In the ever-evolving realm of blockchain and cryptocurrency, the concept of Decentralized Autonomous Organizations (DAOs) has emerged as a hotspot of innovation, challenging our traditional paradigms of governance and decision-making. But what exactly is a DAO?
In this guide, we’ll explore the basic concepts of DAOs, what they do, how they operate, how you can create one – and the best examples of DAOs from across New Zealand.
What is a DAO?
At it’s heart, a DAO is any organization that uses blockchain and on-chain governance to determine and self-execute the direction, decision making, and will of the DAO members.
These DAOs, or ‘Decentralized Autonomous Organizations’ are in essence a new form of organizational structure where votes and proposals are represented by tokens and smart contracts. In a DAO, users can submit proposals and the community is enabled to vote, forming a collective, democratic and decentralized consensus on organizational activity.
DAOs can be set up in many ways, acting as the foundation of organizational coordination. Almost any organization can become a DAO, such as friend groups, clubs, companies and even governments. DAOs most often still have internal group chats and activities, but the exoskeleton of decision making operates in a decentralized, transparent, open-source way.
In 2024, there is estimated to be atleast 4,000 DAOs across Earth, with Ethereum being the most preferred platform to build on. New Zealand is home to atleast 3 DAOs, including the University of Canterbury Crypto Soc, The Wellbeing Protocol, and Christchurch’s TyanDAO.
How Do DAOs Work?
DAOs are like any organization; a nexus of people, purpose and processes; but instead of having a hierarchical, top down, centralized governance structure like most corporations and the military, DAOs are flat, democratic, transparent, open-source, and decentralized.
DAOs fundamentally work by leveraging blockchain technology, tokenomics, governance mechanisms and smart contracts to record and self-execute proposals submitted by it’s members. The proposals and organization assets are recoded and store on-chain in the DAO’s contract, and once a decision is made, either the members or the DAO itself executes the will of the collective consensus. To strip away the complexities of DAOs, they’re simply on-chain governance structures where users vote with special tokens on proposals that decide how the DAO manages it’s treasury, assets and decision making.
All members are uniquely represented by their Ethereum public addresses (wallets), most commonly using MetaMask as their DAO ‘identity’. Your MetaMask wallet is where you store your voting tokens, which are allocated to you depending on how the DAO is setup.
The most well known DAO software is DAOHaus; allowing anyone to ‘summon‘ a DAO. You invite friends or associates, and create a system where members can contribute assets like ETH or ERC-20 tokens which are then stored in the central DAO treasury; the account of the organization. Members then propose and vote on how the assets are managed.
Examples of DAOs in NZ
The easiest way to wrap your head around DAOs by looking at existing DAO models in NZ.
TyanDAO
In my own view, the best example of a DAO so far in New Zealand is the TyanDAO – a Christchurch collective of 20+ mates (with many of them dating back to Highschool) who opted to become a DAO with each member having equal vote on collective governance.
Tyan’s members have a wide range of skills such as crypto wizardry, IT, accounting, risk management, music, arts, construction, fabrication, public service and scientific research.
What started off as an idea became reality over a holiday in Queenstown in 2020, when it was decided they would become a friend group DAO. They collectively decided on their principles and their DAO’s goals, asking “how can we best coordinate a group of friends with a shared goal of fun, collaboration and success?“. Using DAOHaus, they summoned the DAO, allocated one voting token per member, and introduced TyanHaus’s first funds.
Over the following years, together they would lease out and personalize a warehouse in Christchurch, becoming their central headquarters and backyard for events, creativity, expression, development and entertainment. They threw many gigs, exhibitions, threw Techweek events, fantastic parties, and put Christchurch NZ on the global DAO map.
The story is best told by them so I highly recommend checking out their full story here.
From my own perspective, TyanHaus’s DAO model; the brainchild of James Waugh, Will Smithies and Callum Gladstone, is a textbook example of what a DAO can and should be. It definitely makes me wonder how much other friend groups, such as my own, could achieve together if we had more collective coordination and understanding of DAOs.
University of Canterbury Crypto Society
The next example is the UC Crypto Soc – the DAO myself and a collection of likeminded UC students passionate about crypto and decentralization launched at the start of 2024.
By being the 2023 club president and after witnessing TyanHaus’s remarkable story and their true alignment with decentralized ideology, we collectively decided to move all of Crypto Soc’s decision making on-chain and rebuild ourselves as a DAO using DAOHaus.
We’d discussed the idea over 2023, already pledging towards a flat governance structure. At our 2023 AGM, we made the call, teed up a meeting with James from TyanHaus, and formally summoned ourselves as a DAO on the 19th Jan 24′. You can view our DAO here.
At the University of Canterbury, famous for it's 100+ student led clubs, the USCA (UC Students Association) policy mandates all clubs must follow a classic, hierarchal power structure, lead by a single club president.
Now as a decentralized autonomous organization, we have fundamentally renounced the concept of a ‘club president‘ and a centralized power structure, opting for a democratic, transparent organizational structure of governance, decision making and coordination.
It’s going to be interesting what the University of Canterbury Students Association thinks about our developments – an organization that would itself benefit from becoming a DAO.
As a club that receives sponsorship and coordinates events with Cryptocurrency NZ, Easy Crypto, Binance, PIN, Pest Free Token, Blockchain NZ and other industry stakeholders – soon we will receive a crypto payout from each sponsor, injecting life into our treasury.
