Myth of Money: DAO'n the Rabbit Hole
Welcome to this week’s edition of the Myth of Money, a weekly newsletter on all things money, economics and technology read by 10,000+ investors, curated by Tatiana Koffman.
Disclaimer: The following is not intended as investment advice. Do your own research.
Dear Investors,
As you know, the advent of blockchain has enabled entirely new forms of money (cryptocurrency), collectibles (NFTs) and even the internet (Web3).
So it is with DAOs, which represent an entirely new form of a decentralized organization.
Although the features of a DAO are fairly straightforward, only time will tell exactly what a decentralized autonomous organization may look like.
To better understand DAOs, it’s helpful to look at the relevant characteristics of the two most well known crypto projects: Bitcoin and Ethereum.
As a decentralized currency, Bitcoin gave rise to digital transactions that didn’t require middlemen, like banks or credit card companies. Ethereum expanded upon this foundation by building a protocol that enables smart contracts, which self-execute agreements when certain conditions are met, thereby enabling autonomous transactions.
Take these two features and apply them to a community, and you’ve got a DAO: a blockchain-based organization that uses decentralized decision-making (with voting power typically determined by how much of the DAO’s native token one owns) and autonomous execution of decisions when certain predefined conditions are met (e.g. when enough votes are cast).
These features allow for a new form of mass coordination, such as making financial or governance decisions. They also allow members to reap shared rewards, via token-value appreciation and any perks that accompany membership in a given DAO.
It’s very early days for DAOs, but the space is moving fast.
According to DeepDAO, the total asset value that the top DAOs control has more than 10x’d since February 2020, while the number of DAOs with over $1 million in assets under management has more than tripled.
The range of missions that DAOs are striving to achieve is also expanding. To get a clearer sense of the potential of DAOs, it’s worth examining some actual, albeit nascent projects – including both relative successes as well as failures.
There is no standardized categorization of DAOs, but the types I find most interesting tend to fall into two buckets: investment (in e.g. real property, digital property, or companies) and charity.
Investment DAOs
LinksDAO: “A global community of thousands of enthusiasts has come together to create one of the world’s greatest golf clubs - and reimagine the country club.” Per its roadmap:
“In mid-2022, the LinksDAO community will support the acquisition of one of the world’s greatest golf courses…In 2023 and beyond, (it) will expand to additional locations and begin to create a global membership and IRL community that rivals, yet redefines, all membership clubs that have come before.”
ConstitutionDAO: Formed to acquire one of the 13 original copies of the U.S. Constitution known to exist, ConstitutionDAO raised nearly $50 million, but failed in its bid to win the document in a Sotheby’s auction. After losing, the DAO made full refunds available to its community.
SpiceDAO: SpiceDAO raised donations to fund a $3 million purchase from Christie’s of a rare book of storyboards for an unmade film based on the book Dune. SpiceDAO sought to make the book public and support spinoff projects, including creating an animated series based on the book and selling it to a streaming service. It’s been a rough ride, however; SpiceDAO has received some negative press surrounding its ostensible misunderstanding of copyright law that has so far prevented it from achieving its mission.
DAO Jones: A collective of “Degens and DJ’s”, this DAO pulls capital from some of the most influential angels in cultures - Steve Aoki, Disclosure, Mike Shinoda - pairing them with seasoned crypto investors.
Charity DAOs
Big Green DAO: Created by Big Green , a 501(c)3 non-profit focused on food justice and co-founded by Elon Musk’s brother Kimbal, “The Big Green DAO is a first-of-its-kind experiment to radically reconcile and restructure grant-making” and ultimately use blockchain to fix what Musk considers the inefficiencies of philanthropy.
OrphanDAO: “OrphanDAO aims to build community-funded, community-led, sustainable technology driven orphanages across Africa.”
“By joining Orphan DAO you will get a voice on the design of the orphanage, the materials used to build it, propose solutions for net carbon 0 footprint, power management, internet access, smart farming and more!”
