Recently, I took a course on blockchain and digital economy. The teacher assigned a major project to think about the application, benefits, and future of blockchain in a specific field, and asked for a 3000-word essay. Usually, for projects like this in elective courses, I would just copy and paste to get it done. However, this course is very hardcore. Although it is offered by the School of Business Administration, it covers a lot of blockchain technology principles. I suggest that the teacher offer a public course. Currently, the only Chinese public course on blockchain that is worth watching is the one offered by Professor Xiao from Peking University, "Blockchain Technology and Applications." If there is a public course for this subject, it will definitely have a market. Coincidentally, I am currently interested in DAO, so I decided to write a blog post as my major project to record my thoughts on DAO.
Overview of DAO#
For those who are not familiar with DAO, you can understand it literally as Decentralized Autonomous Organization, a decentralized organization that is completely governed by the community without a central authority. I believe the biggest characteristic of a DAO organization is that its rules are guaranteed by code rather than law. By writing the organization's rules into smart contracts, the rules are executed in a decentralized manner with certainty. It is this form of rules that allows people to cooperate without the need for trust, bringing together people from different countries and with different values as long as they have a common goal. In a DAO, everyone is equal regardless of their real-life identity. Actually, I have always been confused about DAO. I know it is a decentralized autonomous organization, but I have never been clear about how to implement a DAO and how it operates normally. Even until now, I have not personally joined a DAO to experience it, so I can only observe it from an outsider's perspective.
The easiest DAO to understand, in my opinion, is Compound and Uni. These DAOs govern on-chain protocols, and the entire process from voting to execution is completed on the blockchain. The voting result is enforced by smart contracts.
The image above shows the governance process of Compound. If an address has 65,000 COMP voting power (including delegated voting power), it can propose a proposal. It can also create an autonomous proposal by locking 100 COMP tokens. After being delegated with 65,000 COMP, the proposal becomes valid. It then enters a 2-day review period, followed by a 3-day on-chain voting period. If more than 50% of the votes agree and the total number of votes is at least 400,000, the proposal is passed and enters the timelock contract queue. The proposal can be executed two days after joining the queue. Therefore, any proposal takes at least one week to be executed. DAOs like this fully embody the concept of "code is law," where all decisions made by the community are enforced by smart contracts, and the project team or core team cannot intervene. However, this type of DAO also has obvious drawbacks. It is only suitable for governing on-chain protocols, and the high gas fees discourage user participation.
Snapshot is an off-chain governance tool. Users can participate in voting by signing with their wallets without the need for gas fees. This type of proposal requires the project team to execute, and it only serves as a soft constraint on the project team. If the project team does not want to execute a proposal, there is not much users can do. Voting bots and users randomly voting are also issues. Currently, most projects use Snapshot to understand community opinions. In the early stages, most projects choose this method because it has low governance costs and high efficiency. It is not possible for the community to independently manage and operate the project.
Juicebox Ignited by ConstitutionDAO#
Now, let's talk about Juicebox, which has been recently popularized by ConstitutionDAO and KrauseHouseDAO. These crowdfunding DAO concepts are booming. Currently, Juicebox provides a solution for DAO treasuries. One of its initial clients is the famous SharkDAO, and many high-priced NFTs are collectively owned by Juicebox treasuries. The DAO treasury has infinite possibilities, not just limited to NFTs, but anything you can think of. People can come together to buy a copy of the constitution, or fans can collectively manage an NBA team. There will definitely be more in the future. DAOs are taking over the world. ConstitutionDAO can be said to have ignited this imagination. Will similar DAOs explode in the near future? We will wait and see.
Take a look at Juicebox's technical documentation. It is the most beautiful technical documentation I have ever seen. I wish I could write such documentation someday 😭 Since I don't have experience in writing Ethereum smart contracts, reading this documentation is still challenging for me. Let me briefly explain the information I can gather.
https://www.figma.com/file/dHsQ7Bt3ryXbZ2sRBAfBq5/Juicebox-Technical-Docs?node-id=0%3A1
https://www.figma.com/file/dHsQ7Bt3ryXbZ2sRBAfBq5/Juicebox-Technical-Docs?node-id=0%3A1
When creating a DAO, users can choose different funding strategies. It can be as simple as investing a certain amount of money and receiving a proportional number of tickets, or it can involve setting a discount. For example, the number of tickets received for the same investment decreases by 10% every 14 days. This rewards early supporters. Another strategy is the bonding curve model, which affects people's willingness to withdraw funds. For example, if a person holds 10% of the project's tickets and the bonding curve value is 70%, the amount of money they can withdraw is 7% of the treasury, while the remaining 3% is shared among other ticket holders. Additionally, funding strategies can change at different stages of funding.
