Are you in a DAO without knowing it? A case study.

We normally think of DAOs as blockchain-based organizations with a governance token, on/offchain voting, a treasury, etc. But there are currently millions of groups around the world organized essentially as a DAO without even suspecting it. In fact, you may already be a member of a few.

Shh, it’s a secret!

Have you ever been part of a secret Telegram or Discord chat group where trading alpha is discussed? Members join, sometimes by invitation only. Members can be kicked out for bad behavior or for lack of contributing information. Members propose trading strategies and debate them to come to some consensus (or at least a clear flushing out of the pros and the cons). The group may even have membership dues. Its governance may be decided by majority voting or some seniority/trust level-based system.

Sounds a lot like a DAO, doesn’t it?

In some ways, such groups are even more DAO than current DAOs. Take, for example, the membership dynamic.

Membership

Membership is hard to come by in such secret groups (else it wouldn’t be so secret and desirable). A member may be accepted first only for a trial period and with limited power within the group. A new member could be evaluated based on the usefulness of his activity and the profitability of the information he brings to the group.

By proving their worth, members can move up in the group hierarchy, aka merit-based advancement rather than nepotism or oligopoly. Likewise, members can lose standing or even be booted from the group for demonstrating a lack of merit or useful involvement.

Governance

With such groups being secret, it’s hard to know all the details of governance. Often, such groups are started and are run by experienced traders in a top-down fashion. However, they maintain leadership by consistently demonstrating good performance and maintaining the trust of other group members. After all, members are free to leave the group if they find it useless.

Thus, group creators are wise to pay attention to member sentiment and govern by consensus rather than by decree. Moreover, since other members can demonstrate their worth and move into leadership positions, this shows degrees of decentralization of governance power.

Treasury

Some groups are strategy-only, without any money pooled together in the group itself. In this case, their main assets are their ideas and their motivation to help each other succeed. Yet others do pull together money from members in order to qualify for favorable allocations from projects they want to invest in (essentially taking advantage of bulk purchasing power).

With members contributing their personal funds to the joint pool and expecting a proportionate share of any resulting profits, they now have a vested financial interest. As such, their money becomes a governance tool. In the most simple example, they can vote by contributing or withdrawing money from a shared investment. Or they can pressure the group to invest in accordance to their preferences, using their money as leverage. With a large and diverse enough group, this creates decentralized governance of the treasury.

DAOing it better

While these quasi-DAOs exist and function already in various social media groups (Telegram, Discord, WhatsApp et al), they would be better served if formalized into actual DAOs. For example, membership criteria can be formalized and automated via tokens and NFTs, the latter of which could be made dynamic to assign or take away DAO roles based on member behavior.

Similarly, the governance of these groups is murky and requires a lot of trust that the leadership is acting in the best interest of all the members. Formalizing such a chat as a DAO would give transparency to members about the actions of the leadership. It could also give members direct control over who leads the group and how, with clearly defined voting power based on tokens and/or NFTs.

Same goes for treasury management. DAOs make it really easy to pull money together in a way that everyone can see and agree on. With transparency of how the treasury is spent and distributed to members, the group gains a lot of clarity and ease of operations. Members can formally propose, comment on, and debate treasury allocations in a way that’s easy to track and participate in. No need to comb the entire chat history.

In short, DAO-like structures already exist in function and spirit. If they upgrade to formal DAO structures, such groups can function better, faster, cheaper, and more equitably. This also helps scale them as needed. Not to mention that it makes such groups flexible to adapt to changing circumstances and needs. In short, they are doing well but could be DAOing better.

Stay tuned!

Website | Telegram channel | Telegram chat | Facebook | Medium| LinkedIn | Twitter | Reddit | Discord