DAOs present an opportunity for communities to allocate capital with accountability, something big corporations and governments are currently struggling with. But what happens when decentralized decision-making takes over all aspects of society? Will these vehicles be able to sustain the basic infrastructure of society and allocate food, water and shelter? This movement is in stark contrast to the fast and efficient progress that hyper-centralized societies were able to make. Only time will tell how far this trend will develop and the effects it will have on society as a whole.
This Week By the Numbers 📈
It was a bad week for equities across the board and cryptocurrencies took an especially hard beating. This aligns with my previous expectation, however, that crypto prices will follow capital markets’ bearish response to tighter monetary policy.
Top Stories 🗞
Twitter Seeks Senior Crypto Role on Heels of NFT Verification Announcement
Twitter expanded its foray into Web3 this week, launching a new feature to verify NFT profile pictures and seeking to grow the crypto team that it launched in November. The new “Senior Product Manager, Crypto” role will focus on “creator monetization,” along with “NFTs and NFT tooling, membership tokens, DAOs and more!”
El Salvador Purchases 410 More Bitcoins Amid Market Drop, President Bukele Says
The Central American nation that last year became the world’s first to adopt Bitcoin as legal tender increased its balance this week by nearly one-third to over 1,500 tokens. “Some guys are selling really cheap,” President Nayib Bukele wrote in his tweet announcing the deal.
Paradigm Leads $110M Investment in Bahrain’s First Licensed Crypto Brokerage
Rain Financial’s Series B was co-led by Paradigm and Kleiner Perkins. According to a statement the company will use the new funds to expand its team, platform and international footprint. “We believe Rain is a crucial piece of the puzzle for bringing the Middle East deeper into the new crypto economy,” a Paradigm partner wrote.
SEC Rejects MicroStrategy’s Bitcoin Accounting Practices
The U.S. securities regulator issued a letter to the NASDAQ-traded business intelligence firm led by crypto-optimist Michael Saylor, stating it objected to MicroStrategy’s accounting adjustment related to its Bitcoin purchases. “Please revise to remove this adjustment in future filings,” the SEC wrote. MicroStrategy reportedly owns over 124,000 BTC.
Tom Brady’s Buzzy Celebrity NFT Startup Autograph Banks $170M from Silicon Valley’s Top Crypto Investors
Days before Tom Brady’s Tampa Bay Buccaneers were set to kick off their second-round playoff matchup against the L.A. Rams, his NFT startup Autograph announced a $170 million Series B round led by Andreessen Horowitz and Kleiner Perkins. Former A16z general partner Katie Haun and Lightspeed partner Nicole Quinn also reportedly participated. Alongside the ageless quarterback the L.A.-based startup’s cap table also includes musician The Weeknd and FTX’s Sam Bankman-Fried among others.
Additional Reading
From the Fed: Money and Payments: The U.S. Dollar in the Age of Digital Transformation
“This paper is the first step in a public discussion between the Federal Reserve and stakeholders about central bank digital currencies (CBDCs).”
Deal of the Week - CoinMARA💰
CoinMARA is building a centralized exchange, lending platform and NFT marketplace for the African region, the next outsized opportunity to create sustainable financial infrastructure over the next decade. Based in Kenya, the founder and the project have a strategic alliance with SafariCom (M-Pesa), as well as several high profile individuals in the region.
CoinMara has confirmed investment from Distributed Global, FTX, Coinbase Ventures, DIGITAL (Steve Cohen), TQ Ventures (Scooter Braun), Mechanism Capital, Woodstock, Day One Ventures, GDA Capital and others.
The company’s private token sale is now open. Please contact me directly at tatiana@tatianakoffman.com for more information.
MyAsiaVC is also running a syndicate with low minimums for angels on Angellist.
Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
By Tatiana Koffman
Hi there and thanks for reading. If you stumble upon my newsletter, you will notice that I write about money, economics and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital and Cryptocurrencies. I believe in empowerment through closing the financial education gap and creating equality of opportunity for the next generation. Check out my articles in Forbes here.
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