7 O’Clock Capital: A Comprehensive Overview of DAO's Yesterday, Today, and Tomorrow

Author: 7 O'Clock Capital

Introduction

According to data from DeepDAO, there are currently 4,834 DAO organizations in the Web3 space, managing a total of over $8 billion in assets.

DAOs were originally called DACs (Decentralized Autonomous Corporations), and the concept of DAO as we know it today was established by Vitalik Buterin in his 2014 article "DAO, DAC, DA, etc.: An Incomplete Terminology Guide."

The earliest DAO was called The DAO, founded in May 2016, which set the record for the largest crowdfunding event at the time: worth $150 million in ETH. It is a decentralized venture capital fund built on Ethereum, serving as a "hub for distributing funds to projects." DAOs grant voting rights to members through their tokens, allowing members to vote on how to allocate these funds to various projects proposed by different "contractors," while "curators" are responsible for conducting background checks before projects are whitelisted.

In less than a decade since their inception, DAOs have become the darlings of the crypto world. We cannot deny that many people are swept up in FOMO, but the reason DAOs have become an important track in the crypto industry is that they leverage blockchain technology to innovate some traditional rules in human history regarding interests and power.

The reasons are twofold: internally, DAOs create a fair distribution of interests devoid of emotional subjectivity and a power center, providing an equal environment where all members can exercise power, satisfying humanity's inner need to be free from hierarchy and subordination. Externally, the COVID-19 pandemic has been an unexpected booster. The prevalence of distributed work during the pandemic has made online collaboration a daily routine for teams, further fueling the decentralized governance of DAOs.

1. Definition and Advantages of DAO

DAO stands for Decentralized Autonomous Organization, which is an organization spontaneously generated by a consensus-driven group based on blockchain technology.

Traditional organizations have a top-down hierarchical structure, where goals and tasks are assigned downwards, and members complete tasks to receive rewards, resembling a pyramid model. In contrast, a DAO is a group of people who come together due to shared consensus, participating in governance through proposals, voting, and bounties, with incentives realized through tokens.

The keywords of DAO are: decentralization, autonomy, organization.

- Decentralization

The foundation of DAO is blockchain, with governance being decentralized and devoid of hierarchical executives and centralization.

- Autonomy

The ideal DAO management is coded, based on pre-set smart contracts that can trigger programs automatically upon meeting certain conditions.

- Organization

Driven by consensus, anyone can join any DAO organization.

The difference from traditional organizations is:

Traditional organizations operate top-down, with power centers making arrangements and distributing interests among various roles, incorporating various emotional factors. DAOs are flat, with roles collectively making decisions, and interests or incentives are distributed objectively based on on-chain data and algorithms.

For detailed differences, please refer to the following chart from the research department of China International Capital Corporation:

The advantages of DAO stem from its characteristics:

- Stronger organizational consensus

Decentralized organizations differ from traditional organizations in that they are formed out of consensus, leading to higher member loyalty and willingness to contribute.

- Greater transparency

DAOs are based on blockchain technology and smart contracts, with on-chain data traceable, making all actions more transparent and fair.

- Greater freedom

Online collaboration breaks geographical limitations, and joining or exiting is also more flexible.

2. Classification and Representatives of DAO

7 O'Clock Capital has categorized the current DAO projects in the crypto market into seven major categories: Protocol DAOs, Grant DAOs, Investment DAOs, Art Collecting DAOs, Social DAOs, Media DAOs, and Tool DAOs. The following sections will explain the characteristics and operations of each type of DAO organization in detail.

(1) Protocol DAO

Protocol DAOs are mostly related to DeFi and aim to manage decentralized protocols through the characteristics of DAOs, such as lending applications, decentralized trading platforms, or other types of dApps. Representative projects include MakerDAO, Gnosis, and Lido.

1. MakerDAO

Founded in 2015, MakerDAO is a decentralized stablecoin platform on Ethereum that launched the first successful decentralized stablecoin, DAI, which maintains its peg. Investors include a16z, Dragonfly Capital, Paradigm, IOSG Ventures, Polychain, Febushi Capital, and FBG.

