Aug 2024
Organized Data on the Blockchain
The blockchain's utility extends far beyond merely recording transactions and messages; it can also host entire software programs, known as smart contracts. Like other blockchain participants, these software programs can send and receive transactions, but these programs can also operate autonomously.
For instance, a smart contract can be written such that it requires participants to vote on a proposal, and will only execute the proposal if a majority is reached. Importantly, the smart contract operates the voting mechanism and autonomously executes the proposal if the vote is successful.
The users voting don’t have to know each other; they don’t have to worry whether someone will execute their collective wishes; they can read the public code of the smart contract, and see how the code will handle their input.
This type of voting and execution is one element of a Decentralized Autonomous Organization. DAOs raise money by selling or distributing a cryptocurrency token, which can act both as a financial instrument that represents the market value of the group and as a verification of group belonging during voting processes. Certain DAOs have multiple tokens, separating the roles of financial speculation and governance into different tokens.
A holder of the governance token is able to put forward a proposal to the group or vote on proposals that other participants put forth. The proposals put forward contain a text explanation of why this proposal would benefit the group, criteria for success or failure of the proposal, a budget for how much the proposal will cost, and the function that would be called on the smart contract if the proposal is successful. This function is typically a withdrawal of the amount of funds requested to execute the proposal to the proposer’s wallet address.
Nouns DAO is a project that auctions off one artwork per day to the highest bidder. All the funds raised sit in a collective treasury, which currently stands at 12 million USD. Winning the daily auction costs between 5k and 10k USD, and gives the buyer membership to the DAO. These funds go towards the treasury, and all members can put forth or vote on proposals for how to spend the treasury.
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Recently approved proposals include 545k USD for a team of 7 to continue producing social media content raising the profile of the Nouns project, and 289k USD to fund a three-day conference in Los Angeles.
Approved proposals typically attempt to raise the profile of the Nouns community in some way, while rejected proposals stray away from clear benefits to the project and read closer to crowd-funding applications with the Nouns project named in some cursory way. In the words of the Nouns project: “This treasury exists for Nouns DAO participants to allocate resources for the long-term growth and prosperity of the Nouns project”.
The Nouns artworks are human-like characters, the style of each chosen randomly by a generative algorithm. The community around this project see these characters as intellectual property to be proliferated and profited from as if they were managing a character like Hello Kitty or a Disney franchise. Decisions are made from a marketing point of view, and the end goal seems to be to ultimately raise the value of each Nouns artwork.
The Nouns artworks can be sold on secondary markets, allowing buyers to realize any increase in value the DAO-funded proposals generate. But of course, if you only hold one Noun, selling that Noun will mean you can no longer participate in governance decisions. There are currently 1215 Nouns in existence, with 337 unique owners, which means that each owner has an average of 3.6 Nouns in their possession.
Friends With Benefits operates as a DAO with an added social layer. To join the accruingDAO, applicants must hold at least 75 of the FWB token, but also provide the DAO with a bio and links to other online profiles. Once admitted, participants gain access to a private chat room, and access to events organized by the DAO around the world.
In the same way that Nouns operate, FWB’s events aim to raise the profile of FWB. A higher profile results, in theory, in a higher price for members. In a sense, the value of the FWB token can be a place where rewards for the collective work of building a community are reaped.
FWB members can apply for funding to throw events under the aegis of FWB. At the smallest scale, members can receive USD 250 to fund a dinner party. A requirement is that 50% of participants are FWB members, and certain standards are expected of the dinner, detailed in the FWB documentation.
These two examples demonstrate the idea of value accruing to a centre. This idea of value accruing back to the group is a central idea of DAOs, and the contrast with platform capitalism where the value produced accrues to the platform owner is often cited. The example of Nouns is quite clear cut, with a collective treasury that increases with each sale, whereas the value FWB provides is a little more intangible. Looking at the price history of the FWB token, its value tracks a speculative arc, rather than appearing to respond to any of the IRL events that the DAO puts on.
A group of Berlin-based artists called Terra0 proposed in 2016 the idea of a forest that owns and exploits itself to achieve sovereignty. Their proposal was as follows: using their own capital, they would buy a section of logging forest. Through a smart contract, the forest would commission a yearly survey of itself, and sell a portion of its timber to a logging company. The proceeds from this sale would go to paying off the money the artists spent on the land, and the cycle would repeat each year until the land owns itself.
