Some of us are wary, or confused about DAOs, others are interested, and some others may even be excited. To learn about the basics of DAOs and explore their usefulness to mutualists and social entrepreneurs, we sat down with Daniel Hwang, head of protocols at stakefish (a leading proof of stake validator. Watch the full conversation here. Here are a few of the highlights.

What’s a DAO?

Starting with the basics, we asked Daniel to define what a Decentralized Autonomous Organization (DAO). In essence, it’s a non hierarchical community that is owned and managed by its members through the use of tokens and smart contracts (a piece of code processed on a blockchain to formalize and execute agreements between untrusted participants over the Internet). Here’s how he broke it down. For more, we recommend Shermin Voshmgir’s chapter on the topic.

Investment DAOs

Investment DAOs are likely the most common, as of 2022. These tend to be highly speculative investment communities who pool money/tokens together for investment purposes. Members are typically anonymous and the more they invest, the more say they have in how the community governs itself. Concepts like anonymity, immutability and self-sovereignty are central to most investment DAOs.

Social DAOs

When the goal is social (i.e. curbing carbon emissions), the dynamics of the DAO can become quite different. Token distribution to DAO members for example is based on the contributions they are each making to the social goal and usually have very little (or nothing) to do with capital distribution. Daniel Hwang explains why this difference leads to different governance principles in social DAOs. Among the social DAOs mentioned in the conversation were All for Climate DAO and the UPF Coin community.

How to set up your DAO

Before starting a DAO you may want to join a few to understand how they work. But once you’re ready, Daniel says the building blocks can be quite simple and some “off the shelf” DAO tooling is starting to become available. In a nutshell you’ll need: a wallet to hold and exchange the token that governs the DAO, governance or voting tools such as snapshot to help your community make decisions on or off blockchain, a communication forum (such as a Discord), and a web-interface (a website, medium page, etc.) to share governance proposals.

DAOs – Take it or leave it?

There was a healthy dose of skepticism in the room about the value of DAOs for mutualists and social entrepreneurs and what their true value add might be. Some felt coops and DAOs have a lot to learn from each other, while Sara suggested perhaps the biggest contribution may just be that DAOs can help automate more mundane decision-making, so as to increase the social sector’s efficiency.

For more check out the DWeb Learning Collaborative, convened by Ashoka & Mutualist Society