Decentralised Autonomous Organisations are basically a flat-hierarchy group, that operates under a shared goal. Each member gets an equal share in the decision making, be it group purchases of NFTs or even decisions on how a business is run. Be it through the connection to existing groups, or the ability to create their own, brands and marketers have the chance to get in on the ground floor.
Just try to picture a big school of fish. Those fish swim together, eat together, make decisions through majority decisions, and head in the same direction together. Get caught in a net together. Vote 10-4 to leave the net. Get out of the net together. Well, at least I think they do. I don't know that much about fish - I'm no David Attenborough.
One (better) analogy of a DAO has been given by Travis Miller, a blockchain enthusiast:
"Imagine a vending machine that not only takes money from you and gives you a snack in return but also uses that money to automatically re-order the goods. This machine also orders cleaning services and pays its rent all by itself.
Moreover, as you put money into that machine, you and its other users have a say in what snacks it will order and how often should it be cleaned. It has no managers, all of those processes were pre-written into code."
So, essentially, DAOs are an entity that is represented by rules decided and controlled by their members. This means no central government or power is involved in the influence of decisions, meaning all governance is done as part of the collective. This decentralised nature means that DAOs are increasingly being thought of as the business model for Web 3.0.
According to Jason Yanowitz, co-founder of crypto trade publication Blockworks, DAOs have a "completely flat hierarchy", which are providing "a way to govern people differently around a shared balance sheet". So it is a brand new world for brands.
Some of the most forward-thinking brands are starting to consider DAOs as part of their business strategies for Web 3.0 and the Metaverse as a result. But to do this, marketers must see beyond the hype. That's why we're here to help.
Is there potential to build community, create brand new customer experiences, and improve content and publication within your brand? Or is it, as DAO pioneer Ameen Soleimani joked, little more than "group chats with a joint bank account"? Let's find out.
Oh most importantly: it's pronounced Dow, not Dee-Aye-Oh, as I said in the big team meeting today. Now, without any more interruptions:
The History of DAOs: How Did We Get Here?
The first DAO - unsurprisingly called The DAO - was created by a company called Slock.it, a German Developer. This organisation was built on top of the Ethereum blockchain and worked to connect physical world transactions to the blockchain, with the aim of allowing people to make property decisions and moves without a middleman.
By May 2016, The DAO held more than $150M in value. Just like today's iterations, owners of The DAO tokens were entitled to voting rights and would use these powers to decide on different projects to fund, enabling them to profit from investments. So, if you've cheated and moved ahead to the next section, you'll see they were an early version of an 'Investment DAO'.
The project was pretty short-lived, despite its precedence. Unfortunately, it was taken down by a security vulnerability known as 'recursive calls' being published on GitHub, which resulted in a hack on June 17th 2016. This led to a loss of a third of the DAOs investments up to that point. So, by September, the world's first DAO was no more.
But since then, the number of DAOs has increased and increased. In fact, as of January 2022, the total market capitalisation of all DAO tokens was around $21B, while the total number of DAOs was 4,227.
The Types of DAOs: What Is Out There?
There are a number of types of DAOs floating around in this day and age, including:
- DAO Operating Systems. These are the operating systems needed to create a DAO in the first place. So, these operating systems typically include useful templates, frameworks, and tools, on top of smart contracts and interfaces. What are smart contracts, I hear you ask?
A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. It's basically the backbone of all the decentralised technologies and concepts; it's the reason why the transactions don't have to rely on a middle man or the honour system.
- Investment DAOs. Investment DAOs are what they say on the tin. These enable members to bring together capital and invest in projects while still in the entry stages.
- Collector DAOs. Also what they say on the tin. These DAOs are used to collect digital artwork, projects, or NFTs, in order to cash in on long-term value. Take PleasrDAO, for example, which has been pooling funds to acquire culturally relevant digital art.
The collective paid $5.5 million for an NFT sold by Edward Snowden, which at the time was the fourth-highest-selling NFT ever, and placed the winning $4 million bid for the sole copy of “Once Upon a Time in Shaolin,” the Wu-Tang Clan album once famously owned by “pharma bro” Martin Shkreli.
- Grant DAOs. Grant DAOs allow members of the group to donate funds to specific projects and vote on how these funds are distributed to various contributors using governance proposals.
- Protocol DAOs. These DAOs provide networks with a framework that can issue a token that members can own and operate.
- Service DAOs. These groups use on-chain credentials to direct resources from one DAO to another. Basically, they allow for the creation of decentralised working groups for individuals and act as web 3 talent agencies.
- Social DAOs. Social DAOs focus on just that: the social aspect of DAOs. Instead of promoting financial gain, these groups are all about the community.
- Media DAOs. Media DAOs decide how content creators and consumers engage with the content, and turn content into a transactional relationship, allowing creators to reward their community.
