DAO The Evolution of Organization 

DAO The Evolution of Organization

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DAO The Evolution of Organization

The DAO Phenomenon and Why It’s Important

Knowing what to look for can help future investments

The top graph shows the DAOs tracked by CoinMarketCap’s DAO Index vs. the total market capitalization. DAOs are not
immune to global economic conditions and have reacted similarly to traditional markets from 2021 through Q3 of 2022.
Some DAOs have produced a better return on investment (ROI) than Bitcoin (BTC). Not all DAOs are highly correlated
with major cryptocurrencies. For example, Curve DAO (CRV) can improve a Bitcoin portfolio’s risk-adjusted return since
their daily price movements do not move together often. This means there may be investment opportunities for those
who know what to look for, and this report can help provide a starting point.

Cointelegraph Research continues to bring up-to-date reports on the cryptoverse

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Michael Tabone

Sr. Economist at Cointelegraph Research

$60B
$40B

Number of DAOs
Market Capitalization

80
60
40

$20B
$0

20
2018

2019

2020

2021

Number of DAOs

DAOs can be a more efficient form of organization

DAOs are the frontier of coordination. Even though we are individuals, we work together in order to survive. Decisions
for how to deploy resources such as capital and labor can be made collectively in a transparent way with the blockchain
technology. Members of DAOs can propose ideas and vote on how to use community savings. This reports provides a
glimpse of how our society can function in the future without top-down structures. DAOs are a powerful way to make
resource allocation more efficient, and there are many examples of DAOs that have already fostered a higher standard
of living for its members. If you want to know how DAOs are shaping democracy, corporations, this report is a must-read.

Market Capitalization, USD

The blockchain industry is still maturing, and every day, new applications of the technology are being created. Over the
past few years, decentralized autonomous organizations, or DAOs, have captured the imagination of the blockchain
space. DAOs are disrupting investment, corporations, social clubs, and even political parties. But what exactly are DAOs,
and why should the average crypto investor care?

Figure 1: Market Capitalization and DAO Index Based on CoinMarketCap Data

2022

1
90-Day MA Correlation

Dear Partners, Investors and Friends,

2

0.8
0.6
0.4

DAOs-Bitcoin
DAOs-Ethereum

0.2
0
−0.2

2018

2019

2020

2021

2022

Source: CoinGecko, CoinMarketCap, Cointelegraph Research

Cointelegraph Research constructed a value-weighted index of DAO tokens that
includes large projects, such as Aave, Uniswap and Dash, but also a variety of
smaller DAOs. Although this does not represent the entire DAO space, which
comprises several thousand organizations, it yields some insights as to how DAOs
move independently from major cryptocurrencies such as BTC and ETH. The chart
above shows that the correlation of returns has been rather high during the Bitcoin
hype of late 2017 but high during the bear market that followed. Since late 2019,
the picture has been more nuanced, with a lower correlation during the bull
market of 2020 and 2021 but a high correlation in the early 2022 slump. Notably,
the correlation to Ether has been consistently higher starting in mid-2020.

Table of Contents & Key Highlights
DAO 1.0

How It All Started: DAO 1.0
Decentralized Authority if the Key to a True DAO

DAO 2.0

The Next Step: DAO 2.0 Blockchain Governance Innovation by Dash
Smart Contracts and DAO 2.0
DAO 2.0: Lessons Learned and “The DAO” Case Study

DAO 3.0

Rise in Infrastructure Sparks DAO 3.0
DAO 3.0: Scaling, Adoption, & Use Case – DeFi and Tooling
DAO 3.0: Scaling, Adoption, & Use Case – Social and Metaverse
Popular Blockchains for DAOs
Tokenomics
Governance
Key Metrics
Key Metrics — Continued
DAO Token Correlation and Return vs. Bitcoin
DAO Token Correlation and Return vs. thereum
Cast Study: Olympus DAO
C Investment in DAOs
Some Notable Investors In The Top Ten DAO Funding Rounds
Treasury Analysis
Bounties, Contributions & Governance: How DAOs Get Things Done
Case Study: Coinshift
Social Media Tools DAOs Use To Communicate
All of DAO 3.0 Case Study: Alien orlds
Is Alien orld a Glimpse of DAO 4.0
Legal Considerations for DAOs: Risks & Drawbacks
Conclusion
Authors

E

V

W

?

W

?

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Page 3
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5

3

Key Highlights

$20 billion

As of mid 2022, there are currently
.

over 4,000 active DAOs with a market capitalization of around

fi

1.0 was the pre-Digital
3.0 was an explosion

Cointelegraph Research identi ed three eras of the evolution of DAOs where
Revolution and Bitcoin,
was the advent of blockchain smart contracts, and
of DAO infrastructure growth.

2.0

hacked in 201 for $ 0 million

There was an early example called “The DAO,” which was
6
6
worth of
ther and eventually caused a major fork. Today, this split can be seen in the different protocols of
E
C
E
.

E

thereum lassic and thereum
In 2022, 40% of all DAOs are focused on decentralized finance (DeFi), but this is not the only
application of a DAO.

gaming

, politics 4 , art culture
s at 1
Ethereum is the most popular blockchain for building DAOs, with 83 of the top 100 governance
tokens by market capitalization.
Venture capital (VC) investment into the DAO space reached a local peak in Q1 2022 at over $160
million.
DAOs have respectable treasuries. Uniswap has a liquid treasury of around $1.5 billion, and
BitDAO is sitting on $1.3 billion at the time of writing.
Over 50% of DAOs hold USD Coin (USDC) (a cryptocurrency pegged to the United States dollar on
the Circle protocol), with close to 45% of DAOs holding MakerDAO’s stablecoin, Dai, and over 40%
hold Wrapped Ethereum (wETH).
Alien Worlds, an NFT game where six different DAOs interact in the game and compete over
limited resources, is the highest active non-DeFi decentralized application (DApp) by transaction
volume, according to DappRadar.
DAOs can be applied to all different spaces, including
(5%)
( %)
&
(6%), and the second largest focus for DAOs are nonfungible tokens (NFT )
7%.

DAO Timeline and Report Road Map

4

Academic journals
talk about
decentralization in its
application in
business, preInformation Age.

The term decentralized
autonomous organization is
coined when talking about digitally
integrated houses in the context
of the internet of things (IoT).
These ideas gave birth to DAO 1.0.

Satoshi Nakamoto releases the
Bitcoin white paper and mines the
Genesis Block on Jan. 3, 2009. The
Bitcoin network is said to the first
example of a DAO.

Father and son, Stan and Daniel Larimer, present the

Multiple whitepapers were published
between 2013–2014 including Ethereums

1960–1970

1997

2008–2009

2013

2013–2014

Page 6

Page 6

Page 7

1.0

idea of decentralized autonomous corporation (DAC) as
an “unmanned company” that operates without human white paper, explaining how the promise
involvement, which operates by business rules running of Bitcoin can be improved upon through
smart contract application.
on code that would be incorruptible or “sovereign
corporations governed with inhuman integrity.”
Page 7

Page 7

2015

“The DAO” is launched in 2016 and
hacked for 3.6 million ETH ($60
million at the time). A hard fork
takes place, breaking the Ethereum
chain into two seperate blockchains:
Ethereum Classic and what we know
today as Ethereum.

Altcoins, which provide additional
functionality like smart contracts, such
as Ethereum are publicly launched. The
ability for code to act as a thirty-party
arbitrator was another setp in the
evolution in DAO 2.0. A myriad of
altcoins with smart contract capability
come to market as well during this time.

Dash pioneered decentralized governance
using blockchain technology with the launch
of its two-tier masternode network. This
marked the change to the next era of DAO 2.0.
Dash is the longest-running DAO to this day.

Page 8

An explosion of infrastructure and tooling applications
come to the market and bring on the current era of
the DAO, or 3.0. There are over 4,000 active DAOs
with over $20 billion in market capitalization in 2022.

Does the blockchain game Alien
Worlds exemplify all of DAO 3.0?

Are Alien Worlds, Bored Ape Yacht
Club, and other projects showing us
signs of the next area of DAO 4.0?

Legal Considerations for DAOs
along with risks and drawbacks.

2018–2022

2022 and beyond

2015

Page 9

2016

Page 10

3.0

2.0

Pages 11–29

Pages 30–33

4.0?

XDAO is a Multichain DAO Ecosystem for Safely Managing Crypto Assets
Blockchains supported by XDAO

XDAO features

Layer 1

Segregation of governance 

and economic rights

Our innovation is to give the DAO creators and managers
governance rights (by issuing governance tokens, or
GTs), while investors will be able to have a share in the
DAO (by purchasing and holding liquidity provider tokens,
or LPs).

HECO Chain

Layer 2

Cardano

Interaction with LP and GT

Polkadot

Near

TRON

DAO Created

Nervos

Smooth no-code connection to any DeFi Protocol via XDAO
Connect

XDAO Connect allows our DAOs to swap, buy, sell, stake, borrow, supply and more!

Liquidity Provider Tokens
— Made for investors and
teammates

— Can be burned to take a
share back

— Can be traded on DEX
(AMM)

— Used for off-chain voting

Governance Tokens
— Made for DAO’s governors

— Soulbound (not salable)

— Used for on-chain voting

Learn more

XDAO successfully works across 27 blockchains and plans to expand its presence.
XDAO PRO

Flexible Governance

XDAO offers XDAO Pro paid consulting service. It allows anyone who is not
deeply involved in crypto to launch a DAO with XDAO expert assistance. XDAO
helps to work out all the specifics of the DAO, tokenomics, and the
development of additional one-of-a-kind modules.

When creating a DAO you should use

To apply for XDAO Pro the user should fill in the form provided on the
dedicated page:
Explore

Create your DAO. Easily

reliable solutions and clearly prescribe all
aspects related to the storage and
approval of spending, as well as decisionmaking in the organization. XDAO gives
you that ability. All you have to do is
allocate governance tokens and balance
off-chain or on-chain voting.

DAO Modules

Upgrade your DAO using Modules. Each Module can execute any algorithm embedded in it.

Launchpad
Start Token Sale of LP
tokens of your DAO

Manage your DAO
through Telegram Bot
Payroll

Dividends

Pay dividends by distributing
tokens from DAO account

xdaoapp

Telegram Bot

Private Exit

Get a private offer burning
LP for exit from DAO

Pay salaries to employees
of other regular payments

xdao_eng

22000+ monthly active users

XDAO Community

100k+ monthly visits

20000+ DAOs created
across all blockchains
xdaoapp

company/xdaoapp

How It All Started: DAO 1.0
ointelegraph Research identified three eras DAOs history

C

The concepts for DAO 1.0 started over half a century ago and
evolved through the concept of an internet-connected home to
the deployment of blockchain technology.

DAO 2.0 was born out of the addition of Dash’s governance
mechanism and smart contracts in the next phase of blockchain
protocols, such as Ethereum, EOS and Tezos. This allowed for
more decentralization and wider adoption across decentralized
applications (DApps).

The rise of infrastructure relating to DAO governance marks the
transition to DAO 3.0, which has seen an explosion in DAOs
created over the past two years to over 4,000 active DAOs.

