As the Web3 industry matures, having DAOs (decentralized autonomous organizations) for managing digital-native entities is becoming increasingly popular. DAOs provide a unique and efficient way of building and conducting businesses in a decentralized manner. There are several DAO use cases to explore, from UniSwap — the most prominent decentralized exchange — to a DAO raising $3 million in support of the army in Ukraine. As such, we’ll take this article to explore the different types of DAOs and provide real-life examples of each.
Before we take a closer look at the variety of DAOs, we’ll initiate the article by creating an understanding of DAOs. What’s more, to appreciate these organizations’ value, we’ll also explore some of the benefits of DAOs. Following this, we’re briefly going to point you in the right direction if you have the ambition to build your very own DAO with Moralis. With a more profound understanding of these organizations, we’ll dive deeper into the different use cases and explore eight types of DAOs.
If you’re already familiar with DAOs and the various types, we recommend checking out additional content here at the Moralis blog. For example, you can learn about Web3 authentication to find out how to authenticate Web3 users. Also, feel free to explore additional Moralis features like the metaverse SDK or learn more about Web3 syncing.
What is a DAO?
Before taking a closer look at different types of DAOs, we’ll take this initial section to explore the ins and outs of these organizations. Once we have a better understanding of what a DAO is and how they function, we’ll dive into the various types of DAOs.
A DAO or ”decentralized autonomous organization” is generally the governing body of dapp, protocol, or other Web3 projects. DAOs are basically dapps providing the necessary ability to run parts or the entirety of an organization completely democratized. This suggests that DAOs have the potential to remove central autocracies with complete control of a platform or project.
At the very core of DAOs are smart contracts, which are fundamental for the decentralization of these organizations. A smart contract can ensure that certain holders of particular tokens receive the right to democratically participate in the governance of a protocol, project, or other dapp.
The community often refers to the tokens which the smart contracts specify as ”governance tokens”. As such, if you’re the holder of a governance token, you have the right to participate in polls and other governance mechanisms. This provides you with an opportunity to directly influence the future of a platform or project.
The community often calls the ability to make decisions through a DAO ”on-chain governance”. As the governance mechanism is based on blockchain technology, anyone with tokens and a device has the opportunity to participate, regardless of geographic limitations. As such, DAOs provide true decentralization in all decision-making processes relating to their organization or platform.
Now, with a better idea of what a DAO is, it’s important to understand why DAOs are important and how they can benefit the community and your users!
What are the Benefits of DAOs?
There are multiple benefits of DAOs, and we won’t be able to cover them all in this short article. For this reason, we’ll focus on two significant benefits that can prove intriguing when you develop your own dapps or business. As such, the benefits we’ll focus on are transparency and building community trust.
- Transparency — As DAOs function through on-chain governance mechanisms, they utilize blockchain technology. This provides full transparency as all participants generally will have full access to an immutable record of all changes that occur to, for example, a Web3 DeFi protocol. This unchangeable record provides safety to all users and restricts participants from committing fraudulent behavior.
- Build Community Trust — The second advantage is to build community trust. As such, since platform users know how the platform is governed, it will provide transparency in how changes are implemented. What’s more, as token holders are the ones making the decisions, they are the once in power, and they are often the users of a platform. As such, their interests are often aligned, which can boost community trust.
If you have further interest in DAOs, please check out the following guide allowing you to create a DAO in only ten minutes! What’s more, if you’d rather watch a video explaining the entire process, watch the following clip from Moralis’ YouTube channel:
The clip above goes into the intricacies of Web3 development and showcases how you can create a simple dapp DAO. The functionality of the DAO allows users to sign in using their Web3 wallets and vote in a particular poll, assuming they have the proper amount of governance tokens.
What are the Different Types of DAOs?
Now, with a better understanding of what a DAO is, why they are important, and how to build a DAO, we can take a closer look at the different types of DAOs in the following sections. As many different types of DAOs exist, we’ll unfortunately not have the time to cover them all. As such, we’re going to focus on the following eight:
- Protocol DAOs
- Philanthropy DAOs
- Venture DAOs
- Media DAOs
- Social DAOs
- Grant DAOs
- Collector DAOs
So, with no further ado, let’s begin and explore the details of protocol DAOs!
Types of DAOs — Protocol DAOs
One of the most common types of DAOs is protocol DAOs. As the name indicates, these are DAOs focusing on the governance of a particular decentralized protocol. An example is AAM protocols that use smart contracts to offer DeFi services like lending and borrowing. An additional example can be a decentralized exchange where users can buy, swap, and sell cryptocurrencies.
A prominent example of a DeFi application on the Ethereum blockchain utilizing a protocol DAO is MakerDAO. This platform uses smart contracts allowing users to lend and borrow crypto. The protocol use MKR governance tokens enabling holders to vote on changes to the Maker Protocol. This includes annual borrowing rates, the amount of collateral for collateralized debt position, etc.
Unlike protocol DAOs, philanthropy DAOs are less common. These organizations focus on supporting social responsibility initiatives. As such, these DAOs are organized around a common goal to create a positive impact on the Web3 world.
