Daostack ICO Review: Aiming to Usher in an Era of Decentralized Autonomous Organizations
Daostack is an ambitious upcoming ICO, and in our review, we touch over its main proposition, feasibility, and other aspects of interest to ICO investors and participants.
The foundations for the Dao (Decentralized Autonomous Organizations) space began with crowd-sharing and crowd economy propositions like Airbnb, Uber, and Dribble. In the early days, when everyone was looking more at Bitcoin rather than the underlying Blockchain powering it, these Marketplaces created disruptive community-centric business models. However, these Marketplaces were not on a Blockchain and were still centrally controlled.
With the advent of Smart Contracts and their ability to enable functions like voting, the next evolution in the Dao concept was fixing trust and community self-regulation. This powered a wave of new Blockchain Marketplaces, claiming not only to cut out the middlemen in this sharing economy but also to give control of consumers’ data back to the consumers.
Then Dao suffered a PR disaster. A Startup called ‘The Dao’ did an ICO on Ethereum. During the ICO the Founders became aware of a bug in their smart contracts. Instead of pausing the ICO to fix the bug, they run both actions in parallel.
The result? A hacker moved all the funds from ‘The Dao’s’ account to a child account the hacker-controlled. At that time ‘The DAO’ held 15% of all ether (ETH) in existence. The scandal in this matter was not only the theft of funds but the fact that the Founders knew they would have problems fixing the bug given their Dao had no defined process for changing the existing protocol.
Time passed, and a lot of core work on Dao ceased, as developers collectively decided the tech wasn’t ready yet.
DaoStack has spent the last year assessing the legacy weaknesses in DAO and laid out a framework which aims to address those weaknesses.
Token Sale: 1st May – 7th June
Token type: ERC20
ICO Token Price: 1 GEN = 1.00 USD
Fundraising Goal: 30,000,000 USD
Total Tokens: 60,000,000
Available for Token Sale: 66.67%
To best explain this proposition to potential investors I’m going to simplify it, so I’m going to avoid using the terms/labels DaoStack have applied in their White Paper. Why?
The White Paper uses terminology that intellectually lays out the broadest, all-encompassing applications for DaoStack. It requires a fair amount of brain power to navigate that terminology.
So, let’s start with the high level
If Blockchain is the new supernova highway (with built-in driver records of accountability for anyone using its roads), then DaoStack is the Tesla. It provides the 1st driverless architecture (let’s call them engine modules) for Startups/businesses to design their own cars to drive down that supernova highway.
OK, possibly a bit poetic. Another way of looking at it is, if crowd-sharing and corporations had a baby, it would be DaoStack. Why?
DaoStack is a corporate governance framework, on the Blockchain, with its own toolset to allow you to run your organization in the most hands-off, decentralized way, delivering ‘automated autonomous self-governance’ by leveraging the ‘community’ of stakeholders around your business.
So how would you use it?
DaoStack have laid out three modular approaches for organizations, which they called ‘modes’:
- Assembly mode
- One main entity ( company) with multiple direct stakeholders
- Fractal Federal mode
- Parent entity with subsidiaries containing multiple stakeholders
- Mesh Network mode
- Parent entity with direct stakeholders + subsidiaries with stakeholders
Now the modes move from ‘conceptual’ to ‘actual’ when you then apply the DaoStack framework + tools + business models to them.
The framework is:
- Governance protocols
- To create any type of rule, restriction, limitation, which auto-implements. Examples: rules around weighted voting or voting period or new proposals, how many people to form a subsidiary within a DAO
- Proposal system
- To propose anything inside the DAO: new products, new processes, etc. ( these sit inside Smart Contracts)
- Reputation system
- To award and allocate reputational credits to stakeholders associated to that DAO based on contribution or deliverables
- Reward system
- To use the voting tools and wallet to allocate rewards in a decentralized manner via the stakeholder pool
- Sharing System
- DAOs allow their stakeholders/community to submit, curate and share content submitted to their database ( registry).
The Tools are:
- Token (creation and issuance of reward/payment )
- Smart contracts
- Voting (votes must have a majority agreement one day before voting closes, otherwise the process starts again)
- Dashboard (for building, managing and upgrading governance protocols)
- App Store (for discovering and buying pre-accredited governance protocols)
- Database (for searching & storing content)
- Marketplace (for everyone to meet, post requests and offers)
The business models are:
- Decentralized Collaboration
- Decentralized Cooperative
- Decentralized Curation Network
- The Stack Model
1.Decentralized collaboration model
In this model, the reward is tied to contributions made to your DAO.
You could reward:
- Miners/developers who maintain the DAO
- Contributors who create new schemes for the DAO
- Employees who innovate within the DAO like designers, product contributors
- Early adopters of your Startup.
Functioning very much like ICO bounties today but instead of being centrally assigned, these bounties are collectively voted on and awarded by your stakeholders. Then the bounties are auto-executed via the smart contract framework, using DaoStack’s rules tools ( schemes).
2.Decentralized Cooperative model
In this model, the reward is tied to contributions made to your revenue.
Various parties along the revenue contribution chain (which could be external Stakeholders or internal Stakeholders) are rewarded for their efforts by either:
- issuing tokens redeemable against the revenue achieved (into a wallet)
- as dividend tokens with the token price directly linked to the revenue achieved
- Linking the reward/payment of service/contribution to the actual revenue achieved on a project or DAO is similar to profit sharing and supports use cases where organizations collaborate to win contracts, win customers, win business.
3.Decentralized Curation Network model
In this model, the reward is tied to contributions made to curate content in your database.