6

Once upon a time…
When we think of a modern business, firm or corporation, we think of
an organization of people that uses a top-down structure where a
single decision maker or group directs resources, including labor and
capital, toward a goal. Business entrepreneurship can be traced back
to around 17,000 BCE in New Guinea, where obsidian was traded for
food, skins and other goods.1

Over the last few centuries, the number of firms has proliferated, and
several economists have studied this growth. The Nobel Prizewinning economist Ronald Coase dedicated a large part of his
academic career to studying what the structure of the firm is and why
it exists. His work on property rights and the transaction costs of
contracting with labor and managing resources helped identify
reasons for a firm.2 These ideas are focused on centralized decision
making, but others have theorized if a more decentrlized approach
could be benificial.

In the 1960s and 70s, academics in the business discipline started
theorizing on concepts that would become important decades later.3
In 1997, Werner Dilger wrote a journal article on a “smart home” that
would be integrated as part of the “Internet of Things,” or IoT, which
he termed a decentralized autonomous organization.4 However the
technology to integrate a home without human intervention did not
practically exist at the time of Dilger’s writing. This time period, prior
to creation of the Blockchain technology, can be called DAO 1.0.

veryone alive has in some way been part of a DAO, albeit
unknowingly. Every pickup basketball or football game, every
spontaneous outpouring of support for a community in a natural
disaster, and every voluntary interaction of a group of people have
elements of what a DAO is.5 With the advent of blockchain technology
there may be a better way to organize ourselves in social and
professional applications.
E

DAO Breakdown

Decentralized

Decentralized — decentralized means the relationship of participants in the organization is “no longer determined by administrative affiliation, but follow
the principles of equality, voluntariness, reciprocity and mutual benefit, and driven by individual’s resource endowment and complementary advantage.” 6

Autonomous — this interaction being managed by protocols creating a “code is law” voluntary agreement can not only impact the concept of the firm from
the standpoint of eliminating bad actors or mistakes by management but, in some cases, could be used to remove the need for managers completely.7

Organization — a generic term that may or may not have legal considerations depending on the formality of what is connecting everyone together, which
would also potentially include activities using smart contracts.8
1
2
3
4

“Voyagers of the Vitiaz Strait: A study of a New Guinea Trade System” Thomas Harding, 1967
Read more about Coase’s seminal work “The Nature of the Firm” here
“Decentralized autonomous organization” Samer Hassan & Primavera De Filippi. Internet Policy Review, 10 (Issue 2), 2021
“Decentralized autonomous organization of the intelligent home according to the principle of the immune system” Werner
Dilger. International Conference on Systems, Man, and Cybernetics. Computational Cybernetics and Simulation, 1997

5
6
7
8

Autonomous

DAO

Organized

To read more about this concept, read “You have been in a DAO your entire life” M. Tabone, 2022
“Decentralized autonomous organizations: Concepts, model, and applications” Ding Wang, et al., Transactions on
Computational Social Systems, 2019
“Contracting in the smart era: The implications of blockchain and decentralized autonomous organizations for contracting
and corporate governance” A. Murray, et al., Academy of Management Perspectives, 2019
Samer Hassan & Primavera De Filippi, 2021

Decentralized Authority Is Key to a True DAO
The Digital Revolution or Information Age, which came about with the explosion in
personal computer use and the advent of the internet, lowered the barriers to entry
and made information more accessible to everyone.9 This made information more
symmetrical, increasing the skill set and the ability of more people to do what could
only have been done by a few qualified people previously. In 2008, an individual or
group of individuals called Satoshi Nakamoto released the Bitcoin white paper
outlining a peer-to-peer electronic cash system.10 This was different from previous
attempts, and it brought together several technologies (decentralized ledger,
blockchain, cryptography, etc.) into one application.11 On Jan. 3, 2009, the Bitcoin
Genesis Block was mined, which marked the start of the Blockchain Revolution.
Bitcoin is a generation one (Gen1) blockchain that does not have what is called
smart contract capability. This allows parties to enter into a contract governed by
code and not reliant on the actions of an outside party to enforce.

Father and son, Stan and Daniel Larimer presented the idea of DAC as an

“unmanned company” that operated without human involvement and business
rules running on code that would be incorruptible, or “sovereign corporations
governed with inhuman integrity.”12 They helped give rise to the blockchain protocol
EOS, which, like Ethereum,was a Gen2 blockchain protocols. It is unclear if Vitalik
Buterin, one of the co-founders of Ethereum, knew Dilger create the DAO term in
1997, when stating he invented the it in 2013.13

While the DAO, as seen through the blockchain lens, was still being worked out,
several different entities were trying to innovate how these dispersed groups could

interact in a meaningful way to accomplish like-minded goals. An innovation
ushered in by Dash was a novel governance model that helped influence the
evolution of the modern DAO.
9
10
11
12
13

7

A DAO is an entity that can operate with no central
leadership. Decisions get made from the bottom-up,
governed by a community organized around a specific set of
rules enforced on a blockchain.

Companies are often registered in
a country or given operational
authority through a government
entity. DAOs operate in a
completely decentralized manner
and, in many cases, without a
governmental body overseeing the
enforcement of contracts and the
daily activities of the organization.

DAOs are fully autonomous and transparent. As
they can be built on open-source blockchains,
anyone can view their code. Anyone can also
audit their built-in treasuries, as the blockchain
records all financial transactions.

Proposals and Decisions

Traditional

aka centralized

A traditional or usual organization follows a
top-down hierarchical model of leadership
with a centralized authority on top, for
example, a CEO. Generally, financial
decisions are made by a chief financial
officer. This is not the scenario at a DAO.
Here, the leadership and decision-making are
transferred to a distributed network of
autonomous participants.

Investors or
stakeholders can
participate in a DAO
without the presence of
an intermediary, like
governments, or
financial institutions,
like banks, giving many
greater financial
autonomy.

Decentralized

This allows participants to invest, borrow or raise money for
any purpose as long as there is community consensus.
Traditional firms rely on governmental forces for the
implementation of agreements between different parties, or
contracts. DAOs utilize a “code is law” mentality, which means
that the code automatically functions as the decision arbitrator.

“Evolution of industry and blockchain era” M. Hasan, S. Akhtaruzzaman, S. Kabir, T. Gadekullu, S. Islam, P. Magalingam, R. Hassan, M. Alazab, & M. Alazab. Transactions on Industrial Informatics. 2022
“Bitcoin: A peer-to-peer electronic cash system” S. Nakamoto, 2008
Mastering Bitcoin: Programming the open blockchain” A. Antonopoulos, O’Reilly Media, 2017
“Bitcoin and the three laws of robotics.” S. Larimer, Let’s Talk Bitcoin, 2013
“I invented the term in 2013, and Daniel Larimer came up with DACs” V. Buterin, Medium, july, 2016

The Next Step: DAO 2.0 Blockchain Governance Innovation by Dash

Humble beginnings

el regulating incentivized in rastructure

S

Bitcoin was once considered a DAO because most network participants had
never met, and the network evolves through community agreement that
requires miners and nodes to signal their support. owever, Bitcoin is no
longer considered a DAO by today’s standards, as a true DAO must have
complete autonomy it must fund and manage every aspect of its operations
independently, free from outside interference or centralized control, thereby
reducing the risk of single points of failure and potential con icts of interest.
;

fl

f

Because of financial incentives, the governance of the Dash DAO is quick,
e cient and very purposeful. Anybody can submit a network proposal for
a small anti-spam Dash fee, which helps to ensure that only serious
proposals are submitted. As a result of a free-market-competition funding
approach, the best concepts and ideas that add value to the network are
rewarded.

ach masternode can vote on each proposal once (yes no abstain). If a
proposal is approved, the payment specified in the proposal is paid in a
monthly “superblock” with all other proposals that passed that month.

On occasion, the network receives decision proposals for significant or
divisive decisions. For instance, the outcome of a vote can be used to
determine whether Dash’s developers should implement a feature or not.

As it is possible to submit proposals that pay out over several months,
masternodes can revoke support from a project by amending the vote if
the use of already-awarded funds is unsatisfactory. This incentivizes
proposal owners to work honestly and diligently to gain the network’s trust
and approval.
E

The first superblock was mined on 7 September 2015, making Dash

Dash (a fork of Bitcoin) was the first cryptocurrency DAO to have a selffunding, self-governing protocol. Dash pioneered decentralized governance by
blockchain with the launch of its two-tier masternode network in 2015, and it
remains the industry’s longest-running DAO to date.

Dash allocates 10% of all block rewards to fund its own development in a
competitive and decentralized manner, unlike other cryptocurrencies that
depend on donations, pre-mined endowments, foundations, volunteerism,
corporate sponsorships or third parties.

the world’s first Decentralized Autonomous Organization (DAO)

What are Dash masternodes?

the direction of the project.

Dash masternodes are a decentralized network of powerful servers backed
by collateral held in Dash designed to deliver advanced services and
governance over Dash’s proposal system securely in exchange for a
portion of the block reward. Dash believes that masternode operators
make wiser decisions when they have something to lose as well as gain
when they have “skin in the game.” Dividing the block reward may appear
to be a minor detail, but it has a significant impact, as it allows Dash to hire
everyone who works for the network rather than miners consuming the
network’s entire revenue stream of the network.

f-

ffi

H

Innovating blockchain decentralized governance

8

A decentralized network of master nodes controls and govern

Dash’s virtuous cycle: As the price rises, the Dash treasury has

/

/

The DAO gold standard

The Dash DAO has stood the test of time and inspired numerous
projects. Dash’s approach to decentralized governance hasn’t changed
in years, but that’s by design. Dash is able to adapt to what works best
for the network due to the DAO’s free market approach, as opposed to
the limitations and restrictions in centralized traditional corporate
structures.

To learn more about Dash, read our recent research report: Why Are
Crypto Funds Investing in Dash?

more money to invest, creating a positive feedback loop.

How does Dash’s DAO solve problems that traditional structures cannot? — Joël Valenzuela | Director at Dash Marketing Hub
Dash’s DAO stands out due to its simplicity, which makes perfect sense since it was the world’s first. It’s essentially an open book: Anyone can ask a question or request funding of the network, and Dash’s holders get to respond. After a vote is held, that’s it. It’s done.

This allows projects to be funded and decisions to be made quickly on a consistent basis, without hoping for oligarchical structures to burn out or lose their power. It also lets anyone with Dash pool their funds to have a voice, rather than explicit shareholders or a
board of directors. Finally, it’s anonymous, meaning it’s truly open to participation from anyone anywhere in the world, without geopolitical restrictions.

Smart Contracts and DAO 2.0
Smart contracts allow different parties to engage in an agreement locked in
code relating to digital assets.14 This can include what makes DAOs possible:
voting, proposing, signing and delegating coins or tokens in a way to support
different functionalities that a DAO needs to operate. Any DAO participant is
allowed to make proposals and vote on other proposals, with no one entity
controlling the majority of tokens or votes.