This might sound unattainable and a bit strange; however, there are prominent examples providing proof of concept. One of the first philanthropy DAOs is called Big Green DAO, which is interrelated to big Big Green, a food justice charity. The charity focuses on teaching people how to grow their own food to provide higher nutrition security, lessen climate impact, and improve mental health.
Types of DAOs — Venture DAOs
These types of DAOs accumulate capital to invest in Web3 projects, which is why they are additionally called investment DAOs. The funds are often used to invest in different Web3 startups, off-chain investments, protocols, etc. Moreover, these organizations work similarly to conventional investment funds. However, instead of working with a centrally controlled entity, decisions are made on-chain and in a decentralized manner.
A prominent example of a venture DAO is MetaCartel Ventures. This is a for-profit DAO in close connection to the MetaCartel community created to invest in dapp startups. What’s more, MetaCartel Ventures is one of the first DAOs focusing on investing in new startups for a profit. As such, they lower entry barriers by providing investments in the early stages of projects.
DAOs offer a wide range of use cases, and an attractive application area is media. Media DAOs provide an alternative to traditional media which usually apply a top-down approach where the content is based on a central agenda or influenced by ads. Media DAOs reinvent traditional media practices by providing content driven by their community.
This can be compared to social media; however, instead of a large conglomerate controlling profits, individuals within the media network are the ones earning a piece of the profits. An example of a Media DAO is BanklessDAO. This decentralized community coordinates and propagates bankless media, education, and culture. The ultimate goal of BanklessDAO is to drive the adoption of a monetary system free of intermediaries like banks.
Types of DAOs — Social DAOs
Social DAOs — also often referred to as creator DAOs — focus on the self-organizing community aspect of a DAO and try to bring together individuals that are like-minded. As such, they are focusing on bringing together communities like artists, builders, etc.
However, even though these organizations are community-driven, they typically have some sort of barrier to entry. Examples include owning a specific number of tokens, being personally invited, or owning a particular NFT.
An example of a social DAO is Developer DAO. This is a collective of developers aiming to build the future of Web3. To become part of this organization, people must hold a Genesis NFT or have the privilege of being invited to the community’s private Discord server.
The purpose of Grant DAOs is to strategically deploy capital assets in the Web3 ecosystem and facilitate non-profit donations. On occasion, Grant DAOs are either extensions of larger projects but can also be entirely separate organizations within the DeFi space.
An example of a Grant DAO is supplied to the space by the Aave Protocol, and it is called Aave Grants DAO. This is a community-led program to fund projects powering the development of the Aave Protocol. The organization accomplishes this by supporting a more all-inclusive network of community developers. The grant DAO allocates a specific amount of funds per quarter. Submissions include but are not exclusively limited to Aave development, developer tools, integration, etc.
Types of DAOs — Collector DAOs
A collector DAO pools together the funds of the members so that the collective community has the potential to invest funds into NFT art and other collectibles. Each member receives a share corresponding to their investments.
On occasion, the community refers to collector DAOs as NFT DAOs. Moreover, considering the increased attentiveness towards this field, and more specifically, extensive NFT collections, it would not be strange to see an increase in these DAOs shortly.
Moreover, an example of a collector DAO is FlamingoDAO, and it rose with the explosion of NFTs. The DAO has collected expensive NFTs from different artists and collections, one being CryptoPunks.
If you have a particular interest in NFTs and want to learn more about creating your own tokens, you’re in the right place. Moralis’ NFT API makes Web3 development more accessible, allowing you to easily create NFTs. Moreover, if you have an interest in NFT collections, you can start generating NFTs in minutes!
The last type of DAOs we’ll explore further in this guide are SubDAOs. A SubDAO is essentially a subset of DAO members with the task of managing specific functions like partnerships, marketing, grants, operations, etc. As such, it’s a way to distribute functions from a central DAO, allowing organizations to pass proposals without requiring the entirety of the original DAO to reach a consensus.
Furthermore, an example where a SubDAO was implemented was Balancer Protocol. Balancer Protocol found an opportunity within its DAO to create a SubDAO to manage DAO-related decision-making and execute proposals without the need to involve the entire DAO. As such, they now have the potential to move more efficiently.
Types of DAOs — Summary
There are numerous use cases for DAOs ranging from an organization raising funds for the Ukraine army to the governance body of DeFi protocols. As such, this suggests that there are many types of DAOs worth exploring further. Based on this, we took our time to explore the following eight types of DAOs in further detail:
- Protocol DAOs
- Philanthropy DAOs
- Venture DAOs
- Media DAOs
- Social DAOs
- Grant DAOs
- Collector DAOs
What’s more, along with exploring the different types of DAOs, we also dove a bit deeper into the intricacies of DAOs and how you could create one using Moralis. Moreover, if you have further interest in building Web3-compatible projects, you’re in the right spot. For example, here at Moralis, you can learn everything there is to know about Solana programming and how to build a Solana dapp in 3 steps!
Moreover, this accessibility originates from Moralis’ Web3 API, allowing you to easily create cross-chain compatible dapps. The API aids in a lot of processes, such as fetching on-chain data and facilitating the communication between your projects and the various blockchains available.
So, if you’re looking to create dapps or even DAOs, make sure to sign up with Moralis right now. Creating an account is free, and it only takes a couple of seconds!