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By Rick Porter, CEO and Co-Founder of DSCVR
A year ago, DAOs seemed on the brink of revolutionizing governance.
Their numbers soared eightfold from 700 in May 2021 to more than 6,000 one year later, according to figures compiled by Snapshot Labs, the dominant governance voting tool for crypto projects. Governance proposals and voting volumes have seen similar substantial increases during the past 12 months.
Some even speculated that the DAO structure would one day take over mainstream institutions, from charities to governments.
Looking closer, though, the story is more nuanced. Individual snapshot votes may have grown from 448,000 to 3.7 million, but more than 65 percent of all proposals came from just ten percent of DAOs.
My personal observation suggests that participation rates are low. It is common to see DAOs comprising hundreds of thousands of people registering just a couple of hundred votes in a poll. In fact, research shows that for 99% of DAOs, fewer than 0.5% of governance token holders participate in votes.
So why is it that so many people join a DAO, get excited, and then disappear never to return?
The answer is staring us in the face. There’s no hook for them. DAO members may join in search of a community, but they’ll stick around only if that community is engaging.
To fulfill their potential, DAOs must become more social.
The fact that they aren’t is a problem. And one that in no way reflects the huge interest and excitement within these organizations, or within web3 itself. The truth is that DAOs as we currently know them are dysfunctional. Many people join DAOs full of enthusiasm and with much to contribute, but all too often do not meet with positive experiences.
This is in large part because the tools that currently support them are extremely technical. They’re focused on the mechanics of getting a DAO up and running, rather than on the element of human collaboration and community.
A DAO requires a group of people to work together. It’s a lot like forming a company – the creation of engaged and efficient teams is a prerequisite for getting anything done. If people don’t feel part of a whole, they tend to slack off, or quit. Successful businesses put time and effort into helping employees get to know each other, and to appreciate how the parts function together.
That’s how it should be with DAOs. Decentralized or not, they also require social alignment, engagement, collaboration, and a common purpose - not just a technical framework.
It’s important we fix this problem. The DAO model of distributed authority is a valuable new paradigm absent from the web2 world. It has the power to unite us behind a shared goal or interest – and give it heft when required. Breakout examples include Ukraine DAO, set up by web3 activists to provide support in the aftermath of the Russian invasion. Within days, it had raised millions of dollars worth of crypto that could quickly be accessed by Ukranians on the ground. And then there’s Constitution DAO, which was beaten to the punch in last year’s bidding to buy an original copy of the U.S. Constitution. But not before it had successfully raised – and returned – $47 million.
How was this different from straightforward crowdfunding? The fact that they were part of a DAO meant these donors would have had the right to vote on what to do with this copy of the Constitution, had they attained it, as well as how the organization itself should function going forward.
In the wake of their losing bid, Constitution DAO’s creators described it as “a beautiful experiment in a single-purpose DAO.” It certainly illustrated their power and utility.
Making the beautiful experiment work
At the moment, though, this beautiful experiment is hampered by an ineffective web2/web3 mashup. Blockchain-based DAOs are still resorting to legacy channels to share news and build community. It’s common for messaging around governance proposals, reminders to vote, and poll results to be circulated via a Discord channel, Telegram group, Twitter, or even email. It’s a very disjointed way of trying to grow interest and build community.
The question is, how do we get members of a DAO to become more involved, and to enjoy being productive in alignment with the shared purpose?
Well, we already have evidence that DAOs can do a great job. We also know that people love building communities. What if we integrate the daily active users of a social network with the economic organization of a DAO? What if DAOs just need to become more social?
The advantages are obvious. No more having to switch to web2 channels to get the latest news related to the DAO. No need to remember to check in with Snapshot to find a vote result. When web3 networks can become more social, members can stay up to date with governance within the same forum they use to consume and contribute content. This provides the foundation for organically grown DAOs with much higher engagement.
In my view, this is the obvious next evolutionary step for social media communities. DAOs will give these groups newfound autonomy. And social media communities in turn will provide DAOs with the recognition they deserve as the engines driving collaboration, shared interests, fun, and change in the world.
DAOs make sense for collectivized economics
There are other reasons a social community might consider becoming a DAO. In web2 social media, we’ve long seen communities organized for economic activity, whether that’s selling items on Facebook or non-profits promoting their campaigns across platforms. Similarly, wherever we see web3 communities organizing for collective action where rewards are a possibility, then there’s a strong argument for initiating a DAO.
Web2 social media platforms – think Facebook, Instagram and Twitter, among others – are failing to provide effective commercial tools for their users and, more importantly, for their communities. Facebook’s commerce, for example, is conducted via advertisers or through Marketplace. It controls all economic activity in rigidly defined systems rather than empowering communities with tools for economic action. Instead, users must organize activities on their own, forming groups to trade cars, watches, gold etc. But none of that economic activity is supported by a shared community infrastructure.
Another instance: Many creators on YouTube or Instagram want to reward their followers with giveaways. But it’s not an easy process – and there are no tools built into the platforms to make it easier. In web3 social groups, creators are able to build DAOs their fans can join, plus they can build more direct content channels and a streamlined way of rewarding and sharing with their communities. Monetization is also simplified – take tipping, for instance. Some web3 social groups are already receiving fees from tips sent within their community. Initiating a DAO would enable members to vote on how to use this income. Or automatically trigger pre-arranged actions.
The larger theme here is the enormous potential benefit to shape more equitable economics than those currently offered by web2 platforms. Web3’s cooperative ethos opens up a new paradigm: it gives these fledgling online communities a way to govern themselves.
Opportunities arrive when a community thrives
The recent boom in the popularity of DAOs is promising. They’re increasingly recognized as the way forward for online communities wanting to collectivize individual contributions behind a shared objective. They’re revolutionizing the potential for economic coordination between a distributed group of people. However, they often put the cart before the horse.
Sometimes a cause is so compelling that it’s enough on its own to justify setting up a DAO. To help Ukrainian refugees. Or protect a copy of the Constitution. Often, it’s just not.
The fact is it's a rare case where the first step should be setting up a DAO.
We need instead to let social communities coalesce around a shared interest or motive. Once a community is thriving, there may be opportunities for organization. A clearer vision will emerge. Crucially, one that’s shared.
Allowing a community to grow organically in this way, rather than trying to force it into a preconceived template, is I believe a more effective route to creating DAOs with real purpose, as well as higher levels of participation.
Let’s focus first on connection, community, and common ground. When that happens, DAOs will fulfill their potential.
Rick Porter is CEO and Co-Founder of DSCVR, a blockchain-based social network.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.