Its governance token, MKR, is used to vote on key protocol decisions such as DAI savings rates. To participate in voting, MKR holders must "lock" their tokens by transferring them to the voting contract. Voting is weighted based on the amount of MKR locked in the contract, with voting periods generally lasting between 3 and 7 days.

MakerDAO governs both on-chain and off-chain, currently offering three voting methods:

1) Governance voting: Only selected governance leaders can initiate votes on the voting page regarding governance, consensus, and other protocol-related issues.

2) Administrative voting: Pertaining to technical decisions about the protocol, such as adding or reducing collateral, adjusting the treasury, etc. Anyone can propose a vote, which is conducted through a continuous approval voting method (competing proposals can be submitted and voted on simultaneously).

3) Forum voting: Off-chain forums primarily used to gauge community sentiment and perception issues.

2. Gnosis

Founded in 2015, Gnosis is a prediction market based on Ethereum, providing open-source infrastructure, incubated by ConsenSys. Gnosis consists of various products, including Gnosis Safe, Gnosis Protocol, and GnosisDAO, allowing users to create, trade, and hold digital assets on Ethereum.

GnosisDAO effectively controls 150,000 ETH and 8 million GNO tokens, with a vesting period of 8 years for GNO tokens. Discussions about governance will take place on its own forum, where anyone can join, but participation in voting requires at least 1 GNO.

Proposing an idea involves three steps:

1) Proposal: Community members need to present their ideas in the forum and gain a certain level of community support, with no time limit.

2) Planning: A formal proposal must achieve a relative majority in the forum vote to move to the next stage, lasting 5 days.

3) Consensus: Proposals accepted in the final stage need to be voted on in Snapshot, requiring at least 4% of the token supply to vote in favor, lasting 7 days.

3. Lido

Founded in 2020, Lido DAO is a community that provides liquid staking services for Ethereum. Investors include a16z, Three Arrows Capital, Paradigm, Alameda Research, Coinbase Ventures, Digital Currency Group, and Jump Trading.

Lido DAO is governed by its members. All ideas and suggestions are initially posted on a research forum, with a 7-day period between the initial posting and proposal advancement. If a proposal gains traction and is incorporated based on feedback, it moves to the Snapshot voting stage, requiring at least 5% of the total token supply to participate in voting for it to pass.

After passing Snapshot, a final vote is conducted on Aragon, lasting 72 hours. The first 48 hours are for support or opposition, and the last 24 hours allow for vote modifications. Again, at least 5% of the total token supply must participate, and the number of supporting votes must exceed 50% for it to pass.

Additionally, Lido DAO has five committees: LNOSG (Node Operator Sub-Governance Group), LEGO (Ecosystem Funding Organization), Rewards Committee (Liquid Staking Management), RCC (Resources and Compensation Committee), and Recommendation Program Committee (recommending wallets and DeFi protocols compatible with Lido), each managing different parts of the organization.

(2) Non-Profit Grant DAO

Grant DAOs are non-profit donation DAOs that strategically deploy assets throughout the Web3 ecosystem. The community donates funds to a grant pool and collectively votes on the allocation of funds. Representative projects include Gitcoin and DoraHacks.

1. Gitcoin:

Founded in 2017, Gitcoin is a decentralized collaboration platform based on Ethereum. It consists mainly of six products: Bounties, Hackathons, Grants, Quests, Kudos, and Kernel. Bounties, Hackathons, and Grants provide funding support for outstanding projects and developers. Quests, Kudos, and Kernel help builders/developers/funders learn about Web3.

Among these, the most important is the Grants section. The platform regularly conducts donation events, with each round lasting about 15 days. Various projects (after preliminary screening by the platform) showcase their ideas and plans on the platform for community investors to choose to fund, with funding reaching up to $35 million to date. Known investors include ConsenSys Mesh, 1kx, Paradigm, The LAO, and MetaCartel Ventures.

