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Two years after "The DAO" was hacked, leading to a hardfork that recovered the stolen funds but split the Ethereum community, Decentralized Autonomous Organizations are undergoing a renaissance. This week alone, a new DAO was launched to help market the Ethereum ecosystem, while an existing DAO, called MetaCartel, announced the next cohort of DApp projects they'd be funding. Let's briefly explore the past, present, and future of DAOs on the Ethereum network.

The DAO Hack

Even if you know relatively little about Ethereum, you've probably heard of "The DAO" hack. The DAO aimed to be a decentralized venture capital fund implemented via smart contracts. It allowed anyone to join simply by contributing funds, which could be released via an on-chain voting mechanism to would-be investments. The project was embraced by the nascent Ethereum community. At its peak, it held 12.7 Million Ether, worth over $150 Million at the time.The infamous hack occurred in June of 2016, when an attacker abused a bug in The DAO's smart contract to ciphon 3.6 Million Ether. This represented a sizable percentage of all the Ether in existence, and posed an existential threat to the network's future. After a messy and rushed deliberation process, core developers made the contentious choice to hardfork the network and recover the lost funds. The original chain continued, albeit with a minority's share of the community, as Ethereum Classic. Link

The Summoning Of Moloch

The hacking of "The DAO" left a scar on the Ethereum community. For two years after the incident, minimal experimentation with DAO's occurred, and as crypto went through the ICO-driven hype cycle of 2017, tokens took the spotlight. Where DAO-like principles were applied, it was typically in the form of token-weighted voting, such as the MakerDAO project, where holders of the MKR token can vote to change system parameters.This DAO ice age began to thaw earlier this year with the launch of Moloch DAO. The founders of the dubiously-named project sought to implement a minimum viable DAO. The result was a smart contract that allowed members to contribute funds to join, then vote to disperse those funds to interesting projects. Moloch DAO does not seek to make a profit in any way, but simply serves as a way to distribute capital to projects seen as beneficial to the ecosystem.Crucially, Moloch DAO also allows any member to "Rage Quit" at will— to take their share of the coffer and depart— leaving the organization with fewer funds to disperse. For this reason, members are dissuaded from putting forth divisive proposals, lest they trigger a mass exodus that drains the treasury. Link

The Dancing Chili And Beyond

Moloch DAO attracted a lot of attention in the Ethereum world throughout 2019, as many high profile community members, including Vitalik Buterin and Joe Lubin, pledged funds and became members. The success of the new DAO soon inspired others.In summer of 2019, a group of developers used the Moloch DAO source to launch MetaCartel, a DAO aimed specifically at funding the development of interesting Ethereum based DApps. The new DAO aimed to be more accessible, requiring a pledge of "only" 10 ETH to join, as opposed to the steep 100 ETH pledge required by Moloch. It also chose a more whimsical logo: a sombrero-wearing, maraca-wiedling, dancing chili pepper. Link With MetaCartel leading the way, DAOs based on the Moloch contract code have begun to proliferate. Last month, for example, at the DevCon conference, a "secretive" DAO call Orochi pooled its funds to host a number of events. Link Also noteworthy is this week's launch of Marketing DAO, an organization which aims to fund projects that (you guessed it) market Ethereum to the wider world. Link MetaCartel itself has funded a number of interesting projects, and recently revealed their new cohort structure, in which they'll fund projects in discrete groups. This week, they announced the five projects chosen to be in the first cohort. Link Among the projects funded by MetaCartel, one stands out as particularly interesting: SwagDAO. First, the idea of a DAO funding a new DAO is very, well, meta. Beyond that, though, the project's founders are hoping to build the "first community-owned fashion brand," one that will sell merchandise and generate profits for its members. There a lot of open questions around profit generating DAOs, so this will be an interesting project to follow. Link

💡Commentary

What makes decentralized cryptonetworks such a promising development? In short, they enable global human cooperation without ceding power to a centralized entity. Given this, it's not surprising the first use of said networks was to create a new form of money and enable transacting with it. Money and markets are the foundation of scaleable human cooperation in the modern world. Without them, it's simply not possible to coordinate large groups of people to tackle big problems.The thing is, not every problem is a big one, and not every task requires a large group of people. An underrated aspect of cryptonetworks is their ability to enable cooperation on a small scale, but amongst people spread across the globe, living in varied legal jurisdictions. The experimentation with DAOs that we're seeing on Ethereum is an exciting and instructive example of this.Even in this germinal stage, what's happening with Moloch and MetaCartel is quite remarkable when you stop to think about it. Dozens of individuals, from many different countries, are pooling millions of dollars to fund public goods in a digital community they care about. They're doing this without an official legal structure or legal documents, and without any centralized executor or escrow service. A decentralized network, and the smart contract code that runs on it, is all that is needed.In a sense, cryptonetworks are completing the work of the internet in this regard. The internet enabled digital communities to form around every imaginable affinity. Tribalism is much maligned in the modern world, and not without good reason. It's important to remember, though, that for every problematic online community radicalizing its members on fringe beliefs, there are dozens of wholesome digital subgroups which have brought immense richness and satisfaction to their participants' lives.DAOs give these digital clans the ability to pool and apportion their capital, and perhaps someday soon, to earn profit together as well. This is pretty magical, and fundamentally new. Don't sleep on DAOs. The potential here is enormous, and things are just getting started.

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