Here, a content owner posts content to your database (the registry). The content owner pays to post this content. If the content is of poor quality, this can damage the content owner’s reputation (of which there is an intrinsic value) and that could increase the content owner’s fees for posting content in the future.
If the content is deemed good after being curated by all your DAO Stakeholders, then the content owner’s reputation can rise and posting fees could be reduced.
This system allows your network of Stakeholders to maintain a self-policing level of quality to your database/s for items like code, files, reviews, ratings etc.
4.The Stack Model
In this model, DaoStack itself rewards contributions to its own network of contributors/stakeholders using all of the three business models outlined above.
3.Feasibility of Idea/Business Model in the current Market
What makes DaoStack special is the ability to combine modes, frameworks, tools and business models in any flavor you want. They call this the modular approach. This flexibility turns the rigid legacy corporate governance system we have today into a living, breathing, constantly morphing, organism of collaboration.
This is conceptually a groundbreaking, very clever approach to structuring how modern companies could and should be run. But how feasible it is going to be, to get large blue chips, with billions of dollars of revenue on the line, to fundamentally re-invent how they work?
It’s possible a migration path might solve this issue, i.e., if SME’s start adopting it and big old corporate can see it’s feasible in operation mode. Then blue-chips could begin by implementing this framework to test areas within their business, scaling up to a full-scale implementation.
What sort of problems could it solve?
- Corporates unable to innovate due to size
- Corporates unable to react quickly to market forces due to size
- ICO startups run by their communities but lacking a structure to manage themselves
What’s going to make this scale in terms of an ROI / core business model?
DaoStack allows open source building of dApps on its ecosystem. The more these dApps are used, the more it’s Stack currency is in demand and rises in value ( the same as Ethereum). Add to this DaoStack’s ability to allow rewards to be voted on and executed on a huge scale and you have effectively a version of Ethereum’s growth but with rocket fuel poured on top. How? Because tons of Startups building on DaoStack, with millions of users voting and triggering auto-executing smart contracts, means a huge leap in usage, in commerce.
CEO & architect
The CEO founded a company, just before DaoStack, which seems to be nearly the same proposition as DaoStack. It was called www.backfeed.cc
Backfeed was a consensus framework built on the blockchain, very like DaoStack with Non-Transferable Reputation, Value Distribution etc.
Backfeed even has the same use cases outlined in DaoStack’s white paper.
My concerns around this are:
- Why did the Founder walk away from Backfeed after 18 months and then start DaoStack, just three months later? What happened? Did Backfeed fail to get funded and if so, why?
- Why didn’t the Founder try doing an ICO for Backfeed? Why did he feel the need to rebrand Backfeed as ‘DaoStack’?
- Did this CEO fall out with his Backfeed team, decide to cut his losses, and start again from scratch?
Regardless, this CEO founded two startups before DaoStack and left them both within 18 months. As a potential investor that worries me in terms of ability to follow through on and execute an idea.
Backfeed currently sits abandoned online, like a discarded toy.
Incredible academic Ph.D. background but zero work experience building and shipping tech in companies. Also, there’s no prior experience leading development teams in a business environment.
Now to compensate for the CTO’s lack of real-world build experience, the Lead Developer has seven years worth of real-world engineering chops, which is fine. It’s not amazing, the guy hasn’t been a VP of engineering and to be clear, he’ll have to carry the CTO in his role.
So one of the few weaknesses with this ICO right now is the team. The concept is wonderful but let’s be clear, if the team doesn’t have the ability to execute it, you’re investing in people’s ability to write great papers about wonderful ideas.
Strengths: As a former CEO of a Blockchain, I’m aware from first-hand experience that many of the startups today in the Crypto space have serious governance issues because they are being run by their communities but without any framework. DaoStack can address this problem immediately, enabling these crypto startups to work more effectively by creating a consensus framework for harmony.
That is a strength and I don’t see anything else out there viable enough to solve that problem. Solving that problem could mean the difference between a ton of crypto startups failing ( with billions of dollars being wasted) and some of these startups becoming the unicorns of tomorrow.
The other strength is clearly the fact large corporate blue chips can take pieces of this framework to test out and learn from, in order to begin re-thinking centralized structures.
Weaknesses: The weakness in DaoStack is that right now, it’s just a very cool theoretical concept. Until you actually apply the framework to startups, to corporations, you won’t really know if it’s viable. Yes, company-wide voting on stuff sounds cool and collective but can it work; will it cause more problems than it solves?
Remember when you mix neat theories with human beings things start to get messy, grey.
So there are question marks around - can these guys build this? If it gets built, will it work operationally?
Opportunities: In my mind the opportunity on this is huge.
The DaoStack framework has the power to reinvent more than just Startups/ Corporates. This framework could potentially be used to re-invent the way governments work and interact with their citizens. This framework could enable the masses to decide on policies in real time, determine politicians power based on the reputational value the people assign to that politician. So I see DaoStack as having a potential application to update democracy for the 21st century.
Threats: Commercially DaoStack has no direct threat, it has no direct competitor, because it’s carving out new ground. The threat will come from inside DaoStack if the voting system operationally can’t function in the way the Founders have envisioned. Then users would abandon DaoStack.
For sheer ambition, for sheer disruption, DaoStack gets our respect. If they can seriously deliver this and get traction, this will be one of those moments in the evolution of the Blockchain that we see as a paradigm shift. A game changer.
- Idea/Business Model 4
- Scope/Potential 5
- Team/Advisors 5
- Token Economy 5
- Marketing 2
- Community/Communication 2