Is 2022 the year of DAO?
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Is 2022 the year of DAO?
In which赛道 should the next conceptual breakthrough, the next narrative evolution, and the next grand perspective be born?
Navigating Web3 tides with focused insightsAuthor: Beam | H.Forest Ventures
"We tend to give our era a romantic name, commemorating everything we've experienced in the dust of time."
In the summer of 2020, we used AMMs to remove the final barriers to decentralized finance. Then Compound launched its token, distributing it as rewards in a process known as liquidity mining. Countless protocols mimicking DeFi concepts quickly emerged, token prices soared, and DeFi exploded. We called it DeFi Summer—or referred to 2020 as the inaugural year of DeFi.
In March 2021, after 14 days of online bidding, a digital artwork by an American artist titled *Everydays: The First 5000 Days* sold for the equivalent of approximately 450 million RMB. Subsequently, a flood of users and capital poured into the NFT space. PFPs became nearly impossible to acquire, and Ethereum gas fees remained high due to the surge in activity. This year was hailed as the inaugural year of NFTs.
In 2022, having grown accustomed to measuring time by get-rich-quick phenomena, massive capital inflows, and non-stop mining and whitelist hunting—where should the next conceptual explosion, the next narrative upgrade, or the next grand vision emerge?
Some say 2022 should be the inaugural year of DAO.
Yet in reality, when you type "DAO Year One" into a search bar, you’ll find that every year since 2016 has been labeled as such.
Year One, Year One—when will the true Year One arrive? Future, future—when will the future of DAO finally come?
Another Possibility for Modern Organizations
In 1937, Ronald Coase—the proposer of the Coase Theorem—published two landmark articles, *The Nature of the Firm* and *The Problem of Social Cost* (which earned him the Nobel Prize in 1991), arguing that: when market transaction costs are too high, people naturally organize themselves into more or less formal institutions such as associations, partnerships, corporations, chambers of commerce, or other types of organizations.
Traditional organizations often face two main types of transaction costs during operation and production: information costs and enforcement costs. Breaking this down according to production processes, these include: search costs, negotiation costs, contracting costs, execution costs, and monitoring costs.
DAO represents another possibility for modern organizations. By connecting disparate individuals through code-based systems, search and negotiation costs are reduced; decentralized ownership paradigms defined by tokens create new forms of contracting; smart contracts, which automatically execute based on agreed-upon rule sets, abstractly standardize governance processes, thereby reducing execution and monitoring costs—that is, all costs associated with ensuring protocol compliance and enforcement when necessary.
To truly understand "DAO," one cannot脱离 the context of blockchain, discussions about "ownership" and its guaranteed "governance rights," or conversations around "code" and its "primitives." It is precisely because blockchain protocols have demonstrated their potential as effective new systems for rethinking traditional finance, supply chains, and other use cases that DAO has been repeatedly discussed in recent years.
For DAO to become a mainstream feature of financial and collaborative organizations, and to predict when the "Year of DAO" might arrive, it’s worth clarifying several key issues—before these commonly debated challenges and use cases are universally accepted without friction, the true breakout of DAO will not come.
The Legal Dilemma of DAO
1. A DAO That Almost Succeeded
The DAO was one of the earliest substantial experiments using smart contracts to manage and coordinate economic activities. In early May 2016, some members of the Ethereum community announced the formation of The DAO, also known as Genosis DAO, aiming to function as a venture fund within the crypto and decentralized space. It was built as a smart contract on the Ethereum blockchain. The code framework was open-sourced by the Slock.It team but deployed under the name "The DAO" by Ethereum community members. During its creation phase, anyone could send Ether to a unique wallet address in exchange for DAO tokens at a 1:100 ratio. The creation phase was unexpectedly successful, raising 12.7 million ETH (worth $150 million at the time), making it the largest crowdfunding campaign in history.
Despite its potential to fund promising projects within the Ethereum ecosystem, The DAO lacked a legal structure and thus violated U.S. securities laws. The U.S. Securities and Exchange Commission (SEC) stated in its Report of Investigation (Release No. 81207) that virtual organizations offering and selling digital assets must comply with federal securities laws.
In The DAO’s case, the SEC determined it was established as a venture capital fund, DAO tokens were securities, and it constituted a profit-driven enterprise, therefore subject to federal securities regulations. These tokens were offered by a central organization with promises of profit. Thus, unless a valid securities law exemption applied, any tokens tied to ownership interests in the profit-seeking The DAO had to be traded on registered exchanges to protect investors and ensure proper disclosures. The SEC reiterated that the law does not disappear just because an organization relies on blockchain technology.
