A Golden Age, Part 2 — The DAO Economy

14 min readDec 17, 2023

Decentralized Autonomous Organizations (DAOs) are poised to fundamentally reshape the economy by introducing a new paradigm of collective ownership, decision-making, & profit-sharing. By leveraging blockchain technology for transparency & trust, DAOs democratize business operations, allowing for broader participation in economic activities.

This shift not only challenges the conventional norms of corporate governance and investment but also empowers communities, giving rise to an economy that is more resilient, adaptive, and aligned with the collective interests of its participants.

DAOs have the unique potential to redefine transparency in organizational hierarchies. While DAOs can adopt various hierarchical structures, from flat to more traditional pyramidal forms, the key differentiator lies in how access to leadership and executive decisions is managed. In a DAO, this access is not just given but earned and enacted in a trustless manner through automation using blockchain solutions.

This model disrupts traditional hierarchical structures, enabling a more inclusive and participatory approach where stakeholders directly influence and benefit from the organization’s success. In industries ranging from finance to creative arts, DAOs facilitate a more equitable distribution of wealth and power, fostering innovation and collaboration across global networks.

Harnessing Resources, Together

The impact of DAOs on the global workforce is multifaceted. Firstly, through crowdfunding, DAOs democratize the funding process, allowing anyone to contribute to and benefit from successful ventures. This breaks down barriers to entry for both entrepreneurs and investors, fostering a more inclusive economic landscape.

Shared governance in DAOs ensures that all members have a say in key decisions, including strategic direction, resource allocation, and policy changes. This collective decision-making process not only empowers employees but also aligns their interests with the organization’s success, leading to more engaged and motivated teams. they are able to facilitate the transfer of resources & voting power without any reliance on a trusted 3rd-party.

Strength in Trustless Numbers

Investment DAOs are a powerful example of ways that resources are pooled and managed, leveraging transparent & secure DAOs.

These DAOs enable a collective group of investors to combine their financial resources in a transparent, trustless environment. Every transaction, investment decision, and distribution of profits is recorded on the blockchain, ensuring complete visibility and auditable trails. This transparency builds trust among members, as they can clearly see how funds are being used and how decisions are made.

In an investment DAO, decisions about where to allocate funds are typically made through a democratic voting process, with each member’s vote often weighted by their contribution or stake in the DAO. This not only decentralizes the decision-making process but also aligns it with the interests of all members, fostering a sense of ownership and collective responsibility.

Transparent, Automatic, & Shared Systems.

DAOs reinvent how resources can be collected, managed, & distributed across an organization. They make it possible for resources to pulled together by various bodies & individuals where they are used to fund different initiatives.

Open Contribution Systems

DAOs bring transparency & efficiency while realizing trustless business operations. Smart contracts, which are self-executing contracts with the terms of the agreement directly written into code, facilitate automated processes such as pay raises, promotions, or terminations. These processes are based on predefined criteria and member votes, ensuring fairness and reducing biases.

A unique aspect of DAOs lies in their ability to merge the communal aspects of socialism and communism, where there’s a collective ownership and responsibility, with the incentive-driven dynamics of capitalism. In DAOs, ownership stakes are awarded based on contribution, not distributed freely. This merit-based system rewards those who add value, aligning individual efforts with the collective success of the organization. It’s a powerful blend that incentivizes participation and rewards genuine contributions, fostering a balanced and inclusive economic environment.

This hybrid economic model facilitated by DAOs is a groundbreaking approach, combining the best elements of various economic systems. It demonstrates the potential for a more harmonious and sustainable economic future. By aligning individual goals with collective objectives, DAOs could lead the way in developing innovative, inclusive, and fair business practices, harnessing the collective intelligence and efforts of a diverse community to drive progress and equitable growth.

