Over Within a few weeks, a virtual flash group called ConstitutionDAO, together with thousands of crypto enthusiasts, funded nearly $45 million to purchase a copy of the United States Constitution. Despite losing the auction, they have already woven a batch of sweaters, embellished with emojis, distributed by the newsletter company. Morning.
This experiment, which has flooded social media with countless memes and invitations to join the pool, is just one example of the kind of decentralized autonomous organizations (DAOs) that are now becoming ubiquitous in venture capital circles. Much like open source projects like Bitcoin Core, DAO projects involve volunteer participants and passive followers, often sponsored by paid core contributors. How the project raises funds to pay these contributors varies widely, depending on the project.
Several other DAO projects, including Andreessen Horowitz’s DAO Friends With Advantage (FWB), manage more than $600 million in assets. FWB Lead Organizer Alex Zhang, former DJ and event coordinator, took over the lucrative DAO in May 2021 and says the club now has a fellowship program that accepts up to 40 scholarship members each quarter. The program is funded for up to three years. (It costs you approximately $8000 to become a full member.)
People often start DAOs automatically, to see if the idea quickly attracts fundraising or fizzle out, and join DAOs for a variety of networking opportunities, including more social ways to experience cryptocurrency. Backtracking: Many DAOs are primarily crypto-fuel media companies. There is a lot of overlap between DAOs and jointly funded organizations (fiat) like The Information, with the main difference being that FWB throws parties rather than press events.
In short, FWB is a group of investor friends who raised funds in September 2020 and invited any Ethereum fan who wanted to join their club to buy some tokens. They then held exclusive concerts for icon holders in Miami, Paris, New York and Los Angeles. The FWB now has 2,000 full members, according to Zhang, as well as a small fleet of fans who have cheaper read-only or local city-only memberships.
“We have an entire editorial and content team creating multimedia assets like zines and definitely moving into other forms of content. We will be launching a radio station soon where we will book different DJs,” Chang said. “We are moving away from the subscription fee model and moving into asset acquisition.”
The most popular DAOs include the DAO project Dirt newsletter, founded by journalists Daisy Alioto and Kyle Chayka, crypto-exchange DAOs for users of tools like Uniswap, as well as crypto social clubs like FWB and please. Art-focused DAOs like PleasrDAO raise and allocate millions of dollars to assemble art collections that include everything from JPEGs to rare albums.
“We are writing the game guide as we begin,” said PleasrDAO co-founder. James Johnson, who participated in the sale of the original Ethereum token in 2014. “The membership totals 74 people; as with any DAO, there is a constant ebb and flow. We now have full-time employees, dedicated operators. I would say about five full-timers. Basic contact form Ours is Telegram.”
So far, most DAO participants, across various DAOs, rely on companies from Ethereum co-founder Joe Lubin’s portfolio, including MetaMask, Gitcoin, Gnosis, and Infura. MetaMask, in particular, now claims to serve 10 million monthly active users. The Bitcoin Dow treasury is estimated at more than $643 million.
As of 2021, a Gitcoin-sponsored study showed that 33% of 422 DAO participants surveyed earned between $1,000 and $3,000 per month from DAOs like FWB. The respondents were mostly young people who had already been heavily involved in Ethereum projects prior to 2020. Even if most DAO participants today seem to be wealthy crypto-fans, this is not the broader goal of the movement.
According to FWB investor Li Jin, dubbed the “It Girl” investor behind creative economy companies like Substack, Patreon, and crypto blogging platform Mirror, the goal is for DAOs to become “the front door for many newcomers to crypto.” “
Meanwhile, some organizations are already adopting DAOs by doing business with them. The ConstitutionDAO is performing with Sotheby’s, while PleasrDAO has purchased their rare Wu-Tang Clan album directly from the US Department of Justice. Wyoming became the first state to recognize DAOs as a unique legal structure earlier this year, although the application process remains challenging and potentially limited.
So far, DAO Masters and FWB member David Phelps, founder of the environmentally focused EcoDAO, said the DAO movement at least gets people to donate to charitable causes. The space is already full of scholarship programs and Donations of millions of dollars for various charitable causes.
Referring to his DAO experience, Phelps said, “If we issue a token with an ECO value, I’m sure all of us will be paid just fine.” Over $37,000 For indigenous land reform and charities to reforest the rainforest yet. “But for now, the goal is to create a sustainable economy for artists to support each other and possibly earn a lifetime income.”
He added that the DAO movement, while expensive and difficult to join, had already encouraged raising values by “associating prestige with giving, paying people to party, and then reallocating money to meaningful causes.”
But the elephant in this gilded room is that no one, not even an Ethereum veteran, knows how members of the multi-million dollar crypto club will pay taxes. Many middle-class participants in the DAO movement are unaware that they are amassing thousands of dollars in tax liabilities.
“We have seen a lot of contractors or developers, people who work for DAOs, who are unaware of the tax reporting requirements,” said Andrew Gordon, tax attorney with Gordon Law. “Usually, a company needs to issue a 1099. How do you do that without their Social Security number? There are penalties for not issuing a 1099.”