2. Seeking Legal Entity Status: Exploring LLC Operations
DAO shares common characteristics with nearly all forms of legal entities, including general and limited partnerships, corporations, nonprofits, and cooperatives. For DAOs, the fundamental questions are: “How should a DAO be viewed legally?” or “What specific features of a given DAO might expose individual members to liability?” Wyoming paved the way for DAOs to operate as LLCs under a new category established within its Limited Liability Company Act.
In April 2020, Aaron Wright, co-founder of The LAO, drafted what later became the enacted "Wyoming DAO Bill," granting DAOs legal recognition in Wyoming.
Under this legal structure in Wyoming, individual members are shielded from personal liability for the DAO’s actions—similar to limited partnerships or LLCs, but unlike general partnerships. However, unlike traditional hierarchical companies where management bears fiduciary duties, all members of a DAO bear responsibility for participation and equal access to information.
Currently, The LAO limits membership to accredited investors as defined by U.S. law, with a maximum of 99 members.
Users join by purchasing "LAO Units," each priced at 310 ETH. Upon purchase, members receive 0.9% voting power in The LAO and the right to 0.9% of investment returns. Each member may buy up to nine units. Prospective members must pass checks for accredited investor status, anti-money laundering (AML), know-your-customer (KYC), and Office of Foreign Assets Control (OFAC) compliance.
Following Wyoming's lead, other states now recognize two types of DAOs: member-managed or algorithm-managed. Member-managed DAOs are governed via blockchain-based voting mechanisms—typically governance tokens—where decision-making authority lies with members and is controlled by majority vote. Algorithm-managed DAOs are fully governed by underlying smart contracts. In both models, the DAO’s governance—including relationships between members and the DAO, rights, voting powers, transferability of member interests—is codified in either the DAO’s articles of organization or its smart contracts. Significantly, under Wyoming law, a DAO’s smart contract is now legally recognized as equivalent to corporate charters and other official organizational documents.
3. Council DAOs: Legal Mapping to the "Real World"
Although DAOs offer significant operational advantages—transparency, tamper resistance, and fast fundraising and deployment—they still face other challenges. One major pain point is how a DAO can enter into contracts with service providers. In a council DAO model, service providers can interact, negotiate, and sign agreements with the DAO more easily. Conversely, traditional legal entities need to carefully consider how they engage with DAOs.
At least in the short term, the most effective and seamless option for interaction between DAOs and traditional companies is the council DAO. Such DAOs appoint a designated core group approved by members (possibly forming a "real-world" company) to represent the DAO, execute approved actions (e.g., signing contracts with other firms), and manage day-to-day operations on behalf of the organization.
An example is FWB, which created four core teams—governance, board, team leads, and contributors—to clarify responsibilities and show new community members how to contribute. This eliminates the operational burden of putting every daily task to a DAO-wide vote. The core team has the authority to retain services, negotiate contracts, develop and publish platform terms, hire personnel, and handle routine operational tasks.
In fact, FWB’s council structure—which mirrors traditional "real-world" companies—aligns well with its intrinsic vision and direction. FWB is among the few DAOs to raise external funding, making it resemble a startup or corporate entity. After fundraising in the first half of 2021, it announced in October 2021 a $10 million round led by a16z, valuing the organization at $100 million. According to FWB’s official disclosure, funds are primarily allocated to team building and expanding real-world event influence through FWBcities, which aims to extend the DAO’s presence into physical spaces and partner with local communities and venues to deliver tangible benefits to members.
In terms of membership benefits, holding 75 $FWB tokens unlocks Full Membership, granting governance rights along with access to token-gated features such as Events App, NFT Gallery, Web3-focused Venture initiatives, a virtual music studio, in-person meetups, and parties worldwide.
It’s clear that what FWB digitizes are only members’ identities, interests, educational backgrounds, and life experiences—not the interpersonal agreements and relationships. It merely strips away certain social attributes while actively striving to interact with the offline world. The council DAO model thus becomes the optimal and most convenient solution today.
However, this solution—or compromise—does not fully align with the flat, decentralized governance ideals of DAOs. We’ve already seen some DAOs reject such structures in favor of more fully or entirely decentralized decision-making. Despite these technical and legal challenges, the appeal of DAOs remains undiminished.
4. Code Compliance Based on Legal Frameworks
The MetaCartel community existed as early as September 2018. On June 5, 2019, the MetaCartelDAO smart contract was officially deployed on the Ethereum mainnet. Initial supporters included Matic Network, NuCypher, SpankChain, Gnosis, AdEx, The Graph, Abridged, Odyssey, and Giveth, plus over ten individual investors. MetaCartelDAO officially launched in July 2019.