Real-Time Raises & Transparent Growth

DAOs can integrate innovative mechanisms like Proof of Attendance (POAP) tokens to reward members for their consistent contributions. POAPs serve as digital certificates, verifiable on-chain, which acknowledge and record an individual’s participation in specific DAO activities. This system can be ingeniously adapted to incentivize and recognize consistent effort and engagement within a DAO.

For instance, these POAP tokens can be utilized to apply bonus multipliers to employee wages, drawing inspiration from reward systems commonly seen in video games. This adds an element of gamification to the compensation structure. Employees who consistently contribute to the DAO, participating in meetings, completing tasks, or contributing to key decisions, earn POAP tokens.

These tokens can then be linked to their wage structure, where each POAP acts as a multiplier, enhancing their earnings. These tokens can also, once a preset & known total has been earned, unlock a permanent increase to a worker’s base income.

This system provides a tangible and immediate reward for active participation and contribution, differing significantly from traditional models where employees often wait for annual reviews to hope for salary raises.

This approach to real-time wage increases through POAP multipliers creates a dynamic and responsive compensation model. It encourages ongoing engagement and rewards members not just for the results they achieve but also for their active involvement and dedication to the DAO’s mission. This system fosters a more motivated and engaged workforce, as members see a direct correlation between their day-to-day contributions and their earnings. Moreover, it aligns individual incentives with the collective goals of the DAO, driving overall productivity and success. This method of compensation, rooted in blockchain technology, exemplifies how DAOs are reimagining traditional work structures to create more equitable, transparent, and responsive economic systems.

The DAO economy is a transformative and more balanced approach to business organization and operation. It breaks away from the conventional top-down hierarchical models, paving the way for a system that’s rooted in collaboration and driven by community involvement. By aligning individual motivations with the wider objectives of the group, DAOs create a synergy that not only promotes fairness and transparency but also builds economic systems that are more robust and capable of adapting to changing environments.

A Future of Open Opportunity

Creating a DAO begins with a solid foundation — a comprehensive whitepaper and/or business plan. These documents are essential, outlining the DAO’s vision, goals, operational strategies, and financial requirements. The next crucial step is the design and structuring of the DAO. This involves detailing the funding needs, identifying necessary skills and roles, and establishing a governance framework.

Attracting investments & support is key to bringing a DAO to life. Offering governance tokens, provide voting rights and a stake in the DAO, to venture capital funds and community investors is common practice here. To protect investor interests, the release of funds can be made contingent on the successful fulfillment of all necessary roles and the DAO’s readiness for launch.

This conditional funding approach, enforced using immutable & self-executing systems, ensures the safety of investments and guarantees that the DAO is fully equipped and operational before it goes live. This comprehensive approach, from planning to funding, paves the way for a DAO’s successful launch and sustainable operation — unlocking an innovative way to collaborate, build, & generate value through a global system that allows ideas to quikly get off the ground & under development.

Decentralizing Science

DAOs offer a transformative approach to democratizing research funding and development. By leveraging open and transparent systems, DAOs can fundamentally alter how research projects are selected, funded, and managed, making the process more inclusive and equitable.

  1. Open Call for Proposals: In a DAO-based model, researchers from across the globe can submit their project proposals directly to the DAO. This open call ensures that a diverse range of ideas, including those from underrepresented regions or disciplines, get a chance to be considered.
  2. Transparent Voting and Funding Allocation: The decision-making process in a DAO is carried out through a transparent voting mechanism. Members of the DAO, which can include scientists, academics, and even the public, review and vote on proposals.
  3. Collaborative Research and Development: Once funded, the progress of research projects can be tracked and shared openly within the DAO. This encourages collaborative efforts, as members can contribute their expertise, provide feedback, or even participate in the research.
  4. Accountability and Impact Measurement: DAOs can implement mechanisms to track the impact and outcomes of funded research. Since all transactions and milestones are recorded on the blockchain, it ensures accountability and enables effective measurement of the research’s impact.
  5. Profit Sharing and Reinvestment: If the research leads to profitable innovations or products, profits can be shared among the DAO members and reinvested into funding more research. This creates a sustainable cycle of innovation funding, driven by the success of its own investments

By breaking down traditional barriers and leveraging the power of collective intelligence and resources, DAOs can accelerate scientific advancement and innovation in ways previously not possible in the closed and often bureaucratic systems that dominate traditional research funding models.

