Demystifying DAOs

In simple terms, DAOs are 1) a community of people 2) united by a mutual interest 3) who buy voting rights in the group. 

The decentralized nature of DAOs ensures no individual has absolute power; instead, decision-making is autonomously controlled via votes from the members of the organization. It’s designed to divest an organization from human egos & foibles that could hold it back, by letting blockchain technology take over most of the governance work. Much of this governance is controlled by smart contracts, which are applications of blockchain technology that rely on a decentralized, immutable public ledger. Smart contracts are carefully written in advance to establish rules around the variety of decisions that could arise over the life of the DAO. Note that members are regularly voting on governance, though. How the DAO will work and what its focus will be are still very much in the hands of humans. Check out this helpful explainer video from Forbes for a slightly deeper dive. In the meantime, here’s a practical example combining Web3 technology with another passion of ours: wine.

Imagine you run a vineyard in Wine Country. Competition is fierce, as the 800+ wineries spread across Napa and Sonoma counties make it difficult for your wine brand(s) to stand out. You created a subscription club to cater to your fans; in Web1, it was supported with a website and email newsletter. In Web2, you started curating a social media presence, and added a mobile site. Yet, you feel your club could be better. More valuable. More meaningful.

Enter Web3. You decide to convert your subscription club to a DAO. This is no small decision, as it means you are surrendering control, essentially spinning off an autonomous organization. While it seems daunting, you’re replacing one-on-one relationships with one relationship. A big, powerful customer who already loves you, and has a vested interest in helping you thrive. 

You carefully design smart contracts that align the DAO with the capabilities of your vineyard—you want to ensure the DAO’s expectations are realistic, e.g. voting to produce a type of wine your land can accommodate. Once these foundational elements are established, interested individuals buy a stake in the DAO in the form of a unique token the winery creates. The proceeds from the token sale fuel the logistics of the subscription program. Members buy into it every year to get the usual benefits of a wine club: priority access to exclusive releases, events, experiences, etc. But beyond this, they become engaged, active participants in steering a course for your DAO-backed brand(s). They might contribute input on formulations, names, packaging, membership benefits and more. They could even weigh in on what wine bars, restaurants and more represent the best partnership opportunities. The winery surrenders a degree of ownership, but that’s in exchange for having a passionate group of customers with skin in the game. A more than fair exchange in our opinion. 

By putting the end consumer at the center with Web3 technology, wineries could change the ways their wines are developed and create more meaningful, useful, and profitable communities around their brands. Illuminator is eager to help any brand navigate the possibilities of Web3. We’re already doing so in the gaming and entertainment space for NOR and Consortium9 Labs. And if you just so happen to work for a winery, well, our team has deep category experience, driving success for numerous wine brands back in the Web2 days. 

Web3 is changing everything. And brands who don’t accept the inevitability of Web3 technologies like blockchains, DAOs, and tokens risk putting themselves irreparably behind. As a Web3 brand agency, we’re constantly encouraging our partner brands to look beyond the hype—both the positive and negative news cycles—and embrace these promising new technologies. Web3 is all about building brands with passionate communities at the heart, and DAOs provide a revolutionary means for doing so.