The future of work is DAO, and the future of income is "X-to-earn."

Author: Ben Schecter, Head of Operations at RabbitHole

Compiled by: Gu Yu

In the future, ordinary people are likely not to work for companies. Instead, people will earn income in non-traditional ways through activities such as playing games, learning new skills, creating art, or curating content. This shift in how we work is not uncommon or surprising— the idea that most people would be employed by large companies seemed crazy to some in the 1800s.

This new future of work is enabled by networks formed around crypto protocols, which are becoming new ways to coordinate, measure, and reward contributions to complex ecosystems. This shift has already begun to unlock new earning potential for individuals and has led to value capture increasingly shifting from organizations to individuals participating in crypto networks.

The traditional way of making money is "work to earn," but the future of income is "X-to-earn"— earning by playing games, learning, creating, and working.

However, this will not happen magically—it will require new decentralized autonomous organizations (DAOs) that can coordinate all these new activities in the context of enterprise systems. This article provides a framework for understanding the options available in the future of work.

I. Limitations of Companies as Coordination Mechanisms

First, we need to explain the shortcomings of existing profit models. In the information age, traditional corporate employment as a means of coordinating activities is rapidly becoming outdated—we have already seen this with the emergence of alternative forms of income, such as influencers, contractors, creators, gig economy participants, and more. These ways of making money do not necessarily feel like "work," but they are all examples of individuals participating as value providers in complex networks and earning income through their contributions.

However, the number of these non-traditional opportunities is limited, and when available, they often undervalue the contributions of the participants. This is because these jobs are still based on the web2 paradigm, in which companies continue to control the business model.

An increasing number of traditional companies have "peripheral stakeholders," participants whose roles blur the lines between internal and external members of the organization. Think of Apple and developers creating apps for the App Store, YouTube and its creators, or Uber and its drivers—participants contribute to the company's growth from the outside, but companies struggle to align incentives with these stakeholders.

As companies grow, they can no longer maintain sustainable relationships with these external network participants. The relationship between companies and participants becomes a zero-sum game, where companies begin to extract value from these participants to maximize profits.

The company model with strict boundaries between internal and external may have made sense in the industrial age, but in the information age, this model leads to misaligned incentives and unsustainable extraction. In a world where we have complex information and peripheral stakeholders, companies are no longer suited to help us coordinate our activities.

Crypto networks create better alignment among participants, and DAOs will become the coordinating layer in this new world.

II. DAOs as a New Coordinating Layer

DAOs will ultimately replace traditional models. A DAO is an internet-native organization whose core functions are automated through smart contracts and composed of individuals engaged in tasks that automation cannot achieve (such as marketing, software development). In practice, not all DAOs are decentralized or autonomous, so it is best to view DAOs as internet-based organizations that are collectively owned and controlled by their members.

Although DAOs are still in their early stages of development, they are no longer just a hopeful concept. They are real organizations managing billions of dollars in capital, providing real products and services to millions, and creating new earning opportunities for people.

This is a great overview of the current DAO landscape by Cooper Turley:

DAOs come in many different types and sizes: there are DAOs managing crypto protocols (protocol DAOs), DAOs engaging in venture capital (investment DAOs), DAOs providing services to other DAOs (service DAOs), DAOs purchasing NFTs (collector DAOs), and many more.

However, among all DAOs, there are some common threads that distinguish them from traditional organizations (these are generalizations, so note that they may vary by specific instance):

These elements that distinguish DAOs from traditional organizations actually enable DAOs to establish more symbiotic relationships with their stakeholders and participants. DAOs operate as open economies, encouraging value accumulation wherever it is provided, rather than based on arbitrary legal boundaries. Chris Dixon has pointed out:

Crypto networks use various mechanisms to ensure they remain neutral as they grow, preventing the lure and switch of centralized platforms. First, the contracts between crypto networks and their participants are executed in open-source code.

Second, they exert control through "voice" and "exit" mechanisms. Participants gain a voice through community governance, both "on-chain" (via protocols) and "off-chain" (through social structures around protocols). Participants can exit by leaving the network and selling their tokens or, in extreme cases, by forking the protocol.

The structure of DAOs is inherently open and accountable, which is a compelling feature that allows them to share value with the participants who create them. Otherwise, other DAOs will outcompete them, or their participants will leave to seek other opportunities.

