Ever since a group of chronically online crypto enthusiasts tried to buy a copy of the U.S. Constitution in a high-profile bidding war, DAOs (decentralized autonomous organizations) have been at the forefront of discussion in the web3 world. How are they different from companies, you ask? DAOs have been lauded for their ability to give everyone in a community a voice by involving them in decision-making and recording those decisions in a transparent, immutable manner on the blockchain. But the utopian vision some people have for DAOs seems far off from the reality today.
This week on Chain Reaction, the TechCrunch podcast about all things web3, we talked with Alexander Taub, CEO and co-founder of DAO tooling platform Upstream. Upstream started as an online community for professionals to connect with each other during the pandemic and pivoted to providing mechanisms to manage DAOs when the blockchain-based communities took off during crypto's bull run in 2021.
You can listen to the full episode below:
While some see DAOs as a catch-all solution, Taub argues that there are a few use cases for the structure that make sense today while others aren't as clear. Taub cited investment clubs, where people pool money to purchase a digital asset, and NFT projects looking to give back to their communities as some of the most intuitive use cases for DAOs.
"DAOs, blockchain -- it's programmable money. That's really what it is. So you can program money to do what you want it to do. Not everything, not every community, requires money. If I want to share cute photos of my dog with other people who want to share cute photos with their dog, I don't necessarily need any money there," Taub said.
Taub attributed the DAO's rise in popularity to the fact that many DAOs have enabled members to make money in new ways, a view that makes sense in light of his example of investment clubs. But as for democratizing decision-making, Taub said it is up to each individual DAO whether or not it will really operate that differently from a centralized corporate entity.
"I think a lot of people look at the word DAO, and they think the 'D' stands for democracy. And that's just not [the case]. People aren't sitting in a circle singing Kumbaya and being like, 'oh, we're all going to do this together.' That can happen, and that does happen ... But that's just like saying there's only one way to start a company or one way to launch a project or product," Taub said.
DAOs, like companies, have unique shareholder voting structures, Taub said. Just because many DAOs strive to give their members an equal say doesn't mean they are all effective in achieving that goal, particularly when many of them offer voting rights based on the number of tokens each member holds.
"If you want it to be a democracy, great. If you want it to be a dictatorship, people shouldn't join your DAO if they are not okay with your dictatorship," Taub said.