GitcoinDAO is governed by the GTC token, which has no price and serves purely as a governance credential, with 50% locked in the DAO treasury, 35% allocated to the team and investors, and 15% distributed through airdrops.

GitcoinDAO has three governance roles, each with its responsibilities:

1) Steward: Community members can self-nominate to become stewards, with community members deciding whether to delegate voting rights to specific stewards. Stewards exercise the voting rights and leadership granted to them to serve the community.

2) Delegator: Community members holding GTC who wish to exercise their voting rights by delegating them to stewards.

3) Contributor: Members who contribute to the DAO's work, investing their time, talents, and expertise to support Gitcoin DAO's mission and help achieve its goals, with valuable contributors receiving GTC rewards.

Members holding over 1 million GTC can propose ideas, with the process as follows:

1) Proposal: All proposals must be publicly posted in the forum for at least 5 days, with at least 5 unrelated stewards making suggestions.

2) Voting: Off-chain voting occurs on Snapshot for 5 days; for reallocating GTC, an additional on-chain vote via Tally4 is required for 5 days (essentially a re-approval).

3) Voting Approval: At least 2.5 million GTC must participate in voting.

Additionally, Gitcoin has a workflow system that provides a venue for discussion, collaboration, and advancement in specific work areas, serving as the atomic unit of Gitcoin, composed of a group of individuals actively engaged in alignment with Gitcoin's purpose and fundamental intent.

Proposal and lifecycle:

1) Informal: The workflow has not yet proposed an idea.

2) Proposal Stage: The workflow has submitted a formal budget proposal to governance.

3) Active: The workflow budget and goals have been approved by governance.

4) Updated: The workflow has been updated or is undergoing continuous funding.

5) Archived: The workflow has been canceled.

2. DoraHacks

Founded in 2015, DoraHacks is a decentralized open-source developer community and one of the most active geek organizations globally. Its products include Grants, Buidl, Hackathons, and Bounties. DoraHacks is known for hosting hackathons and funding Web3 startups. Investors include Binance Labs, FTX Ventures, Liberty Ventures, Circle Ventures, Gemini Frontier Fund, Sky9 Capital, and Amber Group.

Earlier this year, DoraHacks launched Dora Grant DAO and raised $5 million from over 30 partners, planning to provide grants for more hackathon projects. Additionally, its Hackathon DAO, specifically for supporting hackathons, was also established this year.

DoraHacks' community discusses and supervises fund allocation on Discord, where members can report incidents and seek assistance from DoraHacks. The DoraHacks team will take corresponding actions by calculating collective decision-making and community governance data in Discord to optimize transparency and operations.

(3) Investment DAO

Investment DAOs pool community funds to invest in early-stage Web3 startups, protocols, etc. Representative projects include The LAO and MetaCartel Ventures.

1. The LAO:

The LAO is a legally recognized limited liability entity in Delaware, a profit-oriented DAO, realized through OpenLaw (a project that creates "smart" legal agreements, providing a simple way for everyone to reference and trigger Ethereum-based smart contracts to manage contractual commitments) and established in 2019 with support from Tribute Lab. Governance is conducted through MolochDAO V2.

MolochDAO V2 features a blockchain-based governance model and game-theoretic design, functioning as a multi-signature smart contract with weighted voting, where proposals can pass with over 50% of votes. Additionally, the contract includes a "rage quit" mechanism, allowing members to receive a proportion of the escrowed funds equivalent to their voting weight upon exit. Members dissatisfied with the DAO's performance or management can choose to rage quit at any time.

The LAO has a cap of 100 investor members, who must undergo KYC to purchase "LAO Units," representing ownership in The LAO, priced at 310 ETH per unit. Upon purchase, members receive 0.9% voting rights in The LAO and the right to 0.9% of investment returns, with a maximum of 9 units purchasable per member.

Compared to traditional funds, there is no GP, and members have complete control over all investment decisions and governance, meaning no one has the authority to arbitrage.