In fact, the best DAOs are those that reward their participants, forming the basis of an ownership economy. This emerging positive-sum dynamic is the foundation of the X-to-earn trend, which will shape the future of work.

III. The Future of "Work" in DAOs

To better understand the options available to people, we must explore the specific structures of DAOs:

Graphic inspiration from Brian Flynn, Zakku, and the Orbit team

As open economies, DAOs will drive the trend of X-to-earn, making work more flexible, fluid, and fun than the traditional 9-to-5.

The openness of these crypto economies will allow people to participate in multiple DAOs and crypto networks, mixing and matching different income streams and ownership returns (remember, the best DAOs allocate ownership to their participants through their own native tokens).

People's income will be a blend of things we already do in life (like playing games), things we consider traditional work (like bonuses/contracts), and things that currently only a small portion of people can access (like investing, passive income). In other words, DAOs will expand the types and number of opportunities available to a variety of participants, including token holders, bounty hunters, and core contributors.

For example, token holders might earn through grants from major DeFi protocols, passive income from various tokens, etc.; bounty hunters will earn by completing incentivized on-chain actions; network participants can earn by playing Axie Infinity or other upcoming P2E games.

In this new future of work, jobs will be shorter and more dynamic—the transition costs between jobs will be lower, opportunities will be more apparent, and work will be reduced to more atomic units, unifying the entire world under one labor force to access all opportunities. We will discover new opportunities based on our on-chain history, ownership, and reputation, and we will contribute where we have the best comparative advantage.

Here’s a detailed look at how participants can see earning opportunities through DAOs.

Core Contributors: work-to-earn

Core contributors are what we typically think of as employees today—people who focus full-time on one (and in some cases, 2-3) projects or organizations. This singular focus allows individuals to immerse themselves in projects and accumulate contextual and strategic knowledge.

The demand for focused and embedded workers will never disappear, but in web3, this group will be much smaller than ever before. Software and, to a greater extent, smart contracts enable a small group of people to have a massive impact. Instagram was acquired by Facebook for $1 billion when it had only a team of 13. This type of outcome will become more common in the future, as the power of software automation and larger networks composed of smaller contributors will keep the number of core contributor team members small.

In the future, working for this team will not be significantly different from working for a company—DAOs will still have core contributors whose interests are most directly aligned with the health of the organization. Because DAOs are more transparent than companies and can be held accountable by a larger community, however, the pressure is greater (think of the scrutiny public officials face).

Bounty Hunters: contribute-to-earn

"Bounty hunters" complete clearly defined work for an agreed-upon price and/or duration. These individuals are typically functional experts in fields like finance, development, and design, serving multiple DAOs simultaneously and completing specific tasks with clear boundaries.

Bounties are often publicly posted for anyone to claim and may sometimes be competitive, rewarding the best submissions based on the merit and value of contributions after the fact, rather than through a pre-application process or bidding war.

Many bounty hunters will band together to form their own service DAOs—think of these organizations as providing outsourced help to DAOs that lack the necessary skills at hand. The emergence of these service DAOs is to complete tasks that require functional knowledge, such as fund management (e.g., Llama), software development (e.g., RaidGuild), governance (e.g., Fire Eyes), and more.

While bounty hunters and service DAOs may sound like contractors and professional service firms, they will be distinct and more popular within DAOs for several reasons:

Smart contracts will automate a large portion of the core functions of DAOs, leaving more clearly defined, functionally specialized work that is well captured through bounties.

DAOs will intentionally try to push work to the periphery to maintain decentralization and avoid large hierarchies, while bounties create a sustainable way to do so.

The transparency of DAOs will lower the coordination costs of bounties.

Network Participants: participate-to-earn

This is the newest and perhaps most exciting part of the future of work. In any given DAO, this is where most people will fall.

Networks gain power with more activities and more participants; however, for years, users, consumers, and participants have been adding value to networks without receiving their share of that value (e.g., Apple’s app developers, YouTube creators, and Uber drivers).

Compared to closed organizations, DAOs are more like open economies, rewarding each individual's contribution based on the value they provide to the network, regardless of who it comes from. This means that everyday actions that are valuable to the network will translate into earning opportunities.

Almost anyone can earn some income simply by living online, using products, and participating as a user. For those who are rewarded for participating in networks, earning income feels like a game.

