A typical NFT has nothing to offer but pixel art. Bring it up a notch, and perhaps you get some utility out of it, such as staking for passive income. At an even higher level, NFT projects can run a service that` generates profits and distributes them back to the holders.
But all of this misses out on one crucial element of an NFT project. The community. And that’s where the DAO steps in. We will be talking about DAOs in a bit.
So while the DAO is relatively popular amongst many projects, we’re starting to see a problem; DAO overload. And hence the birth of sub-DAOs, which is the crux of what we’ll be talking about today.
I know that a lot of terms I just used may sound foreign to some of you. But rest assured, we’ll explain it step-by-step through this article. So sit back and prep your mind, this piece will introduce a ton of new ideas to the space.
What Is A DAO?
A DAO, short form for Decentralized Autonomous Organization, is a term describing organizations that are managed by people, and executed by computers. This could be confusing, so let’s simplify DAO into two main ideas.
First, a DAO is made to be decentralized. That means there is no singular entity controlling the organization, like a “founder” or an “executive committee” of leaders. Instead, DAOs run on an ultra-democratic system. Everyone can make proposals, and everyone has a vote. No exceptions.
The second idea is that human beings do not “execute” activities in the DAO. Code (or more specifically smart contracts) act as predetermined protocols, so once a vote is passed, the smart contract will automatically execute the preset direction. No human intervention can alter this without ringing alarm bells.
We can conclude that DAOs are superb models of democracy and get rid of human corruption… after all, that’s why so many projects adopt this framework! But of course, every coin has two sides to it. We previously critiqued the DAO framework, do check it out in this post.
So you’re convinced by DAO. But why sub-DAO?
The Importance of sub-DAOs
You probably guessed it: a sub-DAO is just a DAO within a DAO.
Yea, useless. Why would we need another layer of decentralized governance in an already decentralized-governed DAO? And if so, where would we draw the line of a DAO within a DAO within a DAO??
These questions are all valid. And they’re the exact reason why sub-DAOs are necessary.
The Problem With The DAO
Various sources say democracy has existed since around 500 BCE. So if democracy was a middle-aged man, DAO wouldn’t even be a zygote.
But you get the point. Something so early is bound to have problems, and truth be told, we didn’t even think about this issue when we were critiquing the DAO structure in our previous article linked above.
Let’s explore a few problems.
- A High Entry-Level
Power to commoners like you and me? Bullshit. Only to the whales, celebrities, and lucky few who got in early.
Unfortunately, that’s the current state of many high-profile DAOs in the web3 world. While some of the most high-profile personalities claim that DAOs give the decision to the people, they’re either shielding reality from their followers, or blindsided by it themselves.
Take for example BAYC. One of the most well-known projects (if not THE Trademark NFT collection), also comes with a high price tag. A floor price of roughly 110 Ether, or more than $350K at current Ether prices, and it ain’t coming down anytime soon.
It would be naïve to think that any Tom, Dick, or Harry can join the Club. Eh, even those with money to burn to the bank will think twice before apeing into a literal ape. It’s clear that the benefits of the mega-DAO stay within an elite circle.
- Mega-DAOs aren’t Specialized
It’s understandable that Mega-DAOs are almost always general. After all, it’s hard to find people from the same field that can all afford to make up a Mega-DAO. Diversity within DAO is good, and that’s something we should not change.
However, this inherently creates the problem of “generalization”. Categories can’t have sub-categories, lest they be seen as too specific or insignificant. Different cultures are embraced in Mega-DAOs, but sub-cultures are less likely to be picked up by the DAO.
Take for example, Mega-DAO choosing between a collab with a Sports Label and a Surfing Label. Even if both remunerate equally, the Sports Label has a wider target audience, and the Mega-DAO would not have the time to “niche down”.
- DAO Competition Is Unfair
It seems like the problems we have mentioned above only applies to Mega-DAOs… so why not just create a DAO catered to newbies? Hmph. Not only would this create oversaturation in the DAO space, but the “small-DAO” would also be cast aside and die a slow death.
