of Web3 and the traditional off-chain world, representing a hybrid model. Compared to traditional funds, MetaCartel's fund management is conducted on-chain, providing a member exit mechanism without review, and the fund management model is entirely different.

It also emphasizes collective decision-making among members, exhibiting a stronger flat management style; conversely, compared to blockchain-native DAOs, MetaCartel has strong interactions with the off-chain legal world, possessing a legitimate entity status.

MetaCartel currently has over 60 DAO members, with an admission threshold of 10-200 ETH for individuals (5 ETH minimum for women) and 50-200 ETH for organizations. New members must pass the review of existing members.

2.2.2 NFT Collection DAO: PleasrDAO

PleasrDAO is a digital art collection DAO dedicated to collecting digitally significant artworks. Its token is $PEEPS, with a current circulating market value of approximately $15 million.

PleasrDAO originated from a group of users who formed a crowdfunding organization to bid for an NFT by the artist pplpleasr. Pplpleasr is known for creating promotional works for several leading DeFi projects like Aave and Uniswap, auctioning an NFT of the promotional video "x*y=k" created for Uniswap V3.

Users began to gather on Twitter to crowdfund ETH and quickly issued the token $PEEPS as proof of crowdfunding, ultimately purchasing the artwork for 310 ETH (approximately $525,000 at the time).

Subsequently, PleasrDAO also purchased the famous meme expression doge NFT for 1,696 ETH (approximately $5.5 million at the time) and attempted to share the NFT: splitting it into billions of fungible tokens and selling these tokens to achieve NFT sharing. Currently, the doge NFT project has a circulating market value exceeding $80 million, shared by over 7,000 addresses.

PleasrDAO continues to explore new initiatives and even incubates new DAOs. At the end of 2021, PleasrDAO established FreeRossDAO, aiming to purchase NFTs of Ross Ulbricht and split them for broader ownership, with all funds donated to save Ross. Ross Ulbricht, the infamous founder of the dark web market Silk Road, was arrested in 2013 and charged with multiple crimes, ultimately sentenced to two life terms plus 40 years without the possibility of parole. FreeRossDAO purchased a series of NFTs from Ross for 1,446 ETH, and the current circulating market value of this project is around $3 million.

PleasrDAO currently has about 80 members, with no public entry channels, but individual positions are disclosed.

2.2.3 Crowdfunding DAO: Constitution DAO

ConstitutionDAO was established to crowdfund the purchase of a copy of the original U.S. Constitution, with participants receiving voting rights for managing the Constitution copy. ConstitutionDAO raised a total of $47 million but ultimately lost the auction. The core team is no longer operating the DAO and has opened up all funds for redemption.

ConstitutionDAO is a rapidly assembled civilian DAO with a clear action goal. Although it was hastily established and its framework is not complete, compared to traditional crowdfunding, the fundraising and redemption of ConstitutionDAO were executed transparently on the blockchain.

However, ConstitutionDAO still relies significantly on the off-chain world, partnering with the non-profit organization Endaoment from the outset, which assisted it in the Sotheby's auction. The DAO also established a limited company to avoid issues with the collaboration with Endaoment. Furthermore, the DAO's fund management is relatively centralized, with the wallet managed by 13 core members, requiring at least 7 signatures to access the funds.

2.2.4 Gaming Guild DAO: YGG DAO

Emerging in GameFi, the gaming guild YGG established YGG DAO in 2021 and released its token $YGG as a membership credential and governance token, with a current circulating market value of approximately $3.4 billion.

YGG's core business model is to purchase NFT assets in P2E games and rent them out to other players for profit. The change of YGG DAO compared to the original guild model is that it gradually migrates the guild's functions to smart contracts, achieving automatic DAO operation. YGG aims to transfer functions such as player rewards distribution, asset management, and NFT leasing to the blockchain, where $YGG token holders collectively vote on decisions and execute them automatically.

Additionally, YGG DAO will customize separate SubDAOs for major games, with each SubDAO having its own rules but still contributing revenue to the overall YGG DAO. Customized SubDAOs will have a dedicated player manager, their own wallet and tokens, and can borrow NFTs from the YGG treasury.

