Article by 0xSardius Edited by Kornekt Cover Art by Dippudo

Decentralized autonomous organizations are fast spreading across the web3 ecosystem, and they are constantly evolving into new models and use cases. A novel use case, termed “ImpactDAOs”, is defined as “any DAO that creates net positive externalities to the ecosystem around it” (Owocki 1). ImpactDAOs seek to use crypto-economics coupled with open, verifiable, and transparent tools to achieve their goal of increasing resources, encouraging sustainability, and regenerating an ecosystem over time.

Resources aren’t strictly financial  —  an ecosystem contains several resources, in intellectual, cultural, and material forms. Tokenization allows these resources to take on a virtual life on the blockchain, be utilized within an organization, and creates room for accurate measurement of their impact. Some specializations of ImpactDAOs include scientific research, carbon offsets, and cultural capital. ImpactDAOs offer the potential to extend the DAO model towards positive social impact by incentivizing positive-sum, regenerative behavior on and off-chain.

https://twitter.com/banklessDAO/status/1562566481178951683?s=20

Source: Twitter

ImpactDAOs offer an opportunity to redefine incentives and scale human coordination around new ideas of resource abundance and systems design. While still in the early stages, they are exploring innovative combinations of cooperation, profit models, and non-profit mechanisms that haven’t been available to traditional organizations. These new combinations haven’t been available due to the coordination and remuneration limits of traditional, hierarchical companies. ImpactDAOs utilize blockchain technology to shift organizations away from rigid hierarchical organizations towards flexible, scalable, and autonomous structures, optimized from the ground up.

Unpacking each word composing the term “decentralized autonomous organization” clarifies how ImpactDAOs extend the DAO model. DAOs are blockchain-enabled organizations built around fulfilling a mission chosen by a community, with members free to choose how to pursue that goal.

DAOs are decentralized via blockchain technology, this allows the organization to exist without a third-party intermediary like a government entity or a bank. Anyone can spin up a DAO using no-code, permissionless tools like DAOhaus or Aragon, making organizational creation direct and customizable based on the needs of the community. DAOs operate in a decentralized manner, mimicking the technology they are built on. Members are empowered to make decisions without seeking top-down approval, similar to co-ops. DAO members also have a say in how capital is used, they are thus empowered to take ownership of the direct impact of their decisions. With no centralized player controlling the organization, members are free to develop their own rules on forming guilds and projects to pursue the primary mission of the DAO as they see fit.

DAOs utilize smart contracts for payments, voting, and tooling. Smart contracts autonomously execute on the blockchain, akin to a programmable vending machine. What you put into a smart contract will give you the same result, every time. This feature, referred to as immutability, is important as it prevents third parties from interfering in the execution of internal DAO votes, treasury management, and other operational procedures. Most DAOs are built as a hybrid of web2 and web3 technologies, with often very little of a DAO’s internal mechanisms actually using smart contracts. DAO members are also autonomous in how they pursue the goal(s) of the DAO  —  an important aspect in how the DAO coordinates its efforts.

DAOs operate in practice like cooperatives, holocracies, or sociocracies. Organizational and governance structures are built from the ground up based on the desires of the community. Once a goal is decided, DAO members often form guilds or ad-hoc workstreams to coordinate around accomplishing these member-chosen objectives. Coordination can be challenging as there is no top-down direction, which means incentives and organizational design are especially important in DAOs. Members must be incentivized to collaborate, or nothing will get done in the DAO.

In addition to the core principles of how DAOs work, ImpactDAOs have several unique characteristics:

ImpactDAOs take advantage of network effects to compound efforts and achieve greater impact. Composability enables efficient movement of talent, energy, and resources to where it is needed most. This allows ImpactDAOs to leverage larger structures when needed to tackle societal problems.

For example, after a community has collectively decided what values, goals, and actions they will coordinate around, members can use Proof of Humanity to get access to UBI tokens and cover basic needs, allowing each member to contribute their own expertise to uplift the community. Members focusing on agriculture can use the Regen Network to understand best practices to regenerate particular species and understand how to unlock monetary value in particular ecological transformations. Proof of Humanity can again be used to verify that the person who worked the soil within Regen Network is the same person who uploads the data and receives the rewards. Geospatial sensors (akin to what Astral Protocol is building) can trigger and reward behavior via smart contracts once the positive change occurs in real life. Once this hypothetical DAO begins gaining momentum via real-world impact, the community can then utilize Gitcoin quadratic funding to further fund projects of value to the community (Owocki, 44–46).

ImpactDAOs are specifically designed to have a regenerative and sustainable effect on the ecosystem they comprise. In a regenerative system, resources (however these are defined by the ImpactDAO) increase over time (Owocki, 7). Tokenomics can be customized to circulate wealth back to a community, and community members can collectively vote and design systems that amplify impact. Projects could bootstrap using “Augmented Bonding Curves” as designed by Commons Stack (Owocki, 46). Community members invest in projects they care about, and the curve design ensures a portion of funds is always distributed to a shared pool that sustains public goods.

ImpactDAOs demonstrate “a sustainable, long-term strategy towards achieving positive outcomes on their primary impact area” (Owocki, 16). The impact achieved would not be possible without the use of web3 technology. “Each ImpactDAO, by definition, creates positive externalities, which enables value to the rest of the ecosystem. This creates a nascent equilibrium of give-first value creation. Over time, organic collaboration between ImpactDAOs enables an emergent network of deeply positive-sum behavior” (Owocki, 43).

