Author: Jialin
This research focuses on the relationship between DAO tools and DAO governance, specifically covering:
On-chain/off-chain governance and a comparison of governance models
Introduction to several typical DAO tools
Selection of DAO tools
Future evolution of DAO tools
Part 1: About DAO Governance
1.1 On-Chain Governance
On-chain governance refers to the decentralized governance process that takes place within a blockchain network. It involves various participants in the network reaching consensus on protocol parameters, software upgrades, resource allocation, and other issues. The goal of on-chain governance is to achieve a fair, transparent, and non-single entity-controlled network. On-chain governance is generally implemented through Governor smart contracts.
Governor smart contracts are commonly used open-source governance contracts that allow token holders to control the DAO using entirely on-chain voting. Smart contracts can be designed to automatically execute proposals based on on-chain votes without requiring trusted third parties or core teams to determine voting results.
Proposals can do anything on chain such as:
Sending funds from treasury
Updating DeFi protocol parameters
Changing sub-DAO permissions
Minting NFTs
Or modifying Governor's own rules.
Decentralized protocols have been evolving since their public release. Typically, the initial team retains control over this evolution in its early stages but eventually delegates it to stakeholders' communities. This community decision-making process is called on-chain governance and has become an integral part of decentralized protocols driving various decisions such as parameter adjustments, smart contract upgrades, integration with other protocols financial management funding etc.
1.2 Off-Chain Governance
Off-chain governance refers to the governing process outside of blockchain networks where community members project teams core developers discuss and reach consensus via non-blockchain platforms.
The main characteristics and advantages of off-chain governance include:
More flexibility: Off-chain governances are not limited by blockchain technology; they can flexibly discuss negotiate decisions for human intervention & quick response.
Diverse participants: Off-chain governance has more diverse participation, including community members, project teams, core developers and other stakeholders.
Multi-channel communication: Off-chain governance may involve various communication methods such as offline discussions, forum discussions, discord telegram etc., which helps to collect more opinions and suggestions.
However, off-chain governance also has some disadvantages:
Lower transparency: The off-chain governance process may not be transparent enough to track and audit in real-time.
Easily influenced by centralization: The decision-making process of off-chain governance is easily influenced by centralized entities such as project teams or core developers. This can lead to abuse of power and interest transfer.
Governance decisions may not be executed according to proposals and consensus: The implementation of the results of off-chain governance requires manual intervention; the execution process is less controllable & reliable and susceptible to human factors' influence.
1.3 Comparison of Governance Models
Governance is not better with higher on-chaining levels; it's a means rather than an end. DAOs should choose appropriate governance models based on actual situations.
On-Chain Governance vs Off-Chain Governance each have their pros & cons. On-Chain Governance features high transparency automatic execution broad participation but faces challenges like low participation rate insufficient incentives etc. Off-Chain Governance provides greater flexibility for human intervention & quick response but its decision-making process may lack transparency & easily affected by centralization entities' influence.
In fact, many blockchain projects decentralized applications adopt a combination of on-chain/off-governance modes for efficient fair sustainable governing. For example some projects make core decisions on chain while leaving specific implementation details discussion in an off chain environment. Such hybrid governance models fully utilize the advantages of both on-and-off chain governances ensuring transparency broad participation retaining certain degree flexibility for human intervention ability.
Part 2: Introduction to several typical DAO tools
2.1 Tally (On-chain Governance)
2.1.1 Positioning: On-chain Governance Dashboard
Tally includes a voting dashboard, proposal creation wizard, real-time research and analysis, and educational content. Users can view what's happening on Tally and then delegate voting power, spend DAO funds by creating or passing proposals, manage protocols or upgrade smart contracts - all done on-chain. The Tally team believes that governance should be like building with Lego blocks - infinite possibilities from standard shapes and sizes.