In addition, Gordon added, dozens of these DAOs pay independent shareholders and operators in their membership tokens rather than in dollars or ether. This means, Gordon said, that “the responsibility lies with the taxpayer to determine the fair market value” of the tokens. In cases where DAOs automatically provide non-fungible tokens (NFTs) to their members, this may also raise questions about tax obligations. When tax season begins in 2022, if the price of these digital assets drops, some DAO shareholders may be liable for more taxes than they can afford.
“We get calls all the time from people who don’t know what cryptocurrency they received is being taxed based on the fair market value at the time they received it,” Gordon said. “When it gets more and more complicated with NFTs again, the question of valuation…is the value the lowest price or the average market price?”
There are already many young people who cannot join the above-mentioned DAOs who are emulating these experiences and releasing their own. It is with Shannon Lee.
She graduated from college in 2018, quit a job she hated early in the pandemic, and has since started participating in online coding bootcamps. Now she’s creating her own DAO because she can’t afford the membership fees for the more popular DAOs, and the free opportunities she applied for has never responded. So it cleverly reduces legal risks by starting without tokens.
“The biggest concern for DAOs is actually the legality and attorney fees,” Lee told me, saying that some DAO tokens may be regulated as securities. “This is a big reason why I want to build a DAO that is a service for service, rather than a service token that you can sell on the secondary market.”
create me WECrypto DAO, a 80-person Discord server focused on encrypted educational content for women. Ultimately, her plan is for the DAO to include token-gated group chats and tickets to NFT events. Currently, in the boot phase, it’s focused on “learning more about coding and spreading it for others to use in it as well, and hopefully building relationships via a shared learning journey.”
It remains to be seen what the DAO ecosystem will look like as the movement grows outside of companies sponsored and backed by Ethereum founders like Lubin and Vitalik Buterin. (Some people have already started implementing the same DAO concepts while using blockchains like Bitcoin and Solana.) On the bright side, there are already many efforts to improve the diversity of movement through DAOs like FWB and collaborative index.
“Our community has launched a fellowship program with 18,000 tokens to reward artists, creators, and other people who cannot join but can apply on merit,” Zhang said of FWB. We offer global underlying asset ownership. If you are creating something in this world, you should be able to retain some of that value.”
Even today, the tools used by DAOs are still widely considered experimental. Julia Lipton, founder of Awesome People Ventures and a member of several DAOs including PartyDAO, said holding millions of dollars in digital assets in widely used Gnosis Safe wallets is still “risky” and often takes a “dumb amount of time.” To complete the technical aspect of DAO experiments. In addition to the technical difficulties, she said, transaction fees can sometimes be prohibitive for middle-class users.
“We really have a lot to go. The bucket of unknowns is huge, not just for taxes and regulations but in terms of DAOs in general. Everything about this concept of community ownership is still being studied. We’ve been testing all of these A/B projects, piloting them in places,” Lipton said. the public”.
for this reason Lipton Help find DAO Masters, crowdfunding hundreds of thousands of dollars worth of ether to help newcomers learn about the opportunities, skills, and risks involved with DAOs.
“One of the things I am most passionate about is attaching value creation to value assignment and value distribution.” Lipton said. “How do we create a more just and equitable system?”
Ultimately, the alpha insight into the DAO movement may be how much people are willing to pay for a sense of belonging in the esoteric metaverse. DAO members are a tribe, not a passive audience. As such, they are willing to pay (either with money or work) for media and experiences in which they feel represented.
As with any cryptocurrency trend, this sense of belonging is amplified by the hope of getting rich. Several DAO participants, who only commented on the background, confirmed that they were participating in DAOs in the hope of connecting with investors who might one day invest in the participants’ startup or DAO.
This is part of the allure of belonging to the full DAO of the Andreessen Horowitz Investor Network. Jin Hee is the same quasi-giant and said she was a “girlfriend [FWB founder] Trevor McFedries for years.” Chang also said that he was a personal friend of McFedries long before he was invited to join the FWB. DAO members routinely invite their friends to join lucrative business and investment opportunities. Joining these crypto clubs is, in some ways, comparable to fraternities Ivy League.
On the other hand, Jin spoke about the FWB investor frankly Twitter and her podcast about aspirations to see universal basic income (UBI) opportunities with more direct ownership by the creators. Other DAO experiences such as the Dirt Newsletter and Forefront Writers Program offer a flashy peek into the future potential of DAOs, beyond rich friends investing in project-backed group chats.
Forefront’s ability to pay close to $400 apiece for a book, thanks to a growing community of hundreds of paid token holders, isn’t something they can shake off. Even factoring in tax concerns and Ethereum transaction fees, that price is still comparable to what some mainstream traditional outlets are paying for writers these days. It is clear that DAO advocates believe that they are working towards a more equitable and decentralized media system. Only time will tell, as compliance models emerge, how risk and responsibility will be distributed across those networks.
“DAOs potentially open up new ways the labor market can function and new economic incentives,” Lipton said. “The jury is out on what will happen to community symbols in the long run, but the concept of community ownership is here to stay.”
Disclosure note: The author is a founding member of two DAOs, and Komorebe pool and the DAO . women Project.