The development and outlook of DAO

13 min readDec 7, 2021

Foreword: DAO, Sociology on a Chain

The book <The Great Disruption> by Francis Fukuyama reveals the essential source of the birth of order in contemporary civilization: “it is no longer considered as a top-down granting of authority by a politics or religion hierarchy, but as the result of self-organization on the basis of scattered individuals”. The exploration and construction of order generation in the blockchain world, which is authority-less, coercion-free, self-organizing and full of single short games, is probably one of the most interesting and important intellectual developments.

From the birth of the blockchain, all contributors have been idealizing a fundamental question that is also the world’s interrogation of crypto organizational morphology: “How will dispersed individuals in an information vacuum form a unified goal and work in collaboration to achieve it?” . In the real world, the influence of social norms is so deep that a whole new discipline, sociology, has emerged. In the crypto world, organizational relationships are defined by code as consensus, and this unique product, native to the blockchain, has been given a name full of DAO.

DAO is both a sociological concept and an organizational relationship paradigm, even becoming a buzz word in the crypto world. Bitcoin itself can be understood as the original DAO. After 12 years of growth, the DAO havs its own development panth and participants, we need follow the DAO’s path to see its future. let DAO it!

An overview of the development of on-chain self-organization

The differentiates of conceptual logic of DAO

DAO as a collective decision-making organizational governance paradigm corresponds to the blockchain tech stack in three forms: protocol consensus, application decision-making, and middleware services, respectively.

Protocol level governance

Off-chain governance, like Bitcoin,Ethereum,BIP,EIP, that is non-formulaic negotiation model

On-chain governance, like decred, tezos, polkadot, that execute upgrades automaticlly

Application level governance

Finance type: The DAO → Molon DAO

Business decision type: MakerDAO → Dapps DAO modules

Governance middle layer

With the refinement of the governance, tools like Aragon for creating and managing DAO and proposal integration platforms such as Snapshot has emergened.

Aragon, DAOstack→ SubDAO

The evolution of DAO and crypto market have evolved in tandem. In pre-Ethereum era, DAO was embodied as Bitcoin’s on-chain consensus and community governance. With the diversification of underlying public chains, the first divergence of DAO implementation emerged. The formulaic negotiation model of off-chain proposals represented by BIP which also provided continuous support for network upgrades, but there was still controversy over development efficiency and on-chain execution, and some communities believed that more events should happen on-chain, which with the emergence of Decred and Tezos that automatically execute upgrades on-chain, others like DashDAO that created by Dash is a node dedicated to governance.

After the launch of Ethereum, there was a watershed event “The DAO”, the earliest funded DAO project, which culminated in the successful raising of $150 million and ended with the theft of funds. Although it quickly fell by the way, the logic of “creative projects funded by the community, DAO Token holders contributing and enjoying future benefits” that has remained, becoming the basis logic of the current popular venture DAO, like The Moloch, the prototype of the funding DAO, inherited this logic in its functional design.

Whereas the decisions of underlying technology development are likely to be more concentrated among crypto fanatics and geeks, participation in governance cannot be extended, and then governance can only be the self-indulgence of a few. It is often from the application layer that crypto users begin to get involved in governance on a broad scale. MakerDAO is not only the originator of DeFi, but also the beginning of the real experience of the practicality of DAO. This direct-to-end user protocol in application layer gives people a real sense of their rights as token holders.

Before DeFi took off in 2019, voting governance had not yet become the norm for crypto players due to the concentrated economic distribution of tokens in most projects and the limited size of funds and users. And some visionary practitioners recognized DAO as an organizational prerequisite for the crypto world is a necessary ingredient for any community-based organization. DAO service platforms, represented by Aragon (2016), DAOstack (2018), have provided DAO tools to thousands of community-based projects, sinking hundreds of millions of dollars into governance. Incomplete statistics, DAO participants to break through 60,000 addresses, which is more than 60 times growth from 10,000 at the beginning of last year.

With the rapid growth of the crypto industry and its business refinement, DAOs are also evolving at a rapid pace, and while Ehereum’s competitor ecosystem is growing rapidly, its organizational paradigm is also seeking innovation. Polkadot adopts a timely upgrade model of on-chain governance at the protocol level, and the multi-chain architecture provides a new ground for DAOs to develop. Unlike Etetherem’s “strong application and weak protocol” status, Polkadot is a latecomer that relies on strong tool support to provide a silky smooth development experience for projects to help applications get off the ground efficiently at low cost. SubDAO was born to help Polkadot projects create and manage DAOs in an agile manner, and to become a solid middle platform for the entire ecosystem to further realize the value capture of DAOs.

DAO specific scenarios in Application level

According to the actual use case there are more widely present: As Deep DAO reveal, Aragon is now the largest DAO platform, supporting more than 1300 various decentralized projects. There are relatively few decentralized communities on comparable platforms like DAOstack and Colony. Furthermore, dozens communities forked from Moloch, which is the most common DAO model in financing.

Based on the classification of scenarios in the application level, we discuss the mechanisms of DAO in the following environments.

