SBF

Chapter 21DAO Is the Way

Here's a weird idea that definitely wouldn't work in the real world but sort of does on blockchains.

Imagine having stock in a company, such as Pepsi. In this world, stockholders have one of two options. They can just sit on it and hope the company does well, like stockholders do now.

Or they can go to work at the company. If they do that (here's the kicker), their work would be remunerated not based on what they did but on the amount of equity they held in Pepsi.

In 2020, crypto people were starting to realize that tokens could be used that way—kind of. They could be treated as a sort of dual‐use asset within a crypto project regulated by code, not by law.

In 2017, entrepreneurs thought tokens were like arcade tokens, keys to access cool tools online, but that approach never clicked.

By 2020, a new idea was taking hold: governance tokens. That's what comp was. Robert Leshner, the founder of Compound, has always been clear about this when I talked to him. He only wanted comp to control Compound. He didn't want it to do anything else.

If tokens were becoming a tool for governance, then something else was happening, too. A previously verboten idea was returning to polite crypto conversation: the idea of decentralized autonomous organizations, or DAOs. Tokens are the building blocks of DAOs.

DAOs may be one of the most idealistic concepts in crypto. The first DAO of any note also led to one of crypto's biggest disasters. The first important DAO was called ...