2.1.2 Features and Characteristics
Tally is the front-end of the Governor contract which is a commonly used open-source governance contract allowing token holders to control DAOs through fully on-chain voting mechanisms. Token holders use Governor to propose, pass and execute proposals that can do anything on-chain such as sending funds from treasury, updating DeFi protocol parameters, changing sub-DAO permissions, minting NFTs or modifying Governor rules itself.
Key features:Tally API: makes querying on-chain data about Governor DAO easy; lists governors' accounts; chain-based proposals & delegated accounts; build notifications; mine voter data or build governance into your game/app using APIs.
2.1.3 Compatibility & Adaptability
Tally has good compatibility supporting DAO governance contracts across Ethereum mainnet/Polygon/Optimism/Arbitrum/Avalanche/BSC/Gnosis/testnets.Tally is more suitable for mature business modules requiring advanced knowledge in deploying OpenZeppelin governance contract modules before importing tally making it less user-friendly for non-tech users.
2.1 .4 Financing & Adoption Status
Financing status: In March 2021,T ally raised $15M led by Lemniscap& 1kx.In August 2021,T ally announced raising $6M led by Blockchain Capital& Placeholder with around25% funding from DAO organizations such as The LAO, MetaCartel Ventures, Fire Eyes DAO and angel investors associated with DAOs (including Bankless founder Ryan Sean Adams).
Tally has been adopted by many large projects mostly mature businesses including Arbitrum, Sudoswap, Nouns, Opensea, Uniswap,Gitcoin ENS,Hop& Fei. In the past few months,T ally was ranked top 3 in the Web3 30 selection initiated by Alchemy based on thousands of nominations and votes from web3 enthusiasts worldwide for DAO &DAO tool categories along with Guild& Snapshot.
2.2 Aragon (On-chain Governance)
2.2.1 Positioning: One-stop On-chain DAO Tool
Launch on-chain governance without coding; plugin-based DAO OS.
2.2.2 Features and Characteristics
Aragon App: user-friendly application to launch on-chain governance without coding providing a simple-to-use on-chain homepage for your community to create proposals,vote,and add new members.
Aragon OSx: our smart contracts lay the foundation for organizations we can't imagine today through lean design.Plugins easily customize your governance.Build a one-stop-DAO operating system using our governance plugins!
1）Build & Manage Your Own DAO Deploy and run custom-made DAOS programmatically within your dApp directly.
2）Customize Your Organization Extend DAOS functionality using governance plugins(not yet launched).
3）Evolve & Adapt Our permission management system grants/retracts permissions so that your organization can evolve according to its needs.
2.2.3 Compatibility & Adaptability
Aragon is an old project from the ICO era which underwent significant changes in product exploration and roadmap.Currently,the new version products(Aragon App&Aragon OSx)support only Ethereum mainnet/Polygon network&Polygon/goerli testnet.
As an all-in-one comprehensive on-chain governance tool,Aragon is easy-to-use suitable for both novices and professionals.
2.2.4 Financing & Adoption Status
Aragon conducted an ICO token sale in May 2017 raising 275,000 ETH (worth about $500M at current Ethereum prices).Therefore, Aragon has always had ample funding to experiment with various products and roadmaps.
According to the Aragon website: 5,000 DAOs Created; +300,000 Community Members; +$6B In Aragon DAOs; +$200M in Aragon Treasury... However, the actual adoption of the new system is relatively low, maybe due to it’s new launch in February/March 2023.
2.3 DAOLens (Off-chain Governance)
2.3.1 Positioning: One-stop Off-chain DAO Tool
Founded in January 2022 aimed at simplifying DAO operation processes by helping businesses with onboarding/contribution management.B2B commercial company based in India.
DAOLens was founded by Vikram Aditya& Apoorv Nandan in January 2022 aimed at simplifying DAO operation processes by helping businesses with onboarding / contribution management.
2.3.2 Functions and Features
DAO Manager is the product name of DAOLens and has a very complete off-chain governance infrastructure such as snapshot, bounty, proposal, events, library, space, etc. It can connect to discord, wallet, permission management, encrypted payment, etc. It has token and nft gateway, etc. Initially, in order to get as many users as possible, DAOs can design their own requirements without DAO Manager and give them to DAOLens.
