gm readers and welcome back to another edition of Decrypting DeFi.Â
Just as DAOs find more traction in the industry, so too have a series of different tools to measure how decentralized autonomous organizations stack up alongside one another.Â
Now the question emerges: What makes one DAO better than another?
Sure, you can use the size of their treasury as a metric, but itâs also important that an autonomous organization is also decentralized, something one may crudely measure by determining the number of token holders.Â
Then thereâs voter apathy and the myriad ways one measures how active those token holders actually are.Â
Even the number of token holders is a splotchy metric. Wallet addresses donât equal the number of users one for one; oftentimes one user can have multiple wallets, each of which may be holding tokens for the same project.Â
If one person, with 150 different wallets, holds 60% of a tokenâs supply across all those wallets, is a project really decentralized?
Itâs sort of like measuring the quality of various democracies around the world; itâs super messy and thereâs clearly no one right answer.Â
âSome DAOs maximize for decentralization, trustlessness, and transparency. Others will focus on efficiency, with a focus on sufficient decentralization to avoid capture or control,â Snapshotâs head of growth Nathan van der Heyden told Decrypt. âWorst than that, some start off as the first, and then become the second, and vice-versa.â
Apples and oranges
To make clearer how difficult it is to rank DAOs, let’s look at a few examples.Â
According to OpenOrgs, Uniswap currently has a treasury of $2.5 billion. Much farther down the list is Decentraland, with a treasury of $88,500. If we flip over to DeepDAO, a convenient data dashboard for DAO data, Uniswapâs community has posted just 124 proposals. Conversely, Decentralandâs community has made roughly 2,000 different governance proposals.Â
A high number of proposals certainly seems like evidence that a community is highly-active in stewarding the projectâs direction. But if those proposals fall outside the scope of what a DAO can actually do to influence a project, then it doesnât really matter.Â
The Web2 equivalent would be something like spam mail; just because youâre firing off emails doesnât mean you’re actually being productive.
Finally, beyond measuring how active or large a DAO is, one need also be mindful of whether the communityâs votes are actually being effectuated.Â
Last Summer, for example, TribeDAO took some flak on crypto Twitter after it announced it would be doing a revote on a very sensitive subject after its community had already voiced their wishes. This is a surefire route to kill voter enthusiasm.Â
Arbitrumâs newly-formed DAO has thus implemented self-executing votes, which means that as soon as a change is voted on, it will be pushed directly on-chain.Â
Ultimately, itâs quite the spectrum. DAOs come in all shapes and sizes, some optimizing for one metric while others optimize for another.Â
And some projects may only care about one thing.
âFor some DAOs, the price of the token can be a good representation of how well theyâre achieving their mission,â Snapshotâs van der Heyden told Decrypt.
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Gnosis first launched in 2015 as a decentralized prediction market built on Ethereum. Now itâs a DAO, a multi-sig wallet, a staking chain, and a vibrant community with its own GNO governance token. Co-founder and COO Friederike Ernst talked to Dan Roberts and Stacy Elliott about the careful evolution of Gnosis, decentralization impostors, account abstraction, DeFi UX failures, why Ethereum is the âManhattan of crypto,â and much more.