The investment process of The LAO:

Sourcing: Any member can nominate one or more projects for consideration through The LAO DApp;

Due Diligence: There is no formal due diligence process; members can conduct their own before voting;

Fees: The DAO and members bear any upcoming fees, but their daily expenses are paid quarterly by service providers;

Investment Terms: The terms of each approved investment are determined by voting.

As a limited liability entity, The LAO complies with U.S. law, limiting members' liability and clarifying their relationships, thus preventing double taxation for the entity and those holding labor relations regulations.

2. MetaCartel Ventures

Founded in 2018, MetaCartel Ventures invests in early DApps and currently has over 60 DAO participants and more than 800 community members. Investors include 1kx, P2P Capital, Zee Prime Capital, KR1, and Stake Capital.

MetaCartel Ventures, as a profit-oriented investment and legal entity of MetaCartelDAO, is a limited liability company in Delaware. It is formed through Grimoire, a limited liability company (LLC) agreement, constituting a voluntary, legally binding agreement among DAO members. Through the LLC, MetaCartel Ventures can enter into legal contracts and participate in investment opportunities without incurring personal liability risks beyond the DAO's capital. It also allows registered legal entities to participate in the DAO and issue securities to the DAO.

Joining MetaCartel requires support and evaluation from internal members, and MCV members submit proposals and vote on-chain. Additionally, members are only liable to company creditors for the DAO's assets.

Members are divided into three categories:

1) Mages: Composed of 61 practitioners from Web3, similar to GPs. They actively participate in management work, responsible for due diligence, proposing ideas, and voting.

2) Goblins: Other organizational members who can propose ideas and hold voting rights without needing to actively participate in the DAO.

3) Summoners: Operational representatives within the DAO, executing legal, financial, and coordination tasks supervised by the Mages, but they are not necessarily DAO members.

MCV also employs the MolochDAOv2 smart contract developed by OpenLaw and MolochDAO for on-chain governance. While MCV's fundraising and asset management occur on-chain, many decisions are coordinated through off-chain community communication channels, such as group chats, video conferences, and face-to-face meetings, allowing members to reach a consensus before on-chain proposals.

The investment process of MetaCartel:

1) Queue: Submit proposals and information while confirming how many tokens are expected to be staked in exchange for shares, representing your rights in this DAO, including voting rights, profit rights, etc.

2) Voting Period: Each proposal has a 7-day voting period, requiring 51% to pass, with a maximum of 5 proposals submitted daily.

3) Buffer Period: After the voting period ends, there is a 7-day buffer period during which dissenters can exit the DAO and reclaim their tokens. If a majority of members support your proposal, you are accepted into the DAO, and your contributed shares officially enter the DAO's guild bank. If the proposal fails, the shares are burned to redeem tokens.

The guild bank is the public fund of the DAO, created, managed, and owned collectively by all members. The funding source comes from the tokens staked by members before entering the DAO, representing the DAO's business income, generally used for profit distribution or collective investment.

4) Pending: After the buffer period ends, the proposal enters the pending stage, which can be processed by any member to achieve the proposal's goals (e.g., allocating shares, accepting contributions).

5) Completed: All processed proposals will be recorded in the DAO along with all other proposals in their final state (on IPFS).

Metacartel voting process diagram

(4) Art Collecting DAO

The primary purpose of Collector DAO is to pool funds so that the community can invest treasury funds in blue-chip NFT artworks and other collectibles, with each member holding shares corresponding to their personal investment.

For example, Pleasr DAO, established in 2021 and backed by A16z, Mechanism Capital, and BitDAO, consists of DeFi leaders, early NFT collectors, and artists, most of whom remain anonymous, dedicated to purchasing and collecting representative NFTs.

Initially, it was formed to buy the animated NFT x*y=k created by crypto artist pplpleasr at auction (https://foundation.app/pplpleasr/x-y-k-13623), which was created to celebrate the launch of Uniswap V3, with auction proceeds donated to the Asian American and Pacific Islander communities in the U.S. and other minority groups.