Decentralized applications, or DApps, utilize smart contract functionality to
allow users to log in to different interfaces and authenticate their cryptographic
identity. Whoever signs the transaction has access to the private keys, making
them the owner of all the assets in that wallet. This is why the blockchain and
crypto community often says, “Not your keys, not your coins.” In DAOs, this
means that a participant can identify themselves and utilize cryptocurrencies as
a means of paying for a vote, proposals and other actions. These used to
require a centralized gatekeeper to act as an intermediary, which was drastically
reduced with the advent and adoption of smart contract technology.

9
Smart Contract

Code Governs The Agreement

Party 1

• Private Keys

• Coins or Tokens

Party 2

• Private Keys

• Coins or Tokens

Agreement

Blockchain

Conditions

Execute

Coding

Recording

DAOs as part of Layer2 Ecosystem

Individual

DApp Browser
DAO UI

Front End
Smart Contracts

Membership

Voting

Fund allocation
Validator

14

“Blockchain in industries: A survey” Al-Jaroodi & N. Mohamed. IEEE Access, 2019

User

Developer

Exchange

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DAO 2.0 Lessons Learned: “The DAO” Case Study

11

The use of Ethereum for decentralized finance (DeFi) was one of the

Not everyone supported this action, but the process of the hard

earliest use cases for the protocol. The Ethereum network launched

fork was completed. This hard fork resulted in two chains: Ethereum

in July 2015, and in May 2016, “The DAO” was formed. This was one of

and Ethereum Classic. Those who refused to accept the hard fork,

the earliest entities built on Ethereum, and it received a large amount

which altered the blockchain’s history, supported the pre-forked

of attention in those early days. The DAO raised $150 million worth of

version; this blockchain is now known as Ethereum Classic.

The DAO treasury is hacked 


Ether (ETH) and was one of the earliest crowdfunding efforts and

Ethereum Classic proponents support the phrase, “Lex

for $60 million of ETH.

high-profile projects built on the Ethereum blockchain. The DAO was

Cryptographia,” or code is law. Code is law means that the code of a

hacked three months after it had launched, and $60 million of ETH

smart contract is the ultimate arbiter of the outcome of an on-chain

was stolen. There was much discussion about the vulnerabilities of

interaction, as opposed to some overriding force from outside the

The DAO’s code before the attack took place from supporters who

network.16 As a result, applications are unstoppable and run exactly

wanted to see the project be successful. However, as the code was

as programmed without downtime, censorship or third-party

refund of the hacked funds to The DAO participants and

reviewed by a few inquisitive computer scientists, concerns were

interference. The blockchain presently known as Ethereum is the

the code-is-law side, which had advocated for leaving the

expressed to Ethereum leadership. The dominant concern was a bug

one that implemented the hard fork and altered the blockchain’s

blockchain unaltered.

in The DAO’s wallet, which allowed funds to be drained. Programmers

history. As a way to atone for the lost funds, hacked funds were sent

attempted to fix the bug, but an attacker exploited the vulnerability

to an account available to the original owners.

and began siphoning funds.15

On the Ethereum blockchain, 

The DAO is formed in 2016.

A debate between Ethereum and The DAO communities
erupts over rolling back the blockchain to before the hack.
The camps are divided between those who argue for a

A hard fork of the blockchain happens, resulting in two chains.

This was an important step in the implementation of smart contracts

The response to the attack by some in the community was to hard

and DAOs. The exploit brought along with it lessons that have been

fork Ethereum’s blockchain. A hard fork is a radical change to a

incorporated into DAOs and other Web3 projects ever since. The

network’s protocol that makes previously invalid blocks and

importance of a sound and secure system is vital, and the vulnerability

transactions valid, or vice-versa. A hard fork requires all nodes or

of a blockchain protocol to unknown exploits is a risk that needs to be

Ethereum

Ethereum Classic

users to upgrade to the latest version of the protocol software.

taken into account when getting involved in these ventures.

The chain reverts to its

Code-is-law proponents

prior state before the

continue to utilize the

hack and drains the

“old” Ethereum chain,

Cointelegraph Research published the report “Does the Future of

treasury, becoming

which is not reverted to

Decentralized Finance Still Belong to Ethereum?” in the first part of 2022.

known as Ethereum

the pre-hack version of

(whose native crypto,

the blockchain. This is

ETH, is currently the

now known as Ethereum

It covers the history of Bitcoin and Ethereum and some of the next wave
of blockchain protocols. You can view the document by clicking here.

second-largest by
market capitalization).

15

“The DAO controversy: The case for a new species of corporate governance?” Morrison, Mazey, & Wingreen, Frontiers in Blockchain, 2020

16

“Blockchain and decentralised autonomous organisations: the evolution of companies?” Sims, New Zealand University Law Review, 2019

Classic.

Rise in Infrastructure Sparks DAO 3.0
Figure 2: DAO 3.0 Categories of DAO Focus in 2022
40% DeFi

6% DAO Tool

Gaming 5%
Greater Good / Political 4%

6% Art & Culture

Infrastracture 8%

3% Work & Hire

Investments 5%
Media & Communications 2%

4% Physical Assets
17% NFTs

Note: Data as of August 2022. Based on 550 DAOs, one DAO can belong to multiple categories

Source: Deepdao.io, Cointelegraph Research

17
18
19

See Cointelegraph news article from 2020 here
“Year 1602 revisited: Are DAOs the new corporate paradigm?” Andrew Singer, Magazine by Cointelegraph, February 22, 2022
“Number of DAOs increases 8x along with spke in votes and proposals.” Brian Newar, June 10, 2022

Powered by

12

The fall of “The DAO” was a learning moment for the entire crypto
space and is still a cautionary tale for new projects in the hopes of
not repeating the same fate. While DeFi continued in its many
forms, other projects started working on making the infrastructure
and tooling applications, which would pave the way for an
explosion in DAO growth. From 2019 to 2020, there was an
increase of 660% in active DAOs.17 This was the start of DAO 3.0
or the major proliferation of DAOs that branched out widely to not
just DeFi but art, social activity, politics, NFTs, gaming (often called
GameFi in the crypto space) and beyond. Some of these tools, as we
break down the categories a bit deeper in the following pages,
made treasury management easier, voting and proposal less costly,
or made the entire start-up and operation of a DAO so easy that it
could be done without needing to know how to code.

Cointelegraph has been asking, “Are DAOs the new corporate
paradigm?” for some time now.18 There continues to be positive
momentum in the growth of DAOs as a testament to the growth
from 700 in May 2021 to over 4,000 active DAOs in mid-2022.19
DAOs are still organizations, however, and just like any startup
business or venture, they have a high percentage of failure in the
first year. This report intentionally focuses on active chains with
substantial treasuries and active participation. Unlike traditional
companies, if a blockchain protocol is a token built on a layer-1 (L1)
blockchain, like the Ethereum network, it is still a locatable record
viewable by blockchain analysis tools. While just under half of all
DAOs are concentrated on DeFi, there are a growing number of
categories, which are broken down in the following pages.

DAO 3.0: Scaling, Adoption & Use Cases — DeFi and Tooling
DeFi and Investment — 45% of DAOs

Infrastructure and Tooling — 14% of DAOs

DeFi is the largest application of DAOs, which entails the likes of Uniswap, Aave and MakerDAO. These
DAOs serve the primary purpose of acting as an ownership and governance system for DeFi
applications. Investment DAOs operate like an investment fund commonly seen in traditional markets.

As DAOs have become more prevalent in the blockchain space, tools to accommodate DAO scaling
have emerged. As more firms take on a DAO structure, there will likely be more “picks-and-shovels”
tooling spawning up to address the unique issues DAOs face.

The DAO with the largest daily trading volume on the Ethereum blockchain is Uniswap.
Uniswap obviates the need for trusted intermediaries, prioritizing decentralization,
censorship resistance and security. The purpose of Uniswap is to manage liquidity pools of
different ERC-20 tokens, which assist users with completing swaps of different ERC-20
tokens. The UNI token sits at a $4 billion market capitalization,20 with a total treasury of
over $2.2 billion.21
BitDAO is a powerhouse investment DAO that manages assets worth upward of $2.3

billion. BIT token is the governance token that has assisted in collecting of such a large
treasure chest. Members of BitDAO are a part of the on-chain governance in which DeFi
protocols receive sizable investments from the DAO. BitDAO’s BIT token has a $1.0 billion
dollar market cap,20 with a $1.3 billion dollar treasury total.21
The LAO, is structured as a member-directed venture capital fund in the US. It is registered
as a Delaware limited-liability company (LLC) and compliant with US laws but carries out its
functions via a Decentralized Application (Dapp) and smart contracts.22 The LAO is sitting
on a modest $9.7 million treasury,21 but is a novel approach in future investment sources.

20
21
22
23
24
25

Information sourced from CoinMarketCap in September 2022
OpenOrgs.info provided the basis for this information on treasury balances from September 2022
For more information, visit the LAO website here Learn about Snapshot here
Learn about Snapshot here
Aragon has a well organized and informative webstite all about DAOs and launching an organization as a DAO
To learn more about Coinshift and their smart treasury management solutions, click here

Some protocols, like the Ethereum network, suffer from high transaction costs, which
prompted the creation of Snapshot, a tool for off-chain voting and proposals for DAOs.
Snapshot is a voting system that removes the need for fees when it comes to a DAO’s
voting process. It can be seen as a blockchain-based polling application to help DAOs
understand how their members feel about certain changes and updates.23
Aragon is a protocol that makes the creation of a DAO simple with governance plugins and
a simple user interface. Utilizing the Ethereum blockchain, Aragon has helped proliferate
the use of DAOs as a global organizational solution without even needing to know how to
code.24 The DAO utilized its own native ANT token for governance, currently sitting at $67.4
million in market capitalization,20 and has $122.8 million in its treasury.21
The ability to manage a DAO’s treasury is key, and Coinshift offers DAOs a multisignature
solution for their regular operations There is a deeper dive into Coinshift on page 25 of this
report. Coinshift is under the umbrella of the GnosisDAO, which has a treasury worth $1.1
billion,21 and whose token, GNO, has a $330-million market capitalization.20

40% DeFi
6% DAO Tool

8% Infrastracture

5% Investments

13

DAO 3.0: Scaling, Adoption & Use Cases — Social and Metaverse
Social and Political — 15% of DAOs

The concept of a social DAO is best compared to a gym or country club membership a person may pay
for in the real world. A membership with a social DAO is contingent on the number of tokens held.
Bored Ape Yacht Club is an NFT collection that issued its own token, ApeCoin (APE), as a
DAO.26 Comprising famous members, such as Tom Brady, Mark Cuban, Stephen Curry,
Madonna, Jimmy Fallon and Gary Vaynerchuk, the Bored Ape Yacht Club’s social member
status is a driving force behind its market value. APE has a market capitalization of $1.7
billion. 28

