Types of DAOs, their common challenges, and how consola.finance helps resolve them

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July 21, 2022

What are DAOs?

Decentralized Autonomous Organizations (DAOs) have been receiving a lot of attention and are expected to lay the groundwork for the future of organizations. DAOs offer the unique opportunity to grow and build decentralized communities and businesses. Since the concept of DAOs is relatively new, to properly navigate this new and evolving landscape, it is important to understand the motivation and benefits behind the formation of a DAO, and therefore, the different types of DAOs that exist today.

DAOs can be seen as a modern variant of an online community that works together towards a shared goal. A DAO is a democratically operated company that is controlled through smart contracts on a sufficiently decentralized blockchain protocol. Membership, which itself has specially defined criteria, allows the contributors of a DAO to collaborate according to a shared set of rules encoded on a blockchain, making governance decisions together in a truly transparent way. Governance tokens give holders the right to participate in voting on topics that define the development and operations of the DAO.

How can DAOs be categorized?

Depending on the goal, structure, operations and technology, DAOs can be categorized as follows:

  • **Protocol DAOs
    **Protocol DAOs are designed to manage the governance of decentralized protocols. DAO tokens serve as the voting mechanism to conduct protocol changes. In most cases, these protocols apply to borrowing and lending applications, decentralized exchanges or other types of decentralized applications (dApp). Most prominent examples of Protocol DAOs are MakerDAO, Uniswap, Compound or Yearn.finance.
  • **Grant DAOs
    **In a Grant DAO, members contribute capital with the intention of funding and fostering new projects and ventures with a shared objective. Examples of Grant DAOs include Aave Grants DAO, MolochDAO or Uniswap Grants.
  • **Charity/Philanthropy DAOs
    **Philanthropy DAOs concentrate on helping social responsibility projects with the shared objective of having a positive impact on the web3 landscape/world. In most cases, Philanthropy DAOs are not-for-profit. Although less common than the other DAO categories, their most prominent Philanthropy DAOs are Big Green DAO and Angel Protocol.
  • **Social/Creator DAOs
    **Forming communities made up of like-minded people, such as makers, artists, and creatives is the main objective of so-called Social DAOs. Although they are community-focused, Social DAOs typically have specifically defined entry requirements, such as holding a certain amount of a respective token, owning a certain NFT, or being personally invited to join the community. Social DAOs prioritize social capital over financial capital in a field where speculation rules. Group chats naturally evolved within social DAOs as friends turned into co-workers. Examples for Social/Creator DAOs include FWB, Seed Club, and The Bored Ape Yacht Club (BAYC).
  • **Collector DAOs
    **Members of collector DAOs build a community to collect funds that will be invested in digital collectibles with high demand, such as popular, sometimes expensive, NFTs. The members of these DAOs share ownership of the acquired collectibles through smart contracts. Most well-known examples include Flamingo DAO, PleasrDAO and SquiggleDAO.
  • **Venture/ Investment DAOs
    **A very common application of a DAO is a venture or investment “fund”. These DAOs are created to raise funds and conduct investments, embodying more of a community-oriented membership structure. Venture DAOs tend to be considered more of an open-source software project with an angel fund compared to traditional venture capital firms. Examples include MetaCartel, theLAP and BitDAO.
  • **Media DAOs
    **Media DAOs enable creators to directly contribute content in exchange for a token payment. Content is fully community-driven, in contrast to a top-down approach where content would be produced with a certain agenda or influenced by advertisers. Examples for media DAOs include Decrypt, BanklessDAO and rekt.
  • **Entertainment DAOs
    **Entertainment DAOs create a digital space to engage in fun activities in a decentralized way. Creators have control over how their innovation is governed. Examples include Flufworld or the The Bored Ape Yacht Club (BAYC) or PartyDAO.
  • **Service DAO
    **Service DAOs help offer knowledge and advice to other DAOs and protocols and can be compared to traditional consulting firms in the sense that expertise is offered to improve another DAO. Service DAOs offer advice regarding DAO operating mechanisms and culture which is best serviced by other crypto-native contributors. Examples include Indie DAO, llama DAO and Bankless Consulting.

How does consola.finance support DAOs?

Even though each type of DAO may have a different objective or protocol, one thing they all share is the demand for accurate data, transparency, and financial reporting capabilities. Consola.finance developed the most innovative approach to consolidate blockchain data in a fast, secure and reliable way. Finance managers of DAOs can simply connect their wallets, customize their data and generate modular reports with ease. This reduces lost time due to manual work and the risk of human error. The DAO community and token holders benefit from the solution due to increased clarity and transparency on how DAO finances are managed to ensure full compliance of token investments. Overall, consola.finance helps shift the focus back to the community goal by lifting the burden of data reliability.

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