Play-to-earn

Play-to-earn is a new type of gaming model that rewards players for playing games and achieving accomplishments. Traditional gaming models involve a one-sided transfer of value to game creators or platforms, whereas play-to-earn games also reward users.

The mechanics of play-to-earn games resemble an economy: players provide labor (their time and energy) and capital (often purchasing NFTs to participate in the game) and receive fungible token rewards for their achievements and progress in the game. Earning currency from games is not new, but instead of rewarding players with in-game currency limited to use within the game, players earn fungible token rewards through games that can be exchanged for other crypto tokens or fiat currency.

This means that video game players can pay their bills based on their achievements in games, especially for people in countries with lower wages and living costs. This phenomenon has become a source of income for millions, particularly through Axie Infinity.

Axie is a popular blockchain game where players can purchase pet NFTs (Axies), breed them, battle with them, and trade them. These actions occur within the game, but each user actually owns the Axies they purchase or create. The game has gained immense popularity in recent months, with total revenue exceeding 200,000 ETH (currently $860 million) in July and August (these numbers have since declined, which is the subject of intense debate I will discuss below).

Source: Axie World

This explosive growth is attributed to the alignment of incentives between Axie and its users, which Axie describes as follows:

Axie has a 100% player-owned real currency economy. Game developers do not sell game items or copies but focus on developing players into a player economy and charge a small fee to monetize. Axies are created by players using in-game resources (SLP and AXS) and sold to new/other players. AXS token holders are the government that receives tax revenue. Game resources and items are tokenized, meaning they can be sold to anyone, anywhere on an open peer-to-peer market.

Axie has opened the door to earning income and, more importantly, has shown people the larger X-to-earn trend, demonstrating how individuals can earn income by contributing to networks.

Learn-to-earn

Learn-to-earn is a new educational model where a person is actually rewarded for proving they have learned something, rather than paying to learn. This is possible when the skills, knowledge, or information a person learns add value to the network, and that network is willing to fund the learning.

On RabbitHole, crypto protocols pay for tasks, incentivizing users to complete specific actions on-chain. When users complete these actions, they receive rewards provided by the protocols. While bounty hunters typically contribute to building protocols, these on-chain actions often relate to participating in the protocols.

This new positive-sum interaction benefits all parties:

• Users learn new skills or methods in the crypto industry and earn tokens for it.
• Crypto protocols gain knowledgeable new users.
• RabbitHole receives a portion of the revenue to promote interaction.

This new model is similar to Google sharing part of its ad revenue to learn about new products or paying you because you strengthened their alumni network. In both cases, value was provided to the network without reward, but now, you can be rewarded.

Since its launch, RabbitHole has distributed over $750,000 in rewards, paid by some of the largest crypto protocols (such as Uniswap, Aave, Compound, The Graph, Pool Together, and Polygon). While this space is still in its early stages, the potential for earning rewards through learning is enormous when considering the education and advertising revenue currently not captured by users.

Create-to-earn

Cryptocurrency has created new wealth and digital scarcity, paving the way for the explosion of the NFT market in recent months. This has provided opportunities for artists around the world to make a living, and in some cases, even generational wealth.

But this is functionally no different from any artist being compensated when their work is successful. More interestingly, creators are rewarded for their value addition to the network, not just for the personal profits they gain from their own work.

For example, the NFT marketplace SuperRare airdropped 15% of its tokens to early users, collectors, and artists on its platform to acknowledge the role these value creators played in its early network success.

Audius is a decentralized protocol for music streaming that allows creators to earn tokens by uploading music and curating playlists. Because of the value creators bring, Audius grants them ownership of the network.

Token Holders: Invest-to-earn

Anyone with an internet connection and a crypto wallet will be able to invest in high-growth opportunities.

In a world where every network has a token, tokens are earned through participation in the network, and the ability to purchase tokens is permissionless, everyone becomes an investor.

Investing will become a primary source of income for an increasing number of people. Not every investment will appreciate, but individuals will have the opportunity to access opportunities previously reserved for a select few, unlocking an entire class of income-earning opportunities.

IV. What It Takes to Launch DAOs and the Future of Work

Only when DAOs become mainstream will X-to-earn opportunities become mainstream. DAOs show a lot of promise, but they are still in their early stages, and there is a long way to go before realizing the future of work. In a recent survey conducted by Gitcoin and Bankless of 422 DAO participants, <45% of respondents indicated that DAOs are their primary source of income.