AssangeDAO, a political DAO, uses its native token, JUSTICE as a means to support and free
media activist Julian Assange. While being a small DAO compared to the rest of the
cryptocurrency market, this demonstrates the laser-focused efforts one community can
have by issuing tokens. The market capitalization of JUSTICE is $0.7 million.28
If you contribute to a DAO as an independent freelancer, you may not have access to many
different benefits which come from being employed in the traditional world. Opolis
provides access to medical insurance, retirement plans, tax compliance, and other benefits
for those in the Web3 gig economy. This is changing the way people approach employment
and see themselves in society, as Web3 jobs are mostly remote, the ability to pick up and
move at a moment’s notice if a more favorable political or social geographical region
becomes available. Through Opolis, someone working in Web3 can process all their various
streams of income into various tax documents like a W2 in the United States.30

26

27

28

29

30

3

1

32

For more on the Bored Ape Yacht Club ecosystem, and how the ApeCoin DAO works, click here
Click here for more information on Avacado DAO
Information sourced from CoinMarketCap in September 2022
OpenOrgs.info provided the basis for this information on treasury balances from August 2022
For some more detail on the Opolis, and how it is impacting decentralized employment click here
Read more on the Wu-Tang music backstory here
From the Pleasr.org about page found here

Metaverse, GameFi, and NFT — 26% of DAOs

The metaverse, a computerized world that is a blend of real life and digital experiences, with which
someone may interact through the use of augmented or virtual reality, is a growing sector in the
blockchain space. Part of the metaverse experience is through the use of NFTs for the user to wear or
otherwise interact with in these digital worlds. DAOs are popping up in NFTs, metaverses and in
GameFi as a means of community engagement.
One of the oldest NFT cultivators and curators in the blockchain space, Pleasr DAO has made
a name for itself outside of its own industry. It’s famous for purchasing a one-off album by
the Wu-Tang Clan called Once Upon a Time in Shaolin and turning it into an NFT.31 The 74member collective goal is to “fund culturally significant pieces” and take that to another level
by sharing it with the community. While its treasury is just under $4 million,29 the members
of the DAO can raise capital dynamically depending on the circumstances.32
Receiving investments from the likes of Binance, Polygon and Solana, Avocado DAO
focuses on investing in virtual games and the NFT space.27 The token for AvocadoDAO is
AVO, which took a large hit in the market decline in the first half of 2022 and sits around
$1.36 million in total market capitalization. 28

Perhaps the most complex ecosystem of DAOs in a metaverse game that utilizes NFTs and
its own native cryptocurrency, T M, Alien Worlds combines all these elements into an
immersive experience for players. A more detailed case study is outlined below and
potential implications for the future of DAOs.
L

17% NFTs
5% Gaming
6% Art & Culture
4% Greater Good / Political
4% Physical Assets
3% Work & Hire
2% Media & Communications

14

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https://
twitter.
com/
opolis

https://
discor
d.gg/
p9FQH
YhxcM

https://
t.me/
Opolis

Popular Blockchains for DAOs

top 100 governance tokens by market capitalization, 83 of the respective DAOs primarily link into the Ethereum ecosystem. The network

embraced by traditional entities?

effects that come with employing the second-largest cryptocurrency by market capitalization are a strong pull factor for DAO launches.

Established businesses tend to look at results vs

DAOs on Ethereum can leverage a large pre-existing user base that has already set up browser wallets, transferred funds to their

concepts to estimate potential. Conversely, and

addresses, and is connected to the ecosystem’s communication channels on social media. Thus, it becomes easier for a project to reach a

perhaps because they are still in their infancy, DAOs

critical mass of token traders required to frictionlessly exchange governance tokens on DEXs without unsustainable price volatility.

tend to focus on the big idea, often failing to clearly
define goals and measure success accordingly.
There is a middle ground to be reached, whereby
traditional corporate entities bring their mastery of

90

process, delivering results to the cultural priorities
of more democratic DAOs.
60

What are the main obstacles to DAOs

Number of Top 100 DAO

G

overnance Tokens

Figure 3: Most Common Blockchain Protocol Ecosystems for DAOs

and DeFi entering the mainstream?
The biggest elephant in the room is regulation.
30

Traditional entities are hesitant to take part in DeFi
and DAOs without the support of governments and
central banks.

0
Unique Chains

Neo

Polygon

Elrond

Fantom

Solana

BNB

Ethereum

Y

et more and more individuals look

to these new paradigms as distrust in governments
grows and a new financial crisis looms.

Source: Coinmarketcap.com (Throughout this report different sources of data have been utilized. Each one specializing in different areas relating to DAOs, their coins/tokens, or activities.)

W

ith this in

mind, financial education is another key challenge,
but one that can be addressed from the bottom up,

Depending on the type of DAO and use case for the token, this is essential for the success of the organization. Token emissions are

unlike the rigid, top-down process that regulation is.

often used as economic incentives, and in many cases, the native token constitutes the majority of a DAO’s treasury. Violent price
fluctuations risk destroying a DAO’s ability to provide incentives and a loss of confidence in the DAO’s value proposition and treasury.
The quantitative data shows that the aforementioned constraints are tight, and not many organizations make it across the critical
threshold just described. More than half of the DAO projects surveyed by DeepDAO do not have more than 100 tokenholders. Merely
4% of the projects had more than 10,000 tokenholders. Over 80% of these rare successes deploy Ethereum as the main treasury chain,
and it is plausible that many of them would not be viable without the strong network effects of Ethereum’s ecosystem.

William

V

andy

COO Pollen

k

I

What would it take for DAOs to be

I

Unsurprisingly to anyone with knowledge of the crypto space, Ethereum is by far the most prevalent L1 technology for DAOs. Among the

nsider nsight

16

Tokenomics
Behind every DAO is a carefully designed set of rules that govern the inner workings of the DAO. As
with any other crypto project, these “tokenomics” are supposed to ensure that the DAO can fulfill its

17

DAO Tokenomics

to buy, sell or burn their token

purpose. Crucial elements of tokenomics are the rules regarding the supply of tokens and incentives

Buy / sell

for participation in a DAO’s governance. Naturally, tokenomics for different DAOs will depend on the

Governance

purpose — i.e., for a gaming DAO, the tokenomics will differ from those for an investment DAO.

Vote

Genesis supply — The original supply of tokens

When starting a DAO, a certain number of tokens is minted and distributed among investors,

Treasury will need governance decisions

Market

Treasury
Influence

decisions

ETH / UST…

DAO Token

Burn

Paid for work

Pays

Other DAO

expenses

Generate income

participants, founders and the DAO’s treasury. Tokenholders will, in general, hope for the DAO’s
business model to be successful insofar that income streams are generated, which will then be used
to drive up its token’s price by either burning or purchasing tokens. Good tokenomics will ensure that
there is no inflationary supply of tokens after the initial minting so that supply does not outpace
demand.

Buy / sell

DAO token

Member

Products / Projects

Genesis supply

Source: tokenomicsdao.com, Cointelegraph Research

Contributes time & effort

Demand — The value of a token

The value of a DAO’s token will eventually be determined by supply and demand. Demand for a given
token can come from several conceptual features of that token. First, it can be an investment or store

Principal-Agent Model

DAO

Contribution

quality

of value, such as Bitcoin, which often comes with the additional benefit of being considered as

Contribution

quality

Contribution

quality

collateral by many counterparties. Second, the token can be used to pay for services — e.g.,
Chainlink’s LINK token. Third, the token can offer cash flows, such as those from staking. Finally, a
token may offer additional voting power in the governance of the token issuer, such as a DAO.

Demand for a token can also increase indirectly if a DAO generates revenue. Revenue from a DAO’s
business will often be denominated in other tokens, such as USDC, as people outside the DAO pay
for the DAO’s services. Thus, the DAO can start to convert these tokens into native tokens on the

Principal

100% tokens

Token holdings as % of net worth

market, leading to a positive return for existing tokenholders. In general, a DAO with a profitable
value proposition will attract demand from investors who hope for a positive return on their token
investment. This will depend both on the DAO’s business model but also on the DAO’s tokenomics:
How many tokens will be created in the future? Can tokens easily be exchanged for other tokens?

Acts towards the success of the projects

Acts out of own interest

Self interest is aligned with the interest
of the project. Creating Value.

Needs orders to
contribute at high quality

Source: ffstrauf.medium.com, Cointelegraph Research

Agent

0% tokens

Governance
Figure 4: Number of Votes per User
50

Proposals

40

tokens can make proposals (again depending on the DAO’s internal guidelines).

10

0≤

000

1,00

< 1,
≤x

100

50 ≤

≤x

x<

< 50
0

100

x<
Source: Snapshot, Cointelegraph Research

500

has evolved as a tool to facilitate voting without incurring large gas fees.

5≤

Voting on proposals is a crucial feature within a DAO’s ecosystem. Yet high gas fees may deter some
tokenholders from participating, especially if their stake in the DAO is not very large. Thus, Snapshot

50

1

Snapshot

x

0

x<

decisions related to the DAO’s treasury. Only members with a pre-specified amount of governance

20

10 ≤

DAO. These proposals can range from paying other organizations for services to investment

10

A successful proposal will be a binding decision for the community and has to be implemented by the

30

4

Members of a DAO’s community can make proposals that all governance tokenholders can decide on.

Share of Users (in %)

be changed over time if the DAO community decides to do so.

3

valuable for investors. However, with DAOs being in a constant state of change, tokenomics may also

2

As we have shown, tokenomics are crucial for the success of a DAO in terms of its token becoming

18

Voting

Figure 5: Average Votes per Proposal

tokenholders may choose to delegate their voting power to other members. This form of indirect

Source: Snapshot, Cointelegraph Research

Jul ‘
22

‘22

Jun

‘22

May

‘22

Apr

‘22

Mar

22

Feb

‘22

Jan

‘21

Dec

‘21

Nov

1

Oct
‘2

‘21

Sep

‘21

Aug

21
Jul ‘

‘21

Jun

‘21

May

‘21

Apr

‘21

Mar

‘21

Feb

‘21

Jan

‘20

Dec

‘20

Nov

seems more like those DAOs that are successful continue to attract interest from members.

0

‘20

number of average votes is purely driven by new DAOs being successful for a short period of time, it

Oct

proposal appear to be more stable over time. While it cannot be ruled out that the continuously high

50

‘20

attention from their members. If you consider the data displayed in Figure 5, the average votes per

100

Sep

the limited participation may be explained by unsuccessful DAOs that have only drawn limited

‘20

way. As the referenced data from Snapshot has been collected since the beginning of 2020, some of

150

20

users may vote several times and in several DAOs, the majority of users only participated in a limited

200

Jul ‘

Snapshot displayed in Figure 4 shows that nearly half of all voters only voted once. While some power

Average Number of Votes

democracy means that tokenholders can participate while not actively making decisions. Data from

250

Aug

Once a proposal has been put up for a vote, members can cast their vote. Some governance

Key Metrics

19

Data on DAOs

DAOs are diverse and so is the data available for DAOs. Extensive research in this report has
identified a number of high-quality sources for the most important DAO metrics. Token prices and
market capitalization can easily be gathered from established data outlets, such as CoinGecko.
However, not all DAOs have tokens that trade on exchanges or are liquid enough to yield accurate
price information. Depending on the project, some DAOs may have a very active community without
having an actively traded token. Nouns DAO, for instance, is governed by Nouns (NOUN), which are
themselves NFTs rather than conventional tokens. Thus, this report will look at traditional metrics,
such as the ones listed below, together with “activity” metrics obtained from DeepDAO and Snapshot.