Right, now we've done a big old definition of what DAOs are, let's ask: how can marketers utilise the potential of the concept to the fullest extent? Well, they might consider:
DAOs and...Funding and Advertising
DAOs can have a lot of money, be it crypto or otherwise. And if the majority of the group is willing to spend it, then they can be a pretty lucrative partnership.
Some publishers, like crypto trade publication Blockworks, have already begun pitching directly to DAOs with advertising opportunities, including offers for event sponsorships. Basically, some companies are recognising the potential of a group of people itching and willing to invest, all sitting on top of a big treasury of money.
“DAOs are becoming the new institutions. There are DAOs with more than $10 billion in their treasury [and] media companies have not recognized this,” said Jason Yanowitz, co-founder of Blockworks. He’s in the process of having Blockworks’ sales team learn how to sell to a DAO Discord channel.
DAOs and...Developing Social Media Strategy
Social media, at the moment, might be the most appealing aspect of DAOs for brands, as it ties pretty directly into marketing efforts.
As DAOs are community-focused 'group chats', each individual has a voice and a contribution, so the Voice of the Customer is pretty loud and pretty genuine. Each person has an equal ability to contribute and will receive the reward from the outcome of a decision.
Also, with a distinct community that bonds over a specific passion project, DAOs can be a pretty captive audience. For example, Friends With Benefits is an online social club DAO with nearly 2,000 members which is turning into a blossoming media empire through its music discovery platform, start-up incubator, and online crypto news publication.
FlamingDAO and PleasrDAO are other examples of mission-focused DAOs, both being groups of crypto investors who have teamed up to purchase and collect rare and expensive NFTs.
With a community built around a token, as we've mentioned before, members have an incentive to create a thriving, valuable, and collaborative community. So, this might look like the sharing of insights, hosting meetups, or even throwing parties.
Social DAOs might even use NFTs as the mechanism for unlocking access to a broader community, such as Bored Ape Yacht Club. Purchasing an Ape unlocks access to the Discord, NFT airdrops, and merchandise. So, the perceived value of the community drives value to the collection of NFTs. So, having this captive and thriving community can be an easy drop-and-drag audience for brands who attempt to collaborate with these projects.
DAOs and...Content and the Creator Economy
The face of content creation could change significantly with the development of DAOs.
Media DAOs put the control of content back into the hands of the producer, and out of the hands of the brand which hosts the content. Consumers also benefit from this, as they'll not only have more of a say over content but also more control of their data and how it's used. This moves away from the current model, which sees hosting companies harvesting data produced during consumption. DAOs may even allow individuals to get paid for the data they produce.
Brands will be able to choose between a number of different models in how they approach their content.
“Brands that employ either a Performer Content Model or Platform Content Model will be mobilizing their audiences toward community building around newly created DAOs."
While the Platform Content Model might be easier for businesses to identify with, based on developing a business strategy, the ability for businesses to pivot toward a Performer Content Model will benefit audiences more.
"This content model will help brands connect audiences with content that is focused on immersive experiences, one of the key ingredients that will be heavily marketed by brands looking to innovate in the metaverse."
As we've mentioned previously, NFTs can be utilised effectively within a DAO community. NFTs allow for a nice overlap between DAOs and brands, in that they both offer a monetisation model for both using content pieces.
Michael Ippolito agrees, stating:
"When you’re thinking about NFTs, I would buy them based on the community that underpins that NFT.
[Especially if] you get access to this community of people [and] they’re continuously experimenting with ways to add value to that community. That ties more broadly into a thesis about NFTs and how they and the media are going to combine in general.
I think NFTs are going to be a really interesting way that media companies to monetise in the future."
DAOs and...Changing the Customer Experience
It's also likely that this shift in how media is consumed and produced will change the landscape of customer experience. Michael continues:
Media is a changing landscape and people are subscribing more to individual people in general. I think crypto and some of these native things that we’re talking about – DAOs and NFTs – offer some pretty interesting solutions to media and I think they’re going to combine in interesting ways over the course of the next let’s say five or so years.
So, DAOs offer a way to connect with a community of people and get direct communication on what will make their customer experience better and smoother. It can remove any of the sticky, ineffective aspects of testing what works, and what doesn't, with a brand's community. Instead of decisions being made top-down, they are bottom-up. Changes to the customer experience can be made based directly on the majority's experience.
A lot of Web 2 platforms, such as Facebook, Twitter, and Instagram, have lost the trust of their users. So, some of today's internet users are looking to create these social organisations for a specific reason: trust and safety. Blockchain enables automated trusted transactions and value exchanges, allowing users to organise themselves in a safe and effective way, to work with like-minded individuals all around the globe.