Initially, in order to get as many users as possible, DAO can ignore the functions already available in DAO Manager, design their own requirements and give them to DAOLens, who will customize the implementation in DAO Manager. the basic version of DAO Manager is free, and the future depends on AI services and full solutions including consulting to solve revenue.
2.3.3 Compatibility and Adaptability
Because DAOLens is a comprehensive off-chain governance tool, a more centralized system that can access various governance gadgets, it has good flexibility to support various on-chain tokens and nft for off-chain assisted governance. It is suitable for whites and professionals, simpler and friendlier than on-chain integrated governance tools, and has strong applicability for various community organizations and non-onchain governance DAO organizations.
2.3.4 Financing and Adoption
Web3 startup DAOLens announced a $5 million funding round led by Nexus Venture Partners, Better Ventures, and iSeed II, with Coinbase board member Gokul Rajaram, Polygon co-founder Sandeep Nailwal, and Raj Gokal, co-founder of Solana, Simon Doherty, vice president of Animoca Brands, and Arjun Sethi, co-founder of Tribe Capital. The funds raised will be used for product development, talent acquisition, and to drive the subsequent launch of its tool stack.
DAOLens is a B2B commercial company with strong business expansion capabilities. Almost all projects with Indian participation will be taken up by the DAOLens team first to get them into DAO Manager.
The DAOLens team is also lobbying BanklessDAO (the core members of BanklessDAO are almost the same as Polygon DAO).
Because of its late start, not many famous projects are using it yet. But DAOLens has a wide range of applications and many people are optimistic about its commercial prospects.
2.4 Zora (On-chain Governance)
2.4.1 Positioning: An all-in-one on-chain governance tool for Nouns DAO
Zora is a decentralized protocol that allows anyone to buy and create without permission. It has created a series of tools that make it easy to get started building, and serves as a governance tool for Nouns DAO, allowing users to create their own style of Nouns DAOs with distributed governance, composability and upgradability, and continuous funding.
2.4.2 Features and Products
1）Zora Stack
Nouns Builder: Deploy custom DAOs in minutes
Create: Easy deployment of contracts for NFT projects
API: Retrieve metadata and market data on any ERC-721
Zora V3: On-chain marketplace functionality for ZORA
ZDK: Development toolkit for interacting with the ZORA API
NFT Hooks: The easiest way to interact with the ZORA API
NFT Rendering: Tool for easily displaying NFT data
2）Modular Architecture
The architecture used by ZORA V3 allows new market types to be deployed by the Zora DAO as well as updated versions of existing ones. Each deployment version of the market module is immutable but can be deployed into an approved space within zoraDAO which helps developers choose which modules they use while making it easy to upgrade without having to fully migrate (as we did from v2 -> v3), reducing total gas costs.
3）Creating a DAO with unique "Noun-style" through Zora
Allocation Mechanism - Consistent time intervals allow communities form at healthy rates rather than distributing governance via air drops. Composable & Upgradable - All contracts are individually upgradable meaning that your dao isn't static but evolves over time. Continuous Funding - DAOS generate sustainable funds by continually issuing new nfts over time.
2.4.3 Compatibility and Adaptability
Zora is currently only compatible with the Ethereum mainnet and Goerli testnet, and its governance tool serves a narrow range of applications for Nouns DAO.
2.4.4 Funding and Adoption
NFT trading market Zora raised $50 million in funding at a valuation of $600 million, led by Haun Ventures. Zora founder Katie Haun was the first female general partner at a16z, and Zora has previously conducted auctions for TikTok-related NFTs as well as Andy Warhol Art Foundation NFTs.
Since its launch, Zora has gained some influence in the NFT field with many artists, creators, and collectors publishing and trading on it.
