Reasonable DAObts: Addressing DAO Skepticism as a Skeptical Optimist

There has been a noticeable shift in my Twitter content over the last month. I didn’t really mean for it to happen, but once I really went down the rabbit hole regarding DAOs, it became all I wanted to think about.

It is such a new space that there are so many theories floating around about how things should work. So many experiments are happening that could revolutionize the DAO landscape, or at least be a significant enough failure to help the next group to try and solve that particular challenge.

I admit it, I’m hooked in that sense. But it is important to me that those of you who I have cultivated a relationship with on Twitter don’t think I lost my objectivity. I am still the skeptical optimist that you know. I haven’t been convinced to join a cult. The blood at that one DAO initiation wasn’t even real!

In all seriousness, though, there is a specific lane I want to occupy within the space that I think is the way for me to get deep into Web3 whilst retaining my authenticity. I want to help build a bridge from Web2 to Web3 that is specifically for people like me: Web2 natives that were or currently are skeptical of Web3, but are ultimately open-minded.

Some Common Doubts Regarding DAOs

• Not actually decentralized
• DAOs are just (Co-Ops / employee-owned companies / etc.)
• Not financially viable
• Governance too altruistic
• No “real-world” utility

“DAOs aren’t truly decentralized”

For those that don’t know, DAO stands for Decentralized Autonomous Organization. So obviously, decentralization and autonomy are the two focal points of discussion.

This doubt is not wrong, however I would argue that you really don’t want a DAO to be truly be decentralized in every sense of the word. I mean, I don’t think you can even call that an organization at that point.

What you want to look for in a DAO is decentralization where it matters. Those areas are token allocation, governance, and ownership.

DAOs are governed by a social token. It can be an NFT, but it can also be an ERC-20 token. DAOs that are governed by an ERC-20 token are intriguing because that token can theoretically accrue some sort of value in relation to ETH and can be swapped for ETH on certain exchanges.

The above point is SUPER important in the context of you actually giving a shit about them because if a DAO has an ERC-20 token, it provides a relatively frictionless way for you to liquify at any time.

Phrased another way — this provides a way for DAOs to meaningfully compensate contributors in a way that accrues in value as the DAO treasury goes.

The thing about DAOs that becomes a little tricky, though, is these tokens are also used for governance. So in the simplest (and therefore most vulnerable) structure is 1 token = 1 vote.

If you are saying “wow! So many ways this could be exploited!” I agree with you 100%.

In fact, I would say such a voting structure is ultimately my biggest red flag about the space.

That being said, there is work being done on this front, both in terms of the voting technology and DAO organizational philosophy. Ultimately the future here is just 1 person = 1 vote. No reason to re-invent the wheel when the wheels still work.

Also, the elephant in the room is that yeah, every DAO has a founder or group of founders. Everything initially does flow through them.

The KEY word there that essentially makes a DAO a DAO is the initially.

That core founding team organizes a community around their vision, and then gives them the tools they need to ultimately take collective ownership in their quest to achieve said vision. This is the sole goal of a “baby” DAO trying to reach childhood.

The final thought regarding decentralization — most people in financially viable DAOs use centralization where it make sense, like having a Discord to centralize communication and a system for centralizing workflow and deliverables.

“DAOs are just (already established business structure)”

I don’t want to spend too much time addressing this one because I do not think there is much validity to it. No, they aren’t. They take bits of already established business structures and throw it in a pot with their own proprietary blend of seasonings.

DAOs are not financially viable

Many people think DAOs have no real futures because there is no actual way to sustain revenue growth. This line of thinking is actually typically tied to a misunderstanding on decentralization.

I totally understand why you would think a group of people who are basically organizational anarchists would never be able to achieve financial viability. DAOs like that are super rare, though, and more power to them. Unlike a business, they can just simply exist for fun. So they don’t need to be financially viable.

That being said, mature DAOs are certainly making money. If your issue is that most are making money off of other DAOs, consider that are 10,000 SaaS companies and a lot of them sell to other SaaS companies. New technology creates new ecosystems.

I wouldn’t be contributing to a DAO for free, trust me. The rate is on par what I get from other clients as a ghostwriter, but the key difference being that theoretically has a chance to accrue in value, and can also be used to build a larger crypto portfolio without having to put “real” money into it.

Governance isn’t actually decentralized

Like I alluded to earlier, this is one area of the space where I am still highly skeptical.

The 1 person = 1 vote method is the only way to truly decentralize decision-making, but then the DAO inevitably gets bogged down by having to deliberate and vote on every little decision.

In every single group context throughout humanity, leaders arise. In their most pure state, the leader arises because they truly have the greater good of the group in mind with all of the decisions they make.

Unfortunately, we all know how human nature works. The more the DAO grows, the higher the chance the founders start to act more like a C-suite than they’d care to admit. The rank-and-file community member’s vote becomes essentially meaningless.

The great DAO leaders will actively work against that force and bring a true sense of collectivism to leadership. You have to remember — DAO leadership right now is akin to what it was like for leaders of ancient settlements had to figure out how to make sure everyone eats and no one dies. Shit is hard and there aren’t yet examples of long-term sustainability to follow.

“No Real-World Utility”

Phrased another way — people just want you to tell them why web3 is relevant to them. Honestly, most people don’t need to know a damn thing about web3. A carpenter never had to learn SEO, ya know?

That being said, there are several DAOs that are tied to a real-world initiative that folks outside the Web3 space can understand. I will use CreatorCabins , the DAO I’m a member of, to illustrate my point.

So their mission is to build a decentralized city. Now if I’m having a conversation with a Web3 person, that probably piques their interest.

Talking to you guys who are most likely Web2 natives, you would mentally check out.

But if I say how sick would a creative retreat be in Texas Hill Country that lets you have all the modern amenities you need as a creative professional, yet just steps away from the natural Zen you need to recharge those batteries?

That’s something any creative professional can get juiced up about. Scaling that concept into multiple locations and generating revenue through hosting retreats makes sense to you. Scaling nodes for a decentralized city does not…even though they are functionally the same thing. That’s where the DAO-y parts of the DAO come in.

I won’t get too crazy into different DAOs here since I already have taken to much of your time.

I hope I was able to ease some of your doubts about the space. If you are still skeptical, I would love to have a chat over on Twitter @BrettPucino.