Traditional metrics that are closely related to a DAO’s tokenomics will be discussed on page 17.

Market Capitalization, USD, 7-Day MA

Figure 6: Market Capitalization of DAO
1,000B

100B

10B

1B

100M

Among these traditional metrics are:

2018

Maximum token supply

Token price

Trading volume

Circulating supply

Market cap

Fully diluted valuation

A DAO investor may additionally be interested in the health of a project that may yield some

2019

2020

Source: Coingecko, CoinMarketCap, Cointelegraph Research

2021

2022
Ethereum

Bitcoin

DAOs

Figure 7: Number of Active DAOs on Snapshot

information in the long term:
Active members

Votes

Proposals

Treasury value (vested and liquid)

Such data is more difficult to obtain; for example, treasury wallets need to be identified through onchain analysis. Proposals and votes may happen on-chain or off-chain through tools such as
Snapshot. The charts on the right display the number of DAOs on Snapshot. While this only highlights

Number of DAOs

4,000

3,000

2,000

1,000

the explosive growth of DAOs since late 2021 on Snapshot, it can be seen as a proxy for the entire
space. Other data outlets, such as DeepDAO, currently track more than 4,800 DAOs.

0
Jul ‘20

Oct ‘20

Jan ‘21

Source: Snapshot, Cointelegraph Research

Apr ‘21

Jul ‘21

Oct ‘21

Jan ‘22

Apr ‘22

Jul ‘22

Key Metrics — Continued

20

Participation in DAOs

Figure 8: Total Votes per Month Within the DAO Ecosystem

Despite the impressive growth in the number of DAOs, the sheer number does not tell us much
about the activity within the DAO space. Figure 8 displays the number of daily voters active in the
DAO space as tracked by DeepDAO. Although one voter may be active in different DAOs, the chart
tells a clear story about the rise and fall of DAO activity. Despite the impressive activity in late 2021,
the number of voters has retreated back to levels of early 2021. While this is by no means the end of
DAOs, it is a clear sign that interest has been waning together with the general market downturn in
the crypto space. Nevertheless, a healthy consolidation phase will likely result in DAOs that have a
clear value proposition for users and clients surviving.

Voters per Month

300K

As discussed on the previous slide, there are two ways of evaluating a DAO’s ecosystem. One would
be the investor perspective that is primarily concerned with the performance, scalability and liquidity
of DAOs and their tokens. The “activity” perspective, on the other hand, would merely look at the
engagement of DAOs and their members. Figure 8 has shown that interest seems to have faded
compared to the heydays in late 2021. Figure 9 below displays that activity within a DAO is not
necessarily associated with its reaching a large valuation. While these stylized facts do not mean that
DAOs with a large community engagement cannot be successful, it is evident that the mere quantity
of interaction within a DAO is not a guarantor of success.

200K

100K

Oct
‘21
Nov
‘21
Dec
‘21
Jan ‘
22
Feb
‘22
Mar
‘22
Apr
‘22
May
‘22
Jun ‘
22
Jul ‘2
2
Aug
‘22

‘21

Sep

Aug

‘21

1

Jul ‘2

21

Jun ‘

‘21

May

‘21

Apr

‘21

Mar

Feb

‘21

21

Jan ‘

‘20

Dec

‘20

Nov

‘20

Oct

‘20

Sep

‘20

Aug

Jul ‘2

0

0

Source: deepdao.io, Cointelegraph Research

500K

Aave

ENS

m
Acal
a

nbea

Moo

pou

nd

r

Com

Moo

nrive

ma

Kusa

land

ntra

Dece

Unis

wap

0

adot

Prot
ocol
aCar
tel V
entu
res
Bifro
st
Synt
hetix
PieD
AO

ma

ao

AO

Dxd

Kusa

UXD

Bere

zkaf

LexD

land

ntra

wap

Dece

akeS
Panc

ance

O

year
n.fin

e DA

Curv

Dash

ao

Bitd

Synt
hetix

er
Mak

AO

Lido
D

Aave

1M

Polk

Govermance

Token Holders

Proposals

2K
0

coin

0

Ape

DAO

hi

Ban

kles
s

gotc

Aave

CityD

Powered by

2B

Met

Source: deepdao.io, Cointelegraph Research

AO

O

Klim

aDA

Fei

wap

Unis

AO

usD

ncer

Olym
p

Bala

akeS
Panc

Aave

0

4K

wap

20K

4B

Unis

Market Cap, USD

40K

wap

Active Members

Figure 9: Top 10 DAOs by Active Members, Market Cap, Proposals, and Governance Token Holders

Insider Insight

How have YouHolder maintained high yields
during the recent downturn in the market?
The yield percentages you see on our platform (up to 10.7% APR +
compounding interest) are powered by the fees from our other
features (crypto-backed loans, turbocharge loans, crypto-fiat, fiatcrypto exchange, and Multi HODL).

Due to the current bear market, clients will likely use these features
in more conservative ways. So it’s only natural our rewards are more
conservative as well. When the market is down as it is now, returns in
both traditional financial markets and crypto markets are lower.
That’s just a fact. As a result, we temporarily lowered our yields
slightly to match the current market condition. We will raise them
again when conditions improve.

As for our sustainability in general, we prioritize a conservative and
sustainable approach to FinTech. Unlike other platforms, YouHodler’s
business model is contained within the platform. We never take
clients’ funds for financial activities outside of the platform. Doing so
is risky and goes against our conservative approach to FinTech. At
YouHodler, everything is kept inside the platform. This is how we
maintain liquidity and balance. Furthermore, we never lock clients’
funds inside the platform. Users are free to withdraw whenever they
want, regardless of market sentiment.

Once again, the fact that we keep all funds within the platform
results in more conservative returns than some high-risk DeFi
platforms but we believe our business model is better in the longterm for safety and sustainability during volatile market conditions.
The same cannot be said for other platforms using riskier strategies.

////////////////////////////////////////////////////////////////////////
////////////////////////////////////////////////////////////////////////
////////////////////////////////////////////////////////////////////////
////////////////////////////////////////////////////////////////////////
////////////////////////////////////////////////////////////////////////
////////////////////////////////////////////////////////////////////////

Ilya Volkov

CEO YouHodler

DAO Token Correlation and Return vs Bitcoin

22

In any given asset class, it is important to identify the theoretical risk-free rate if you were to invest solely in that category. In crypto, that is Bitcoin, as it has the largest
adoption, market capitalization and longest record. The two important areas of the analysis are correlation (how each asset moves in relation to Bitcoin’s fiat valuation) and
whether there is any return higher than simply purchasing Bitcoin. As we can see from the chart, over the past few years, there has been a strong correlation between the
crypto market, in general, and the largest cryptocurrency, Bitcoin. Although most DAOs run on the Ethereum protocol, the tokens of each DAO have some idiosyncratic
movement that can be attributed to the financial performance of the DAO’s activities or general market sentiment toward the DAO’s sector of business.
Figure 10: DAO Correlations with Bitcoin

Source: CoinMarketCap, Cointelegraph Research

Source: CoinMarketCap, Cointelegraph Research

Comulative Return Bitcoin

(in Percentage Points)

0.7
0.5
0.3
0.1

6K

800

5K
600

4K

400

3K
2K

200

1K

0
Apr ‘21

Jan ‘21
Aave

Curve DAO

Jul ‘21

Oct ‘21

Ethereum Name Service

Jan ‘22
PancakeSwap

Apr ‘22
Uniswap

Jul ‘22

0
Apr ‘21

Jan ‘21
Aave

Curve DAO

Jul ‘21

Oct ‘21
Ethereum Name Service

Jan ‘22
PancakeSwap

Apr ‘22

Comulative Return of PancakeSwap over Bitcoin,

(in Percentage Points)

1,000

0.9

90-Day MA Correlation

Figure 11: DAO Cumulative Returns over Bitcoin

Jul ‘22

Uniswap

The chart above sheds some light on how the most popular tokens of DAOs have performed in recent months and to what extent they have moved independently from
general market developments. DAOs such as Aave and Uniswap outperformed many of the other big DAOs on this chart during the last year and a half. During this period,
it would be a prudent time to consider selling off a portion of a particular holding to lock in gains before risking riding down the position of the asset to a zero or negative
return compared to Bitcoin.

DAO Token Correlation and Return vs Ethereum

23

While most DAOs exhibit a lower correlation to Bitcoin compared to Ether, there is nonetheless a rather strong co-movement, especially since early 2021. Since Ethereum
has a high correlation to Bitcoin, it is no surprise that the charts on the previous page show similar results. PancakeSwap is the only represented DAO token that has out
outpaced both Bitcoin and Ethereum the entire time from January 2021 through 2022. All other DAO tokens would have provided a negative return to the alternative of
holding Ethereum.
Source: CoinMarketCap, Cointelegraph Research

Figure 13: DAO Cumulative Returns over Ether
600
Comulative Return over Ether

(in Percentage Points)

90-Day MA Correlation

0.9

0.7

0.5

0.3

0.1

Source: CoinMarketCap, Cointelegraph Research
6,000

400

4,000

200

2,000

0

0

−2,000

−200

Jan ‘21
Aave

Apr ‘21
Curve DAO

Jul ‘21

Oct ‘21

Ethereum Name Service

Jan ‘22
PancakeSwap

Apr ‘22
niswap

U

Jul ‘22

−400
Jan ‘21

Comulative Return of PancakeSwap over Ether,

(in Percentage Points)

Figure 12: DAO Correlations with Ether

−4,000
Mar ‘21
Aave

May ‘21

Jul ‘21

Curve DAO

Sep ‘21

Nov ‘21

Jan ‘22

Ethereum Name Service

Mar ‘22

May ‘22

PancakeSwap

Jul ‘22
niswap

U

ETH is the L1 coin which many of these long-standing, high-market-capitalization DAOs in the chart above operate on. Many DAOs operate as a layer-2 (L2) blockchain,
riding along with the rails of an L1. Aave is a great example of this, utilizing ETH for gas fees to make transactions. When looking at a particular DAO to invest in, the
popularity of the DAO may impact network effects on the L1 blockchain, theoretically increasing the value of the L1 blockchain more than that of the L2, as the L1 will have
to be continuously spent for transactions, increasing its demand. This is one reason why DAOs often hold assets like ETH. It is important to factor in not only the utility of
the token but any yield that can be had by staking or for hodling the asset to offset simply holding onto the L1 coin.

Case Study: OlympusDAO

A potential problem for new protocols is how to maintain liquidity on decentralized exchanges. As some
investors only provide liquidity during periods with strong incentives but quickly withdraw liquidity once
a new protocol offers preferable terms, the retention of liquidity is of central importance to new crypto
tokens. Olympus addresses this issue by offering so-called “bonding,” which means that investors hand
over their funds to Olympus in exchange for OHM, the protocol’s native token. Technically, investors
deposit their funds and receive OHM tokens at a discount after a specified vesting period. By doing so,
the investors’ funds directly go into the treasury of Olympus, increasing its liquidity. Currently, the value
of Olympus’ treasury stands at nearly $300 million, invested in more than 50 cryptocurrency tokens.

