2021 will be remembered as the year of the NFT. Non-fungible tokens launched cryptocurrency topics into the mainstream in 2021, so what’s next for 2022?
My research suggests we should look to decentralized autonomous organizations (DAOs), which are essentially LLCs on a blockchain. DAOs allow people to come together to form communities that serve some purpose or achieve some goal, and they tokenize those communities. This is pivotal because being social and having communities is what makes us inherently human.
So, imagine if you can take something meaningful — your passions, hobbies, whatever it is you love — and tokenize that. That is powerful. That is scalable. That can go mainstream to anybody in the world who has a computer.
This summer, a group of crypto fans pooled their money to buy Once Upon A Time In Shaolin, a rap album by the Wu-Tang Clan of which there was only one copy, for $4 million. The buyers eventually revealed themselves as PleasrDAO, the same people who bought the original “Doge” meme NFT for $4 million in June.
This DAO created a new community around DeFi, letting people pool their funds to buy digital art and NFTs. By connecting online communities with a figurative shared bank account, PleasrDAO is effectively creating a new tokenized governance structure, which I think will be huge.
Think of DAOs as new LLCs – limited liability companies – except they are aimed at the crypto world or metaverse. Let’s look at an example of how DAOs can be big. We talk about smart money and following smart money, but what if I told you that many smart investors are involved in DAOs as a means to find their deal flow?
Let’s discuss MetaCartel Ventures, which is basically an investment DAO. Interestingly enough, its members (called “mages”) are listed right on the website. If we go through this list, it includes the who’s who of crypto. We have Ameen Soleimani, the founder of SpankChain and Moloch DAO; Stani Kulechov, the founder of Aave; Roneil Romberg, the CEO of Audius and recent TMTV guest; Ana Andrianova, the CEO of Akropolis who we interviewed on YouTube in 2018; Ocean Protocol founder Nexus Mutual; Lasse Clausen from the well-known crypto VC firm 1kx Capital; Leo Cheng, the founder of C.R.E.A.M. Finance, Cooper Turley of Fire Eyes DAO; and lastly Bobby Ong, the founder of CoinGecko.
As you can probably tell, these are high-profile people with crypto clout. By pooling their funds, connections, and brains together to invest in projects, they can more easily find undervalued, high-quality projects.
Let’s look at the investments MetaCartel Ventures has made. It was involved in the pre-seed round for Zapper Finance, the seed round for Gelato Network, the seed round for EPNS (which scored an 80+ on our code review), The Defiant (one of the best newsletters in all of DeFi), the Rarible seed round, as well as Xdai. Basically, these founders in the crypto space are pooling together, forming an exclusive club, tokenizing that club, and investing together. This is a powerful concept that can scale. On their website, if you click Blood Mages, it will take you to a Twitter list of their members. You can go through and follow these members, which is definitely a good place to keep an eye and see what smart money is saying.
PleasrDAO’s membership has at least as much to offer, as there’s a lot of smart money there. Andrew Kang, co-founder of Mechanism Capital, Tarun Chitra, founder and CEO of Gauntlet and partner at Robot Ventures, David Hoffman, co-owner of Bankless and PoV Crypto podcast host Robert Leshner, founder of Compound, Daryl Lau, principal at Mechanism Capital, Alex Svanevik, founder and CEO of Nansen, Su Zhu, co-founder and CEO of Three Arrows Capital, Leo Cheng, co-founder of C.R.E.A.M. Finance, and Stani Kulechov, founder and CEO of Aave are all members of PleasrDAO.
Let’s additionally take note of some of the smart money players who are involved in multiple DAOs — as they have the best deal flow. James Waugh is a member of PleasrDAO, Fire Eyes DAO, MetaCartel, and Venture DAO. Cooper Turley is a member of PleasrDAO, Fire Eyes DAO, and Friends With Benefits. Julien Bouteloup is a member of PleasrDAO and StakeDAO. These smart money players are pooling their funds together to invest in NFTs, an emergent trend in crypto that many are reaping benefits from.
Let’s now look at Flamingo DAO, an initiative similar to PleasrDAO. Flamingo DAO also invests in NFTs, however to become a member you have to purchase 1% blocks of Flamingo units for 330 ETH each. Basically, it costs about $1.3 million to join (but when the DAO launched the price of ETH was a lot lower). As the price of ETH rises, it gets harder to join the DAO.
Another interesting DAO is Friends With Benefits. Cooper Turley is the co-founder of this DAO, and there’s a meme on Twitter that all DAOs lead to Cooper Turley as he seems to be involved in every single one. Friends With Benefits is a social DAO that purports to be the ultimate cultural membership, powered by a community of Web 3.0 artists, operators, and thinkers who are bound together by shared values and shared incentives of the FWB token.
In terms of joining, you have to submit a membership application, join its Discord, and either buy 75 FWB tokens for a full membership or 5 FWB tokens for a local membership. With a full membership, users get access to learning and education events, lifestyle and culture events, along with NFT and trading alpha and governance rights. It costs more than $5,000 to join, as FWB tokens are currently trading around $70. The lowest price per token was around $5 in June 2021, so if you were early, you could have joined FWB DAO for just $375.
