Project DAO
Definition
A traditional company is a centralized entity where decisions are made through the use of governance structures. The management team runs the business, the board of directors is responsible for oversight and strategy, and shareholders elect the board.
A decentralized autonomous organization (DAO) is managed through transparent rules run on a computer program and controlled by the voting of DAO members. The holders of DAO governance tokens cast votes to determine the actions of the DAO. Unlike traditional corporations, governance token holders may not have any formal ownership of the DAO or rights to its assets. DAOs can sell governance tokens or give them to people or entities that are strategic to the success of the enterprise. This enables community ownership and incentivizes participation.
DAO For A Decentralized Exchange
DAOs create an incentive for community participation and ownership. DAOs can issue tokens that they can sell to participants on the supply and demand side. Marketplaces that scale successfully follow common patterns. Liquidity attracts incremental liquidity, which can create positive feedback that could result in a leader taking-most market. DAOs have an advantage over traditional marketplaces owned by centralized organizations because they can enable participation, hence driving incremental demand and supply.
DAO Could Be Used To Raise Project Funding
One of the primary constraints on the offset economy is the upfront cost to start sequestration projects and the ongoing costs to verify carbon credits. For instance, regenerative farmers already sequester carbon but generally are not compensated for it because the cost of verification is too high. DAOs can use funds from treasury to pay for farmers to adopt regenerative agriculture practices and the on-going verification costs (see Dovu). The credits created through that project can then be sold on the owned exchange by mandate, allowing for the initial upfront investment to be recovered. This new source of revenue for regenerative farmers would attract the incremental farmer to adopt regenerative practices.
Entity will earn fees for tokenization and marketplace transactions
Overtime marketplace and tokenization fees can help fund projects to bring more supply on to chain
Entity can manage liability to insure purchases with a carbon or dollar reserve, and pay out to supply providers with vesting as their permanence obligations are met
Community participation can be incentivized with ownership of the DAO via utility-like tokens
DAO Can Provide Periodic Rewards
Offset sellers can receive payment over time utilizing verification vesting coded into the NFT, incentivizing continued land maintenance, for instance. The DAOs that issue the NFTs can serve as the liable entity should an offset seller change their practices or if the sequestration is proven impermanent. The DAO can hold a reserve of NFTs or US Dollar-linked stable coins in treasury as insurance to compensate buyers should the initial sale prove impermanent. Having the liability transferred to a DAO lowers the risk of corporate buyers who fear reputational harm from mistakenly buying low-quality credits.
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