Dao Application Scenarios

1.Financing scenario

Purpose: Created to fund investments or grants, decentralized incubator to support project development

Moloch dao, Duckdao ,Marketing dao, DAOSquare, DAOX , DEPO

Extended Application: Initial DAO Offering

The following is an example of Moloch to understand the financing i.e. DAO and how it as principle of a financial business in the origin scenario.


The Moloch DAO, which emerged in 2018, was created to manage funds allocation for Eth2.0, one of the ongoing Etherum scaling programs. The design of v1 has provide a classic paradigm for on-chain DAO investment, and forms the supply and demand negotiation mode of early investment into on-chain norms through simple and elegant codes. A Minimally Viable DAO.

Moloch can be described as two main smart contracts:

1. Moloch.sol — responsible for managing membership, voting rights, proposal submission, voting and processing voting results

2. Guildbank.sol (union bank) — responsible for managing union assets

Joining as Financing

The SHARE assets are minted and allocated to the new members, who are introduced by the proposal pass of the original members; SHARE is not transferable, but the corresponding ETH can be withdrawn from the union bank with it. In fact, new members join is the realization of the event that old members invest in them. The old member deposite 10ETH and initiate a proposal, which specifies the amount of SHARE to be allocated to the new member, and those who hold SHARE will vote for or against the proposal. If the vote passed, the distribution will be realized. If they fail to pass the vote, the status quo will be maintained. Members who are dissatisfied with the voting results can use the “angry withdrawal” function to quit the organization.

Moloch’s forks

In 2019, developers in the Etherum community forked the code to modify smart contracts in order to develop more complex DAOs, such as MetaCartel Ventures and Marketing DAO, which are able to allocate and transfer SHAREs and other assets among members. MetaCartel Ventures, a for-profit DAO focused on early-stage investments in Ethereum ecosystem projects, has since raised nearly $24 million from its 64 members.

Other DAOs like DuckDAO and DAOMaker also operate token public offerings. rSHO by DAOMaker has even been approved by regulators in Malta, which analysis on-chain address to find historical transactions to identify applicants who are likely to become long-term token holders and cultivate them to be valuable community members.

2. DeFi Scenario

The governance of the projects in the application level varies based on their business models, and there are some representative scenarios:

The DAO module in DeFi: Mainly used to make decisions about key parameters in DeFi business by a decentralized way. Starting with MakerDAO to Uniswap, governance has become a landmark transaction for on-chain activities and is widely marked as a standard for projects to filter qualified users (e.g. for airdrops)

l Cross-chain liquidity DAO: Represented by BadgerDAO, BoringDAO and LidoDAO, aiming to solve the centralization problem in the cross-chain assets trasaction process.

3. NFT crypto art scene

A DAO project focused on crypto art investment and ecological construction. As the NFT craze (or bubble) reached its peak, the DAO formed around it also attracted attention. Pleasr DAO was founded with the purpose of winning Pplpleasr artworks, and has purchased three more artistic works and plans to invest in NFTs continually.

However, it is not the first DAO to commit to NFT. Flamingo DAO is a project launched by LAO in October 2020. According to Wright, it already has 40 members, a $10 million fund, and has acquired about 600–700 NFTs, including NBA Top Shot cards and some rare CryptoPunk.

4. Service aggregation scenario

The increase in projects comes with a strong demand for DAOs, and DaaS (DAO-as-a-Service), which specializes in providing developers and projects with easy-to-use standardized modules for integrating DAOs, will become standard configuration in any blockchain ecosystem.

DAO ecosystem at a glance

The scale of asset management is riding high in the crypto ecosystem, with over $12 Billion in assets sunk in just counting the dozens of aforementioned projects counted by Deep DAO. Taking Ethereum’s ecosystem as an example, the cost of capital used to organize synergies is only 0.07% of the market cap in an economy with a current market cap of about $1 trillion. On the one hand, we can understand that in the crypto world, people can collaborate at a very low cost, and on the other hand, it shows that the whole market of DAO still has great potential.

The demanding of DaaS for Polkadot ecosytem is also strong. SubDAO, a decentralized, highly customized, low development cost and multi-asset supported DAO service platform, tend to become a parachain of Polkadot. SubDAO explore the usage scenarios continually to attract more new partners, which will beneficial ecological development by providing a complete and easy-to-use governance module for projects, promoting governance refinement, division specialization and decision making efficiency.

Value Capture of DaaS

In the traditional world, infrastructure is difficult to sink and capture the value it carries, often as a public good to export positive externalities. In the crypto world, the value of the protocol layer has been validated, and middleware and tool-based items can sink value through sensible usage scenarios and tools.