The 40+ members who gathered during the auction did not dissolve after the successful auction but instead issued the governance token PEEPS, distributed proportionally to contributors, with holders collectively sharing ownership of the NFTs under the DAO. Each member participates in the governance of the DAO through group chats.

Currently, Pleasr DAO is attempting a new concept of digital and community art ownership, breaking iconic works into pieces for community ownership, with 11 NFT collectibles to date. This includes the iconic Doge meme image, which PleasrDAO purchased for 1,696 ETH ($5.5 million) and fragmented into 170 pieces as NFTs.

The team's vision includes not only investing in NFTs but also becoming angel investors and incubators for early NFT projects.

(5) Social DAO

Social DAOs focus on self-organizing communities within DAOs, bringing together like-minded individuals (such as builders, artists, and creatives). While social DAOs are community-centric, they often have entry barriers, requiring a specific number of tokens, ownership of NFTs, or invitations.

For example, Friends with Benefits, established in September 2020, initially existed as a social experiment, requiring written applications and community member voting for membership. To become a full member, one must hold 75 FWB to unlock the entire ecosystem, while local membership requires only 5 FWB to unlock city and event sections.

As an online community, FWB is the first DAO organization to provide offline meeting and communication scenarios for community members, resembling gatherings among friends rather than forums, meetings, or commercial events, connecting online identities with offline lives.

Currently, Friends with Benefits has 3,000 members. Investors include A16z, Kindred Ventures, Spark Capital, and Variant Fund.

The community primarily operates through Discord, featuring learning, art, creative, trading, and lifestyle areas, with over a hundred channels covering music, gaming, film production, tech learning, market information, food, and more.

Friends with Benefits has established four core teams: Governance, Board, Team Leaders, and Contributors.

1) Governance: Composed of all FWB holders, voting through Snapshot to optimize the DAO and participate in governance channels and forums.

2) Board: Composed of staff, community members, and advisors, focusing on community building strategies and community engagement and education.

3) Team Leaders: Professional leaders managing contributor teams, selecting potential team members based on project contributions. Leaders have the authority to set key priorities, allocate bounties or reward budgets, and are ultimately responsible for the team's success. Potential team members receive USDC salaries and token grants to ensure accountability and reward innovation.

4) Contributors: Members who contribute—professional token holders who join based on skills and interests. Current teams within FWB include product, editing, and membership. Contributors are rewarded based on their level of contribution to the community.

Other management mechanisms:

• Team leaders meet weekly with another board member or advisor to share priorities, challenges, and KPIs.

• Team leaders and the board report monthly to the entire governance department through "town halls," providing all members with updates and community discussions.

• Each team receives quarterly budgets based on snapshot proposals for team hiring and other investments.

• Each team leader has a fixed salary, while contributors share the remaining funds based on their relative contributions.

• Contributors are rewarded based on their value using tools like Coordinape or Sourcecred.

(6) Media DAO

The purpose of Media DAOs is to reshape content platforms, incentivizing creators and consumers with tokens rather than relying on advertising revenue.

For example, ForeFront, an information aggregation site in the social token space, was established in August 2020 and currently includes nearly all DAO and individual social token project data. Any member can apply to become a contributor and receive monthly token rewards based on their contributions. Investors include 1kx, MetaCartel Ventures, Scalar Capital, and ConsenSys.

ForeFront has six core members and 1,311 token holders, with members communicating on Discord and having over 100 FF channels unlocked for governance and voting.

ForeFront's governance combines decentralization and is governed by three principles:

1) ForeFront Forum: A bi-weekly live discussion forum that gathers core staff, team administrators, and all active contributors, ensuring that the actions of sovereign individuals and groups align with the mission and priorities of the entire DAO community;

2) Decision Space Map: Clearly grants specific decision-making powers and constraints to all core roles (staff, leaders, coordinators, and team administrators) and working groups;

3) OKRs and Reflection Periods: Different categories of members set goals on a monthly, quarterly, and yearly basis;

Additionally, ForeFront's members are divided into four categories:

1) Core Staff and Center: Establish policies and frameworks for general decision-making regarding the DAO roadmap, token economics, mission, and vision.