This is the future of crypto. This is a huge trend because it touches and affects everybody. All humans have things they love, which is why this is so powerful. As DAOs allow one to tokenize human passion and add economic incentives to reward those who participate the most, it seems they will eventually explode. Most likely, DAOs will be a leading and new crypto narrative for next year.
None other than Andreessen Horowitz recently invested in Friends With Benefits DAO. With regard to this, he commented: “what comes next is hard to predict, but DAOs are likely to have an enormous impact on the adoption of Web3 products. DAOs are internet-native, global collectives that share resources, build products, and work together toward common goals.” DAOs impact everybody who is online.
Until recently, DAOs were used mostly to secure DeFi protocols, and DAO members consisted primarily of highly technical contributors. Now, however, DAOs are abstracting and becoming available to everybody. Rather than just crypto natives, DAOs allow anybody who has something of value on the internet with a community around it to get involved and receive value for being early.
Turning back to popular DAOs, let’s take a look at Seed Club, which builds, supports, and invests in tokenized communities. Its portfolio lists the communities it has invested in. Being able to tokenize any community you like showcases how powerful DAOs can become.
In terms of how DAOs run, there are many projects in the blockchain space to help you create a DAO. For example, Aragon is a project that lets users build DAOs on their infrastructure, and it had a token sale in 2017. A few other DAO operating systems that are used to manage daily upkeep are Boardroom and Colony. Boardroom helps users with DAO governance, voting, proposals, tracking the price of tokens, and it has been backed by well-known investors. Colony calls itself the complete DAO toolkit and promises users to build a DAO in 90 seconds.
Another example to help you understand DAOs is EtherRock, which will also help you understand why the price of EtherRocks is so expensive. EtherRocks are cartoon rock art and there are only 100 of them. However, they are powerful — as anyone who buys an EtherRock is one of only one hundred people in the world who can join their private group, called Stonehenge.
Stonehenge is available via Telegram and Discord, and in this group are the who’s-who of crypto. Inside Stonehenge consists of people who share investment alpha with each other. As of December 6th, 2021, the floor price of an EtherRock is 420 ETH, or $1.7 million, and they have sold for a high of 888 ETH, or $3.6 million.
Why would anyone buy a picture of a rock for $3.6 million? Because they are buying access to a private club with top-notch investors who can help them make money. Not to mention that they can also sell the EtherRock down the road for even more money.
Countertrademol on Twitter said, “When I minted the last EtherRock back on August 5th (2020), I couldn’t have imagined how it would influence my mindset and my trading over the next months. Today we’re going to focus on the latter – how I made $1.5 million off the calls, alpha, and suggestions of Stonehenge.” Purchasing this NFT provides him with access to this private group where insights from the group gained him $1.5 million. He minted the last EtherRock, meaning his entry price was not $3.6 million, but a lot lower than that.
That is the power of DAOs. EtherRock is not a DAO, but essentially it has made itself into a DAO by using NFTs. DAOs are building on top of NFTs using governance. On the most basic level, NFTs confirm your ownership of that NFT, but what if you want to add a governance structure to people who hold them?
A famous example of how this is done (in a centralized manner) is the Bored Ape Yacht Club. Its website shows their membership details and roadmap, but this is governed by one central entity, the company Yuga Labs LLC. Imagine taking all these amazing NFT collectibles and collections, and making them decentralized. That’s huge. By taking something that is already mainstream and giving everybody access to its governance, we can see why there is a natural progression from NFTs to DAOs.
What does it actually look like to create a DAO based purely on people’s passions? People who follow me know that I love basketball. We are seeing this play out with The Krause House DAO, which was developed in late November 2021. This is a DAO of basketball fans and crypto fans coming together to empower individuals to purchase an NBA team. This is basically an investment DAO, where members pool their funds together to pursue buying an entity, which in this case is an NBA team, and then govern that team.
This is something I have always wanted to do myself, so it’s pretty cool that it is already being done. In its whitepaper, it discusses its plan to purchase an NBA team, and it has three approaches. The DAO can either buy a majority stake by having more than 50% equity in a team, or it can be a minority owner by having less than 50% stake in the team. If a DAO can pull off buying an NBA team, then there is no saying what DAOs can’t buy in the future. It could be art, investment companies, blockchain projects, even music. The world is everyone’s oyster.
There are actually companies out there that can give DAOs a legal status. Consider a site called openlaw.io, which creates real-world contracts for Ethereum and makes it easy to create legal agreements that are compatible with Ethereum. These are basically digital contracts that are tied to real-life legal contracts.
Giving DAOs legal contracts where the community votes and controls governance is very powerful. DAOs can wrap smart contracts into legal agreements in minutes using OpenLaw’s tools. DAOs can execute, sign, and interact with contracts. OpenLaw also has an API available. The website has a beginner’s guide on how you can use OpenLaw to create and automate agreements on the blockchain. The future is exciting, and it is especially exciting within this niche.
If 2019 to 2020 was the year for DeFi and 2020 to 2021 was the year for NFTs, I believe 2021 to 2022 will be the year for DAOs. The only question is: which DAOs will you join?
Founder and CEO of Token Metrics / General Partner of Token Metrics Ventures