The rise of the DAOs — Loft Financial

There are a lot of hypes in crypto world right now, NFTs and Metaverses and Gaming being the top dogs. I want to talk about something else here that is overlooked for now but will rise hard I predict in the upcoming year. The DAO.


The first DAO was called The DAO and ended miserably. It was hacked (probably from an insider) due to a bug and it started the most contentious and divisive spat in crypto. The hard fork of 2016 where ETC was born. You can read more about this incident here. But the thing is that the idea was exciting and many people rushed. Apparently it was early. Not that hacks are infrequent right now but still there is more knowledge and expertise on the subject. Vitalik found DAOs to be one of the first and most important uses of the blockchain (and I humbly agree). Now what *is* a DAO?

What is a DAO (Decentralized Autonomous Organization)

I like the Feynman way that said you should describe everything as you were talking to a single child (the famous ELI5 acronym) and I will try to do that.

A DAO is a group of people that want to do something and instead of court and laws they use software to govern their endeavour.

Quite simple isn’t it? It can be companies running for profit, investment funds that onboard everyone that send money to the smart contract, it can be non-profit NGOs that want transparency and it can be even silly stuff like K-POP fans that want to vote on the next event date. In one word: groups. The DAO and the underlying technology (blockchain) facilitates all.

Interesting projects

There are not many plays in this field. That makes me excited because there can be clear winners. I will be talking only about platforms to build DAOs and not specific DAOs you can join because they will be infinite and each idea will come and go but the technology will stay.

Aragon is one of the oldest projects on Ethereum. It’s a platform to build DAOs and the team is from Spain (obviously with this name!). It’s the most mature platform right now and it will enable many communities to form and manage everything from where the funds go to voting to governance using it. L1 transactions are expensive as we know so it needs to be in L2. If they don’t accomplish a smooth transition it will be hard to be the winner.

Metis is building a Layer 2 on top of Ethereum using rollup technology (the latest and coolest of all) to facilitate the use of DAOs and DACs as they call them (c is for company). Interesting project that just launched.

DAOstack is an operating system for DAOs. It’s open source and openly governed (no central team) and it is more community focused. It’s based on xDai(see below). The market cap of this one is really low for now.

STAKE (xDai) is an Ethereum sidechain but uses a different consensus algorithm: Proof of Stake ( PoS) and Proof of Stake DAO (POSDAO).xDAI is a Layer 2 scaling solution and is compatible with Ethereum. It is designed to be more efficient than Ethereum, with higher transaction throughput (70 transactions/second) and has a much lower transaction fee.

Why now?

Here in Loft Financial we have correctly predicted both the rise of NFTs and the rise of the Metaverse (proven by our articles and their dates). This is the new theme for the next year. Why? Because we monitor the news and the important people and the trends. NFTs blew up when Silicon Valley entrepreneurs started talking about them. Now they are talking about DAOs on their Twitter. They are usually early. It’s their job, they are VCs and visionaries. Also another project blew up that showed the world what a DAO can do (crazy things!). It was called the Constitution DAO. Check it out. Although it failed in its objective it was a milestone much like when the first Crypto Punk NFT was sold for a crazy price and woke everyone up.

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Disclaimer: The information on this site is for informational purposes and isn’t financial advice. We cannot guarantee that you will have the same results as we have nor can we guarantee that the information shared here is appropriate for you. This is not financial advice and not given by professionals.

Originally published at on December 27, 2021.

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The Loft Financial

The Loft Financial

Newsletter and blog about macroeconomics, stock market, real estate, alternative asset classes and cryptocurrencies.

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