Are DAOs the perfect tool for grassroots organizations and social causes?
Are you passionate about a cause or a movement and looking to get more involved? Maybe you’re an activist looking for a better way to collaborate with your community. Have you considered forming a DAO to fund and support your social cause?
What is a DAO?
Decentralized autonomous organizations (DAOs) are a new breed of organization with no centralized leadership. Instead, DAOs are governed by their community members and predefined, automated rules for how decisions are made and capital is allocated. At a high level, a DAO is a community with a shared bank account.
“At a high level, a DAO is a community with a shared bank account.”
DAOs run using blockchain technology called smart contracts. A DAO’s smart contract defines the rules of the organization and holds the group’s treasury. It defines when a vote needs to be held, and how much community support an initiative needs to be approved. No one can spend the treasury funds without the approval of the community.
DAOs are typically funded by the issuance of a governance token (cryptocurrency) or by the sale of an NFT (non-fungible token) collection. The purchasers of these assets are granted access to a community built on a shared set of beliefs. The assets also represent their voting rights in that community.
Advantages of DAOs vs Traditional Companies and Nonprofits
The primary benefit of a DAO vs traditional companies and nonprofits is the governance structure. DAOs have a horizontal structure giving every member/donor a say in how the group allocates its shared capital. This is an obvious synergy for grassroots organizations without traditional leadership.
Transparency is another key advantage to DAOs. A DAO’s financial transactions and rules are recorded on a blockchain for all to see. There is no question about how the organization is spending money, which is important for many donors.
“DAOs are made up of engaged communities instead of donors.”
Most importantly, DAOs are made up of engaged communities instead of donors. Donors might only interact with a particular non-profit once a year (when they are asked for a donation). On the other hand, members of a DAO community can submit and vote on proposals throughout the life of the project. They don’t just give a donation, they accept responsibility in the form of a governance token. In a DAO, the community drives the movement.
Use Cases for Social Impact DAOs
- Charity allocation: DAOs can be established to support broad causes like Women’s rights or Black Lives Matter. Members of the DAO make proposals and vote on the allocation of funds to various charities.
- Grants for research: DAOs can create and allocate grants for medical or environmental research.
- Impact investment funds: DAOs can be vehicles for investment into impact driven startups or other assets.
- Education and scholarships: DAOs can establish organizations focused on education and training in Web 3.0.
Projects to Check Out
- Klima DAO allows members to drive climate action and earn rewards with a carbon-backed, algorithmic digital currency. Can we really make money and save the world?
- GitcoinDAO is a community of internet citizens who builds & funds digital public goods, like Open Source Software.
- Popcorn DAO helps users automate strategies to generate returns on their defi assets while donating a portion to charities. (Coming soon)
- Endaoment is is a platform that helps users quickly launch funds centered around philanthropic activities and accept crypto donations.
- Seed Club is a DAO that builds and invests in impactful Web 3.0 communities.
- VitaDAO is a community owned collective funding early stage longevity research.
Regulators haven’t quite caught up with this technology, leaving many issues to be decided. Currently, DAOs don’t have a legal framework or liability protections like LLCs. They also exist across multiple jurisdictions, meaning legal issues that may arise will likely require those involved to deal with numerous regional laws.
Even with these remaining questions, it’s clear that DAOs are here to stay. It’s great to see projects using this structure as a force for good.