2) Working Groups: Working groups (teams) are the basic "units" of the DAO. They have the authority to decide and handle affairs within their domain, with members reaching consensus through internal voting processes.

3) Contributors: Members who contribute independently to the organization, accumulating their contribution value.

4) Community: All other members participating in voting governance, community activities, etc.

(7) Tool DAO

This type of DAO provides tools to help establish and manage DAO organizations, making operations and calculations within organizations more convenient.

1. Aragon:

Aragon is an open-source, non-profit blockchain protocol aimed at simplifying the creation and management of DApps, blockchain protocols, and DAOs. It raised $24 million in 2017, aiming to provide secure, simple, customizable, and transparent tools that help developers and communities ensure the effectiveness of smart contracts through its modular approach to general business functions.

Aragon currently offers four solutions:

Aragon App: DAO creation, SDK, smart contracts, and design systems

Aragon Client: A platform for community fundraising, paying contributors, and co-governance

Aragon Voice: Gas-free, verifiable DAO voting

Vocdoni: Provides the most secure, universally verifiable, and scalable digital voting protocol for organizations to conduct any type of voting process and ensure integrity.

Aragon is governed by the Aragon Network DAO through ANT tokens and consists of five parts:

1) Main DAO: Open to all token holders, proposing and voting on treasury investments while governing the community.

2) Executive Sub-DAO: An elected committee that facilitates strategic adjustments across the AN DAO and allocates funds from the Sub-DAO's treasury (operational treasury).

3) Compliance Sub-DAO: An elected committee that promotes management regarding ethics, risks, and sustainability, possessing veto power to protect the network.

4) Technical Committee: An elected committee that reviews and integrates code submissions and organizes technical audits as needed.

5) Aragon Court: A dispute resolution mechanism that allows all ANT holders to oppose malicious proposals and defend against 51% attacks.

2. Syndicate

Syndicate, established in 2021, is a decentralized investment protocol and social network platform for quickly launching investment DAO organizations, where members vote through shared treasuries, smart contracts, and tokens.

Syndicate launched its first community-empowered DAO in May 2021; in June, it launched the Komorebi Collective and Audacity, financially supporting underrepresented communities, specifically for investing in women and Black entrepreneurs in the crypto industry.

In September 2021, Syndicate completed a $20 million Series A funding round led by a16z, with over 150 investors, including Coinbase.

In January of this year, Syndicate launched the Web3 Investment Clubs product, supporting investments in tokens, NFTs, and off-chain startups and assets, allowing for the association of legal entities, opening bank accounts, and issuing K-1s, and can be integrated with any DAO and Web3 tools (such as Gnosis, Snapshot, etc.).

Syndicate's suite of smart contracts guides users through the process of formalizing their clubs with legal entities and handling matters such as setting up bank accounts and obtaining tax forms. Within three weeks of the platform's launch, it helped establish 450 new investment DAOs, and over 1,000 investment DAOs within three months.

3. Coordinape

Coordinape, developed by the Yearn Finance team, aims to make DAO member compensation management transparent and provide a fair contribution reward distribution system.

Its core function is the Gift Circle. First, participants in the same project or working group form a Circle, setting budgets and time epochs (Epochs), with all participants holding the same GIVE.

During the epoch, everyone can describe what they have done during that time and then choose their collaborators (optional). Entering the gifting phase, they can distribute their GIVE to members they believe have contributed. At the end of the allocation period, any unallocated GIVE will be burned, and the results will be exported as CSV to synchronize with managing members. Additionally, each epoch of Coordinape generates a social graph showing the gifting relationships between members and the amount of GIVE each person received.

Currently, projects like Bankless, PoolTogether, and Forefront mentioned in this article are using Coordinape.

