Detailed Explanation of BitDAO: An Investment DAO with Billions in Assets

Original Author: Tanyo Gochev

Original Title: 《BitDAO: What You Need to Know About the Investment DAO with Billions in Assets》

Compiled by: Li Zeyi, Chain Catcher

Decentralized Autonomous Organizations (DAOs) have recently gained significant attention. Collector DAOs like FlamingoDAO are purchasing blue-chip NFT projects such as Bored Ape Yacht Club and Crypto Punks. ConstitutionDAO raised nearly $47 million to purchase a copy of the U.S. Constitution, coming just minutes away from success before being outbid by a billionaire.

These DAOs demonstrate how quickly people on the internet can ally and organize for a common purpose in a self-governing manner. This could be for a specific cause, to build a project, or simply to create a community of shared interests for events and more.

An important part of the DAO space is investment DAOs, and here we will take a look at one of the largest—BitDAO.

1. What is BitDAO?

BitDAO is an investment DAO created by the large derivatives exchange Bybit based in Singapore in 2021. It has the world’s largest DAO-oriented treasury, managing assets worth approximately $2.5 billion. BitDAO aims to support the development of open finance and help decentralized economies based on tokens to grow.

Before its launch, BitDAO raised $230 million through private fundraising. It received funding from investors such as Peter Thiel, Founders Fund, Pantera Capital, and Dragonfly Capital. Institutions like Jump Capital of Synthetix, Spartan Group, Fenbushi, Alan Howard, and Kain Warwick also supported BitDAO. The DAO later raised $365 million when it launched its governance token, BIT.

In addition to fundraising, Bybit has committed to providing 2.5 basis points of all futures trading volume to BitDAO's treasury, which currently amounts to about $1 billion annually. Bybit's contributions will decrease over time. Although Bybit has established the DAO, BitDAO is not managed by the Bybit team; they only provided the initial funding to launch the DAO.

Since July 2021, Bybit has contributed over $400 million to the BitDAO treasury in the form of digital assets such as ETH, USDC, and USDT. Currently, most of it consists of BIT and ETH, but it will gradually diversify over time with token swaps.

BitDAO has attracted a large number of token holders and contributors, with over 15,000 people currently holding its governance token, BIT.

2. How does BitDAO intend to develop its ecosystem?

BitDAO plans to expand its ecosystem by funding various projects in the crypto space. They will support projects and initiatives in the following ways:

1. Investment Grants

BitDAO will provide grants to teams engaged in product development or research to further advance and benefit the crypto industry.

2. Collaborating with Projects and Token Swaps

Projects aligned with BitDAO's interests will receive funding in the form of token swaps, which will incentivize BitDAO to support the projects and help them become category leaders. One area the DAO hopes to fund through token swaps and partnerships is spot and derivatives DEX.

3. Developing Some of Their Core Products

BitDAO will also develop its own products, focusing on making DAO governance easier and more effective. Some of these include on-chain and off-chain governance solutions.

Here are some DAO-related tools currently under development:
(1) On-chain Governance: Allows proposals to be executed without an operator. It may be combined with a portion of the current BitDAO treasury for real-world testing.
(2) Risk Management: Incentivizes experimental ideas while controlling BitDAO's economic risks, especially in collaboration with autonomous entities; possible solutions include collateral and insurance mechanisms.
(3) Governance Suite: A public library of solutions, policies, best practices, and references around governance and financial management. It can be referenced by future DAOs and autonomous entities for rapid creation.

3. What is the BIT Token?

BIT is the governance token of BitDAO. At the time of BitDAO's establishment, its governance token was launched on MISO, a launchpad for crypto projects on SushiSwap. BIT has a fixed supply of 10 billion tokens. Of this, 60% is allocated to Bybit, 30% to the BitDAO treasury, 5% to launch partners, and 5% distributed through private sales. While Bybit received the largest initial allocation, it subsequently delegated some voting power to partners such as Windranger Labs and Pentagon Labs.

Users can purchase BitDAO's native token from cryptocurrency exchanges like Bybit, FTX, and Gate.io.

BIT token holders must delegate their voting rights to an address in order to create proposals or vote. They can only delegate to one address, including their own. When delegating, the tokens are neither locked nor transferred. This way, if a representative's wallet is compromised, the BIT tokens will not be lost.

BIT token holders govern BitDAO, allowing them to create and vote on various proposals regarding DAO activities.