For DAOs to truly become the center of work, we need to develop the infrastructure, tools, and systems that can support DAOs and their members.

Coordination Tools

Most DAOs currently rely on a combination of Web2 software that is not designed for DAOs or very nascent web3 software. In both cases, neither fully meets the needs of DAOs.

DAOs have incredible potential in harnessing the power of decentralized networks and the collective intelligence of people, but they need better software tools for coordination. DAOs will need tools that support governance (e.g., Snapshot, Orca), software collaboration (e.g., Radicle), fund management (e.g., Parcel, Multis, Gnosis), discussions (e.g., Discourse), access (e.g., CollabLand), and more.

One interesting area where new solutions are needed, particularly relevant to this article, is in rewarding contributors. DAOs do not have a CEO or HR department to decide who should be compensated, so new, decentralized ways are needed to determine how much value a person has contributed and how much they should be compensated for it. Some early but interesting solutions include allowing peers to determine each other's rewards (Coordinape) and using algorithms to create contribution graphs and calculate rewards (SourceCred).

Reputation Systems

DAOs are open and permissionless, but they still need new methods to determine trust, collaboration, and reward.

The traditional corporate solution is to conduct extensive interview processes, but this is contrary to the spirit of DAOs. A more complex issue is that many people participating in DAOs are anonymous. In this new world, DAOs need a new way to determine who to allocate scarce resources to.

This highlights the need for on-chain reputation systems. On-chain reputation systems will capture our behaviors that occur on the blockchain: our contributions to DAOs, our governance voting history, our token holdings, and more. Ultimately, reputation systems will use these on-chain behaviors to predict our future actions to determine who is trustworthy, credible, and consistent. On-chain reputation will replace the current methods companies use, such as credentials, resumes, and interview processes.

However, there are many privacy and security issues in tracking public activities associated with personal identities on distributed ledgers. Currently, blockchain identity primarily revolves around addresses, but to make these reputation systems viable, we will need more robust decentralized identifier solutions (e.g., Ceramic / IDX) and identity management.

V. Caution: On Creating Value and Possible Pitfalls

It is unclear how much income can be earned through these channels in the long run. X-to-earn does not mean that everyone can make a living by creating art and playing video games.

X-to-earn is about rewarding value where value is created. DAOs make these non-traditional paths more sustainable and accessible to more people, but the market will not reward everyone. Market dynamics still matter; to receive returns, you need to provide value. Creators need to find an audience, gamers need to achieve results, and bounty hunters and contributors need to create impact.

However, the ongoing debate around the sustainability and scale of certain earning opportunities does not detract from the theme of this article: creating value within networks should be rewarded, and DAOs will coordinate the value returns within crypto networks, leading to new earning opportunities.

More broadly, the future of work will not be absolutely good. Like any major technological shift, there are often both positive and negative sides. DAOs will lead to similar outcomes. Here are some directions worth paying attention to:

Competitiveness and Gaps

Measuring and rewarding all contributions to networks will lead to a more elite distribution of resources. The flip side of elite dominance is a world where a DAO actually amplifies the power laws previously exhibited by web2 economies. For example, on Spotify, the top 1.4% of creators earn 90% of royalties. Moreover, a truly globalized labor force with lower transition costs will only increase these competitive dynamics. If DAOs exacerbate this trend, how will people coordinate the increasing disparities in outcomes?

Cognitive Overload

The processing capacity of the human brain is limited. The Dunbar number is a well-known limit on how many social relationships the human brain can manage, but the "DAObar number" is the DAO version of that concept: how many DAOs can a person meaningfully participate in? Each subsequent DAO participation increases the cognitive load to maintain context and awareness of everything happening. The DAO tools used for communication and collaboration (discussed above) will attempt to alleviate this, but people may struggle with the additional overload.

State Separation

On one hand, DAOs allow people to choose how they work and connect with communities that align with their values. On the other hand, by reducing most work to atomic units and purely economic incentives, we risk reducing people's meaning to pure economic returns. We risk turning work into discrete, meaningless tasks where labor is simplified into commodified services.

There is a common metaphor that the future is already here; it’s just unevenly distributed. DAOs and the future of work are certainly examples of this. Every day, more and more people are joining DAOs and fully engaging in web3. DAOs are growing rapidly and are in dire need of talent to help them achieve their missions.

The future of work is emerging, and it will evolve in unexpected and fascinating directions.