Comprehensive interpretation of investment DAO: or will it become the next trend?
Author: Marina｜W3.Hitchhiker
At the end of July 2021, a decentralized autonomous organization called "PleasrDAO" got together and spent up to $4 million to purchase the only extant copy of the Wu-Tang Clan album "Once Upon a Time in Shaolin." In fact, this is not the first time that PleasrDAO has spent a lot of money to buy collectibles. As early as June, the organization purchased the NFT of the original Doge meme for $4 million. PleasrDAO has millions of dollars of funds dedicated to investing in rare collectibles. It looks like a conventional investment company, but we all know that its biggest difference is that it runs on blockchain technology. The well-known DAO (Decentralized Autonomous Organization).
Recently, some DAOs have begun to attract the attention of traditional investment markets and encrypted KOLs, including billionaire Mark Cuban, who called DAOs the ultimate combination of capitalism and progressivism. A16Z, a well-known crypto investment institution, also specially led and arranged the investment amount for DAO, which is disclosed to be in the millions of dollars.
Driven by the big bull market in the encryption market in 2021, various tracks have begun to invest and raise intensively, and DAO has also attracted the attention of market investors in the past two years. Different from the corporate entity operation mode of traditional encrypted VC, Ventures DAO (which is what we usually call investment DAO) has also begun to shine, and the market has also begun to predict that investment DAO will become the next trend. The main reason is that this This approach frees talent from the traditional corporate framework, and if the community performs well in governance, each member can get a piece of the pie.
In addition to STEPN, a chain game hot spot in the recent market, there is also FOMO sentiment caused by CULT.DAO, a decentralized venture capital institution. It is difficult for ordinary users to participate in the investment in the primary market, especially when the market is overheated. The vision of CULT.DAO is to become the VC venture capital of Web3. Obviously, the current market is easy to rush CULT.DAO as a meme, which is also easy to see in its currency price.
This article will start with subdivided DAOs such as investment DAOs, start with its history and current situation, and explain several representative investment DAOs in detail, and finally summarize the possible problems and risks of investing in DAOs. The investment of large institutions has been rolled up, and the investment in DAO as another type of "investment subject" will of course be rolled up.
1. The history of investing in DAO
The emergence of the concept of DAO originated from a blog in 2013, in which blockchain developer Dan Larimer created the term DAC (Decentralized Autonomous Company), and he described DAC as an organization driven by interests, only It is nothing more than a charter defined by code that pays for the shares of a decentralized autonomous company to obtain the services of operation. A few months later, Vitalik coined the term DAO as we know it today in an article of his musings.
In May 2016, the first real DAO was established - The DAO (a crowdfunded venture capital fund). It is built with smart contracts on the Ethereum blockchain, and the coding framework consists ofSlock.ItDeveloped open source by the team, but deployed by members of the Ethereum community under the name "The DAO". The underlying logic of the DAO is to allow anyone who is involved in the project to promote their good ideas and opinions, and have the opportunity to obtain financing in The DAO. Anyone who owns DAO tokens can vote on these plans. If the project is profitable , then rewards will be obtained accordingly.
However, three months after the fund launched, it was hacked and a total of $50 million was lost in the incident. Unsurprisingly, the market also questioned the DAO's investment operation method. The theft incident was the first stumbling block in the development of the investment DAO. Then it was described in the judgment issued by the US Securities and Exchange Commission SEC on July 25, 2017: the tokens offered and sold by the "virtual" organization named "The DAO" are securities and are therefore subject to the federal securities laws . The report affirms that, unless an exemption is in effect, issuers of securities based on distributed ledger or blockchain technology must provide documentation to register the offering and sale of such securities, and that persons involved in unregistered offerings may also be convicted for violating securities laws. Take responsibility.
In other words, The DAO's offering is subject to the same regulatory principles as a company going through the IPO process. According to the SEC, The DAO and all of its investors violated federal securities laws. Although the DAO project has come to an end, its influence continues. The current blockchain development team should constantly look for ideas and methods from the example of The DAO.
2. Current status of investing in DAO
Now that DAO has developed to cover different businesses and needs, Coopahtroopa, an encryption professional who has been deeply involved in DAO for many years, once drew a pictureDAOAn overview map for 2021.
A report by Dovemetrics states that of the 84 investment DAOs included on the site, 561 investments have been made since those investment DAOs were established. The most active in 2021 are CSP DAO, DuckDAO, The LAO, and Metacartel Ventures. On average, an investment DAO makes 25 investments.
The 94 fundraising events announced in 2021 had at least one investment DAO participating, raising a total of $584 million. Judging from the ratio below, in 2021 it is mainly large institutions that will invest, and the proportion of investment in DAO is only about 11%, but this proportion also shows that investment in DAO is gradually gaining public recognition and attention.
From the perspective of investment amount, in 2021, the average investment amount of traditional crypto VC (except for investing in DAO) is 20.5 million US dollars, while investing in DAO is 6.2 million US dollars.
On the investment track, DeFi is still the favorite track for investing in DAOs. In addition to the enthusiasm for investing in DeFi in the entire encryption market, a large part of the reason is that some investment DAOs tend to provide funds to some DeFi lending agreements and DEXs. Members provide additional services.