Some of the key contributors to BitDAO include:

(1) Jonathan Allen
Jonathan discovered his passion for blockchain back in 2013 when he was an active Bitcoin trader. He collaborated with others at Berkeley to create blockchain projects that empower creators in the crypto world. He is now the managing partner of Mirana Ventures and has successfully submitted a proposal to create EduDAO.

(2) Ronen Kirsh
He is the founding partner of the blockchain investment firm Dekrypt Capital. Ronen is also a strategic partner at Forte, an end-to-end blockchain platform focused on gaming and NFTs.

(3) cateatpeanut
This individual remains anonymous but claims to be a managing partner at Windranger Labs. This lab is one of the partners to whom Bybit has delegated some voting power. Windranger Labs is a research and development center that is formulating protocols for BitDAO.

4. How has BitDAO allocated its funds so far?

BitDAO's first partner is the DAO of SushiSwap. It supports governance and treasury operations in exchange for 2.6% of the total supply of BIT.

Additionally, BitDAO has made some notable investments, such as:

1. Collaborating with Mirana Ventures (BIT's venture partner) to allocate $33 million to EduDAO.

EduDAO has university partners such as the Blockchain at Penn, Harvard Blockchain Club, UC Berkeley, Oxford Blockchain Society, and Tsinghua University Student Blockchain Association. BitDAO will allocate $33 million to Education DAO over three years, approximately $11 million per year.

EduDAO will focus on connecting the university ecosystem to improve blockchain education. It is an independent committee that provides funding for projects and is committed to independent product development. The funds EduDAO receives from BitDAO and other partners will be distributed as grants to different university DAOs.

Each project will be completely independent and have control over its funding. This process will provide creative freedom to various teams. In exchange, these projects will participate in and contribute to the governance of BitDAO. EduDAO will fund various educational projects in the crypto space.

BitDAO will support different university DAOs in the following ways:
(1) Creating proposals for product usage, autonomous entity (AE) creation, token swaps, grants, or additional funding.
(2) Building tools for DAOs.
(3) Seeking talent from BitDAO's AEs or partners.

2. Providing $200 million worth of crypto assets to zkDAO.

zkDAO was created in collaboration with Matter Labs, the organization behind the Ethereum Layer 2 solution zkSync. BitDAO will provide $200 million worth of crypto assets to zkDAO over five years to help expand the zkSync ecosystem. This brings approximately $40 million in funding, which will be released by BitDAO in the form of milestone rewards.

zkDAO will utilize these funds to focus on better infrastructure, security, and R&D grants. zkSync has been dedicated to addressing Ethereum's high network fees.

They will also fully decentralize the governance of the platform and open all development source code, making zkSync fully compliant with the spirit of decentralization in cryptocurrency. zkDAO hopes to support active contributors, so they have made a clear distinction between partners and voting rights:

Individuals or entities that contribute funds or other resources will receive partner rights, while those who make meaningful contributions to zkDAO will receive voting rights.

3. Seed investment of $400 million for the creation of Game7.

BitDAO has partnered with Forte to invest, with Forte being a company fully focused on crypto game development. Members of its team have previously worked at major game developers such as Riot Games, Unity, Sony, and Rockstar Games.

Forte has raised over $400 million from experienced cryptocurrency investors such as Andreessen Horowitz, a16z Crypto, Griffin Gaming Partners, and Griffin Union Grove Venture Partners.

Game7 will receive approximately $500 million in funding, focusing on realizing the blockchain gaming economy, with $400 million coming from BitDAO and the remaining $100 million from Forte.

Game7 will focus on three different aspects to drive the development of blockchain games:
(1) Funding open-source public goods.
(2) Education.
(3) Providing strategic capital with industry knowledge to promising gaming projects.

Game7 will also fund various player DAOs, which are collectives of players managing assets and investing in new games, who may have marketing rewards funded by game token treasuries.

5. Is BitDAO a revolutionary step in funding crypto projects?

BitDAO indicates that there is a way to fund projects that differs from typical venture capital and investment funds. BIT token holders can create proposals and vote on the future of projects. If they cannot participate actively, they can delegate their governance voting rights to another community member.

BitDAO has successfully garnered support from large venture capital partners, with investment experts and a decentralized treasury of over $2.5 billion. This is an exciting start, and it is interesting that investors are willing to deploy their funds through different mechanisms and structures to achieve their goals.

Only time will tell if these bets will pay off and whether early investors and BIT holders will reap substantial rewards for their capital. But BitDAO has immense potential, and it could become a true disruptor in the field of crypto investment.