That a part of the natural world must emancipate itself through financializing itself is a critique in itself, but this concept has resonated with the DAO world and is often shared as a successful concept. A land trust might achieve the same effect and might be able to buy its freedom in the same manner. What the DAO achieves is a lightness and independence from existing legal forms and potential immunity from legal changes. There is also a delight in the bridging of the digital into the physical sphere, but there would be no recourse without the intervention of human stewards if the land was logged illegally.
CityDAO is a group of people excited to build neighbourhoods and towns using their collective crypto funds; as it stands, they have bought a plot of land in Wyoming, a US State where DAOs have legal standing.
The code of a DAO allows people to connect online, pool money and work towards a common goal. But after a project dies down, the inability to change the code running an organization can become an issue. In the case of CityDAO, they require a quorum of 500 votes for each decision, which can make it hard to move decisions forward when participation in the DAO wanes.
The speed of internet culture can be a downfall for DAOs; a group of people get excited about an idea, throw money at it, and then engagement wanes as a new meme dominates the timeline.
Some DAOs address this by only existing for a few days. A famous case was ConsitutionDAO, which raised 43 million in a few days, with the aim of purchasing a copy of the US Constitution that was up for auction. The DAO did not win the auction, and depositors were able to reclaim their funds, minus transaction fees.
PartyDAO is a website that allows anyone to form a DAO; the site’s tagline is ‘your group, on-chain’. The site allows anyone to create a group, and those who buy into the group are able to message each other in a private chat room and vote on proposals. Often Party DAOs are launched with a clear short-term aim, avoiding the languishing of longer projects like CityDAO.
A critique of DAOs is that they simply mirror existing structures like corporations which can issue shares and allow shareholders to vote. This critique is valid, but I think the speed at which a DAO can accumulate and deploy money is one of its key features. The narrative and newness of the entire system also add a layer of interest; it signals a detachment from existing structures, and with that perhaps a sense of optimism.
When combined with a sale mechanic as in Nouns, they do become quite a novel entity. The production of the art is automated, with a treasury increasing weekly. People who have already bought into the project get to compete to further the project, with other participants evaluating what would be in the project’s best interest.
DAOs also do not require people to always participate; a different set of people can vote on each proposal; as long as the minimum number of votes is reached, ideas can continue flowing. Participation can ebb and flow, members can step up at different times and can engage asynchronously, on their own time.
To summarize, three key ideas in DAOs are they can be created quickly; that people trust them with their funds, and that they can perform certain functions without human intervention.
What does this look like in terms of artistic production?
The blockchain's utility extends far beyond merely recording transactions and messages; it can also host entire software programs, known as smart contracts. Like other blockchain participants, these software programs can send and receive transactions, but these programs can also operate autonomously.
For instance, a smart contract can be written such that it requires participants to vote on a proposal, and will only execute the proposal if a majority is reached. Importantly, the smart contract operates the voting mechanism and autonomously executes the proposal if the vote is successful.
The users voting don’t have to know each other; they don’t have to worry whether someone will execute their collective wishes; they can read the public code of the smart contract, and see how the code will handle their input.
This type of voting and execution is one element of a Decentralized Autonomous Organization. DAOs raise money by selling or distributing a cryptocurrency token, which can act both as a financial instrument that represents the market value of the group and as a verification of group belonging during voting processes. Certain DAOs have multiple tokens, separating the roles of financial speculation and governance into different tokens.
A holder of the governance token is able to put forward a proposal to the group or vote on proposals that other participants put forth. The proposals put forward contain a text explanation of why this proposal would benefit the group, criteria for success or failure of the proposal, a budget for how much the proposal will cost, and the function that would be called on the smart contract if the proposal is successful. This function is typically a withdrawal of the amount of funds requested to execute the proposal to the proposer’s wallet address.
Nouns DAO is a project that auctions off one artwork per day to the highest bidder. All the funds raised sit in a collective treasury, which currently stands at 12 million USD. Winning the daily auction costs between 5k and 10k USD, and gives the buyer membership to the DAO. These funds go towards the treasury, and all members can put forth or vote on proposals for how to spend the treasury.
Recently approved proposals include 545k USD for a team of 7 to continue producing social media content raising the profile of the Nouns project, and 289k USD to fund a three-day conference in Los Angeles.
Approved proposals typically attempt to raise the profile of the Nouns community in some way, while rejected proposals stray away from clear benefits to the project and read closer to crowd-funding applications with the Nouns project named in some cursory way. In the words of the Nouns project: “This treasury exists for Nouns DAO participants to allocate resources for the long-term growth and prosperity of the Nouns project”.
The Nouns artworks are human-like characters, the style of each chosen randomly by a generative algorithm. The community around this project see these characters as intellectual property to be proliferated and profited from as if they were managing a character like Hello Kitty or a Disney franchise. Decisions are made from a marketing point of view, and the end goal seems to be to ultimately raise the value of each Nouns artwork.
