Choosing the Right DAO Model
Not all DAOs are created equal.
A DAO is a decentralized entity that operates through a set of rules encoded as smart contracts on a blockchain network, enabling its members to participate in decision-making and governance without the need for a centralized authority.
DAOs can be broadly categorized into different types depending on their business model, sources of income to the DAO Treasury, and methods of disposal:
Community/Protocol DAO
Service DAO
Investment DAO
Community or Protocol DAO
A Community/Protocol DAO has 2 primary objectives:
They aim to unite a community of contributors, creators, entrepreneurs, and enthusiasts around a decentralized blockchain protocol.
They incentivize their ecosystem of contributors to support the protocol, develop their own decentralized applications, issue NFTs, or engage in other activities.
The DAO incentivizes its community members via its tokenomics system, and DAO members may be rewarded through staking/yielding token rewards, minting tokens, etc.
Service DAO
A Service DAO is designed to bring together a community of professionals to collaborate more efficiently in providing services. By pooling their expertise, members can work on larger projects or close complex client cases that they may not be able to handle alone. Service DAOs generate revenue from the services they provide which is deposited into their DAO Treasury. The profit is then distributed among the DAO members and used to maintain the DAO's infrastructure, such as purchasing IT systems or paying administrative staff.
Investment DAO
The primary objective of an Investment DAO is to act as a crowdfunding vehicle that enables individuals to collectively pool their resources and invest in assets that would otherwise be unaffordable individually. Investors can earn dividends from their investments and collaborate in managing collectively-funded assets, like a real estate-focused DAO, including making decisions about trading.
From a legal standpoint, members of DAOs must carefully consider the regulatory implications of their business model. It’s also very important to note that the DAO treasury, which comprises of the DAO’s assets/tokens, must be set up in a well-managed, secure, and compliant manner. This is why choosing an experienced legal advisor is crucial.
Want to learn more about DAOs? Read up on all about the Benefits of DAOs.
Disclaimer:
This website only provides educational and informational content and does not provide legal advice. You are not to rely on this information and should contact a lawyer for their professional advice. There is no solicitor-client relationship with Meta Law until you have been formally retained in writing.
