First of all, this is a reference article about organizing investment activities with the meaning of DAO to make the investment of members easier and more transparent.
“DAO is an organization designed for automation and decentralization. It operates as a form of venture capital fund, is based on open source code and has no typical management structure or board of directors. To be fully decentralized, the DAO is not tied to any particular country.”
An example sequence of actions: If you buy an item and pay in the normal way, you did not only get the item back but you can also see your money after the sale is used to re-import the sold item, it also automatically optimizes other ancillary services such as rental, cleaning. v.v.. Everything will be coded, that is amazing!!
In this article, I will go into some details explaining the first major use case: managing On-Chain Investment decisions.
With time, we envisage a wide range of use cases further afield than DeFi — after all, at the highest level, almost everything any project, organization, and DO does is about making decisions about how to allocate resources.
And if you look at crypto as an evolutionary-level technology allowing such levels of human collaboration to progress through existing boundaries, you will know something happening today.
Today’s DeFi Experience:
DeFi is rapidly building new forms of financial collaboration where individuals are empowered to transact together without the need for trusted intermediaries who add friction and cost.
For those of you that have dabbled in DeFi and even for those who are more expert, you will quickly relate to the day-to-day challenges of managing a portfolio of assets across DeFi platforms.
Most of us hold tokens across multiples chains, often on a MetaMask wallet or equivalent, that needs to be manually configured to read the right chains, find recently acquired tokens (by manually inputting contract addresses!), bridging tokens from one chain to another, converting to wrapped tokens, etc. And that’s just the basics before we even get started on any staking or farming projects.
To then make an assessment on where to stake tokens is a huge undertaking that spans fundamental and technical analysis, game theory, project lifecycles, hype, and sentiment. As if that wasn’t enough, investors must stay on top of project news, understanding the risk of hacking, soft exits, exit scams, and rug pulls, and technology failures.
Further challenges are presented when navigating and understanding drastically different user interfaces, gas fees, error messages, terminology, and network functionality. While Curve.fi, for example, is an incredible technology, it is impenetrable to all but the most committed of DeFi investors.
Enjoying the magic of compounding yield returns (a must to max out on APY returns over the long term) must also be managed manually. On top of all of this, we need to consider market conditions that are constantly changing - having a knock-on effect on investment strategies.
Despite crypto technology supposedly enabling new levels of human collaboration with reduced issues of trust, there are significant obstacles at the user level that result in all kinds of bias and reduced usage levels.
These issues are complicated further when we start to look at Digital Organisations, DOs, or DAOs. This is despite them having large pools of money available to put to use, and pressure from participants to maximize the impact from this money.
An example that reduces the ability for DAOs to deploy such capital is that in many cases they are resorting to using multi-sig wallets. This is done as a way to reduce trust issues for treasuries and a means to manage execution against a consensus. However, these wallets are generally incompatible with most dApps and protocols, and somewhat limited in their functionality.
So typically the group is reliant on an individual or limited set of individuals receiving some of the funds from the multi-sig into a wallet (example: LEDGER, TRUSTWALLET) under their sole control, and then deploy it.
This means the rest of the DAO participants having to trust that said individuals will:
- Perform all desired actions on time and as required.
- Have enough time, headspace, wisdom, the strength of mind to manage other peoples’ money.
- Not be kidnapped or otherwise coerced, losing the wallet, or themselves stealing funds.
- Not becoming exposed to government actions taking control over the assets.
- Not becoming subject to personal taxation over the controlled assets, and correctly tracking and reporting all transactions back to the DAO.
Decision-Making Engine + Investment Execution Engine
There are 2 main functions when in the investment function of the DAO:
Firstly, modules that support the ‘Decision Making Engine’ of a DAO — giving the ability for a group to decide what, where and how chain investments should be made. More specifically these will provide:
- The ability for new or existing DAOs to use the tools they prefer in order to communicate. To allow people in those communities to create investment strategies (or access pre-configured ones)
- Communities with the ability to vote on the deployment of capital into those strategies in a tamper-proof and transparent way.
Secondly, modules that support the execution of the investment will sit under the ‘Investment Execution Engine’. More specifically these will provide:
- Approved strategies to be deployed programmatically in a way that reflects pre-defined parameters.
- The ability to monitor the progress of said strategies and to allow new voters to change strategies as changing market conditions or opinions demand.
From Pink,merit protocol software used in DAO