An additional step that increases the return for investors is Olympus’ “staking” option, which allows
tokenholders to deposit their tokens in a pool to earn additional rewards. With more tokenholders
staking their OHM and receiving sOHM in exchange, there is less supply in the market, driving up the
price. Thus, there is an incentive never to sell OHM, given that other tokenholders act in the same way.
This concept has brought Olympus some allegations of running a Ponzi scheme, as returns can only be
distributed among investors as long as other investors don’t sell.

Despite these allegations, there is some lower bound for the price of OHM coming from the protocol.
OHM will never be valued below 1 Dai, as the Olympus DAO stablecoin treasury acts as a backstop.
Additional OHM can be issued if its price is above 1 Dai. But Olympus does not only collect funds from
new investors — it creates revenue streams by selling liquidity to other protocols and by staking tokens
from its liquidity pool.

While returns from buying and staking OHM have initially been large, the performance was

rather poor in the first quarter of 2022. Even though staking OHM should eventually compensate for the
dilution arising from the issuance of additional tokens, the chart above shows that the total return from
staking OHM is below the return of holding Bitcoin or Ether.

Figure 14: gOHM Performance Comparison
0

−20

Cumulative Return (in %)

To illustrate how tokenomics can shape the initial attractiveness and long-term sustainability of a DAO,
this report takes a closer look at an infamous DAO that started in 2021. Olympus DAO was subject to a
heated debate both due to its unique mechanism and its seemingly unsustainable value proposition. Yet
the protocol’s features deserve some attention from investors.

24

−40

−60

−80

Dec ‘21

Jan ‘22

Feb ‘22

Source: Coingecko, Cointelegraph Research

Mar ‘22

Apr ‘22

May ‘22

Jun ‘22
Bitcoin

Jul ‘22

Aug ‘22

Ethereum

gOHM

In conclusion, investors are presented with a variety of investment possibilities in the DAO space.
Although the price of Olympus has faced some headwinds, the jury is still out to what extent protocolowned liquidity can generate substantial returns for investors. In any case, innovations such as
bonding and staking may continue to attract investors’ attention in future use cases.

A key source of information to help make sense of OlympusDAO can be found here

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VC Investment in DAOs

26

There are two aspects to the venture capital (VC) side of a DAO: VC investment in DAOs and DAOs as the VCs themselves. Venture capital involvement in funding DAO
projects has been on an uptrend since 2021, often coinciding with macroeconomic and crypto market cycles. In Q1 2022, VC investment hit a local peak of over $160 million.
Due to the easily malleable way in which DAOs can form and be focused on different goals, it is no wonder VCs can see these potentially good vehicles for a return on
investment while still holding a higher degree of risk than other crypto-based opportunities. DAOs also allow firms to receive funding from a non-traditional source without
having to deal with some of the sacrifices sometimes associated with the strings attached to VC backing — i.e., giving up the autonomy of a project’s direction. DAOs may
not offer some of the natural benefits of having a VC either, like a network of already-connected companies and individuals
Figure 15: VC Investments in DAOs

Figure 16: Share of VC Investments (by USD Volume) Involving DAO Investors
Share of VC Investments (in %)

Invested Amount, USD

160M
120M
80M
40M
0

2021 Q1

2021 Q2

Source: Cointelegraph Research VC Database

2021 Q3

2021 Q4

2022 Q1

2022 Q2

10
8
6
4
2
0

2021 Q1

2021 Q2

2021 Q3

2021 Q4

2022 Q1

2022 Q2

Source: Cointelegraph Research VC Database

DAOs, which were VC investing in another project in the crypto space, made up around 9% of all VC investment in Q1 2022 and dropped to less than 6% in Q2. This follows
the same current patterns seen in traditional financial institutions and VCs. As we will see on our next page, some DAOs have even invested in other DAOs. What should be
of note is that these decentralized organizations can gather information from different parts of the world perhaps better and faster than traditional systems, which may
learn of trends or changes in a given industry later than the members of a DAO. This can give DAOs an advantage. However, a potential downside is the proposal and
allocation of funds process in order to capitalize on that information.

Some Notable Investors In The Top Ten DAO Funding Rounds
From 2020 to mid-2022, there were 60 DAO and DAO infrastructure firms that received investments from venture capital. Often, a firm raises money from more than one source, and these 60 deals have
over 540 different VCs involved in raising capital. The most active 20 VCs were concentrated in 32 DAO projects. The top 10 projects over the last two years involving VCs and DAOs are broken down below.
Seed Club had a Strategic Raise of $15 million in May 2022
Seed Club is a DAO that brings together upcoming and alumni projects
into an ecosystem in incubating the next generation of Web3 projects.
It’s backed by top investors, such as Union Square Ventures, The
Chernin Group, Placeholder, Collab+Currency, Blockchain Capital,
Framework Ventures, IDEO CoLab Ventures, Distributed Global, Kindred
Ventures, Nascent, Multicoin Capital, The LAO and Hutt Capital.
ield uild ames Southeast Asia
S A had a Seed Round
for $15 million in December 2021
YGG SEA is a blockchain gaming sub-DAO meaning it is a sub-group
within broader DAO groups , and over two rounds, it raised $15 million
from Crypto.com Capital, Animoca Brands, MindWorks Capital, Poloniex,
Jump Capital, Digital Currency Group, Hashed, Polygon, Arca, OK , Yolo
Ventures, Seven Ventures, LongHash Ventures, HashKey Capital,
Morningstar Ventures, Dialectic Capital, SweeperDAO, PetRock Capital,
FBG Capital, Circle, Infinity Ventures Crypto and Yield Guild Games.
Y

G

G

(YGG

E

Coinshift raised $15 million through a Series A round in May 2022
A treasury management tool for DAOs, Coinshift announced a $15million Series A lead by Tiger Global, as well as Sequoia Capital,
Alameda Research, Spartan Group, Ethereal Ventures, Alpha Wave
Global, HashKey Capital, Quiet Capital, Polygon Studios and Volt Capital.
Seed Club

Strategic, 15,000,000

)

E

Rift inance

Unknow, 1 ,000,000
F

8

igure 17:

F

X

X

OrangeDAO

Unknow, 95,000,000

S A

Seed, 15,000,000
YGG

(

)

Coinshift

Series A, 15,000,000

CreatorDAO

Seed, 20,000,000

Top Ten DAO

Investments by

VC 2021–2022

Rift inance held a fundraising round and brought in $18 million
in ebruary 2022
Helping to create liquidity markets to reduce friction in trading
cryptocurrencies, Rift Finance had an $1 -million fundraising
round that included Pantera Capital, Two Sigma Ventures,
Coinbase Ventures, Hashed, DeFiance Capital, Spartan Group,
Jump Capital, Vessel Capital and Morningstar Ventures.

Syndicate

Series A, 20,000,000

CreatorDAO’s Seed Round raised $20 million in August 2022
Imagine a DAO that embodies the idea of mutual enrichment and
support for all participants involved. CreatorDAO is that type of
organi ation that promotes and builds on commentary within its
ecosystem. It also has some of the largest investors, including a16
Andreessen Horowit and Initiali ed Capital among its investors.

Syndicate DAO finished a Series A round of funding for $20
million in August 2021
Giving the ability to easily start the process of creating, launching and
running a DAO in one place, Syndicate DAO attracted funding from
long-term investors in the space, such as a16 , IDEO CoLab Ventures,
Electric Capital, Coinbase Ventures, Aave and Protocol Labs.

F

F

8

z

z

(

z)

z

Source: Cointelegraph Research VC Database

Orange DAO held a strategic round for $15 million in March and
an $80-million round in August 2022

OrangeDAO is an investment DAO specifically geared toward
helping to incubate the next generation of the blockchain and
crypto industry. The Algorand Foundation and Near Foundation
invest heavily in Orange DAO, which invested in some of the other
DAOs on this list.
Alliance DAO’s Seed Round raised $50 million in January 2022
Like Orange DAO, Alliance DAO is a Web3 incubator that has a
systematic process called the Accelerator with different cohorts.
Some of the notable investors included Alameda Research, 0x Labs,
Avalanche Foundation, BlockFi, Chainlink, CMT Digital, Coinbase
Ventures, CoinFund, CoinShares, Crypto.com Capital, Apollo DAO,
1inch, Dragonfly Capital, Injective Protocol, IOSG Ventures, Jane
Street Capital, Kyber Network, Nascent, OrangeDAO, Protocol Labs,
Solana Capital, Ready Player DAO and Polygon.
Utopia Labs raised $23 million in a Series A in May 2022

Neptune DAO


Strategic, 20,000,000

Alliance DAO

Seed, 50,000,000

Utopia Labs


Series A, 23,000,000

z

Utopia Labs is a DAO tooling and infrastructure firm that provides
payments, expense management and compliance features for tax
accounting, among other products. The Series A in Q2 2022 included
some of the following investors: Paradigm, Circle, Coinbase Ventures,
Infinity Ventures Crypto, Distributed Global, Fourth Revolution Capital,
Spice Capital, Chainforest, Global Coin Research, Yield Guild Games,
Paragons DAO, Woo DAO among others.
Neptune DAO’s $20-million strategic round was in April of 2021

The LAO and Flamingo DAO incubated Neptune DAO in 2021 to be a
liquidity provider and produce ROI for its holders. The initial investment
by the separate DAOs into Neptune was $13 million, which it then went
on to source another $20 million in investor capital.

27

Treasury Analysis

28

: k

The treasury of each DAO consists of all assets contained in wallets belonging to the DAO. The treasury

/

Figure 18 To en Holdings Investments

is defined as assets under the discretion of a DAO — i.e., fully governed on-chain funds. 


b

y DAOs

6%
0

may not be freely available to the DAO. Such wallets can contain reward fees or staking accounts.

what is liquid. While GnosisDAO’s total treasury is $1.14 billion, its liquid treasury is $234 million at the

40

%

20

%

P

time of this writing, according to OpenOrgs.info. This report breaks down the makeup of each of these

that

H

The table below displays how potential discrepancies can arise between total treasury holdings and

old Token

roportion of DAO

s


A different way to measure the value of a DAO’s treasury would be to include additional wallets, which

0

10 DAO treasuries in more detail. It is important if DAOs continue to grow in popularity as a form of

U C
SD

group organization, the revenue, treasuries and investment profiles of this up-and-coming class of

DAI

WET

U

H

SDT

W

BC
T

S

UH
S

I

N

SAI

E

PN

S

N X

A

I

DE

Source: OpenOrgs.Info as of September, 2022

companies can rival or surpass top Fortune 500 companies. As this class of business “structure”
continues to grow, due to the competitive advantages of the DAO operations, as we will cover later, it

Figure 1

may eat entire industries.

$

9:

B

DAO Treasury Focus

N

alance

umber of DAOs

8

8B

0
umber of DAOs

N

Sto
ra
ge

Ga
mi
ng

re
ati
ve

C

Sc
ien
tifi
c

hil
an
th
ro
py

en
tu
re

V

P

uid

Ot
he
r

q

0

ap
ita
l

Total and Li

0

C

40

De
FI

:

Figure 20 DAO Treasury

B

FT

Total

the top non-stable asset.

