Do DAOs work?
Good morning! This Wednesday, the downlow on DAOs, Tim Cook made a secret $275 billion deal with China, and an AWS outage took out much of the internet yesterday, including this publication. Sorry about that!
The Tao of DAO
Decentralized autonomous organizations are the way that much of the crypto industry is ostensibly organized today. But some critics are asking whether these groups offer a new world of crypto coordination, or just a more risky way to do things that already exist in traditional finance.
Put more simply: Do DAOs work as promised?
DAOs enable people to form organizations with no central leaders, run on top of a cryptocurrency, for some collective purpose.
- They're often described as a way for people to avoid the hierarchical centralized systems in corporations or other large organizations.
- They also offer transparency through the recording of transactions on a blockchain and are often run through rules enforced by a smart contract.
- DAOs can be designed to be more loosely organized and easier to join than companies. (This makes it easier for people to drift in and out, too.)
- There’s now an industry that provides services such as starting a DAO, providing tokens to DAO contributors, running DAO votes on proposals, handling disputes and managing DAO treasuries.
But can DAOs take the place of the trusty LLC? Can they fund startups or replace crowdfunding campaigns?
- Advocates say that emerging tests of the model show it could bring more transparency and inclusiveness to businesses.
- Critics say that DAOs are not really doing much new, are often not legal and often rely on an assumption of never-ending growth to fuel themselves.
Crowdfunding is a popular use of DAOs. People can spin up a DAO for virtually any financial goal, like trying to address climate change, buying the U.S Constitution or buying an NBA team: A newly formed DAO called Krause House describes itself as a “community of hoop fanatics that are just crazy enough to buy an NBA team.”
- Some teams have started issuing tokens to give fans a vote on club decisions. And fan-owned professional teams are common in Europe and Latin America.
- In North America, they’re rarer, though the Green Bay Packers has long operated as a publicly owned nonprofit.
- But Krause House is the first to use blockchain-based organization as a path to ownership.
- And it’s attracted some serious investors, like Michael Lewkowitz, a general partner at VC firm Possibilian Ventures, who bought some of the DAO’s NFTs for 22.2 eth, or roughly $93,000.
The biggest challenge for DAOs might be their legal status, which is still unclear. That could mean that for some time, the DAO won’t replace the LLC: Instead, it will ride on top of that structure’s established protections. Expect a growth industry in legal advice for starting your DAO LLC.
A version of this story first appeared on Protocol.com. Read it here.
Additional reporting by Ben Pimentel.
On the schedule
The year in enterprise tech
Protocol's Tom Krazit will hold a panel discussion at 10 a.m. PT today with enterprise tech executives and experts to recap the biggest developments at AWS re:Invent 2021 and preview the trends and events that will shape 2022.
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People are talking
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Office re-openings are getting murky again. Meta and Lyft had both planned to re-open in the coming weeks, but both have now pushed the date back indefinitely. Expect more of this over the next few weeks.
Tim Cook made a secret deal with China, according to The Information. He supposedly signed a $275 billion agreement with the country years ago that promised to advance China’s technology and economy to avoid hostility from regulators.
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Ubisoft wants in on NFTs with the introduction of Quartz, a platform forNFTs of in-game items like clothing and armor. This makes it the first major game publisher to launch a crypto project.
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Airbnb created a mini version of Iceland, but it’s unclear whether booking with a gift card will just get you into a Miniverse version of the home, or if booking through the Miniverse will get you a spot at the actual, real-world house. But seeing a digital 3D version of an Airbnb before booking it would be a super practical use of the virtual world!
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