ZORA's new no-code tools make it easier to create DAOs funded by NFT auctions following the model established by popular project "Nouns". This makes it more accessible to creators without requiring engineers to fork or modify existing code so that almost anyone can create an nft-driven dao for almost any project. Purchasing an nft allows each owner to become a member of a DAO or decentralized autonomous organization essentially creating tokenized communities with shared treasuries over time.Nouns has shifted its focus towards advancing open-source intellectual property over time using their ample funds placing nouns imagery into Bud Light commercials & indie films among other community-approved initiatives.
2.5 Summary of DAO Tools
In this report we analyzed four major on-chain/off-chain governance tools: Tally, Aragon, DAOLens, and Zora; each tool having unique advantages depending on organizational /project needs.
Tally is suitable for those who need mature support across multiple blockchain networks but may not be user-friendly enough for non-professionals.
Aragon is comprehensive yet easy-to-use on-chain governance tool with high customizability but still requires further promotion/adoption.
DAOLens provides rich off-chain governance infrastructure integrated with multiple tools but has yet to be adopted by any well-known DAO or community.
Zora serves as a governance tool for Nouns DAO with innovative governance models and strong upgradability, but is limited by the style of Nouns DAO and network support.
When choosing a governance tool, it is important to consider the actual needs and goals of the project in order to ensure that the selected tool can bring maximum value.
Part 3: Selection of DAO Tools
3.1 Adaptability of DAO Tools for Different Types of DAOs
Based on the different types of DAOs, we have made some rough assessments in the table below. Overall, DAOs that focus on asset types need more on-chain governance, and DAOs with many complex operations need off-chain governance components to ensure governance flexibility.
3.2 Reference for SeeDAO OS
1) Governance function plug-in (refer to Aragon)
2) Governance dashboard visualization (refer to Tally)
3) Unconventional user-involved functional modules are hidden as much as possible to enhance interaction friendliness (refer to DAOLens)
Part 4: Future Evolution of DAO Tools
Based on the current development status of DAO tools and various DAO needs, and internal discussions, we have made some possible predictions about DAO governance and future evolutions of DAO tools:
1) Large DAOs will choose to develop their own DAO tools, while small DAOs will choose more generic DAO tools.
With the development of the DAO ecosystem, large-scale DAOs will customize and develop governance tools according to their own needs to meet specific business processes and governance models. In contrast, small-scale DAOs will tend to use general-purpose DAO tools to reduce development costs and improve efficiency.
2) Various specific application plug-in-based DAO tools will emerge in the market for integration by all parties.
In the future, more plug-in-based DAO tools tailored for specific applications will emerge to meet the needs of different types of DAOs. These plug-in-based tools will facilitate integration by all parties, enhancing overall flexibility and customization capabilities of the entire set of available DAO tools.
3) Large-scale DAO tools will integrate more external DAO tool plugins.
As the scope and scale of the decentralized autonomous organization ecosystem continues expanding, large-scale DAO tools will integrate more external plugins providing richer functionality. Large-scale DAO tools aim at providing users with a better governance experience.
4) The proportionality on-chain governance is increasing; hybrid governance models are becoming increasingly popular.
With advances in blockchain technology, on-chain governance's share ratio is gradually increasing. At present time Hybrid Governance Model which combines both On-Chain & Off-Chain Governance methods has become an increasingly popular choice among many organizations aiming at improving effectiveness & adaptability towards decision-making process within their respective ecosystems or projects.
5) The increase in on-chain governance data promotes emerging research into analyzing on-chain data by DAO tools.
With the rapid growth of on-chain governance data, more DAO tools will emerge to research and analyze on-chain data. These tools will help DAOs better understand the data in the governance process and provide powerful support for decision-making.
6) The composability of on-chain DAO tools will promote user identity and reputation integration across different projects, ecosystems, and organizations.
In the future, the composability of on-chain DAO tools will promote user identity and reputation integration across different projects, ecosystems, and organizations. This trend will drive the development of decentralized identities (DID), providing a more efficient, secure, reliable way for identity authentication & management throughout entire blockchain ecosystem.
Article source: SeeDAO's Frontier Research Group of DAO Tools.
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