The Future of DAOs

DAOs of today are bloated, stuck in governance, and overwhelmed with internet-scale human coordination. The token-drop approach to DAO formation has set DAOs on the wrong track. Inviting thousands of strangers to govern — who have no insights or time — is a recipe for bad governance.

DAOs today play a role of fund allocators, as they start with a treasury-first approach. Drop a token, seed the treasury, and invite strangers to vote on proposals on how to disburse the funds.

That’s the most popular DAO use case we’ve seen to date. And the entire DAO tooling ecosystem is built around this functionality — creating proposals, decentralized voting infrastructure, governance frameworks, tokenomics.

DAOs of today are fund allocators, not builders.

DAOs of tomorrow will be builders

DAOs won’t start with a treasury or a token, but with like-minded people who share the same excitement and skills needed to build something people need. DAOs of tomorrow will be small, highly aligned, and efficient. They’ll build in public with a community-first approach — but without the complexity of tokenomics needed to seed an artificial community. The DAOs of the future will have a community made of builders and users — a more organic and natural community that doesn’t need token incentives. Their treasury will be a by-product of their creation.

Additionally, I predict the growth of a new class of DAOs — task-based DAOs that are small and ephemeral. Task done, DAO done. A totally new approach unlike today’s DAOs.

DAOs of tomorrow will have SBT governance

The SBT-first approach to DAO governance is aligned with builder DAOs. SBTs (soulbound tokens) are non-transferable, non-tradeable tokens that can only be earned via contribution to the DAO. It allows people with real skin in the game to govern — rather than people who’ve just come around for a token, as we see with DAOs today.

I imagine in the future, DAO members will vote to decide who the SBTs should be awarded to — decentralizing governance slowly with the members that bring real value to the DAO. Everyone is invited to lurk in the Discord, but only SBTs unlock access to higher levels and responsibilities.

SBT — a permanent record of contribution (proof of work) on the blockchain — will enable contributors to unlock social and economic opportunities not just within the DAO but also elsewhere. It’ll allow for platform-less reputation. Contributors can carry their identity from one platform to another, their badge serving as credential to unlock new work. Think of it as an on-chain resume.

A good example of an SBT-run DAO is Superteam DAO. India’s homegrown Superteam DAO has no treasury — and gaining experience points via work outcome is the only way to get membership. The DAO membership is restricted to 150 members. The ones that have gained entry but aren’t consistently adding value are purged to make room for new capable DAO members.

DAOs of tomorrow will run on AI

Today DAOs are crippled with bureaucracy and mundane, overly repetitive tasks. From onboarding to governance and knowledge management, DAOs are overwhelmed. Since DAOs are built in public and anyone is invited at any stage of the project, they have to indulge in tons of repetitive tasks with every new member coming in.

On the governance side, members are required to read and evaluate proposals. Or figure out who the right stewards are for vote delegation — causing a huge cognitive drain on individuals participating part-time in a DAO.

In the future, LLMs will take on all the boring, repetitive tasks of the DAO — freeing up humans to accomplish the real mission.

• Onboarding new members
• Documentation and helping members navigate where is what
• Listening to meetings, creating tasks, allocating points/bounties
• Designing incentives and governance structures
• Suggesting proposals to vote on based on personal preferences
• Acting as a delegate voter — having full information on the subject matter to be voted upon and casting an objective vote, unlike human delegates that can be influenced or biased

In the future, I imagine LLMs will be able to plan and execute DAO strategy with reasoning and function calling, without human involvement. For instance — an LLM can launch a DAO using the Aragon API, evaluate proposals based on its built-in criteria, dispense funds, evaluate and assign work, and finally close the DAO when the success criteria is reached.

I’m currently tuning an open-source LLM on DAO content, proposals, and other data to unlock all kinds of LLM-powered DAO tools — automatic proposal selection, governance, education, and a lot more.

Nani AI — a legal chatbot trained by LexDAO (DAO of legal engineers) — can answer legal questions related to Web3 and DAOs. No more searching for a legal consultant. Privately chat with Nani AI and get all your crypto legal questions answered.

DAOs of today are over-focused on crypto projects. I expect — with some of the future trends I’ve highlighted here — other tech builders to also adopt the DAO construct for their organization. Teams training LLM models, bio hackers, open-source software teams, urban farming collectives, nomad builder communities, and others.

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If you’re a builder DAO, I’d love to hear from you. Reach out here or on X.

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Originally published on Substack — read the original →.