The smaller DAOs cannot compete with mega-DAOs. With a naturally less experienced community, lesser funds in their treasury, and little incentive to run the DAO, many of these small-DAOs become obsolete quickly.
Even if smaller DAOs focus on niche areas, it’s like a slap to the face for these niche communities; they’re getting collabs with the “small DAO” because their niche community isn’t big enough.
An even bigger problem that is already becoming evident today is the DAO overload; or oversaturation of DAOs in the space. Almost every NFT project has hopped onto the DAO bandwagon, claiming that it gives governance back to the holders.
To me, this is just a weak bid in creating “utility” for an NFT project that is otherwise nothing but a “moneygrab”. I think the course of action that we have to take is to stop making DAOs for the sake of utility, and actually make something worth governing before having a DAO.
Hence, all these reasons and more establish the need for sub-DAOs. So how do these sub-DAOs solve the existing DAO crisis?
The concept of sub-DAO is a DAO within a DAO. Now at surface value, that doesn’t seem to solve any of the existing Mega-DAO problems.
But in fact, the small distinction between sub-DAO and small DAO really makes a whale of a difference. Here’s how.
Sub-DAOs to Mega-DAOs: The L2s To L1s
For those in the crypto space, the terms Layer 2 and Layer 1 (L2, L1) should be pretty familiar to you. In essence, Layer 2 blockchains are built on top of Layer 1 ones, such as the Polygon network over the Ethereum blockchain.
This forms a unique “symbiotic” relationship – Where the L2 gets exposure and leverages off the technology of the L1, and the L1 gains more use cases and gets help with transaction loads from the L2.
Similarly, sub-DAOs serve the same purpose. Not only do they focus on a more specific niche under the umbrella category of the DAO, but it also helps grow the DAO universe simultaneously. And this, somehow, solves all our identified problems.
Lil Nouns, a soon-to-launch Nounish derivative, puts this across perfectly.
@nounsdao (being the source of that CC0 identity) makes up the primary central node.Projects that inherit the CC0 identity are smaller nodes that extend from the central node.These nodes can proliferate the CC0 identity into new subcultures and demographics…~Lil Nouns
Lil Nouns is a @nounsdao ‘extension’ ✨
What do we mean by that? 👀
TLDR: Our mission is to expand the Noun identity to new demographics and subcultures.
Here’s a quick breakdown. 👇
— Lil Nouns ⌐◨-◨ (@lilnounsdao) March 19, 2022
Sub-DAO: A Solution to the Struggles of Mega-DAO?
- Sub-DAO Inclusivity
Sub-DAOs lower the barrier of entry. When catering to a more specific niche, the funds needed for collaborations and activities should not be as massive as Mega-DAOs, and thus the sub-DAO still functions perfectly on a decently-sized budget. In turn, joining the DAO will not be financially impossible for the common collector.
But you may ask, where’s the exclusivity in that?
My answer is that inclusivity triumphs over exclusivity, always. If you’re targeting a specific niche anyway, why the need to price those DAO NFTs at 10 Ether when 0.1 Ether will suffice? If anything, “unnecessary exclusivity” is a moneygrab red flag for me.
- Ultra-specific Specialization
Remember this; the whole point of a sub-DAO is to proliferate a subculture. In other words, a sub-DAO has to be laser-focused on a specific goal, not try to generalize and expand in the pursuit of targeting a wider audience… in that case sub-DAO is no longer the right word to describe the organization.
Hence, sub-DAOs are a great place for niche experts to call Home. After all, it’s difficult to find a space where everyone is like-minded and share experiences in the same space.
As mentioned earlier, it’s unrealistic and uncharitable to expect mega-DAOs to specialize. It falls on sub-DAOs to do so.
- If you can’t win them, join them
The famous saying holds true yet again. What’s the point of creating a small, specialized DAO, when you’re going to be eaten alive by the bigger mega-DAOs? Yea, that’s what I thought… no point.
But in the case of sub-DAOs, you’re not competing against bigger DAOs, you’re supported by these DAOs. Being a sub-DAO means joining the ecosystem of the primary DAO, you can visualize it as a branch from the old tree.