MetaCartelDAO has three primary membership categories:
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The first category, «Mages», includes members who are not accredited investors;
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The second, «Goblins», consists of accredited investor members;
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The third, «Summoners», serve as operational representatives responsible for approving and guiding Mages, legal oversight, finances, and coordination services. Summoners do not necessarily need to be members.
MetaCartel Ventures (MCV) is a for-profit investment and legal entity spun off from MetaCartelDAO, incorporated as a Delaware LLC focused on investing in early-stage dApps. Joining MetaCartel requires endorsement and evaluation by existing MCV members, and proposals are submitted and voted on-chain. MCV uses the MolochDAOv2 smart contract developed by OpenLaw and MolochDAO for on-chain governance. While fundraising and asset management occur on-chain, many decisions are coordinated through off-chain channels such as group chats, video calls, and face-to-face meetings, fostering consensus before on-chain proposals.
Unlike many DAOs that adhere strictly to “code is law,” MCV does not abandon legal frameworks. To better resolve disputes such as member exit issues, MCV adopts two legal layers:
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· First, the Delaware Limited Liability Company Act, providing the legal foundation for forming and operating a Delaware LLC;
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· Second, the Grimoire legal framework—a voluntary, legally binding agreement among DAO members.
Through the LLC structure, MCV can enter into legal contracts and participate in investments, with members liable only to the extent of the DAO’s assets. Registering a legal entity also allows MCV to become a member and issue shares in MCVDAO. Unlike typical LLCs, Grimoire enables MCV’s governance structure to tightly integrate with the MolochDAOv2 smart contract. Thus, when someone purchases DAO shares via the on-chain process, they automatically and legally become a member of the MCV company, with rights and obligations governed by both Grimoire and Delaware LLC law.
MetaCartel Ventures (MCV) offers a novel approach: maintaining the sanctity of on-chain code while using legal contracts like Grimoire to optimize, streamline, and even replace traditional legal mechanisms—reducing transaction costs and execution risks through blockchain technologies such as MolochDAO. Continuously refining legal frameworks and selectively respecting code execution is a more appropriate path forward.
Organizational Structure Discussions
1. The Boundaries of DAO: The Case of YGG
DAO embodies global, flat, and fair connectivity, linking members through peer-to-peer flat structures—often via token issuance rather than hierarchical management—and assigning members specific rights unique to that DAO. DAOs are excellent for gathering individuals around shared ideas, but they have yet to prove capable of executing the micro-decisions essential for large-scale organizational success.
Scale is a contentious point. In management theory, a firm’s scope determines the boundary between internal operations and market transactions—what activities the firm performs internally versus outsourcing via markets. Its horizontal scale defines how large the firm can grow within that scope. YGG provides an excellent example of organizational boundaries.
Beyond venture DAOs like The LAO, social DAOs like FWB, or protocol DAOs like UniswapDAO, YGG resembles a new form of production organization. As a Web3-native gaming guild, it raises capital to invest in games and digital assets in virtual worlds, develops ecosystems, and expands its player base, enabling players to join games more easily and earn income or even make a living.
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· Horizontally, as of March 2022, according to Cointelegraph, YGG’s gold-farming membership across Axie Infinity and other blockchain games exceeded 20,000—reaching the scale of a major corporation in business terms.
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· Vertically, YGG has developed a cohesive GameFi strategy: it makes financial investments in game-specific blockchains, platforms, and cross-chain infrastructure, while organizing gaming guilds for productive activities such as NFT investment and in-game earning—creating a unique dual advantage of capital and traffic.
YGG establishes governance through Membership NFTs (e.g., YGG Founder’s Coin, Guild Badge, and YGG tokens). For security, it creates sub-DAOs dedicated to managing assets and activities for specific games. Assets within sub-DAOs are purchased, owned, and controlled by YGG’s treasury via multi-signature hardware wallets to ensure maximum security.
2. BanklessDAO: An Exploration of Matrix Architecture
There are two main organizational design philosophies:
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· One suits complex internal production technologies and detailed management needs, organizing departments by function—finance, production, design, audit, HR—with the drawback of poor horizontal communication;
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· The other is flatter, project-based, and cross-functional—formed ad hoc and disbanded upon completion.
A structure combining vertical functional systems with horizontal project-based relationships is called a matrix organization—accurately describing BanklessDAO’s architecture.