$4

N

V

balance sheets. Many DAOs hold the stable coins USDC, DAI, and USDT, while wrapped Ether (WETH) is

Inf
ra
str
uc
tu
re

alue

On the right of this page, are the assets and projects DAOs have invested in to hold as part of their

Source: Cointelegraph Research VC Database
Total $2.30B

Total $1.14B

Liquid $1.50B
Total $1.31B

Total $1.01B

Liquid $1.31B

Total $315M

Liquid $315M

Total $231M

Total $225M

Total $141M

Total $130M

Total $128M

Liquid $225M

Liquid $34M

Liquid $130M

Liquid $128M

Stargate

Olympus


Compound

Radicle

Aave

Finance

DAO

Liquid $231M
Liquid $234M

Uniswap

BitDAO

Note: Total and Liquid Treasury Totals taken from OpenOrgs.info on September 20th, 2022.

GnosisDAO

Liquid $183M

Ethereum

Name Services

Lido

In a DAO, participants must use their funds to participate in voting and events proposed by other participants. To sustain this
economy, there are incentives rewarded for participating in a DAO.

“Bounties” are a type of incentive granted to a DAO’s participants when they fulfill a task, such as a development project.33 Typically,
DAOs will have bounties listed with the corresponding task and award amount to encourage users to view what needs to be done in
order to achieve the ultimate mission of the DAO.

There are contributor DAO tools to allow the administration of incentives. Rabbit Hole is an example of an on-chain contributor tool.

Insider Insight

Bounties, Contributions & Governance: How DAOs Get Things Done

What’s it like to work in a DAO with
thousands of bosses?
“DAOs in the real world are no longer a futuristic
fantasy of developers but an opportunity to make it
here and now. As an example of our biggest case
study, we digitized a crypto-oriented city of 50,000

Through Rabbit Hole, users can see what “Quests” are available to earn tokens and/or NFTs across several different DAOs. They can

sq/m. Every apartment is presented as a rental and

also choose to complete mini-courses on introductions to blockchain concepts to earn rewards as well.34

also ready-to-buy NFT. Residents are members of

As with governance and treasury tools, there are also off-chain options. Off-chain contributor tools don’t automatically execute the
awarding of the incentives when a task is completed, rather it relies on a user to self-report this action. This decreases the fees
associated with on-chain tools but can lead to more friction. 35

the DAO who will vote daily, thereby creating the
most favorable living conditions. Surprisingly, we
regularly get requests from real-world companies to
digitize their businesses. They want to use DAOs to

Gitcoin is an off-chain contributor tool that enables users to learn, participate, earn rewards and even invest in other projects. They
also offer hackathon options, grants and a platform to allow users and developers to network with each other and give “kudos” to
reward other users for their participation.36 Coinvise, similar to Gitcoin, encourages users to create their own token, rewards and,
ultimately, their own DAO community. A user can explore other DAO communities to see what bounties and quests they’re offering
and how to promote participation in these DAOs.37

attract investment and manage assets
transparently, as well as to vote. Blockchain offers
substantial advantages. From a legal perspective,
DAOs are already recognizable organizations; they
can pay taxes and show their accounting on a par

PoAP, or proof-of-attendance protocol, rewards users with an NFT proving their attendance or participation in an event, whether it’s

with companies but in a more modern and

virtual, online or a task. PoAP can be used to issue NFTs to users in order to boost their credibility within a DAO. Users holding a

automated way.”

specific PoAP might have access to a certain platform or event that non-collectors are not permitted to attend.38

MintGate depicts credibility within a DAO ecosystem through memberships and membership tiers through the issuance of NFTs. They
refer to this as “Token Gating” to verify users who are allowed to view and participate in certain aspects of the DAO. 39

33

Read more about Bounties here.

34

Explore what Rabbit Hole has to offer here.

35

Learn more about off-chain versus on-chain here

36

Learn more about what Gitcoin has to offer here.

37

Learn more about Coinvise and its options here

38

Explore what benefits POAP collectors receive here

39

Explore how MintGate approaches Token Gating here.

Vlad Shavlidze

CEO XDAO

29

Case Study: Coinshift

Coinshift is an advanced treasury management and infrastructure 

platform for DAOs and crypto businesses.
With Coinshift, treasury teams can have a unified view of their treasury on multiple chains and
multiple safes, helping improve visibility and save time. In addition, Coinshift is integrated with
Gnosis Safe, allowing clients to run mass payouts, easily collaborate on multisignature
transactions, and save up to 90% on gas fees. Coinshift’s team will also be able to solve more
advanced use cases, such as reporting, stream payouts, automating payouts and delegating offchain operations to its team. Coinshift currently supports the following chains: Ethereum,
Polygon, Arbitrum, Optimism, Gnosis Chain, BNB Chain and Avalanche.

Features of Coinshift V2
Moved from one Gnosis Safe to managing an entire organization with multiple Gnosis Safes on multiple chains, which are integrated into one interface with Coinshift v2, with global user management, global
contacts, proposal management and many other features shared across the entire organization.
Users can pay multiple contributors in different tokens with just one transaction, stream payments, and automated salary payments with built-in transaction batching. Coinshift’s native integration with
Superfluid will enable its users to create and manage real-time streams directly from Coinshift’s dashboard. Streaming is a revolutionary way of making payouts that unlock benefits for both the DAO and the
contributor.
Organizational-level financial reporting, combining all transactions across all Safes and all chains, with unified tagging for more seamless auditing and tax reporting.
Users can deploy custom asset allocation strategies with built-in tagging and reporting.
With Coinshift’s transaction batching solution, users can save a considerable amount of time and gas fees on deposits, withdrawals, token approvals, etc. while interacting with DeFi protocols.
Coinshift’s infrastructure has a deep integration with Gnosis Safe smart contracts, which enables a host of benefits such as delegation of proposal workflows, better handling of error scenarios and nonce
management, and an accurate gas estimation service for mass-payout transactions that help reduce transaction failures. Furthermore, its modular architecture enables easy integration with third parties,
making the platform highly composable for advanced and evolving use cases. With deep integration and in-house control over infrastructure, Coinshift aims to provide a platform with best-in-class servicelevel agreements akin to Web2 platforms.

30

Social Media Tools DAOs Use To Communicate
Successful DAOs can attribute their performance to their community. As discussed
earlier, there are several different types of DAOs that can be considered similar to
social networks, as they contain like-minded individuals and organizations. Although
some DAOs are social networks themselves, all DAOs still establish contact with
their communities through the use of social media sites.

Social media networks, including Twitter, Telegram, Discord, Reddit, GitHub and
LinkedIn, are being used to facilitate communication inside DAO communities. The
table on the right of this page shows in more detail how each social media tool is
useful for DAOs to communicate.

Some argue that DAOs will replace the social networks that are known today.
Traditional social networks are beginning to look at the utilities of social media,
when before the main function was to connect people and encourage them to
create content. More people are realizing the consequences of centralized
organizations running social media sites, especially when it comes to collecting and
selling their personal data.

This is why some agree that DAOs are the future of social media. DAOs are
decentralized and are powered by participation in a network. Users don’t only have
the opportunity to communicate and connect with one another but can incorporate
assets and capital into their communities in a private, secure manner. By combining
the utilities that social media platforms are looking to implement but remaining
decentralized, DAOs are paving the way for a new type of social networking.
40
41
42
43
44
45
46
47

Learn more about the uses of Twitter here.
Learn more about DAOs and Telegram here.
Learn more about Telegram’s features here.
Learn more about Discord and its popularity within crypto here.
Learn more about Reddit and its uses for businesses here.
Learn about the purposes of GitHub here.
Learn why some businesses choose to use LinkedIn here.

Learn more about Discord and its popularity within crypto here.

 

Some Common Social Media Tools for DAOs
Social Network Purpose for DAOs
Best for broadcasting news and updates.40 Enables the opportunity for information to
spread across multiple Twitter feeds, which could in turn build the DAOs business network.
Can lead to interactions between members of a community or outsude communities.
Quick and direct communication with the DAO community. Allows members to “join” rather
than “follow” a DAO, making it more personal.41 Option to secret chats which are end-to-end
encrypted.42
DAO Masters claim it’s the “tool of choice for many Web3 organizations”. There can be
several channels for one Discord group, making it easier to separate conversations from
each other. It also supports 3rd party bot integrations, including Token Gating.43 *
Promotes the posting of social news and opinions. Users can choose to create an account to
interact with a DAOs subreddit community or to only view the subreddit to catch up on news
and updates. Each subreddit has its own rules and culture, which is important to note.44
Tech-focused community network that encourages developers to share their DAO projects
and collaborate on them. Developers can upload their code files and track changes made by
them or other users. Users are encouraged to developers to network and share ideas.45
Best for strengthening a DAOs business network and building the credibility of the DAO. Four
out of five LinkedIn users have the ability to influence business purchasing decisions, meaning
LinkedIn ads can be effective for DAOs wanting to partner with other organizations.46

* Token Gating authorizes the Discord group to manage access to channels, depending on a user’s crypto wallet holdings.46

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All of DAO 3.0? Case Study: Alien Worlds
In 2020, Dacoco, a Switzerland-based DAO technology firm,
created and launched Alien Worlds, an NFT- and DAO-based
metaverse and is currently the world’s leading play-and-earn
blockchain game. Founded by Sarojini McKenna, Rob Allen and
Michael Yeates, Alien Worlds was influenced by concepts in
decentralized communities. Its success is rooted in players’ ability
to gather, build and compete in a metaverse using strategy over
skill and building communities with one another — all set in outer
space. Alien Worlds was the first project to put DAOs into
competition with one another within a single economy. Players
earn Trilium (the metaverse’s cryptocurrency token) through the
Mining and Missions games, which they can then stake to one or
more of the Planetary DAOs to either run for governance or to
vote for leaders. In the game, each of the six Planetary DAOs
(which are also known as Syndicates in the game lore) must
organize itself by holding regular elections for Custodians who will
control the vast treasuries, which are funded by tokens staked by
the DAO’s members and topped up by the game economy. By April
2021, Alien Worlds had become the largest gaming DApp in history
and is now the No. 1 blockchain game by monthly users.48

Over 7.9 million lifetime players
DappRadar

The Alien Worlds ecosystem is rooted in interpersonal
relationships, giving players purpose and meaning through
community building, user collaboration and crypto incentives,
including Trilium (TLM) and NFTs (digital objects/property).
48

Rankings and statistics are from DappRadar and can be found here

Alien Worlds aims to unlock the social possibilities of Web3 gaming
by featuring DAOs as game elements. Each DAO is governed by an
elected Planetary Council. These Planetary Councils, in turn, will
decide how to spend their treasuries on the projects or programs
they choose to support. Players who have already staked to
planets can vote and govern the community. By working together,
they build genuine social connections that can evolve into cultural
identities unique to each DAO, to which they have pledged their
allegiance. Collectively, the preferences of the “team” and the
management of the treasury of each Planetary DAO shapes the
outcome for the community with the power to influence both
players’ metaversal and personal lives.