Codebase DAOs & Incentivized OSS

A developer DAO utilizing a verifiable and on-chain Git platform represents a novel approach to collaborative software development. This structure allows developers to contribute to a project in a transparent and decentralized manner, while also potentially earning from their contributions.

  1. Contribution and Collaboration: Developers contribute by solving project issues, which are tracked and managed on the on-chain Git platform. This ensures that all contributions are recorded transparently on the blockchain. The DAO operates on a voting system for major decisions, including which PRs to merge into the main repository. Votes can be weighted based on factors like a developer’s past contributions, stake in the DAO, or other predetermined criteria.
  2. Transparent Decision-Making: All decisions, from the acceptance of PRs to strategic changes in the project, are made transparently and recorded on the blockchain. This open process builds trust among the community and ensures that every action is verifiable.
  3. Profit-Sharing Mechanism: Developers in the DAO can earn money through a profit-sharing system. If the project generates revenue, whether through direct sales, licensing, or other means, a portion of these profits is distributed among the contributors, and the amount would typically be based on a developer’s contributions, their stake in the DAO, or other relevant factors.

This model could significantly impact how open-source projects and collaborative software development are approached, providing a scalable and efficient framework for innovation and profit-sharing.

21st Century DAO — Not Fake News

A marketing or news agency operating as a DAO could present a novel and efficient model for content creation, distribution, and profit-sharing. Here’s an example of how such a DAO might be structured and function:

  1. Structure and Funding: Funding could be raised through a token sale, where investors buy tokens representing a stake in the DAO. These tokens could also grant voting rights on major decisions.The DAO might have different tiers of membership, from core members who handle administrative and strategic decisions to contributors who focus on content creation.
  2. Work Distribution through Bounties: Work assignments, such as reporting, writing, or marketing tasks, would be posted as bounties on the DAO’s platform. Contributors, including reporters, writers, and marketers, can pick up these bounties based on their skills and interests. Completed work is submitted for review, which could be peer-reviewed by other DAO members or an automated system, ensuring quality and adherence to standards.
  3. Profit Sharing (a common theme with DAOs): Revenue generated from advertisements, subscriptions, or syndication would go back into the DAO. Profits could be distributed among members based on their token holdings or their contribution to the DAO. For example, completing bounties earns contributors more tokens, increasing their share of the profits.
  4. Transparency and Trust: This open approach would also allow for community feedback, aligning the agency’s work more closely with audience interests and trends.

In this model, a marketing or news agency DAO leverages blockchain technology to create a transparent, efficient, and collaborative environment. The bounty system for work distribution aligns individual incentives with the organization’s goals, and the automated profit-sharing ensures a fair and merit-based reward system. This approach could potentially lead to more dynamic and responsive news and marketing content, driven by a diverse and engaged community of contributors.

The transparent nature of DAOs, where all transactions and decisions are recorded on a blockchain, builds trust among members and with external stakeholders. This trustless environment encourages a more meritocratic and efficient workplace, where performance and contributions are objectively recognized and rewarded. By integrating these elements, DAOs hold the potential to reshape not just the economy but also the very ethos of how we perceive work, value, and collaboration in a digital age.

Practical & Powerful Implementations.

DAOs could offer a groundbreaking approach to governing a school board or district. In a DAO-governed school system, all stakeholders, including teachers, parents, students, and community members, could have the opportunity to participate in decision-making processes.

For similar reasons, DAOs also offer a more transparent, efficient, and democratic way of handling donations, potentially transforming the landscape of charitable giving.