BanklessDAO originated from Bankless, a media outlet founded in 2019 initially as a newsletter tracking crypto industry developments. Its registered entity is Bankless LLC. Bankless holds significant influence in the crypto community. In May 2021, Bankless proposed launching BanklessDAO to its community. BanklessDAO has no legal entity and operates completely independently from Bankless media, with no overlap in business or legal aspects.
Anyone can join BanklessDAO’s Discord server and gain access to browse most information and historical work documents. To participate in collaboration and meetings, however, one must become a member by holding 35,000 $BANK tokens. There is also a dedicated channel to apply for a Guest Pass (valid for 7 days, renewable), allowing easy unlocking of speaking and collaboration privileges by introducing oneself and stating interests.
BanklessDAO explores a hybrid structural model. Internally, there are two organizational forms: Guilds and Projects.
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· Guilds: Function like small departments—design, development, legal—each with its own members, expertise, and responsibilities. Each guild aims to produce public goods, not just support other departments. Currently, there are 13 guilds: writing, finance, translation, research, operations, marketing, legal, education, design, business development, development, video, and data analysis. Joining any guild is fully open.
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· Projects: Members generate numerous project ideas within guild discussions. Those gaining sufficient consensus move from Idea to Action. Examples include developing a Discord bot, launching a blockchain index fund, building a Bankless Island in the metaverse, or pursuing real-world commercial collaborations to strengthen the guild and organization.
3. Decision-Making Based on Primitives: MolochDAO
A primitive refers to a set of instructions designed to perform a specific function, executed as an atomic unit that cannot be interrupted mid-process. Leveraging this “non-interruptibility” helps reduce all internal and external execution and enforcement-related costs.
In recent years, many projects have sought to organize as decentralized autonomous organizations, with developers experimenting with new governance models and bottom-up approaches to coordinating social and economic activity. Moloch is such a blockchain-based governance model that embeds game-theoretic design directly into code to coordinate grants for Ethereum projects. Its core governance features a “Ragequit” mechanism allowing members to exit anytime, combined with a weighted voting and multisig smart contract that allocates custody funds proportionally to voting weight.
At the heart of Moloch is the proposal. No minimum voter threshold is required. Once a proposal passes, the smart contract executes automatically and uninterruptibly. The sole recourse is “Ragequit.” If a member disagrees with a passing proposal, they may Ragequit during the execution waiting period (provided they didn’t vote in favor). Upon execution, the contract redeems the member’s share, returning the corresponding ETH and revoking membership.
Though multiple versions exist today, Moloch launched in early 2019 with only one version—MolochV1—a mere 400 lines of code. Its architectural simplicity allows natural procedures and inevitable outcomes to emerge smoothly through social consensus.
MolochDAO was the first DAO built on the MolochV1 protocol. Its goal was to fund ETH2.0 infrastructure development through donations. Founder Ameen, formerly at Consensys, left after failing to gain support for his Moloch vision. In February 2019, 21 backers joined as founding members, each donating 100 ETH (then valued at $100 each), totaling over $200,000. Vitalik Buterin donated 1,000 ETH two months later. Joseph Lubin, founder of ConsenSys, also donated 1,000 ETH. Most funded projects reportedly failed, but this doesn’t diminish the greatness of the Moloch protocol. Today, about 30% of active DAOs worldwide are built on Moloch.
4. Collective Value Discovery Through Decision Information
Current DAO collective decisions typically rely on voting methods. Range voting lets members score options, selecting the highest average. Most proposals require support from over 50% of voters. Yet in actual DAO governance, majority rule carries latent risks.
Notably, decentralized ownership does not imply equal voice among all members. The one-token-one-vote model is actually a compromise for complex decision systems. A more scientific weighting mechanism—information-based decision-making—should be introduced.
Nobel laureate Herbert Simon argued that in reality, people’s information, knowledge, and capabilities are limited, as are the number of feasible options considered—meaning decisions rarely maximize utility. Thus, the most critical factor in decision-making is information flow; information is the lifeline of rational decisions. Assuming information quality determines decision quality, collective decisions are generally superior when adequate deliberation, discussion, and dialogue allow shared information to emerge.
AladdinDAO is such a decentralized network that shifts crypto investment from venture capitalists to collective wisdom. Within AladdinDAO, a group of world-class DeFi experts known as the AladdinDAO Boule identify the most promising DeFi projects, enabling community members to benefit from their liquidity mining programs. At its core is the “Boule Council.” The first Boule members were recommended by founders and elected by the DAO. Subsequent members are 80% nominated by initial scouts and 20% directly nominated by the community, with elections conducted via decentralized governance. Boule members earn AladdinDAO tokens (ALD) for participation.
