The Future is DAO
MetaMask Institutional, along with ConsenSys DAO Strategists and friends, hosted an online workshop where we sat down with members of the DAO community to discuss their experiences, what’s worked for DAOs so far, what hasn’t, and generate ideas on how to move forward.
We spoke on community, payments, governance, and treasury management in breakout groups. Let’s look at some key takeaways from the workshop.
Gathering the right people and building a community is fundamental to DAOs. However, as community managers, turning an organization into an “organism” that is responding to its environment and feedback to grow isn’t always easy. Hiring “community” doesn’t always mean that you’re doing “community”.
We asked the attendees their definition of community management. Here’s what they said:
- Community management focuses on building and growing community around a project or a cause, and this “industry” has grown substantially in the past 10 years.
- Some organizations use net promoter scores as a way to measure community happiness.
- Community managers and contributors need to “embody the purpose of your organization”. That means finding people who are trying to provide value instead of extract value.
DAO communities however, have different needs, and decentralization means operations for DAOs run differently from a traditional organizational structure. This also presents a new set of challenges, some of which are:
- Specifically for Web3 and DeFi, community managers will likely need technical writing skills for their day to day work.
- DAO communities should be seen as building “squad wealth”, or an engaged community. It is crucial to find DAO community managers who know how to tease out the needs of the community and the direction DAOs need to go.
- What you need is for members to not only be engaged, but also actively contributing. In short, members who are there to work, not just to enjoy. One analogy that came up was particularly poignant – Everyone wants to spend time at a concert and have fun, but not everyone can “install the lights”.
- Everyone should have a say, but if many members haven’t contributed, it can lead to a fragmentation of opinion.
Ultimately, DAOs have to define what they need in their communities, and what activities they require. They then need to develop working groups and streams where honest work will be accomplished. Using feedback loops, getting unfiltered feedback, and constant communication with members is important for community managers to keep contributors engaged and projects on track. All your members are part of your community.
To establish a good operating and governance structure, a DAO needs to have clear goals.
Governance frameworks directly impact operating structure, including:
- Treasury management
These frameworks help DAOs decide on how their proposals pass, and discussion and questions in this breakout session surrounding the different governance frameworks. Some good good rule of thumb points emerged:
- Contributor compensation is important because it acts as a financial incentive to complete work.
- It is OK to pivot structure and operations, take a step back and evaluate tooling that meets the needs of the DAO. This includes:
- Wallet infrastructure
- Organizational tools
- Governance tools
Engaging your community to participate is crucial to ensure the success of your governance framework.
Whether it’s compensating contributors, keeping track of your treasury, or building out a process for DAO payments, it was generally agreed that payments are tricky and a big pain point. Contributors in this breakout room all shared the difficulties of current systems – think juggling lots of excel sheets and managing quality of data, and also doing treasury work on projects contributors may not have a background in. One thing that all participants agreed on were the issues surrounding payments that were brought up.
Here are some of the major pain points that DAOs face:
- Managing payments is a lot of manual work. Right now, there is no system to get around it, and DAO contributors in payments have to work across a number of CSVs, feed those into payment tools, take screenshots, and relay those back into their google or excel sheets. This makes accounting, auditing, connecting data sources, and building out replicable models difficult.
- Data integrity is a problem, especially looking at the previous point. When juggling many spreadsheets, it’s easy for errors to be made, and they will be made. While these are usually small errors, it takes a lot of time to find these errors.
- When your treasury has one currency like USDC because you don’t want to keep ETH, it’s not easy to directly make a swap.
- Signing off on transactions – for those with a multi-sig and many transactions to approve, signers would like more transparency for what they’re signing off on. Participants agreed that it’s hard to know exactly what they’re approving and requires blind trust. Ultimately, more transparency is needed.
Every DAO has its own process for payments, and currently, the agreed on “best practices” tend to be a combination of using Safe and Excel. The consensus among participants was that unfortunately, they’re still waiting for better tools to be created before payments processes can be simplified and unified across the board. But one important thing to note, is that no matter what, we should be building on the testnet first before any integrations are made.
Likening this to Maslow’s hierarchy of needs, we first looked at the treasury’s hierarchy of management, which we called the foundations of building blocks – before building the top of the pyramid, we need to figure the bottom out first. Treasury management is often put on the backburner by DAOs but is incredibly important. So let’s break down how the different layers of the pyramid can help reframe how DAOs think about managing their treasuries.
- Base: How do you figure out treasury distributions? How do you do payments? How do you distribute DAOs?
- Mid: Next is accounting: What do we hold? What does our portfolio view look like? Once we’ve accounted for it – burn rate / financial planning and announcements.
- Top: Once we get further up the pyramid, risk return targeting, treasury management, fund management.
When thinking of this hierarchy, it’s important to look at what a specific DAO’s needs are. This perhaps will give different weight to allocating time or funds to payments, accounting, planning, and treasury management.
Other important points in our treasury management discussion include thinking about burn, distribution, and liquidity health. Long-tail assets or swaps with DAOs will take longer to materialize. Contributors need to make sure that they’re not over indexing on long-tail assets or long-term investments. If your burn is longer, you can allocate to long-tail or long time horizon investments.
A common theme through all the breakout rooms was that the right tools for DAOs haven’t been built yet. However, until those tools are built, DAOs need to keep it simple. Whether it’s using Zoom to gather members for a quick meeting, or Excel to manage treasury and data, DAOs are currently sticking to what works. Keeping their community engaged, and actively contributing, building solid foundations are key. And though workshop participants shared many of the same difficulties and pain points, what was truly inspiring was the camaraderie, the ethos to uplift each other, and openness to help each other. Having spent this time speaking with and learning from DAO contributors, we truly believe that the future is DAO.