Coordinate has achieved giving members decision-making power over fund allocation, marking progress in DAO management tools. However, as the number of participants increases, it will become challenging for everyone to clearly describe their responsibilities and contributions.

Chapter Summary:

By outlining the major types of DAO projects above, we can clearly see that different sub-tracks of DAOs are gradually improving.

By analyzing their respective governance models, it is not difficult to find that the greatest commonality among these different types of organizations is the emergence of a feasible DAO community structure and governance model: solving the efficiency and specialization distribution issues of complete decentralization through role allocation among community members.

As DAO organizations develop, we will certainly see more large-scale autonomous communities emerge in the future, but as the number of participants and the scale of the industry double, DAOs will also face many challenges.

3. Current Issues Facing DAOs

1. DAOs are not suitable for all organizational forms

It is evident that many of the DAO projects mentioned above share a common point: all voting or proposals require several days or even longer to complete. Perhaps in the future, various tools will be developed to improve decision-making efficiency, but for now, the decentralized governance of DAOs is only suitable for non-urgent matters.

However, among various organizational forms, some matters or organizations require quick decision-making to achieve goals, and progress will not be delayed due to time issues. This is also the reason why centralized and decentralized governance will coexist in the future.

Therefore, before implementing DAO governance, it is essential to assess whether the nature of the organization or the stage of the project is suitable for it to move forward positively.

2. DAOs face the issue of cultivating members' sense of belonging

The sense of belonging in a DAO comes not only from consensus but also from collaboration and connections among members.

According to Dunbar's theory, when a group's size exceeds 150 people, establishing connections and a sense of belonging with other members becomes very challenging. This is unfriendly to many new members. If the scale of DAOs is to continue growing and expanding, certain improvements must be made in this regard.

3. Legal and tax issues

As cryptocurrency trading becomes more widespread globally, countries are gradually establishing tax regulations surrounding crypto assets. If a DAO is considered a tax entity, are all token holders or members shareholders, and should taxes be levied based on the organization's profits?

For corporate taxation, the U.S. currently has a well-established structure, but when it comes to crypto assets and NFTs, relevant regulations become very ambiguous. To date, the IRS has not issued clear guidelines on the specific taxation methods for DAOs. Additionally, beyond taxation, investors are increasingly concerned about the legal liabilities arising from their investments in DAOs.

Currently, while Vermont and Wyoming allow DAOs to register as DAO limited liability companies, providing limited liability benefits to DAO members similar to conventional limited liability companies, the vast majority of existing DAO organizations are not registered companies, so legal and tax issues remain to be resolved.

4. DAO Categories Worth Watching in the Future

From the ideological perspective of Web3, DAOs will be its primary organizational form. 7 O'Clock Capital has been committed to research and analysis in Web3 and supports the innovative development and construction of excellent teams. DAOs are also a key focus for us in the Web3 field.

Through long-term attention and research on the DAO track, we believe that opportunities for DAOs will arise in the following development directions:

1. DAOs combined with artificial intelligence

Currently, many DAO organizations do not operate entirely on-chain and still rely on Web2 communication methods, such as Discord, with many decisions and votes not conducted through smart contracts. Mature DAOs should have all their decisions, assets, transactions, and actions automatically completed on-chain through various auxiliary tools.

With the development of DAO tools, we will certainly see increasingly smooth intelligent management in the future, where actions such as rule-making, new member reviews, proposal initiation, voting completion, task publishing, and contribution distribution will no longer require human intervention and can be completed automatically.

Example: Village DAO

Village DAO is a decentralized customer service platform launched by Consensys in collaboration with conversational AI company LivePerson, helping various Web3 companies address staffing shortages in customer service. Any company can apply to join the platform directly on the official website, and once approved, its users can apply to become experts for that company, earning rewards by solving others' problems.

Wallets, as one of the entry points for ordinary users into the Web3 world, have made Metamask the first customer of Village DAO, incentivizing expert users to assist new users, lowering the barriers to application usage, and attracting newcomers to Web3.