DAOs and...Building Community
Okay, I know we've talked about building community a lot in this article. But DAOs offer such an opportunity for brands in creating a distinct audience and community.
To Amanda Cassatt, CEO and co-founder of web3-based marketing agency Serotonin. DAOs represent:
“A powerful alignment engine to collapse the categories of user or buyer, company or team, and investor into a single group that’s aligned and part of a community that cares about a certain artefact or a certain experience. And [they’re] all participating together,”
As members have to buy into a DAO, there's an incentive to keep the community impactful and effective. Using this approach DAOs can even offer customers the chance to be a part of a brand's success, and work to keep the brand successful.
DAOs rely on smart contracts to grant people the ability to control or direct the company's assets either directly or indirectly. Smart contracts and blockchain can keep track of the members of the organisations, and membership can be purchased or allocated as a reward in exchange for capital, use, rights, or resources.
Some DAOs even give members the right to a portion of an organisation's profits or losses. Others even provide their members with the right to access, manage, or transfer the resources or services that an organisation controls Membership can even be associated with specific privileges, providing individuals with the opportunity to engage in an organisation's decision-making processes.
Brans which utilise DAOs can even get ahead with customer-created content and engagement, using this content as a way to build community in a grass-roots, naturalistic way a la User-generated Content or UGC.
“One area where this can be really leveraged is in marketing/community engagement," said Jon Reynolds, marketing director for TreatDAO
"Users are constantly engaging with one another in the community, organically generating content such as memes, jokes or another signifier that you're ‘in the know’.
"Getting this organic content in a form that can be easily sent across various channels isn't too difficult, meaning that if your community is active and engaged, you have a fairly consistent source of organic content material for your social channels. This makes it easier to identify and align with the brand, both reinforcing current members' affinity and also drawing in new potential members!”
DAOs and...Transforming Customers Into Brand Advocates
Social DAOs give brands the chance to turn groups of loyal customers into contributing brand advocates.
“In general, DAOs have been proven to be effective coordinators, given there are volunteers ready and able to spend their time contributing to a cause,” added Jon Reynolds
But it's not just social DAOs that offer this opportunity. Service and media DAOs can give brands the chance to create third-party relationships with groups of users that would have compelling reasons to want this brand to succeed - as we've said earlier, they'll have a financial stake in the longevity and success of the business.
“I believe that brands will soon realize the wealth of value that engaging with DAOs across multiple elements of their business: marketing, branding, product development, product testing, fundraising, community engagement & management, customer support, etc!" said Jon.
"Similar to how brands have been purchasing NFTs to acquire citizenship in digital communities, such as Bored Apes, brands will reach out to form partnerships with specific DAOs."
DAOs and...Changing the Work Environment
Some people have been asking "can DAOs solve the great resignation?" Well, maybe.
The rise of DAOs may answer many individuals' demands for more autonomy and efficiency, due to the flat hierarchical nature of the whole thing. Because DAOs are governed by self-executing rules, deploying the tech as a workplace structure may eliminate the need for corporate oversight,
This means workers can begin to approach their workplace like stakeholders rather than employees.
How to Build a DAO
Step one: you've got to build a community. DAOs are a community-based and community-owned situation, so in order to get started, you need to build a group of like-minded individuals that share a common interest.
After this, you have two options: one, you create smart contracts and deploy them on programmable blockchains. You'll need a blockchain developer who knows about, well, blockchain development is required to do this.
Two, you can use DApps to allow you to develop and launch a DAO without being slowed down by the technicalities of the blockchain. These will assist you in getting your DAO up and running by providing services such as members management, treasury tools, and governance infrastructure.
Other tools you can use include:
- Gnosis Safe - A multi-sig wallet that is widely used to handle community treasury.
- CollabLand - Bots that offer token-gated access and tips in community channels.
- Parcel - Treasury management to track and send funds effortlessly.
- Tally - A governance platform to track on-chain vote history across various protocols.
- Sybil - for Delegating on-chain governance and keeping track of it.
- RabbitHole - A platform for rewarding tokens in exchange for completing on-chain work.
- Boardroom - A governance portal for token holders to enable critical decision-making.
- Snapshot - An off-chain voting platform for simple token-based management.
For building and engaging with the community
- Discord & Telegram: Platforms preferred by crypto and blockchain enthusiasts for building communities
- Coordinape - Coordination game to determine which contributors(s) deserve token rewards.
- SourceCred - Instance to track community participation and reward active members.
Right, you’ve managed to get to the end. Good job! Now it’s time for the most important bit: was the fish metaphor or the vending machine analogy better? Don’t worry about hurting my feelings.
But either way, it’s clear to see that DAOs, fish or candy, are going provide marketers with advantages for community-focused interactions, especially in the wake of a Web 3.0 revolution. Remember: brands that get in on the ground floor now will benefit significantly from quick action.