What Communicators Need to Know About the Rise of DAOs
Content DAOs reinvent the relationship between content creators, consumers, and media and remove the advertising-based revenue model in the process.
If you’re even vaguely in the know about the world of crypto, beyond the meme-coins and hype, you understand one of the key characteristics that drive the space: decentralization.
How does the concept of decentralization apply to media enterprises, PR pros, journalists, and creatives though?
Enter DAOs – a tool that seeks to reinvent the relationship between content creators, consumers, and the media. A new type of engagement and a fundamental shift away from the long-dominant advertising-based revenue model.
What Are DAOs?
First things first, a definition and explainer.
DAO stands for Decentralized Autonomous Organization.
Let’s break that down.
Decentralized of course means there’s no influence from a central authority and no physical location required. Autonomous means that the rules and governance that the community – token holders – agrees upon are embedded into code by way of smart contracts. The organization is the members of the community that are working towards whatever the common purpose of the DAO is.
In other words, a digital entity that’s led and owned by the community, with no centralized or top-down power.
Critically, it’s a flattened hierarchy where everyone involved has a stake.
They’re often referred to as “trustless”, which is a somewhat confusing way to say that you don’t need to put trust in any third party or person for the system to operate.
DAOs can be built around essentially anything where there’s interest but they generally fall into these main categories:
AMM or Protocol DAOs – AMM stands for automated market maker and these DAOs are used in DeFi or decentralized finance. Example: Uniswap
Collector DAOs – DAOs made to collect and share ownership of art, NFTs, etc. Example: Flamingo
Grant DAOs – Community funds that are allocated without need or expectation of returns. Example: Gitcoin
Investment or Venture DAOs – Pooling funds to collectively invest in for-profit projects. Example: MetaCartel
Social DAOs – DAOs are essentially already a community, but for some, the community is the whole point. Example: Friends with Benefits
Media, Communications and Entertainment DAOs – Sharing and creating content that’s motivated by the community. Example: Forefront
While DAOs are still in their infancy, this nascent industry is already booming. DeepDAO, a DAO devoted to DAO analytics (told you they could be related to anything), paints the picture:
$10.6 billion in the treasuries currently ($21 billion total market capitalization)
8 million governance token holders
575k active voters and proposal makers
All metrics are up month-over-month and with nearly 5,000 DAOs out there already, this space is ripe with opportunities. Particularly, in the world of content and media, where the revenue model was in dire need of revitalization and equity.
Content – be it journalism, music, photos, books, etc. – has long been dominated by a handful of major companies that controlled the output. Content producers were, and still largely are, at the whims of corporate interests and advertisers, only getting a percentage of their own work in terms of profit.
Media DAOs flip the script and put significantly more power in the hands of the creator by way of a passionate community that’s financially invested.
How exactly does it work though and what does financially invested mean here?
A person, let’s say a dedicated reader of a small niche publication, buys the DAO tokens of that media outlet. They’re now not only supporting the writers directly but also part of the democratic process that guides the publication itself.
In essence, both parties now have an ownership stake in the publication.
That’s exactly the model DirtDAO uses.
“The Dirt DAO currently controls a budget to greenlight and commission long-form Dirt features. In the future, it might make decisions around NFT artwork, events, and Dirt product development.”
Similarly with Forefront, who compensates writers with “an allocation of 400 $FF for every accepted piece.”
$FF being the Forefront token and worth $1.29 at the moment, putting each article at $500+.
This represents an absolute sea change in how content creators and consumers interact with media, bringing parties long separated by advertisers and agendas into something approaching lockstep.
Outside of the written word, ModaDAO, for example, makes it possible to invest in music.
Think of media DAOs as crowdfunding content but with the added benefit of that investment also being an appreciable asset. The future scenarios and possibilities are endless in that world, unlocking a world of new and diverse content that benefits both creators and consumers.
Implications of DAOs for PR And Communications Pros
Given that DAOs have the unique ability to bring communicators and their audiences closer, they also have the potential to make public relations more personal and make communications efforts more nimble. Furthermore, as mentioned, DAOs would shift how PR and communications campaigns are funded and agreed upon.
The unique structure of a DAO means it’s easier for PR pros to have their finger on the pulse of the community. The inherent transparency also simplifies communications because accountability and openness are built right into the framework. That translates to having fewer fires to put out due to bureaucratic or administrative issues.
Opportunities & Risks
The prospects are enormous with DAOs being touted as everything from the death of the office to the future of work. Both can be correct and therein lie the opportunities. On the flip side, the concept has distinct risks too.
Digital communities are already the present – taking them to the next level through real collective ownership and monetization opportunities is possible through DAOs.
Establishing new funded communities, no matter how niche, will become easier and easier.
Additionally, as VC firm Andreessen Horowitz points out, income streams can change dramatically from the traditional work-to-earn model to X-to-earn; “people’s income will be a mix of things we already currently do in our lives (e.g., play games), things we think of as traditional work (e.g., bounties/contracts), and things that are currently accessible to only a small percentage of the population (e.g., investing, passive income). To think of it another way, DAOs will expand the type and quantity of opportunities that are open to several types of participants, including token holders, bounty hunters, and core contributors.”
They also represent a streamlined approach to organization.
While the upside can be grand, the downside can be steep.
For starters, there’s a basic lack of clarity on the regulatory side of things concerning not just DAOs, but crypto in general. How will they be taxed? What’s the legal standing? That murkiness alone represents an enormous risk to making a community into a DAO.
In theory, DAOs are decentralized and autonomous, in practice that’s not always the case. If someone, or a small group, buys a majority of the governance tokens, they can effectively control the DAO. As the Federal Reserve Bank of St. Louis found in their research, “in many cases, the majority of governance tokens are held by a small group of people … even when a launch is perceived as being relatively “fair,” the actual distribution often remains highly concentrated.” DAOs, of course, take steps to minimize this risk but it’s out there nonetheless.
Lastly, DAOs are susceptible to “rug pull” scams. Rug pulls are an especially heinous con in which the developers responsible for a DAO, token, NFT, etc. simply abandon the project and steal all the funds. This sort of thing is made possible by the fact that crypto is untraceable. AnubisDAO investors lost $60 million in a rug pull in 2021, for example.
Despite the risks, the potential of DAOs to alter the very nature of business is immense. From the perspective of content, there’s something tantalizing in the notion of getting closer to the creator. Being able to truly invest in those you believe in and want to see, read or hear more from – and knowing they’re being compensated fairly. Media DAOs represent a tangible way to make that vision a reality.