• Large institutional investments or DAOs backed by major brands

Whether from an individual or fund perspective, the investment institutions and brand endorsements behind a project are significant factors that cannot be ignored. While risks cannot be completely avoided, organizations with quality institutional support generally face lower risks compared to others. Additionally, DAOs with higher-profile projects find it easier to reach consensus and have better member cohesion.

Example: Apecoin DAO

Apecoin DAO was established by the parent company of Bored Ape Yacht Club (BAYC), Yuga Lab, by launching the APE token, which is distributed to BAYC/MAYC members on the claim page, forming a DAO organization. Holding APE is the only requirement for membership in ApeCoin DAO.

APE is owned and operated by ApeCoin DAO, and every token holder can vote on the future direction and decisions of Yuga Lab, as well as on the governance and use of the ecosystem fund.

Example: Decentraland DAO

As a veteran virtual project in Web3, Decentraland's brand recognition and influence span the entire industry. Decentraland DAO serves as the decision-making tool for MANA, NAMES, and LAND holders within Decentraland. Through voting in the DAO, the community can issue grants and make changes to banned names, POIs, and catalyst node lists.

3. The combination of inclusive finance and DAO

The essence of inclusive finance is to allow anyone to participate in finance and investment. From a traditional investment perspective, primary projects generally only allow institutions with substantial capital, professionals, and various resources to participate. However, by integrating with DAO organizations, inclusive finance can be realized, enabling anyone to participate in large project investments.

Example: Coinshift

Coinshift is a platform providing financial management for DAOs and crypto projects, facilitating better DAO governance through Gnosis Safe's multi-signature accounts. Currently, Coinshift manages $1.3 billion in assets and $83 million in expenditures from companies like Consensys, Messari, Biconomy, and Uniswap.

Investors include Tiger Global, Sequoia Capital India, Alameda Ventures, Spartan Group, Ethereal Ventures, Alpha Wave Capital, Hashkey Capital, Quiet Capital, and Polygon Ventures.

4. The combination of Web3 and DAO

As the primary organizational form in the Web3 world, any DAO tools and community projects that facilitate governance, diversification, etc., will be key development trends in the future. They serve as the infrastructure for the DAO track, providing organizers and members with better management mechanisms and tools, smoother user experiences, and more cohesive governance methods, creating a higher-quality Web3 environment for DAO organizations.

Example: Commonwealth

Commonwealth is a platform that integrates on-chain community discussions, voting, and project funding. Using Commonwealth, anyone can create a community and utilize tools such as crypto-native forums, off-chain governance, and on-chain governance. They recently launched Common Chat, which is similar to Discord's Web3 iteration, allowing all token communities to log in to Common Chat with their wallets and create chats, forums, and full-stack governance. Investors include Dragonfly, Parafi, Framework, Hashed, IDEO, Nascent, and Balaji Srinivasan.

5. Innovative open DAOs

These DAOs represent projects with bold ideas or marginal innovations that break conventional human perceptions of certain events, such as complete online governance of a country. While it may seem nearly impossible to achieve currently, such unconventional attempts are also directions worth paying attention to in the future.

Conclusion:

Many believe that 2022 is the inaugural year for DAO organizations, but in fact, looking back at the history of DAO development, since the emergence of The DAO in 2016, this new organizational form has been continuously explored and mined. DAOs transcend borders, races, and beliefs, shattering various labels and providing us with an organizational method that is unrelated to status and identity, returning to pure consensus. This is not only the vision of DAO organizers but also the new world we expect from blockchain technology.

With the sweeping impact of COVID-19, it has inadvertently provided DAOs with faster opportunities for popularization and practice, nurturing the soil for decentralized collaboration and inspiring more ideas and exploration regarding future cooperation methods.

As a participant and builder in the blockchain ecosystem, 7 O'Clock Capital will continue to closely monitor the progress of DAOs, just as we look forward to the expansion of the Web3 world, where every tomorrow is always filled with possibilities.