Advancing in the game requires mining, trading and staking TLM,
as well as acquiring different special NFTs, thereby fostering
economic competition or collaboration among different DAOs
vying for power. This gameplay offers a unique petrie dish that
political scientists and economists could only hope to replicate in
real life. There is just enough economic decision making in the
Alien Worlds ecosystem that produces real consequences to
actions taken by each DAO community — ultimately influencing
the direction of the game.

There are direct analogous substitutes for items we all utilize in
our daily physical lives: mining (careers/work), money (TLM),
objects (NFTs), social units (DAOs) and competition or cooperation
over scarce resources (DAO vs. DAO). These dynamics have helped
to propel Alien Worlds to the top spot for metaverse and NFT
games, and with its dynamic structure, it can adapt to the needs of
its participants who can then bring their visions to life.

33

Is Alien World a Glimpse of DAO 4.0?

34

Alien Worlds is a fun, interactive NFT metaverse game. But is that

We also see this with DAOs whose members experience utility in the

all there is to this phenomenon? If we look at how some DAOs are

physical world. DAOs like the Bored Ape Yacht Club, utilizing its APE

evolving, there may be something to glean about the next phase

token, have real-world events like Ape Fest, which are exclusive to

of how DAOs unravel. For example, in Alien Worlds, we can

Bored Ape Yacht Club members. The bleed-over from being a DAO in

“DAOs can advance into multi-asset cross-chain

observe DAOs competing over scarce resources within the same

the digital realm now also includes utility outside of one’s computer.

ecosystems that enable interoperability with social,

universe. This is not unlike a real-world community where

We have already seen firms like Erik Voorhees’ ShapeShift, a

product/technology, and governance rights. This is

different groups have banded together and have to interact with

decentralized exchange (DEX), literally shift and dissolve from a

an exciting theoretical possibility with the innovation

different groups. On a global scale, there is the United Nations,

traditional company with a top-down structure into the ShapeShift

of Web3 technologies and the advancement of new

which can act as a certain type of arbitrator between countries.

DAO. If ShapeShift is successful, it may potentially spur other

layer 0 blockchain protocols that can provide an

Imagine, instead, it was based on the Lex Cryptographia

software-as-a-service companies, and especially DApps, to either

underlying infrastructure allowing data to be

mentioned earlier. While we may not be able to perfectly replicate

transition like ShapeShift or just launch as one outright. Whether a

transferred between chains in a trustless and secure

what this social experiment would look like or play out, games like

DAO can transition from the digital screen to a large manufacturing

manner. Instead of DAO 2.0 protocols and tokens

Alien Worlds can provide glimpses of potential applications not

facility will only be determined in the future. However, we may see

competing for market share, it’s entirely plausible

just through a computer screen but in the physical world as well.

these applications sooner than we might expect.

that interoperability and modularity will serve as

What form will blockchain DAOs 

take in their next evolution?

future pillars for projects wanting to launch in the
DAO 3.0 era.”

Mark Mason

Head of Business Development

Cointelegraph Research

DAO 1.0
Analog
DAO 4.0?
Combination of Physical

and Digital World

DAO 2.0
Smart Contracts
DAO 3.0
Scaling and Application

Legal Considerations on DAOs: Risks & Drawbacks

35

Although DAO treasuries command over $11 billion in assets,

structure, others may question the choice as it often means

TradFi, or set up bank accounts to pay employees and contributors

DAOs have been out of regulators’ watchful eyes so far. Currently,

sacrificing anonymity, autonomy and decentralization, at least in part.

in fiat, all of which would require a DAO to seek legal

there is no globally recognized legal structure for DAOs, but this is

Yet remaining regime-less may be a sound option for a DAO unless it

representation. There is an array of scenarios when a DAO might

likely to change, given the speed at which regulators are creating

needs off-chain representation to ensure its future growth prospects.

have to create a legal entity beyond those named, but each may be

blueprints for regulating crypto. Existing frameworks limit the

There are three key factors driving the decision of a DAO to set up a

important for DAO maintenance.

ability of a DAO to operate as a completely decentralized structure

legal entity, often referred to as “legal anchoring.” Ensuring limited

with no particular leader or representative and low human

liability for DAO members and obtaining tax clarity are one of the

intervention to operations. Yet the need to interact with the off-

main reasons, but much of the rationale appears to be the strategic

chain world in order to develop and grow pushes more DAOs to

and operational management of a DAO.

opt for a legal entity road.

Equity investments from traditional VCs also come with legal
anchoring, with Uniswap’s Delaware C corporation being a vivid
example. Protecting intellectual property also requires legalization
from a DAO, especially if its members would like to assert their IP in

There are plenty of reasons to bridge a DAO to the traditional

court. Curve DAO could be the case if it eventually decides to move

Since DAO is a specific type of an organization, any centralized

world despite the trade-offs of partial centralization. A legal

forward with legal action against Saddle protocol for “wholesale

structure to represent it off-chain comes into conflict with its

structure may be crucial for the day-to-day operations of a DAO in

copying of Curve code” after one of the Curve DAO tokenholders

decentralized nature and may contradict its key principles. Thus,

order to build third-party integrations, sign legal contracts,

submitted a proposal to enforce its IP rights. Curve DAO then made

while some DAO members may be ready to proceed with a legal

establish legal agreements with companies and clients from

a decision not to proceed with the case, given the size of the rival
protocol, but it probably won’t be able to do it for legal reasons —
Curve DAO was not a legal entity at the time, but it would need one
to handle its IP properly.

“ We are not going to know the true long-term feasibility of a DAO 

as a corporate structure until one gets sued and we see how the courts
interpret these organizational formations.”

The tax reasons for legal anchoring may be less relevant for DAOs at
their current stage of development. While DAOs may want to clarify
their tax obligations, there is still minimal guidance to DAO token
distribution and the subsequent capital gains. Meanwhile, DAO
members may report their DAO taxes personally: “In the US, DAO
token holders could be viewed as holding interests in pass through
entities, resulting in taxable income for DAO token holders in a

Dr. Brian Houillion

University of the Cumberlands’ Program Coordinator 

for MS of Global Business with Blockchain Technology

variety of situations,” according to dYdX’s legal documentation.48
Overall, DAOs may point to complying with tax requirements as a
rationale for setting a legal entity; yet no DAO actually pays taxes so
far, according to the law firm Buzko Krasnov.
48

For more on dxdy’s take on DAO’s legal framwork click here

Conclusion

36

DAOs are an exciting phenomenon. The possibilities are seemingly endless as to how a

The wild jungle is the market, and the market seems to have an interest

DAO can be implemented and how it can drive new engagement among the global

in clearing this unbeaten path, expanding DAOs to social, infrastructure,

society in general. This is not to suggest that the road ahead for DAOs will all be easy.

NFTs, metaverse, gaming, and many other use cases. It seems that every

After all, this is an unbeaten path into a wild jungle with dark storms potentially brewing.

day a new DAO is formed.

There are storms brewing, however. All governments
do not really have a good handle on what a DAO is and
The Bitcoin cypherpunks who started this

how to deal with the issues of liability, culpability, and

cryptocurrency revolution would say it is not in the

taxation. An organization that exists everywhere and

purview of the state to make these decisions. It is

nowhere is subject to exactly what laws?

more than likely that the rest of the world is not
ready for this and will seek regulation in some form.
This regulation, if light enough, may still allow for the
implementation of the DAO concept to continue

After the brush is beaten, after the wild jungle is tamed, and after the storm is dealt with,

unabated and down its natural course.

there is a sunny and bright future ahead for DAOs. Just like the blockchain industry is growing
exponentially, DAO adoption will see continued ups and downs on its way to a standard
operating practice each new firm will have to consider. It also may be one that current TradFi
may have to adopt in order to stay competitive — we do not know for sure. Not every industry
and perhaps not every business size is best-suited to utilize a DAO process. All we can and
should do is let the market take its course and allow DAOs to shape their own destiny.

Cointelegraph Research: DAO Report Authors

37

Michael Tabone / Sr. Economist

Alexander Valentin / Sr. Research Analyst

Riley Fay / Student

Michael Tabone is an economist at Cointelegraph
Research. A Ph.D candidate, engineer, economist, and
business strategist, he also provides strategic
consulting to firms concentrating in the DeFi and
blockchain space.

Alexander is a Senior Researcher at Cointelegraph and
focuses on quantitative analyses of blockchain data.
He completed his MSc degree in Economics at Goethe
University in Frankfurt, Germany, where he is currently
working towards his Ph.D. in Economics and Finance.

Riley Fay is the Digital Communications Analyst at the
Global Blockchain Business Council (GBBC) and a
current student in the M.S. Global Business with
Blockchain Technology program at the University of
the Cumberlands. Prior to GBBC, Riley worked for
SIMBA Chain on the Business Development team,
working to bring blockchain education to universities
across the world. Riley is also a member of the
Fellowship of the Ledger Advisory Board at Portland
State University.

Demelza Hays, Ph.D. / Head of Research
Demelza Hays, Ph.D. is the Director of Research at
Cointelegraph. Over the last eight years, she has
authored over 30 analytical reports on digital assets
and managed two regulated cryptocurrency funds.
Formerly, she was a Forbes 30 Under 30 and U.S.
Department of State Fulbright Scholar. In 2021,
Demelza completed her Ph.D. in Business Economics
at the University of Liechtenstein under the guidance
of her doctoral supervisor, Dr. Andrei Kirilenko, the
former chief economist of the Commodity Futures
Trading Commission in the U.S.

Vladimir Shapovalov / Sr. Research Analyst
Vladimir is a Senior Researcher at Cointelegraph and
has a Master of Engineering from the University of
Cambridge. His previous experiences in London
brokerage services, brain cancer treatment firms, and
scientific background is beneficial to his research in
the blockchain industry.

Bryan O’Shea / Research Analyst
Bryan O’ Shea is a Research Writer at Cointelegraph.
He holds a bachelors’ degree in political science and
co-founded the Emerald Foundation, a free-market
think tank in Ireland.

Ron Mendoza / Research Analyst

Zack Samochin / Research Analyst

Ron has worked in business development for several
investment firms in Dubai and Abu Dhabi for more
than six years. He has been covering cryptocurrency,
blockchain, and fintech topics for several publications
since 2019.

Zack Samochin is a research analyst at Cointelegraph.
He holds a bachelor’s degree in Economics and has 10
years of overseas teaching experience. Co-author of

multiple reports at Cointelegraph Research.

Rashad Paige / Student
After finishing his MBA with a Project Management
specialization at the University of South Carolina,
Rashad Page enrolled in the Master’s in Global
Business with Blockchain Technology program at the
University of the Cumberlands. He has seeks to
transfer his knowledge and experiences in Project
Management into new Blockchain projects that are
being developed.

Greg Solt / Student
After finishing his B.Sc. in Management Information
Sciences at Franklin University, Greg enrolled in the
M.Sc. in Blockchain program at the University of the
Cumberlands. He focuses his research on use cases
such as Supply Chain Management utilizing Blockchain
technology. Greg has received several professional
certifications in Blockchain Technologies.