Using DAOs, both local municipality matters & global non-profits can experience several significant benefits:

  1. Transparency and Accountability: Whether for parents in a school system or non-profit donors, participants can see exactly where funds are going and how they are being used, enhancing trust in the donation process. DAOs can distribute funds directly without intermediaries, reducing the risk of mismanagement or corruption.
  2. Democratic Decision-Making: In a DAO, decisions about fund allocation are often made through collective voting by members. This can include parents & teachers, donors & beneficiaries, and other stakeholders, ensuring that the distribution of funds reflects the priorities and needs of the community it serves.
  3. Reduced Overhead and Efficiency: By automating many administrative tasks with smart contract logic, DAOs can operate with lower overhead costs compared to traditional charitable organizations. This means a higher percentage of funds can go directly to the charitable cause being supported.

A World Shaped by the Many

By decentralizing control and embracing a model of collective governance, DAOs are pioneering a redistribution of power and wealth. This shift represents a stark contrast to traditional centralized models, where power and profits are often concentrated in the hands of a few. In a DAO, the success and direction are not just determined by a select group of leaders but are the result of the collective action and decision-making of its members, whether they be contributors, investors, loyal users, or any other stakeholder.

Reshaping the Economy at the Source

The concept of network token holders staking towards DAOs to direct the flow of new tokens — essentially funding — offers a transformative approach to how economic systems and value creation can work, drawing a stark contrast to the traditional generation and distribution of money, as seen in the American system with the Federal Reserve and central banks.

In this new system, the creation of new tokens (analogous to the minting of new currency by the Federal Reserve) is conducted in a transparent and consistent manner. Unlike the opaque and unchecked process of the Federal Reserve, this token generation is mutable, but changes can only be enacted through community consensus. This ensures that the inflation of the network’s currency is predictable, controlled, and aligned with the interests of its stakeholders, rather than being arbitrarily decided by a centralized authority.

The role played by central banks in the traditional system is reimagined through the mechanism of staking. Here, network token holders have the power to stake their tokens towards specific DAOs building on the network. This staking does not only support the development and expansion of services on the network but also aligns the economy’s priorities with the interests of the community. In contrast to central banks, which channel capital at their discretion, often with biases, this model democratizes the direction and distribution of new wealth. Token holders can actively choose which DAOs to support, directly influencing the network’s growth and value.

Crucially, this model also redefines the economic rewards for participants. Instead of facing savings yields that are consistently lower than the rate of inflation, as seen in traditional banking systems, stakers in this DAO network can earn Annual Percentage Yields (APY) that are higher than the inflation rate. This shift not only empowers individuals by offering them a real return on their investments but also redistributes the benefits of inflation from centralized banks to the wider community. Stakers support the DAOs and, in turn, receive a yield that not only preserves but potentially increases their buying power.

In summary, this model takes control of the economy away from centralized entities like the Federal Reserve and central banks, reshaping the economic hierarchy. It places the power of economic direction and the benefits of inflation into the hands of everyday people, aligning economic growth with the collective interests and actively rewarding participation in the network’s development.

Waiting to be Realized

The DAO Economy is a great big world. This is a brave new economic system, one that promises a more equitable, transparent, and community-driven approach to value creation and distribution. However, this future isn’t going to build itself. It will require powerful, dynamic, & scalable systems to unlock the true power of DAOs & usher in a new era of economic opportunity & transparency.

DAOs need to be flexible, they need to have the right tooling, and they need to have access to sophisticated protocols to power their various complexities & business logic needs.

Today, anybody can launch a DAO as a smart contract; however, they are merely shells of what is possible. They lack the ability to enforce custom permissions over members, and they also confine DAOs to a single network, whichever one it is that they initially deployed on. The DAO Economy is not something that you can realize through a system of scattered & fractured organizations. The DAO Economy requires considerable amounts of thoughtfulness & hindsight, and it requires a system designed from the ground up specifically for it.

The good news — that system is on its way.

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