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DAO Funding, Facts, and Future 2023

Here is how organizations in this space are developing.

DAOsDAOs

Decentralized autonomous organizations (DAOs) are decentralized autonomous alternatives to traditional, centralized organizations. Currently estimated at having a total value of $24.3 billion, $21 billion of which is liquid assets, the DAO ecosystem is showing signs of growth. This may allow these organizations to develop new governance strategies and target real-world challenges.

As of April 2023, the total number of DAO governance token holders is 6.9 million, with 2.1 million active voters and proposal makers. Six DAOs have a treasury of more than $1 billion: Optimism Collective, Arbitrum One, BitDAO, Uniswap, Polygon, and Gnosis. Between 2019 and 2020, the number of DAOs grew by 660%. Workgroups have emerged as a popular approach, with $100 million invested into working-group labor in 2020, according to 10 organizations covered by Messari.

DAO categories solidify

As the ecosystem expands, distinct organizational categories emerge. These include:

  • Protocol DAOs govern a platform, exchange, or application. Some well-known examples include Uniswap, Compound, and Yearn.
  • Philanthropy DAOs aim to facilitate a philanthropic cause, organizations such as UkraineDAO vote and fund projects.
  • Grant DAOs, like Philanthropy DAOs, fund projects based on their established protocol and grant applications.
  • Collector DAOs are created to make a collective investment into a valuable asset. Well-known examples include ConstitutionDAO.
  • Social DAOs seek to build collectives or groups to solve specific challenges or simply to create communities.
  • Media DAOs are designed to develop a more democratic structure to media. These DAOs count BanklessDAO and Decrypt among their ranks.
  • Investment/Venture DAOs, much like traditional investments, aim to work together to make smarter investments. Boost VC and the LAO fall into this category.
  • Algorithm DAOs seek to utilize algorithms to solve specific challenges, such as trading. Examples include PowerPool and dHEDGE.
  • DSaaS seeks to provide decentralized software as a service. Examples of this include Aragon and Colony.

DAO structures and roles emerge

To work effectively, DAOs must be constructed to efficiently assign work processes and get things done while adhering to their protocols. To do so, DAOs often draw upon traditional organizational concepts and adjust them to fit the DAO ecosystem. Such roles include:

  • Members: Individuals and organizations who hold tokens or shares. This gives them voting power in decision-making, depending on the DAOโ€™s rules.
  • Proposal makers: Members who suggest projects to the DAO through official channels seeking funding or support.
  • Curators: These members are responsible for evaluating proposals and making recommendations before these proposals are put to the vote.
  • Voters: Often the DAOโ€™s token holders (stakeholders), these members can vote on proposals made in the DAOโ€™s ecosystem.
  • Stewards: Tasked with the role of implementing the decisions made by the DAO community, they work to ensure that the DAO operates effectively.

Additionally, subgroups within a DAO may be created to fulfill its aims. This includes working groups, which could be likened to cross-functional teams that are involved in specific projects. Essentially, they are the cogs that make a DAO tick and keep it running in line with its protocols. These groups can include engineers, marketing team members, and project managers who work in an agile-like environment with a decentralized approach.

As this concept of a working group is somewhat new, challenges exist in implementation and maintenance. DAOs are rapidly developing and their needs change rapidly, which means that working group members may not stay needed for long. This can also lead to the individual’s work being undervalued, as their overall contribution to a DAO is often for a limited period. Additionally, DAOs may need to compete for resources among each other, as expertsโ€™ time is limited. These challenges need to be addressed to ensure long-term sustainability.

DAO working group priorities

Messari recently analyzed the results of 10 DAOs that transparently reported their operational costs via Bitcoinโ€™s works team. This gives insight into current priorities and the focus of DAO working groups. With DAOs such as MakerDAO, ENS, Gitcoin, ShapeShift, and Balancer included in this research, we can observe that these DAOs consistently invested funds into these five focus-area categories:

  • Product and development (58%): managing the DAOโ€™s development, scalability, reliability, and security, product, and development works to ensure adherence to its protocol.
  • Growth (22%): getting more people connected to the DAOโ€™s work and increasing protocol usage membership in the DAO.
  • Operations (~12%): covering compliance, processes, and operations, this category was the third most funded for DAOs.
  • Marketing (~4%): from memes to merchandise, and other marketing tools, this section covers the activities needed to increase awareness and market a DAOโ€™s work.
  • Community (~2%): as DAOs are community-centered, it makes sense that budgets have allocations for this area. This covers such aspects as member engagement and educational activities.

Overall, in 2022, the DAOs reviewed allocated $102 million to internal work processes. These budgets reflect a focus on evolution and long-term support, showing that these nascent organizations wish to become more established.

Summary

DAOs are continuing to develop as trust in the organizational format grows. With a significant total treasury of over $24 billion at their disposal, 6.2 million token holders, and over 2 million active users, DAOs are currently experimenting with and establishing organizational practices to build sustainability while promoting development.

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CategoryFinancial, News
About the author
Maria Isabella

Maria Isabella

Maria is a writer and editor with a passion for technology, health, and lifelong learning. With over 6 years of experience in content creation for the fintech and wellness industries, and 10 years in the non-profit sector, as well as a Masters of Science in Development Management, she is passionate about combining tech and healthcare to make the world a better place.
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