Through this approach, YGG expands the number of participants in decision-making and automates some of its functions. However, YGG's current asset management method is still relatively centralized, requiring at least two of the three co-founders to jointly sign for asset transfers.

YGG DAO Ecosystem Diagram

2.3 Cultural Interest DAO: FWB DAO

FWB DAO initially originated from a private Discord channel of a small group of Web3 enthusiasts and gradually developed into a global community. FWB DAO has its own token $FWB, with a total supply of 1 million tokens and a current circulating market value of approximately $50 million.

As mentioned earlier, FWB has set a high community admission threshold. Applicants must first write a self-introduction, pass the review of a 15-person team, and then purchase 75 $FWB tokens to join, which are currently valued at over $3,000.

The community has a shared mission: to inspire creativity and sharing among Web3 users. Within the community, members share discussions on themes such as art and food, and have jointly initiated and executed several projects, such as developing a ticket product verified by wallets, incubating and exhibiting NFT works, and establishing a real-time dashboard for community dynamics. In 2021, FWB DAO received investment from a16z, although the amount was not disclosed.

NFT works incubated by FWB DAO

The operational model of FWB is as follows: members are generally divided into team leaders, active contributors, and community members. Team leaders lead different teams to complete projects, including the aforementioned NFT incubation and product development; active contributors help implement projects; and broader community members can participate in proposal governance.

Additionally, there is a Board composed of some employees, community members, and advisors, which decides the strategy of FWB DAO. Each team leader regularly applies for a budget, and decisions are made based on proposals on Snapshot. FWB DAO has its own asset wallet, with keys managed collectively by core members.

Division of labor in FWB DAO

3. Conclusion: The Value and Trends of DAOs

This article outlines the evolution of the definition of DAOs from early stages to today's usage, pointing out that DAOs represent a new type of human cooperation model, with core elements including internal capital; a certain degree of autonomy, meaning the ability for autonomous decision-making and execution that does not rely on human will, typically represented by smart contracts; and decentralized human governance, meaning all members have a way to participate in decision-making. Summarizing mainstream DAOs reveals several types of distinctions.

Project governance DAOs are native DAOs based on blockchain projects, where voting decisions are related to the progress of the project itself, relying on product governance communities. This type of DAO has the highest degree of on-chain and autonomous governance, and the admission threshold is generally low, resulting in a relatively high degree of decentralization, which can lead to governance rights being influenced by interests.

Project governance DAOs have also pioneered the operational model of project communities, serving as an important means for Web3 projects to incentivize community member participation and form project moats. It is foreseeable that this model will be very common in the future.

Resource scheduling DAOs have relatively lower degrees of decentralization and autonomy. Some have high closure, such as PleasrDAO and MetaCartel, which have high admission thresholds and fixed membership among a few people; others, while having low thresholds, still have a relatively centralized core management team, such as YGG DAO's assets being managed by three co-founders and ConstitutionDAO's assets and strategy being handled by the core team.

Moreover, many DAOs require assistance from the off-chain world, such as ConstitutionDAO needing other organizations to represent it in bidding, and many activities cannot be automatically completed on-chain. Resource scheduling DAOs function very similarly to traditional crowdfunding and small companies, but by leveraging blockchain, they achieve transparent and public asset management, likely becoming a new model for many organizations in the future.

Cultural community DAOs are similar to resource scheduling DAOs in terms of decentralization and autonomy, but with weaker purpose, resembling social and cultural experiments. The development forms of cultural community DAOs are the least stable; if they produce fixed products or clear purposes, they may transform into project governance DAOs or resource scheduling DAOs.

Compared to past organizational models, DAOs achieve larger-scale decentralization of decision-making power through blockchain-based asset management and partial decision execution, aligning with the open spirit of blockchain. Although DAOs still face issues such as unclear legal status, the efficiency, flexibility, and transparency that DAOs possess will undoubtedly provide them with vast evolutionary space.