AladdinDAO continuously recruits top talent. Boule members vote to identify, analyze, and recommend quality DeFi projects to the community, earning ALD tokens in the process. Their voting decisions are tied to rewards, incentivizing responsible voting by DeFi experts.
Through the Boule Council mechanism, members with more valuable information are granted higher decision-making weight. Incentives drive continuous strategy refinement and better decision iteration, reducing Type I and Type II errors—rewarding votes for strong-performing projects and rejections of underperforming ones—thereby building a superior decision system.
Token Choices for Ownership
Decentralized institutional and decision-making systems are built upon the decentralized ownership architecture of DAO. This governs member access and voting rights in governance. Currently, DAOs distribute ownership mainly through two types: fungible tokens (ERC20) and non-fungible tokens (NFTs).
Some projects use community NFTs (e.g., Lootbags from Loot) as voting weight on Snapshot, while most communities like FWB and AladdinDAO use native ERC20 tokens—a more common approach in the crypto world. Both have pros and cons. The main advantage of ERC20 is its ability to better bootstrap internal economic mechanisms. Fungibility makes ERC20s more effective at incentivizing contributors. Additionally, allocating a large portion of supply to the treasury creates greater leverage for capital formation over time.
However, due to fungibility, ERC20 tokens are indistinguishable, leading DAOs to adopt one-token-one-vote rules, raising concerns about plutocracy—wealthy individuals or whales concentrating capital and tokens may effectively hijack, control, or dominate the ecosystem. Attempts like “quadratic voting” aim to dilute individual influence. Under quadratic voting, if the first vote costs 1, the second costs 2, and the Nth vote costs N, the total cost of casting N votes is 1+2+…+N. A more rational approach encourages broader participation over concentrated voting power.
In practice, quadratic voting only delays plutocracy. We often see instead the “tyranny of the majority.” Discussing elitism here may seem off-topic, but it’s particularly concerning—for instance, Juno Network recently used seemingly legitimate voting procedures to seize whale assets. “Redistributing wealth” appeared more like an abuse of voting power and populist celebration. Moreover, ERC20 tokens, especially in regions like the U.S., may face increasing complexity in sales and transfers.
The advantage of NFT-based ownership is easier monetization of membership rights through NFT drops, facilitating capital inflow into community treasuries. The non-fungible nature of NFTs means valuation doesn't fully follow ERC20 market pricing, and lacking oracle price feeds makes bribery and arbitrage schemes harder. Furthermore, as exploration of NFT meaning and scope remains in early stages, we anticipate future credit systems, on-chain behavior records, and social graphs built on NFTs, combined with DID (decentralized identity) adoption, could overcome one-token-one-vote flaws and enable better governance.
For example, POAP uses NFTs to record on- and off-chain activities; Rabbithole tracks your on-chain interactions to provide incentives; Showme is an NFT-based social platform mapping social graphs and circles. Imagine one wallet identified as an early contributor by a project, another interacting thousands of times with a protocol, and another proving BAYC early community membership via NFT holdings. NFTs can capture off-chain user profiles through on-chain behavior. Communities could then assign different voting weights based on historical behavior, off-chain identity, or interaction patterns captured by NFTs.
Considering all this, DAOs could certainly combine NFTs and ERC20s in their ownership and governance frameworks. However, given that DID infrastructure is still in early development and on-chain reputation systems remain nascent, how ERC20 and ERC721 can be effectively integrated remains unclear—making such discussions premature.
Conclusion
When individuals from vastly different backgrounds unite around shared beliefs, interests, hobbies, or activities—stripped of all worldly attributes like identity, status, honor, race, or gender—we participate in observing or reshaping the world purely as “souls” or “ideas.” We’ve experimented with social circles like FWB; invented new forms of production like YGG; built open companies like banklessDAO; we’ve aimed for the moon, tried to buy the Constitution, build golf courses—we pursue a thousand visions of the world.
What truly distinguishes DAOs from traditional organizations like corporations, guilds, or associations isn’t their specific visions or goals, nor our myriad dreams and fantasies—but how they can effectively interface with the traditional world within sound legal frameworks, how they design inclusive decision systems where Everyone Matters, and how they define new paradigms for ownership and governance. We remain in a perpetual stage of exploration.
Shakespeare wrote a beautiful line in the comedy *The Merry Wives of Windsor*: “The world is my oyster,” meaning the world is our stage, ours to shape.
It’s hard to say when the Year of DAO will come. Unlike the explosive growth of DeFi or the NFT craze—phenomena that quickly spawned replicable, iterative models—the exploration of humanity, cooperation, conflict, and world transformation will undoubtedly be a long and fascinating journey.
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