ImpactDAOs act in a critical place within a community that redesigns core mechanisms around society-causing problems. Instead of merely redistributing wealth or utilizing band-aid solutions, ImpactDAOs provide a new leverage point that ripples out from within the system to redefine behavior that was formerly extractive or harmful to the ecosystem.

ImpactDAOs are currently being used for verifiable, on-chain social impact and regenerative climate projects. ImpactDAOs can act as building blocks to enable other DAOs to build on top of them (e.g., making use of the sybil-proof list of humans from another DAO for governance, proof of identity, and tokenized carbon offsets that can be used in other Regenerative Finance projects). Systems of incentives allow business and revenue models to be built around sustainable use cases. Tokenization of carbon offsets, scientific intellectual property (IP), art, and regenerative community actions all provide use cases for new models of coordination and cooperation. Creating regenerative ecosystems unlocks new web3 building blocks, allowing emergent organizations to be built.

Regen Network is an ImpactDAO building ecological assets for the ReFi economy. By exploring how to tie in the value of ecological health to economic value, Regen Network is creating an open-source, community-driven carbon and ecological asset registry (Owocki, 34). Furthermore, through its community of scientists, researchers, and project developers, Regen Network has a system of tokenized carbon credits that create new markets around taking positive climate action. “Working alongside land stewards, biologists, data scientists, and others, Regen has developed over 40+ methodologies with 12 million hectares of ecological regeneration in the pipeline” (Owocki, 35). By implementing quadratic funding, the Regen Network plans to explore open-source funding towards ecological causes, researchers, and institutions, creating a positive feedback loop for new economies. The positive feedback loop is enabled as researchers and institutions are better able to incubate ecological-impact DAOs and provide more tokenized carbon credits to regenerative marketplaces.

https://twitter.com/regen_network/status/1489374587968126977?s=20

Source: Twitter

Molecule offers a research marketplace, IP-NFTs, and scalable frameworks for building biotech DAOs. The long-term goal of Molecule is to decentralize the ownership, financing, and governance processes for drug development. Molecule enables patient, researcher, and investor communities to directly fund, govern, and own research-related intellectual property. Historically, private companies, universities, and governments have funded research grants and the development/market deployment of biotechnologies. The tokenization of early-stage IP along with research projects allows the combined groups of patients, researchers, and investors to crowdfund needed biotech breakthroughs (Owocki, 108). Three Bio-DAOs currently reside within the Molecule ecosystem: VitaDAO, PsyDAO, and LabDAO; each funding longevity, psychedelic medicine, and wet/dry laboratory services, respectively.

https://twitter.com/Molecule_dao/status/1554024132647477248?s=20

Source: Twitter

Metropolis (formerly Orca Protocol) is creating tools around “DAO governance that put people at the center of design” (Owocki, 76). Orca allows DAO contributors to coordinate within cross-DAO pods. Pods are small working groups organized around one’s expertise and ability to contribute. Pods allow mini-DAOs to operate within larger DAO frameworks, letting the needs of the ecosystem dictate how they can integrate and contribute. Orca aims to eventually enable a composable metagovernance framework that could act as a “connective tissue of multi-DAO governance councils (Owocki, 76).

https://twitter.com/0xMetropolis/status/1565702590037475332?s=20&t=5-idKTVCT6xSkgSI_YEU3Q

Source: Twitter

While the future is bright for ImpactDAOs, there are some significant problems that need to be solved. Coordination of members towards real sustainable outcomes, collaboration of members without a traditional hierarchy, and actually verifying impact beyond lofty mission statements are just a few of the obstacles impactDAOs face. The DAO space itself is still emerging, and ImpactDAOs are still being defined in real-time. ImpactDAOs may be forced to make trade-offs between expedience in accomplishing their missions and using web3 technology in a novel way. The hope is that web3 technology will not be used as simply an unnecessary add-on, but will instead facilitate the creation of some truly novel and paradigm-changing organizations.

ImpactDAOs extend the original DAO model by applying web3 technology to make net-positive, sustainable, and regenerative impacts on their attendant ecosystems. Projects are experimenting and rapidly innovating, creating new paradigms of regenerative ecosystems, redefining how public goods are created, and how resources are used and shared. ImpactDAOs utilize smart contracts, tokenization, and new governance models to “redefine incentives towards actions that regenerate ourselves and the earth” (Owocki, 8). ImpactDAOs offer a way for us to address complex, 21st-century societal problems, and create long term, sustainable organizations that add value and incentivize regenerative behavior.

Works Cited: Owocki, Kevin. Impact DAOs. GitcoinDAO Public Goods Funding Workstream, 2022.

A version of this article initially appeared in BanklessDAO’s State of the DAOs newsletter on September 7, 2022.

Author Bio

0xSardius is a web3 consultant and developer helping his clients grow their web3 idea from 0 to 1. A lifelong learner, Sardius has over 9 years experience in crypto.

Editor Bio

Kornekt is a writer and editor with strong conviction in the world Web3 creates.

Designer Bio

Dippudo is a pseudonymous individual who spends most of his time in front of a computer and has a natural interest in finance. He started contributing to Bankless DAO after falling down the crypto rabbit hole in the middle of 2021. Dippudo subsequently won the Fight Club NFT Competition and is now working on numerous other projects within the DAO and The Rug News as a designer. He is now spending time diving deeper into the worlds of economics, computer science, and finance.

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