The fascination of the crypto world lies in that it uses blockchain technology to disrupt the traditional marketplace that people are used to — DeFi for finance, NFT for art, and DAO for traditional corporations.
DAO refers to Decentralized Autonomous Organization, with uniform rules for automated execution, transparent and not controlled by a centralized organization, where stakeholders can express their interests.
These features of DAO can solve various problems faced by investment funds in traditional markets, such as opaqueness and vulnerability to manipulation by decision makers, so Investment DAOs were born, and DAO-based investment groups began to emerge in the crypto world and truly represent the interests of the majority of members in DAOs.
This article provides an overview of the current mainstream Investment DAOs in three categories classified by investment directions: NFT focused, primary market focused, and secondary market focused.
NFT focused DAOs
With the explosion of NFT, the collection and investment of NFT has become a new craze, and many wealthy crypto whales spend considerable money on buying NFTs. On the other hand, it is difficult for individual investors to participate in the collection and investment of some sky-high NFTs, but DAOs formed by community members with crowdfunded money make it possible to purchase NFTs, and many DAOs have been established precisely because of the process of bidding for NFTs together.
Flamingo DAO
Flamingo is an NFT-focused DAO designed to explore emerging blockchain-based asset investment opportunities. It provides members with the ability to develop and deploy NFT-focused investment strategies, with member management at the core, and relying on DApps and associated smart contracts to facilitate the purchase of NFTs.
Membership in Flamingo is currently limited to qualified investors as defined by U.S. law, with a total membership cap of 100 and membership seats sold for 60 ETH, each with 1% of the voting rights in Flamingo and 1% of the right to receive a pro-rata share of investment returns.
Flamingo members have the power to decide to collect, buy, hold or acquire NFTs. They can create pools of money to make purchase, collection or other acquisition decisions. For example, they vote on the NFTs they want to purchase, and if the vote passes, service providers or members can purchase them on behalf of Flamingo.
Flamingo uses smart contracts such as MolochDAO’s v2 to govern the community. The usages include collecting members’ initial contributions to Flamingo, voting, delegating voting rights to third parties, funding investments, distributing proceeds, etc.
PleasrDAO
PleasrDAO was founded in March 2021 to buy the animated NFT (x*y=k) created by crypto artist pplpleasr at auction to celebrate the release of Uniswap V3, with proceeds from the auction going to the Asian American and Pacific Islander communities and other minority groups as a charitable donation.
The more than 40 members brought together at the auction did not disband after the successful auction and developed into a decentralized organization that purchases high-value NFTs through smart contracts. PleasrDAO distributes ownership of the DAO in the form of tokens, and each member participates in the governance of the DAO through a group chat. Apart from investing in NFTs, the team’s vision also includes being an angel investor and an incubator of early stage NFT projects.
Whale DAO
WhaleShark, a major player in the NFT market, issued the token WHALE in May 2020, backed by its NFT holdings, and the revenue generated by the WHALE project was directly invested to accumulate more valuable NFT assets, driving capital appreciation and community engagement. The community was gradually decentralized after its inception, and Whale DAO is responsible for managing the assets in the treasury. The NFT assets in the WHALE funding pool include Gods Unchained, Sandbox and so on.
WHALE token holders can purchase NFTs created by the WHALE community, rent artwork from the funding pool, participate in WHALE DAO voting and decision making, take part in WHALE liquidity mining, and attend WHALE organized conferences.
Primary market focused DAOs
While it is difficult for individual investors to invest directly in the primary market, the emergence of Investment DAO brings such an opportunity to individual investors, where members of the community can come together to invest in the primary market in the form of a DAO. Some DAOs, which focus on the crypto primary market, have not only proven the viability of the solution in its development, but also have connected more projects to community members.
The LAO
Launched in late April 2020, The LAO co-founder Aaron Wright drafted the now-passed Wyoming DAO Act, which gives DAOs legal recognition in Wyoming. the LAO is centered on membership management and relies on DApps and related smart contracts to facilitate investment in projects that use digital assets.
Membership in The LAO is currently limited to qualified investors under U.S. law, with a total membership cap of 99. Investors can join by purchasing “LAO Units” representing ownership of The LAO at a price of 310 ETH per unit, which gives members 0.9% of The LAO’s voting rights and the right to receive 0.9% of the investment income. Each member can only purchase a maximum of 9 LAO Units.
The LAO’s initial service provider, OpenLaw, has partnered with MolochDAO to develop the smart contract of MolochDAO V2. OpenLaw is a project that uses smart contract to implement legal agreements, providing an easy way for everyone to reference and trigger Ethereum-based smart contracts to manage contractual commitments. MolochDAO V2 has a governance model and game-theoretic design, it is a voting-weighted and multi-signature smart contract with a mechanism called “rage quit”. Members can choose to rage quit at any time if they are not satisfied with LAO’s performance or management.