As a collective, we will then make proposals and vote on how those funds should be best used to achieve our objective of advancing cryptocurrency community, awareness, and education on campus. Unleashing the imagination and contributions of all DAO members.
From my own perspective, it’s incredibly cool what we’re doing and we hope to become a historic example of how DAO and blockchain technology can be leveraged in New Zealand to empower, incentivize and engage all participants and stakeholders in an organization.
The Wellbeing Protocol
The third example is The Wellbeing Protocol, a non-profit DAO based in Wellington that is pioneering a decentralized, well-being driven approach to community self-determination.
As a registered charity with backing from the New Zealand Government, this organization founded by Mark Pascal is developing and deploying a participatory grantmaking platform that allows every day Kiwis to efficiently create and vote on local community initiatives, decisions and events, funded by the DAO’s grant system, backers, and the NZ Government.
The DAO’s vision is to create a world where local communities are empowered to support their own wellbeing – by utilizing decentralized technology to develop and scale public good infrastructure. The DAO envisions a future where communities interconnect digitally, forming voluntary networks that share resources and engage in collective action to create more efficiency, belonging, participation, action and wellbeing in local NZ communities.
From my own perspective, The Wellbeing DAO is another classic example of the potential of DAOs and the alignment New Zealand communities already have with DAO mechanics. I’m looking forward to seeing how this idea develops over the coming years and what kind of local community initiatives The Wellbeing Protocol ignites as it rolls out across NZ.
What About DAO Drawbacks?
With these great examples laid out on the table, it’s clear DAOs represent a profound opportunity for innovative approaches to organizational governance and coordination.
But what about the DAOs that have failed? Or the drawbacks associated with open-source, decentralized, transparent organizational management and collective decision making?
For one, a vegan isn’t going to be too impressed when the DAO chooses to eat at KFC.
This underscores a significant drawback of DAOs – the potential for decisions that don't align with the values or preferences of all participants. In a DAO, decisions are made through voting, and while this democratic process is meant to be inclusive, it can inadvertently neglect the needs or ethical considerations of certain members.
Two, imagine a car that lets everyone in the group take turns steering the wheel.
While the intention might be to distribute control evenly to align with democratic principles, it can lead to chaotic and unpredictable organizational navigation. Similarly, in a DAO, the decentralized and democratic decision-making process might result in slow and contentious progress. The absence of a clear hierarchical structure can sometimes lead to indecision, conflicting opinions, and difficulties in executing timely and efficient actions.
Three, imagine having the ingredients of your secret sauce laid out for everyone to see.
While transparency fosters trust and accountability, it can also expose vulnerabilities and internal conflicts. Sensitive information may become public, potentially leading to external interference or exploitation.
Four, imagine a symphony where every musician has an equal say in the composition.
In a DAO, the absence of designated leaders or experts in certain domains could mean that decisions are made without the necessary expertise. This lack of specialized guidance can lead to suboptimal choices and hinder the DAO's overall effectiveness. There's a saying, a bee can't convince a fly that honey taste better than shit.
With that all said, you can configure a DAO in whatever way you want, and laying strong foundations can ensure a smooth ride for all participants. Many DAOs require new members to sign off a manifesto of values, goals and intentions before becoming full fledged members with voting power. Most DAOs have prominent leaders who leverage softpower and a strong vision to ensure the DAO reaches the goals it set out to achieve.
The First DAO - First to Fail
In April 2016, the world’s first DAO, “The DAO” was launched on the Ethereum blockchain.
The DAO was designed to operate as a venture capital fund and it quickly raised $150 million dollars in Ethereum. The decision-making process and allocation of funds were intended to be governed by the consensus of DAO token holdings, with voting power proportional to the number of tokens held. Everything was looking extremely promising.
However, The DAO suffered a critical security vulnerability in its smart contract code. Exploiting this vulnerability, an hacker managed to drain a significant amount of Ether from The DAO. This incident led to a contentious debate within the Ethereum community on how to respond – and ultimately, the majority of the community voted to execute a hard fork to reverse the transactions and recover the stolen funds, while a minority chose to continue on the original blockchain – resulting in the creation of Ethereum Classic (ETC). This is the only time in Ethereum (ETH)’s history a transaction has ever been rolled back.
The DAO hack was extremely controversial and led to many debates about principles such as immutability and the consequences of reversing transactions even in these situations. In the years since, the open-source Ethereum blockchain has seen immense battle testing and development, with thousands of DAOs being created and operated on it till this day.
My Final Views
Ultimately, the state of DAOs in 2024 provides an exciting keyhole into a not too far away future where democratized, decentralized governance structures become mainstream. This technology and ideology is in stark contrast to many of the power structures that impact our daily lives, so it’s going to be cool to see DAO’s, as they say, “eat the world”.
As founder and CEO of Cryptocurrency NZ, where we already enact democratic decision making between us, I see great value in becoming a DAO and decentralizing governance.
In fact, if there was more interest in our organization we probably already would have. CNZ owns and operates NZ’s largest crypto groups, forums, meetups, marketplace and guide – imagine a version of this organization that has collective governance across it’s 50,000 members. If you’re reading this for whatever reason and see value in this vision, definitely don’t hesitate to reach out. It feels a bit like a vacuum chamber in regards to DAO discussion here in our little corner of the world. If you are considering launching your own DAO, I hope this guide has provided you with value in one way or another. Good luck.