Of course, this solves a ton of problems usually faced by smaller DAOs. Marketing from the bigger DAO equals more publicity, support from the mega-DAO means more capital to spend, and joining the larger DAO equates to further help from experts.
So TL;DR, what is Sub-DAO Magic?
Imagine you have an interest. A passion that may be small. A subculture.
Sub-DAO gives you the ability to proliferate that subculture at a larger scale, the bridge between enthusiasts and whales. Now that’s… sub-DAO magic.
How To Establish a Sub-DAO?
Okay… sub-DAO culture is great, and would be perfect for your smaller but close-knitted community. But it’s easier said than done, so how can you establish a sub-DAO?
In this section, we’ll be exploring that prospect, and raising some concrete examples in the Nouniverse to back our strategies up.
Strategy 1: Join The Mega-DAO
The first strategy is obvious. To pool together resources and collectively join the mega DAO.
A good example of this is SharkDAO, one of the major sub-DAOs in the Nouniverse (although they may have not found out that they’re a sub-DAO yet haha!).
SharkDAO is a DAO that collectively curates Nouns. They currently have a grand total of 6 Nouns, and raised over 1000 Ether.
Their business model is akin to that of traditional DAOs in the crypto world. One would spend ETH to receive SHARK tokens, admitting them into the DAO. From there, the ETH will be used to acquire Nouns, and DAO members will vote on Nouns proposals.
Since there is no “fractional ownership” and instead there is a “collective ownership” of these Nouns, I would describe SharkDAO as a membership token to the wonders that NounsDAO holds. In this way, ordinary members can join the SharkDAO and still have a say in the matters of NounsDAO. Not bad for subculture.
Strategy 2: Credit The DAO (CC0 Required)
Credit the DAO sounds weird, but the main idea is that you should base your sub-DAO on the mega-DAO of your choice.
You see, to join a universe, you must have distinct fields of overlap. It could be the mission of the DAO, how your subculture fits the mega-DAO’s culture, or more likely, art that is based on the original DAO’s pieces. And using the power of CC0, this is both possible and permissible.
A great project that “Credits the DAO” is Noun Cats, a Nounish derivative. With its collection inspired by Nouns, the project puts an interesting twist on their collectibles to make Invisible and Cat Nouns! The fact that Nouns are CC0 puts their art in the public domain, for projects like Noun Cats to make use of.
Such are projects that, if successful in promoting their subculture, could be offered a partnership with the original Nounish community. From there, the prospect of scaling the project into something even bigger suddenly comes into reach. But of course, this won’t be possible without being related to Nouns in the first place.
Strategy 3: Propose & Proliferate
Strategy 3 is a combination of 1 and 2, with an added element of active participation in the mega-DAO to proliferate your very own sub-DAO culture.
Participation in the governance of a DAO is another crucial element of upkeeping it. After all, it’s the steady flow of initiatives that keep the DAO running efficiently and put the treasury funds to good use.
In Nouns DAO, they do that through Nouns Proposals, open to all Nouns holders to make a proposal. And therein lies a unique opportunity to promote and proliferate a subculture… which Gnars expertly navigates.
Here at Gnars, we already have strategies 1 and 2 nailed down. Gami owns the Skateboarder Noun, giving Gnars direct access to Nouns. Gnars’ artwork is also based on Nouns, putting us in the Nounish ecosystem.
So how is Gnars implementing strategy 3? We’re using the “Nouns Stage” to proliferate our subculture of supporting extreme sports athletes through our Gnars sub-DAO. Check out Nouns proposal 51 for more info.
Sub-DAO Culture: It’s Here To Stay
Wow, that was a long read! If you’ve made it this far, I salute you!
In summary, the sub-DAO is a framework or ultimate launchpad for niched communities. Backed by a mega-DAO, sub-DAOs can truly achieve the original purpose of DAOs: To give the power of governance back to the common enthusiast.
One final takeaway.
Sub-DAO isn’t here to overrun another DAO or popularize its culture. Yea, this is not a cult.
Instead, we are looking for a way to proliferate and share our subculture with more communities. Sub-DAO helps us achieve that.