“It feels like a DAO renaissance.”
That’s how Anastasia Andrianova, founder and CEO of blockchain-based
financial protocol Akropolis, described her experience from both the
Dappcon and ETHBerlin conferences this week.
Hosted as parallel conferences for three days at the Technical
University of Berlin, roughly 800 ethereum developers from all over the
world gathered to discuss, debate and demonstrate how to build on the
world’s second most popular blockchain.
Decentralized autonomous organizations,
or DAOs, are infamously difficult to execute well. In 2016, roughly $60
million was stolen from an early DAO application, called The DAO and the effects of this event seriously impacted ethereum’s evolution.
This year, the main takeaway for attendees like Andrianova was the
resurgence of interest in DAOs, and a slew of specialized tooling for
making DAOs work.
The term “DAO,” as William Mougayer, venture capitalist and author of
“The Business Blockchain” told CoinDesk, is applied to all sorts of
ethereum projects today.
“My observation [from the conferences] is that the term DAO is being
used too loosely,” said Mougayer. “Some of these DAOs are really just
smart contracts with some rules that say, ‘If, then, that.’”
The distinction even between big DAOs and little DAOs are important
to conveying the complexity and degree of difficulty in a DAO
application, according to Mougayer.
At the most basic level, however, Jenna Zenk, former CTO of the
blockchain startup Melonport who now sits as vice president of the DAO
governing the Melon protocol, said:
“DAOs are a new way for people, groups, projects and
companies to organize themselves in a decentralized fashion and also,
very importantly, a transparent fashion.”
The timing to start building DAOs is now, said former Polychain partner Ryan Zurrer who himself announced a new DAO initiative earlier this month.
Zurrer was sure to stress that a lot has changed since 2016:
“There’s been a lot of lessons learned. This isn’t the return of the original DAO.”
Progress since The DAO
Since the original DAO, Andrianova, Zenk and Zurrer said specialized
tooling to help facilitate DAO creation on ethereum has advanced
significantly.
For example, Andrianova highlights that the “rage quit” feature in the newly created MolochDAO application was a key innovation to user sustainability within DAO structures.
The rage quit approach basically enables any participant in MolochDAO
to “immediately disengage,” according to Adrianova, and withdraw funds
without penalty.
“[MolochDAO’s] rage quit approach was so important,” said Andrianova.
“Unless you can disengage in a given moment in time then you’re stuck
on suboptimal terms, which leads to people creating factions inside the
organization.”
For Zurrer, the cornerstone for his DAO initiative and DAO development more broadly speaking has been the Aragon framework.
Aragon is an administrative platform whereby users can easily create
and manage decentralized organizations built on ethereum. It provides
modules to help DAOs fundraise, create bylaws, manage membership and
voting rights, among a series of other actionable items to do with
social governance.
“In our white paper, for example,” said Zurrer, “the [parent] pool at
the top has the ability to cut off any mandates at any time should any
of the ‘leagues’ be acting in a malicious fashion. This is enabled
uniquely on Aragon.”
Calling this structure a “nested” DAO, Zurrer explained that granting
various permissions on DAOs over and under other smaller DAOs was a key
“cornerstone” to the security model of a complex big DAO.
Zurrer views Aragon Court, a decentralized dispute-resolution tool
currently being developed by the Aragon One team, as an important
enabler for increasingly functional and scalable DAOs.
DAO and DeFi
But it doesn’t just stop there.
Zurrer noted that several decentralized financial (DeFi) applications
on ethereum have also been key to enabling new functionality with DAOs,
including portfolio management.
If a DAO is going to hold cryptocurrencies from participants and
allocate this money to specific groups, it will likely need to leverage
DeFi protocols such as the Kyber Network or Uniswap to exchange tokens
and convert them into the desired asset.
What’s more, you could have DeFi applications that require governance from a DAO to execute
Zenk said:
“There’s many interesting and creative ways to play
around with [DeFi] and DAOs. For instance, a DAO can be the manager of a
hedge fund. … You could also have a DAO govern code protocol. That’s
the case for Melon protocol today.”
It is this “composability” of differing applications, according to
Zurrer, that makes building on the ethereum platform so interesting and
attractive to developers.
“We look at the defining trends of 2019 and obviously one of them is
DAOs,” said Zurrer. “But another one that is not discussed as much is
this idea of compossibility. Maybe the great network effect that
ethereum has established itself at this juncture in its trajectory is a
threshold of tools that can be combined in order to make synergistic
improvements on old ideas.”
Agreeing with Zurrer, Mougayer said:
“We need to see more of that. We need to see more of
these [DAOs] talking to each other, connecting with each other. When the
pieces are tied together, you see the magic. That’s when the magic
happens.”
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