Decentralized autonomous organizations, or DAOs, have risen in popularity in recent years as blockchain projects strive to uphold democracy in their ecosystems. First utilized in 2016 on the original pre-fork Ethereum blockchain, the concept is becoming widely implemented. Today, there are over 4,200 DAOs in the cryptoverse and over $9 billion in crypto assets locked in DAO treasuries.
DAOs are smart contract-based governing bodies that are responsible for decision-making in cryptocurrency networks. DAO members typically have full voting rights, and only those with a vested interest in the network’s growth can become involved. DAOs operate on a set of rules with software reinforcing the governing principles while preventing systemic manipulation and centralization of power by users. Most networks require at least 50% of the voting members to be in agreement for a proposal to pass.
The first decentralized autonomous organization was The DAO, which was formed in April 2016. However, it faced numerous problems, with the biggest setback being a bug in the code that led to the loss of $60 million worth of ETH tokens. The blockchain underwent a hard fork designed to reverse the unauthorized transactions, despite significant resistance from some DAO members. The fork caused the Ethereum chain to split into two and led to the breakdown of the organization.
While DAOs are designed to be autonomous, some have inherent loopholes that malicious entities can exploit. In 2021, DAOs evolved to become resource pooling networks that help to fulfill collective endeavors outside of the blockchain, such as asset buys.
The ConstitutionDAO, which was launched in the fourth quarter of 2021, accumulated $47 million in a short space of time through donations. The main goal of the fundraising effort was to buy a rare copy of the U.S. Constitution at an auction held in November. However, the DAO was outbid and ultimately disbanded. Nevertheless, the project helped to demonstrate the power of crowdsourcing using DAOs.
The ConstitutionDAO project has since sparked several other asset-purchasing projects. Spice DAO, for example, recently bought a rare copy of Alejandro Jodorowsky’s adaptation of Dune for some $3 million. The organization announced via a tweet that it would sponsor the creation of an animation based on the book.
Another organization, Heritage DAO, recently raised $1.5 million in an effort to buy South Korean national treasures that had been listed for auction. Some of the pieces are over 1,000 years old. The auction was set up to raise funds for the struggling Kansong Art Museum.
The crypto space is experiencing an upsurge in DAO projects. Among the most notable to launch thus far in 2022 is AssangeDAO. Formulated to cover activist Julian Assange’s legal costs while creating awareness about press freedom, the project managed to raise $53 million, making it the biggest DAO fundraising effort hosted on the Juicebox programmable treasury.
Another trending project is the CO92 DAO. Launched on Feb. 7 by Kiat Lim, the son of sports billionaire Peter Lim, it is built to democratize professional sports ownership by allowing enthusiasts to have a stake in high-impact endeavors such as football clubs with outstanding potential and industry technologies.
That said, there have been some setbacks. The saga of DeFi protocol Wonderland, which led to the unmasking of co-founder Michael Patryn, highlighted some of DAOs’ major drawbacks. Patryn, who is alleged to be a serial scammer, held the reins of the project’s treasury. Further investigation determined that the project’s DAO was not actually decentralized. 2022 is expected to continue to be a drama-filled year in the DAO space as the industry matures.
Adoption
