Pantera Partners Interprets BitDAO: A DAO Treasury Driving the Adoption of Crypto Technology

The author of this article is Paul Veradittakit, founding partner of Pantera Capital, and translated by Lu Jiangfei from Chain News.

• Decentralized Autonomous Organizations (DAOs) are fully democratically managed organizations built by community members in a trustless and transparent manner, aimed at helping all members of the organization achieve a common mission. Typically, DAOs use smart contracts on public blockchains to automatically execute key organizational rules (such as voting on priorities and proposals, allocating resources and funds, etc.). Today, some of the most popular crypto protocols in the crypto world (such as Maker, Uniswap, and Dash) have begun to adopt DAO governance models.

1. Collaboration with crypto projects: BitDAO plans to initiate token swaps with existing and emerging DeFi projects, providing them with R&D resources, liquidity, funding, and co-development opportunities, with the goal of accelerating BitDAO partners to become leaders in their respective verticals. BitDAO will hold the tokens of partner projects, incentivizing itself while supporting their success.
2. Building various DeFi products: BitDAO also intends to launch various DeFi products, including a crypto futures exchange (aiming to be the "decentralized version of Bybit"), a community portal (where promising early projects can propose token swaps), and programmatic implementations for governance and treasury management.
3. Growing alongside Bybit: Bybit is one of the fastest-growing crypto derivatives exchanges globally, with its user base exceeding 1 million and trading volume increasing by over 88% between Q4 2020 and Q1 2021. Bybit is one of the earliest supporters of BitDAO and plans to allocate 2.5 basis points of its trading volume to the BitDAO treasury (approximately $258 million based on Q1 2021 trading volume) to support various R&D efforts of the DAO, thereby helping BitDAO achieve its mission.

• BitDAO has received support from some well-known investors and teams in the crypto/fintech space, including Pantera Capital, Founders Fund, Bybit, and Peter Thiel. So far, to advance its mission, BitDAO has raised a total of over $230 million.

• BitDAO is a new treasury based on the DAO governance model, dedicated to promoting the large-scale adoption of cryptocurrencies across various blockchains and projects. Unlike DAOs tied to specific protocols (like MakerDAO), BitDAO will work harder to organize and incentivize the community in the crypto and DeFi space, such as supporting early projects and facilitating collaboration between protocols, with three key pillars for its core growth strategy:

• BitDAO's governance is based on its native token BIT and is fully decentralized. Essentially, ownership of BIT tokens qualifies holders to become "members" of the BitDAO decentralized organization, allowing them to propose initiatives regarding project or fund allocation and vote on proposals from other members, enabling effective collaboration among the crypto and DeFi communities—including users, developers, and investors.

• Ultimately, BitDAO aims to become one of the most promising tools in the industry, accelerating the adoption of crypto and DeFi through organizational collaboration and decentralized efforts. With initiatives like token swaps and grant rewards, the advantages of the BitDAO treasury become increasingly evident (such as democratic governance and ample funding), thus enabling it to support early projects and facilitate effective collaboration between various products and protocols, driving DeFi towards a future governed by capable and more open, collaborative practices.

Introduction to DAO

A Decentralized Autonomous Organization (DAO) is a community owned by its members, characterized by a completely flat organizational structure. By design, every member of a DAO has equal say in all decisions, contrasting sharply with traditional centralized organizations governed by hierarchical leadership.

All operations within a decentralized autonomous organization are completely decentralized (with no single entity responsible for execution) and transparent (all decisions are public and have public records), making it a fully democratic, highly accessible tool for achieving a common mission—any member from anywhere in the world can easily participate in defining the priorities of the DAO and executing various projects within the organization.

Generally, DAOs use smart contracts on public blockchains to automatically execute key organizational rules, with all operations being verifiable. DAOs typically have a treasury (which is itself a smart contract) and a voting-based mechanism (also implemented through smart contracts) to determine various organizational parameters, such as how funds should be allocated. No party can unilaterally change the goals or rules of the DAO; any updates or changes to these smart contracts can only be executed with the approval of a majority of DAO members.

In the crypto world, DAOs have become a common model for managing and maintaining decentralized projects. Some popular DAOs include:

• MakerDAO (managing the Dai stablecoin, with a market cap of $5.5 billion);
• The governance protocol behind Uniswap (Uniswap is a decentralized cryptocurrency exchange with a locked value of $5.36 billion);
• LAO (a decentralized funding pool supporting Ethereum BUIDLers).

It is safe to say that the DAO model is the future of DeFi—a way for communities to achieve true democratic cooperation, helping everyone maintain a fair, open, and useful financial ecosystem.

What is BitDAO?

BitDAO is a newly launched, DAO-oriented treasury dedicated to promoting the large-scale adoption of crypto and blockchain technology. The funds in the treasury are democratically managed by DAO members and then allocated to various projects across the DeFi ecosystem—rather than being specifically allocated to a particular blockchain project or platform.

To support DeFi growth, BitDAO will allocate significant funds and talent resources to the ecosystem, primarily focusing on the following areas:

• R&D: BitDAO partners will establish R&D centers to develop the core protocols of BitDAO (governance and treasury management), build BitDAO decentralized financial products, support DeFi partners, and provide incubation services for emerging DeFi projects. In the coming years, BitDAO-affiliated R&D centers may hire hundreds of people.
• Liquidity: Through its treasury, BitDAO will control one of the largest liquidity pools of DeFi assets, which can be used to provide liquidity for partner protocols and help new platforms (such as DEXs, lending protocols, and synthetic assets) raise funds.
• Funding: Through grants (similar to Gitcoin), BitDAO will provide funding for new blockchain technologies and support DeFi projects through token swaps.

