Now we are on a new stage in the development of decentralized finance (DeFi) and decentralized autonomous organizations (DAOs). We discussed the DAO concept in general here, but we didn’t cover the details of for whom and how DAOs can be helpful. Web3 as an industry was created by the people for the people living online to build an independent and decentralized internet infrastructure. The main idea is that digital services should be governed by users and correspond to their interests. And with the same mission, people created DeFi protocols. Then the DAO was invented to structure and frame Web3 community intentions.
A DAO is a great idea, and together with blockchain technologies and digital currencies, it will completely change the internet’s governance structure in the coming years, making it more open to users. DAOs will affect not only the governance of internet services but also e-money, payments, and investments.
Right now, DAOs are available to any group of crypto enthusiasts, but not all of them understand how DAOs work. Those same people frequently have issues with crypto investments, since making investments without experience is a big risk.
DAO has a solution for crypto investors.
Imagine you are a private investor. You chat with other private investors who are looking for alpha, big profit, or interesting DeFi protocols. How successful will you be? Not very. Because you can only rely on your own experience, and you can’t take too many risks because your savings are limited.
Currently, only venture funds can provide successful investments in crypto with a low-risk level, using portfolio diversification. On the other hand, venture funds take big individual risks and invest in many crypto startups, knowing that the profit from one successful project can cover the losses on 10 unsuccessful ones.
VCs prosper because they can afford to invest large amounts of money and diversify their portfolio, knowing that one successful project can cover the losses of 10 unsuccessful ones.
Individual investors gain in bullish markets, but lose their money in bearish trends. The problem is that to do the same as the funds, you need a big budget…enormously big… Or you can get together with a few people from your private investor chats and start mutually offering projects and voting for which one to put money into.
How can XDAO facilitate that? With a DAO! In this case, individual investors just need to form their own foundation and become an investor collective. Don’t panic about this being a serious structure: everything comes together and is organized over time. We recommend starting the mutual investment process with a few interested people, then growing and inviting new members into your collective little by little.
We recommend starting the mutual investment process with a few interested people, then growing and inviting new members into your collective little by little.
Choosing the type of investment DAO
Your DAO may be a local community, you and your work colleagues, mutual Discord server or any other type of community. The first step is for you and your partners to choose the type of organization.
There are several common types of investment DAOs:
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Friends&Family DAO. All DAO members have the same voting rights on investment decisions. To take profits, an investor leaves the DAO.
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Joint Investment DAO. All DAO members have voting rights on investment decisions. To take profits, an investor leaves the DAO.
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Mutual Fund. An analogue of traditional finance’s mutual funds, operated by professional money managers. To take profits, an investor leaves the DAO.
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Joint Investment DAO with a dividend model. It works the same as a joint investment DAO, but it has a dividend distribution mechanism. The investors in this DAO don’t need to leave to take profits.
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Mutual Fund with a dividend model. It works the same as a mutual fund, but it has a dividend distribution mechanism. The investors in this DAO don’t need to leave to take profits.
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Syndicate DAO. Members pool their money somewhere and invest; usually once. When the investment returns, the syndicate closes or enters into a new deal.
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Venture DAO. Similar to a syndicate DAO, but after entering a deal at an early stage, the blockchain connection is often broken by the investment object (since the entry takes place in SAFT or other paper document); requires reliable managers, whom DAO participants will trust with the task of returning investments when they appear, for example, on a new blockchain.
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Collector DAO. Operates in the field of NFTs & Metaverses. This DAO collectively owns NFTs — art collections, memes, lands, gaming items, etc. For example, it may work as a syndicate for the purchase of specific high-price collectables — CryptoPunks, Bored Apes, or others — in a pool, collecting collections.
Different types of investment DAO have different rules, though they share certain important terms:
- Voting rights. DAO voting rights can be equal or not equal.
- DAO Treasury. The money available for investment, whether from DAO members, external investors, or both.
- Subject of investments. Where the DAO will invest: seed, private (with or without SAFT), presale rounds on launchpads, NFT purchase, investing in metaverses, etc.
- Profit. When and how members receive returns: taking profit at the moment of exiting the DAO, or using a dividend distribution model.
You can implement any rules in your DAO. The entire organization’s management rules can be configured through the XDAO interface, without writing a single line of code.
Providing liquidity
The next important step, after creating a DAO and establishing rules, is providing liquidity — organizing your DAO treasury for investments. Any cryptocurrencies can be chosen by the organization for purchasing “liquidity provider” or LP tokens. By purchasing LP tokens, a DAO investor provides liquidity to this DAO. This liquidity is called AUM (assets under management). The essential advantage of XDAO is the possibility to hold and manage all cryptocurrencies, provided by LP holders, for collective purposes.
Each member of the organization with voting rights can influence decisions that are made on behalf of the organization. Want to add a new member to your organization, reward someone with a bonus, or issue shares to attract investment? Just ask what your teammates think about it. If they agree, the action is performed automatically. Any member of the organization can initiate and, when a quorum is reached , activate a vote.
Another key benefit of our platform is that your DAO can interact directly with all DeFi protocols through Wallet Connect. Make collective financial management decisions and be completely confident that your finances cannot be stolen by intruders. Don’t forget that our platform is built on the most advanced tech stack, which allows you to gain the most complete and comprehensive experience with DeFi. Be ready for mass adoption of DAOs.
To start a DAO, you need nothing but desire and like-minded people ready to become your partners in financial management. Do you or your friends own cryptocurrency and do trading? Would you like to combine your efforts and earn more? Are you running a business or want to start one, earning income in crypto, quickly and cheaply exchanging assets? Why hesitate? Get ready for a quick transition to our platform.