2022 was no doubt a massive year for decentralized autonomous organizations (DAOs). Despite the general crypto winter, the sector managed to hit new highs in the number of new DAOs and voter participation. There were also some noteworthy milestones in the area of regulation. For instance, authorities in the Marshall Islands passed a bill that recognizes DAOs as limited liability companies.
Although no one can say for certain how 2023 will pan out for decentralized organizations, DAO Times takes a look at some possible predictions for this year.
1. Massive shift to DAOs that have a value-accrual model
You’ll have to admit that most people are in crypto to make money. Beyond the governance rights that come from holding the token of a DAO, people want some form of reward, and will naturally levitate to projects that offer more value.
A handful of projects are already exploring this value-accrual model. In 2023, more DAOs will jump on the trend. The Lido DAO token, for instance, accrues value through staking rewards, with the DAO receiving 5% of all staking rewards in real time.
2. The downfall of one-token one-vote
Generally speaking, governance is a huge and complex topic. Many DAOs suffer from voter apathy and are constantly experimenting with new voting mechanisms and best practices. In a June 2022 report from Chainalysis, it was discovered that less than 1% of all holders have 90% of the voting power in DAOs.
While the idea of one-token one-vote seems fair, it introduces plutocracy and encourages voter apathy, and may lead to centralization over time. Many existing DAOs are governed this way. However, there are growing discussions about voter apathy and how to tackle it in many DAO circles.
Dissatisfied with the status quo, more DAOs will explore other models of governance, such as quadratic voting, holographic consensus, reputation-based voting, and liquid democracy/delegated voting.
3. Expect one highly successful memetic DAO
From Dogecoin to Shiba Inu, Dogelon Mars, and several others, we all witnessed how meme coins took the crypto space by surprise. Just recently, Bonk became the buzzword in the Solana NFT space it airdropped free tokens to some users.
Whether you admit it or not, memes have a way of gaining popularity. All it takes is someone to blaze the trail with a creative use of memes in a DAO.
4. Better clarity on tokenization models
We already started seeing a bit of government presence in the DAO scene. As far back as 2021, Wyoming enacted the nation’s first law to mention DAOs: the “Wyoming Decentralized Autonomous Organization Supplement,” which provided liability protection for DAO members who organize as a Wyoming limited liability company. Fast forward to 2022, in what could be best described as a landmark case, a federal court ruled that the Commodity Futures Trading Commission (CFTC) could serve a DAO through a website help bot and forum post.
DAOs and cryptocurrencies in general will always be under the purview of regulators. What may change in 2023 is that US regulators and their counterparts across the globe may give better clarity on tokenization and operational models.
5. True treasury value may become the industry-standard
In our article on six interesting DAO insights from 2022, we noted that most top DAOs prefer to hold their native tokens. This has given room for a false sense of valuation. On the flip side, the total value locked (TVL) in USD of these DAOs has plummeted amid the ongoing crypto winter. This should serve as a lesson on diversification for these organizations.
If the crypto market should rebound, many DAOs may diversify their treasury into stables and legacy assets like Bitcoin and Ethereum. Meanwhile, it may become the industry standard to exclude a project’s native token from the true value of its treasury.
6. Increased ratio of active contributors to passive holders
The seemingly less frothy crypto markets have done a lot to push out pure speculators. With them gone, the space is largely dominated by those who believe in the tech and are eager to contribute. That said, we are already seeing an increase in the number of governance token holders and active voters/proposal creators.
In conclusion, 2023 is primed to be yet another good year for DAOs. There should be a further increase in the number of active DAOs, as well as the number of active voters.1