According to the project, "BitDAO will continue to build partnerships, accumulate the best DeFi assets, and create the most useful DeFi products with billions in assets and regular contributions. Then, our partners and products will contribute assets to the BitDAO treasury, creating a trend of continuously compounding value."

Above: The growth flywheel of BitDAO (Source: Bitdao.io)

BitDAO is primarily built around three key growth pillars:

The growth of Bybit: Bybit is a crypto derivatives exchange and the first supporter and partner of BitDAO. By daily trading volume, Bybit is one of the top 5 derivatives exchanges globally, with over 1 million active users, accounting for 10% of the entire crypto futures market share.

Bybit is also one of the fastest-growing exchanges, with trading volume increasing by 88% from Q4 2020 to Q1 2021. The exchange has committed to allocating 2.5 basis points of its trading volume to the BitDAO treasury (approximately $258 million based on Q1 2021 trading volume) to support various R&D efforts of the DAO, significantly increasing the amount of funding within the BitDAO ecosystem.

Bybit has a large retail user network, industry thought leaders, and a technically skilled R&D team, which can also help BitDAO refine its goals and assist BitDAO in achieving its mission.

Building partnerships with other DeFi and CeFi crypto projects: One of BitDAO's main goals is to conduct token swaps with different DeFi protocols and CeFi cryptocurrency exchanges to enhance liquidity and capital scale in the market. The organization is currently exploring partnerships with large protocols like SushiSwap.

In addition, BitDAO plans to provide funding (decided democratically) to early-stage DeFi protocols to help them establish themselves while assisting these DeFi protocols in expanding into broader industry markets and providing market research services and support for some groundbreaking ideas.

Building DeFi products and protocols: BitDAO plans to launch various DeFi products, including:

• Building decentralized versions of some popular Bybit products (such as decentralized futures)
• Providing effective high-yield farming treasuries on partner DeFi platforms
• Creating a portal where the community can conduct token swaps with promising early projects
• Programmatic implementation of governance, including staking for BitDAO members, time-weighted voting, and time-weighted rewards.

How is the treasury managed?

The key primitive of BitDAO's decentralized governance is the BIT token—holding BIT tokens qualifies one to become a "member" of BitDAO; BIT holders can propose new initiatives (such as new token swaps or various R&D efforts) and vote on other proposals from the DAO (such as granting rewards), enabling effective collaboration among the crypto and DeFi communities—including users, developers, and investors.

The total supply of BIT tokens is fixed at 10 billion tokens, with the following allocation ratios:

• 30% will be held by the treasury to facilitate ecosystem swaps
• 5% will be allocated through private sales
• 5% will be provided as rewards to initial partners at the project's launch
• 60% will be allocated to Bybit to establish R&D centers to support BitDAO and facilitate Bybit's growth (which in turn helps the BitDAO treasury grow). Of this, 15% of the token supply will be available immediately, while the remaining 45% will be locked for 1 year and gradually released over the following 2 years after the lock-up period ends.

Who supports the BitDAO project?

In addition to Bybit, BitDAO has also received support from some well-known "big names" and funds in the fintech and crypto industry. So far, the DAO has raised a total of $230 million from Pantera Capital, Peter Thiel, Founders Fund, DragonFly Capital, and several other early investors.

Many may wonder: why are venture capital funds interested in decentralized autonomous projects like BitDAO? In reality, we often have stereotypes about traditional venture capital funds, believing they are more inclined to invest in projects with centralized control features. However, as investors, they are more focused on how startups can maximize growth potential and long-term value. In many cases, DAOs are excellent tools for achieving these goals because DAOs can:

• Coordinate incentives among decision-makers
• Promote greater transparency
• Prioritize open networks over closed networks

All these advantages are crucial factors in creating value in the new market environment and are the main reasons why BitDAO has attracted the interest of venture capital funds.

Although DAOs are a powerful new tool, traditional venture capital still plays an important role in this field. We can view capital as a commodity, but we cannot view talent, thought leaders, and strategic partners as commodities. DAOs will provide project founders with greater power and choice, encouraging them to launch more projects of higher quantity and quality in the decentralized finance space—DAOs are becoming increasingly important for project founders, and through this value-added approach, venture capital firms will also be "forced" to adapt to this shift.

Final Thoughts

In recent years, the DeFi industry has developed rapidly, proving the power of decentralized governance and management; protocols like Uniswap and Maker, which handle assets worth billions of dollars, are essentially completely democratically governed by community members committed to advancing a common mission—making our financial system better. As more projects emerge in the DeFi space, there is a need for a decentralized mechanism to more broadly support early work and facilitate collaboration between different crypto ecosystems, which is essential for driving large-scale adoption of crypto.

BitDAO has a unique advantage in helping achieve this goal, as it has already secured substantial funding from well-known investors. Moreover, BitDAO has built a flagship partnership with the rapidly growing crypto derivatives exchange Bybit, which will further expand its treasury. Most importantly, BitDAO has begun to provide high-quality products and services to the crypto community, such as:

• A fully decentralized tool,
• Support for token swaps with some of the hottest DeFi protocols,
• Grant funding for early crypto projects,
• Key universal mechanisms for defining and executing priorities.

Many early-built decentralized autonomous organizations have goals similar to BitDAO, namely: creating a decentralized venture capital fund, but these DAOs face several issues, such as

• Profiting for themselves,
• Lack of governance plans,
• Insufficient preparation.

For Pantera Capital, we believe BitDAO can leverage its capital strength, technical expertise, and deep industry relationships to realize this dream, and we look forward to BitDAO driving DeFi towards a future governed by capable and more open, collaborative practices.

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