“It feels like a DAO renaissance.”
That’s how Anastasia Andrianova, founder and CEO of blockchain-based financial protocol Akropolis, described her experience from both the Dappcon and ETHBerlin conferences this week.
Hosted as parallel conferences for three days at the Technical University of Berlin, roughly 800 ethereum developers from all over the world gathered to discuss, debate and demonstrate how to build on the world’s second most popular blockchain.
Decentralized autonomous organizations, or DAOs, are infamously difficult to execute well. In 2016, roughly $60 million was stolen from an early DAO application, called The DAO, and the effects of this event seriously impacted ethereum’s evolution.
This year, the main takeaway for attendees like Andrianova was the resurgence of interest in DAOs, and a slew of specialized tooling for making DAOs work.
The term “DAO,” as William Mougayar, venture capitalist and author of The Business Blockchain, told CoinDesk, is applied to all sorts of ethereum projects today.
“My observation [from the conferences] is that the term DAO is being used too loosely,” said Mougayar. “Some of these DAOs are really just smart contracts with some rules that say, ‘If, then, that.’”
The distinction between big DAOs and little DAOs is important for conveying the complexity and degree of difficulty in a DAO application, Mougayar said.
At the most basic level, however, Jenna Zenk, former CTO of the blockchain startup Melonport who now sits as vice-chair of the DAO governing the Melon protocol, said:
“DAOs are a new way for people, groups, projects and companies to organize themselves in a decentralized fashion and also, very importantly, a transparent fashion.”
The timing to start building DAOs is now, said former Polychain partner Ryan Zurrer who himself announced a new DAO initiative earlier this month.
Zurrer was sure to stress that a lot has changed since 2016:
“There’s been a lot of lessons learned. This isn’t the return of the original DAO.”
Progress since The DAO
Since the original DAO, said Andrianova, Zenk and Zurrer, specialized tooling to help facilitate DAO creation on ethereum has advanced significantly.
For example, Andrianova highlighted the “rage quit” feature in the newly created MolochDAO as a key innovation to user sustainability within DAO structures.
The rage quit approach basically enables any participant in MolochDAO to “immediately disengage,” according to Adrianova, and withdraw funds without penalty.
“[MolochDAO’s] rage quit approach was so important,” said Andrianova. “Unless you can disengage in a given moment in time then you’re stuck on suboptimal terms, which leads to people creating factions inside the organization.”
For Zurrer, the cornerstone for his DAO initiative and DAO development more broadly has been the Aragon framework.
Aragon is an administrative platform whereby users can easily create and manage decentralized organizations built on ethereum. It provides modules to help DAOs fundraise, create bylaws, manage membership and voting rights, as well as a series of other actionable items to do with social governance.
“In our white paper, for example,” said Zurrer, “the [parent] pool at the top has the ability to cut off any mandates at any time should any of the ‘leagues’ be acting in a malicious fashion. This is enabled uniquely on Aragon.”
Calling this structure a “nested” DAO, Zurrer explained that granting various permissions on DAOs over and under other smaller DAOs was a key “cornerstone” to the security model of a complex big DAO.
Zurrer views Aragon Court, a decentralized dispute-resolution tool currently being developed by the Aragon One team, as an important enabler for increasingly functional and scalable DAOs.
DAO and DeFi
But it doesn’t stop there.
Zurrer noted that several decentralized financial (DeFi) applications on ethereum have also been key to enabling new functionality with DAOs, including portfolio management.
If a DAO is going to hold cryptocurrencies from participants and allocate this money to specific groups, it will likely need to leverage DeFi protocols such as the Kyber Network or Uniswap to exchange tokens and convert them into the desired asset.
What’s more, you could have DeFi applications that require governance from a DAO to execute.
Zenk said:
“There’s many interesting and creative ways to play around with [DeFi] and DAOs. For instance, a DAO can be the manager of a hedge fund. … You could also have a DAO governing a DeFi protocol. That’s the case for Melon protocol today.”
It is this “composability” of differing applications, according to Zurrer, that makes building on the ethereum platform so interesting and attractive to developers.
“We look at the defining trends of 2019 and obviously one of them is DAOs,” said Zurrer. “But another one that is not discussed as much is this idea of compossibility. Maybe the great network effect that ethereum has established itself at this juncture in its trajectory is a threshold of tools that can be combined in order to make synergistic improvements on old ideas.”
Agreeing with Zurrer, Mougayar said:
“We need to see more of that. We need to see more of these [DAOs] talking to each other, connecting with each other. When the pieces are tied together, you see the magic. That’s when the magic happens.”
The entrance to Dappcon and ETHBerlin 2019, photo by Christine Kim for CoinDesk