The Nouns artworks can be sold on secondary markets, allowing buyers to realize any increase in value the DAO-funded proposals generate. But of course, if you only hold one Noun, selling that Noun will mean you can no longer participate in governance decisions. There are currently 1215 Nouns in existence, with 337 unique owners, which means that each owner has an average of 3.6 Nouns in their possession.
Friends With Benefits operates as a DAO with an added social layer. To join the accruingDAO, applicants must hold at least 75 of the FWB token, but also provide the DAO with a bio and links to other online profiles. Once admitted, participants gain access to a private chat room, and access to events organized by the DAO around the world.
In the same way that Nouns operate, FWB’s events aim to raise the profile of FWB. A higher profile results, in theory, in a higher price for members. In a sense, the value of the FWB token can be a place where rewards for the collective work of building a community are reaped.
FWB members can apply for funding to throw events under the aegis of FWB. At the smallest scale, members can receive USD 250 to fund a dinner party. A requirement is that 50% of participants are FWB members, and certain standards are expected of the dinner, detailed in the FWB documentation.
These two examples demonstrate the idea of value accruing to a centre. This idea of value accruing back to the group is a central idea of DAOs, and the contrast with platform capitalism where the value produced accrues to the platform owner is often cited. The example of Nouns is quite clear cut, with a collective treasury that increases with each sale, whereas the value FWB provides is a little more intangible. Looking at the price history of the FWB token, its value tracks a speculative arc, rather than appearing to respond to any of the IRL events that the DAO puts on.
A group of Berlin-based artists called Terra0 proposed in 2016 the idea of a forest that owns and exploits itself to achieve sovereignty. Their proposal was as follows: using their own capital, they would buy a section of logging forest. Through a smart contract, the forest would commission a yearly survey of itself, and sell a portion of its timber to a logging company. The proceeds from this sale would go to paying off the money the artists spent on the land, and the cycle would repeat each year until the land owns itself.
That a part of the natural world must emancipate itself through financializing itself is a critique in itself, but this concept has resonated with the DAO world and is often shared as a successful concept. A land trust might achieve the same effect and might be able to buy its freedom in the same manner. What the DAO achieves is a lightness and independence from existing legal forms and potential immunity from legal changes. There is also a delight in the bridging of the digital into the physical sphere, but there would be no recourse without the intervention of human stewards if the land was logged illegally.
CityDAO is a group of people excited to build neighbourhoods and towns using their collective crypto funds; as it stands, they have bought a plot of land in Wyoming, a US State where DAOs have legal standing.
The code of a DAO allows people to connect online, pool money and work towards a common goal. But after a project dies down, the inability to change the code running an organization can become an issue. In the case of CityDAO, they require a quorum of 500 votes for each decision, which can make it hard to move decisions forward when participation in the DAO wanes.
The speed of internet culture can be a downfall for DAOs; a group of people get excited about an idea, throw money at it, and then engagement wanes as a new meme dominates the timeline.
Some DAOs address this by only existing for a few days. A famous case was ConsitutionDAO, which raised 43 million in a few days, with the aim of purchasing a copy of the US Constitution that was up for auction. The DAO did not win the auction, and depositors were able to reclaim their funds, minus transaction fees.
PartyDAO is a website that allows anyone to form a DAO; the site’s tagline is ‘your group, on-chain’. The site allows anyone to create a group, and those who buy into the group are able to message each other in a private chat room and vote on proposals. Often Party DAOs are launched with a clear short-term aim, avoiding the languishing of longer projects like CityDAO.
A critique of DAOs is that they simply mirror existing structures like corporations which can issue shares and allow shareholders to vote. This critique is valid, but I think the speed at which a DAO can accumulate and deploy money is one of its key features. The narrative and newness of the entire system also add a layer of interest; it signals a detachment from existing structures, and with that perhaps a sense of optimism.
When combined with a sale mechanic as in Nouns, they do become quite a novel entity. The production of the art is automated, with a treasury increasing weekly. People who have already bought into the project get to compete to further the project, with other participants evaluating what would be in the project’s best interest.
DAOs also do not require people to always participate; a different set of people can vote on each proposal; as long as the minimum number of votes is reached, ideas can continue flowing. Participation can ebb and flow, members can step up at different times and can engage asynchronously, on their own time.
To summarize, three key ideas in DAOs are they can be created quickly; that people trust them with their funds, and that they can perform certain functions without human intervention.
What does this look like in terms of artistic production?