Investing in DAO has become a way for the community to invest in early blockchain projects, but in order to avoid the supervision of the US SEC, investing in DAO now usually has on-chain components that manage DAO operations in the form of smart contracts and provide some legal liability protection for its members The off-chain component of the DAO, the legal structure of the DAO.
3. Several representative investment DAOs in the current market
official website
1、MetaCartel Ventures DAO
MetaCartel Ventures was founded in 2019 by Gabriel Shapiro, Peter Pan and Ameen Soleimani. Metacartel consists of a large group of crypto-native founders, builders, engineers, KOLs, and investors, and provides open source tools and applications to help the development of the DAO ecosystem. MetaCartel Ventures is currently closed to new members.
It has become one of the most popular and authoritative investment DAOs in the field, dedicated to investing in early-stage decentralized applications. They have invested in more than 40 dApps in total, and recently invested in Float Capital, Ceramic and KnownOrigin, etc.
official website
2、The LAO
The LAO is the first for-profit investment DAO launched by OpenLaw in 2019. It is composed of Ethereum enthusiasts and investors who recognize cryptocurrency. The DAO has no clear investment direction and track. In particular, OpenLaw leverages tools to create binding legal agreements and bind them to the execution of one or more smart contracts, including those that create and manage tokens. In this way, any tokens and smart contracts running on Ethereum have the force of law.
official website
3、Flamingo DAO
Flamingo DAO was founded in 2020 by members of The LAO, an NFT enthusiast dedicated to investing in and managing NFT assets, leading the way to enable its members to develop and deploy NFT-focused investment strategies. According to the Collection on the official website, Flamingo has purchased 140 series of NFT works so far, including blue-chip NFTs we are familiar with such as Cryptopunk/ BAYC, and NFTs released by luxury brand LV, etc. The overall coverage is relatively wide.
official website
4、DuckDAO
andIvanOnTechandBoxminingCooperation expands influence, after all, their fans are as many as 400,000.
official website
5、Angel DAO
AngelDAO was founded in 2020 and is operated and managed by a team of 4 people. In comparison, it is a relatively light DAO. AngelDAO is deployed on Aragon and Gnosis Safe. They invest in various blockchain projects, including blockchain protocols, DeFi applications, and DAOs, and have completed investments in 21 early-stage projects so far.
4. Advantages of investing in DAO
DAO is a major innovation in the encryption community, compared with traditional encryption VC investment:
Investing in DAO allows more people to participate in the investment process of early crypto projects
For a long time, large venture capital institutions or investors have been able to buy tokens at a relatively low price in the early seed rounds and private placement rounds of a project. After the project goes online, most VCs will sell it for profit. Long-term development will cause certain damage. However, the existence of investing in DAO can impact the selling pressure of traditional VC investment by providing opportunities for community users to invest in early projects, and can obtain the benefits of investing in early projects;
Investing in DAO can use the wisdom of the group to make strategic investment decisions
The DAO community can gather people from different professions and backgrounds from all over the world. Distributed offices make their investment decisions more flexible, and diverse community members can bring value-added contributions to the investment portfolio. For example, members of software engineers can provide interpretations and opinions from technical perspectives such as code; personnel with rich experience in community operations and marketing can help incubating early-stage projects quickly get out of the circle; members with excellent graphic design can help provide comfortable UI display interfaces, etc. .
Investing in DAO moved the operating investment funds to the chain, improving the transparency of investment decisions
The DAO community must manage investment funds and make and execute decisions by maintaining communication and voting, rather than having a centralized leadership group determine the direction. Invest in DAO Through the aggregation of smart contracts, use multi-signature voting or tokenized voting mechanism to provide funds for investment projects, all investment activities can be viewed on the chain, and many DAO tools have been born to improve governance.
Compared with traditional encrypted VC, the "in and out" of investment DAO members is more flexible
According to the smart contract deployment of different DAOs, any DAO member has the right to withdraw from the DAO at any point in time, but the traditional encryption VC requires investors to stay in the fund for a period of time.
5. Problems existing in investing in DAO
Legal and tax restrictions
Security Question
Security Question
The current DAO ecosystem is not perfect enough, and the possibility of hacker attacks is a big risk. One of the largest crowdfunding projects, TheDAO, lost a third of the 11.5 million ETH it raised due to a hack. If this happens, the absence of an investor protection system could lead to huge losses for individual investors.
Investment Authority and Efficiency Issues
Although DAO is called a decentralized autonomous organization, since every decision made by DAO needs to be voted on the chain, it is relatively easy for community members who hold a large amount of investment in DAO tokens Whether to invest in a project and withdraw, which deviates from the so-called concept of decentralization. In addition, a large organization may only need a group of people to sit down and hold a meeting to make a decision, and it does not need to put the investment decision-making process on the chain. Members may not know each other before, and the degree of awareness of the project is likely to be different, so the efficiency of decision-making will also vary.
Credit issues of investment projects
Although investing in DAO can avoid the selling pressure of large institutions after the investment project goes online to a certain extent, and the investment amount is relatively less than that of large institutions, but the lack of endorsement by large institutions and the uncertainty of early projects are also worth considering inside.
References:
References:
2、Why Encrypted Investments Should Be DAOized