MetaCartel
The MetaCartel community has existed since September 2018, and on June 5, 2019 MetaCartel DAO’s smart contract was officially deployed to Ethereum mainnet with initial backers including Matic Network (now Polygon), NuCypher, Gnosis and The Graph, as well as more than a dozen other individual investors. MetaCartel DAO went live in July 2019 and now boasts more than 80 DAO participants, as well as more than 800 community members.
MetaCartel Ventures (MCV) is a for-profit investment and legal entity of MetaCartel DAO, investing in early-stage decentralized applications. Membership in MetaCartel requires support and evaluation by internal MCV members with submitted proposals and votes on the chain.
In MetaCartel DAO, there are three main membership categories, the first category is “Mages” which contains members who are not in the status of qualified investors, the second category is “Goblins” which contains qualified investor members, and the third category is “Summoners” which are operating representatives in the DAO who are responsible for the approval of Mages, legal oversight and guidance, finances and coordination related services. It is worth noting that the operating representatives are not necessarily members.
Unlike many DAOs that believe “code is law”, MCV has not abandoned the legal framework. To better resolve disputes over membership withdrawal, MCV has adopted the Grimoire legal framework, a voluntary and legally binding agreement among DAO members. In addition, MCV uses the MolochDAO v2 smart contract developed by OpenLaw and MolochDAO for on-chain governance, which provides flexibility and freedom to process withdrawals so that MCV members can immediately receive their individual assets in proportion to their share of the DAO. While MCV’s fundraising and asset management occurs on-chain, many of its decisions are coordinated through off-chain community communication channels, such as group chats, video conferences, and face-to-face meetings, allowing for some consensus among members prior to on-chain proposals.
Secondary market focused DAOs
In addition to some Investment DAOs that are directly involved in the early stage financing of projects, there are also DAOs that provide liquidity and earn revenue by exploring investment opportunities in various projects in the DeFi space, raising funds as DAOs and voting in accordance with community members.
AladdinDAO
AladdinDAO is a decentralized network, launched in June 2021, aiming to transform crypto investment from a form of venture capital to one that brings together the wisdom of the masses through collective value discovery.
The core of AladdinDAO is the “Boule Committee”, the first Boule members are recommended by Genesis members and elected by the DAO. The founding members of AladdinDAO include Polychain, DCG, 1kx, Multicoin Capital, CMS, Nascent and Alameda etc. For other Boule members, 80% are nominated by the first headhunters and 20% are nominated directly by the community and elected by the AladdinDAO community through a decentralized governance process.
AladdinDAO is constantly screening and recruiting talented individuals. The Boule members vote to identify, analyze and deliver high-quality DeFi projects to the community, and receive AladdinDAO tokens for their participation. This mechanism is designed to encourage responsible voting by DeFi experts, who will be rewarded for voting yes on high-performing projects and no on underperforming projects.
Force DAO
Force DAO is a quantitative hedge fund of DeFi. It is a DAO of DeFi investment strategies designed to generate incentives and rewards through liquidity mining on Ethereum and Polygon, following a strategy proposed by the community.
Holders of Force DAO’s governance token are able to initiate proposals and votes. Force DAO uses a template from Aragon (a DAO solution provider) as the basis for token holders to manage the organization, but due to the high gas cost of maintaining on-chain governance on Ethereum, voting is temporarily available on the Snapshot page. The token holders can make a request in the forum, which becomes a proposal after reaching the required 40 votes.
Summary
As we can see from the above, Investment DAOs have been growing faster and faster in the past few years, and many communities have emerged to invest through DAO. Moreover, DAOs which focus on NFT investment have witnessed explosive growth. Below is a conclusive table of the DAOs introduced above in terms of exit mechanism, investment direction, governance mechanism etc.
The model adopted by most Investment DAOs is still based on having a pool of funds and then members voting on how the funds are invested, but DAOs vary in terms of membership barriers and governance mechanisms. In addition, not all DAOs have governance tokens. Some DAOs with higher barriers to entry can ensure community member participation without tokens, while in some organizations with lower barriers, it is easier for the community to proliferate and grow with token holders as members.
Solo travel is fast, but the crowd travels far. In the future, it will be very exciting to see Investment DAOs provide ordinary investors with more and more opportunities, bring a paradigm shift to crypto venture capitals, and even exert overturning impact on traditional investment industry.
Disclaimer: This research is for information purposes only. It does not constitute investment advice or a recommendation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision.
🐦 @chestersigned
📅 10 June 2022
Links:
https://www.flamingodao.xyz/
https://pleasr.org/
https://www.whale.me/
https://www.thelao.io/
https://metacartel.xyz/
https://www.aladdin.club/zh
https://www.forcedao.com/