The tickets mentioned here are ERC20 tokens and can be freely traded. So when ConstitutionDAO failed to raise $40 million to bid for a copy of the US Constitution, some people discovered the deflationary model of the $people token. A new meme coin phenomenon emerged. The donors at that time probably didn't expect that their playful donations could bring them huge returns. That's the crypto world. People explore purely for the sake of experiencing new things, and who knows, one day you might find yourself becoming rich.
About JuiceBox governance process
Initially, the governance contract is owned by the multisig address of the founding supporters, allowing quick decision-making to adapt to the market. This is similar to how MakerDAO was initially developed and maintained by the core team before being fully managed by the DAO. Generally, early-stage projects need a core team to maintain them.
Afterward, Juicebox will be fully managed by $JBX token holders.
FWB Favored by a16z#
https://a16z.com/2021/10/27/investing-in-friends-with-benefits-a-dao/
"FWB is a random group of people on the internet, meeting each other, hanging out and working on cool projects, whether it music production, digital art, learning about crypto or even just meeting up and having a good time."
This is a summary of FWB by one of its members. It sounds like an interest group. Joining FWB requires an application and the purchase of $10,000 worth of tokens. FWB is divided into different seasons, and the number of tokens required to join the DAO increases with each season. Additionally, you need to remain active to receive a pass for the next season.
This may sound crazy. Joining an interest group and having to submit an application and spend tens of thousands of dollars? Most people might think it's a scam. When I first heard about FWB, I thought it was similar to those elite clubs in the US. Now I have a new understanding of it. First of all, FWB started as a humble social experiment, and the initial members did not need to buy expensive tickets. DAOs or token economies are like magic. They are very radical. Artists and web3 enthusiasts can create value with tokens just by casually chatting. If you are a music lover and you spend a lot of time listening to music, but often due to life circumstances, you may not have the energy to listen to music after a day of work. What if someone tells you that you can make money by listening to music? Will you tilt the balance of your life more towards your interests? When people gather together because of their interests, if they have the secret weapon of DAO, they will create incredible sparks. People are willing to contribute money to a valuable community, and once they join, they can create value themselves. This may not be considered consumption; it is an investment in themselves.
You see, even without a protocol to maintain or a common investment goal, DAOs can still be effective. Perhaps we just lack imagination.
My Vision for the Future of DAOs#
I was initially interested in DAOs because I thought they were very cool. The coolest job in the world should be provided by DAOs. If there is a place where you can leverage your strengths, realize your ideals, make money, and own the results of your work (DAO token rewards), isn't that cool? Of course, I have never had the opportunity to join a DAO and contribute, but I want to establish my own DAO. Currently, our school's blockchain technology association has very few active members other than a few developers. I have always wanted to show more people the charm of Web 3.0, but unfortunately, most people think blockchain is a scam. Even those who recognize blockchain may have little time and willingness to delve into it. So I am thinking, can I establish a DAO? We don't need a specific goal, we don't need to raise funds to bid for an artwork. I believe DAOs can bring people together. We can simply gather to learn about Web 3.0 knowledge. The token economy can provide incentives for the organization's actions, creating a positive cycle. If you purchase DAO tokens, it represents your recognition of its value. The ownership and sense of belonging brought by holding tokens will motivate you to actively contribute to the DAO. Our association can also maintain a treasury together, which can be used to reward contributors and support daily activities. The important thing is that all decisions are made together. Everyone is equal, and no one commands you to do anything. Follow your own thoughts, express your ideas, and let your ideas become proposals.
I think DAOs are like magic. They change the way humans organize themselves. They have a long future ahead, and we need more exploration and social experiments. Join a DAO, and this journey will be exciting!