Aragon establishes a good model for capturing value in a general-purpose governance infrastructure, with the project ANT token combining the dual value of management value and utility-based tokens. First we need to understand that Aragon establishes an on-chain, non-legal concept of governance jurisdiction and allocates governance as economic activity within this jurisdiction. Aragon-based projects fall under its governance jurisdiction, Aragon courts are created to establish its jurisdictional rules and to resolve conflicts within and outside the organization in case of disagreements among participants. The project token ANT with universal oversight serves as an incentive for jurors and transactions . This is reflected in (source: Placeholder Blog)

Management Attributes: Enhancing its stored value status in the Aragon jurisdiction

Court Pledge: Staking to the court system by casting ANJ, jury members need lock-up guarantee

Validation Pledge: Staking and paid for Aragon Chain by casting ARA

In the SubDAO system, the project token GOV work as both utility token and governance incentive equity. Firstly, GOV will be used to pay node maintainers and also as voting rights for the election of SubDAO council. In the SubDAO network, organizations create a governance pool will incur capital opportunity cost, but they can obtain GOV by mining, while the governance pool asset certificates and GOV can be combined to obtain higher revenue.

SubDAO provides a complete set of convenient and easy-to-use DAO development tools and management system for Polkadot developers based on the DAO infrastructure of Polkadot’s ecosystem, and plans to implement application scenarios such as intelligent capital management, reputation system and im, and will also implement more use cases of GOV in future exploration.

It is still not the “ultimate form of governance”

In the real world, Fukuyama asserted in “The End of History” that democracy would “become the ultimate form of governance for the world. The DAO is an attempt to make the whole governance process efficient and trustworthy by the blockchain. However, the current DAO is also far from it. Code security risks and legal risks are original issues that cannot be ignored. There are still many to do.

1. A series of shortcomings caused by insufficient governance incentives.

Low voter turnout is one of constraints, and the governance staking rate is much lower than the average staking rate of the industry (several orders of magnitude difference between Governance Staking and DeFi TVL ), limited participation scope, limited funds attracting and insufficient supports for new projects, just like a vicious circle.

2. Uneven development across ecological DAOs.

Currently,DAO organizations and toolchain platforms are mainly built on Ethereum that has attracted the main resources of the whole crypto market, and the lack of DAO development for related and heterogeneous ecosystems outside the Ethereum will reduce community vitality and diversity of market players.

3. Fragmentation of function and liqudity

The liquidity of the financing DAO is fragmented, and the functions of each governance platform are isolated.

4. The contradiction between efficiency and decentralization

Coordinated and actions are far less effective than centralized decisions that tend to split projects or miss strategic growth opportunities in the middle of decision swings.

5. Chain performance issues

Scalability and high gas fee are issues for Ethereum and also obstacle to DAO growth. In response, such as Metis are building so-called Layer2 solutions, while others see it to keep transactions data on-chain. This leads to another argument Layer2 not being decentralized enough.

In summary, DAO development is still a long way off. we expect projects such as SubDAO to bring new breakthroughs for DAO by solving incentive problems, expect it could support cross-chain asset management and interaction, and explore more application cases.

Development Tendency

0. DAO integrate with corporate governance

In April, dOrg became the first legally recognized DAO in the U.S.. The U.S. Senate in Wyoming recognized the legal status of DAO and gave them limited liability company (LLC) capabilities, which allows the the status of on-chain virtual digital management jurisdictions to be equal as off-chain jurisdictions. We can expect the DIDs that accompany them will also gain a place. On-chain sociology will influence real-world organizational structures and social formations, which may be another exciting paradigm shift in modern society.

1. Flow entrance of crypto world

Each public chain will form a complete financing DAO, governance DAO and DAO tool platform system. Developers only need to invest the minimum cost to adopt DAO, and users will also more easily join. The development of the DAO tooling platform will make DAO easy to be adopted and become the infrastructure as wallets, browsers and Oracle.

2. Composability

Decentralized identity systems: The identity reputation system built based on DAO generates precious value data for users’ behaviors participating in DAO, providing tools for credit rating, on-chain identity audit and diversified scenarios, which is a key part of the combinable blocks.

Governance incentives normalization: Inflationary incentives for participation in governance will become the base yardstick for yield in DeFi.

Integration with other modes: NFT+DAO

There are numbers of projects seeking various possibilities for DAO. Automata buys and sells governance votes to create such lending systems. SubDAO plans to provide a personal reputation system based on on-chain governance behavior and provide support for on-chain financial operations.

3. The absorptive capacity of financial resources will be a key indicator for evaluating DAO platforms

The power of DAO is mainly reflected in the optimization of voter turnout incentive and governance staking mechanism, especially DaaS, whose fund under management (FUM) is is a key indicator of platform competitiveness, as traffic competition period in Defi, attracting governance funds with innovative models will make the project a front-runner on the track, and SubDAO’s governance mining model is already being demonstration.

4. Establishment of industry-type key indicators

After the improvement of DAO track maturity, a tracking indicator service tool will formed, which provides a more valuable decision basis for the whole DAO market. We believe that a vertical data and other tool-like service ecosystem will emerge for the DAO module.

5. DAO Venture is probably the real form of VC in the crypto world

DAO will assume a stronger function of early value discovery. With the improvement of platform functions and network effects, DAO will accumulate more excellent projects, collect a larger scale of funds and unite the enthusiastic practitioners and promoters of ecological development.




Founders fund in Polkadot ecosystem, running as a DAO venture. Long Polkadot, short Web2.0