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According to DeepDAO, DAOs (decentralized autonomous organizations) collectively have about $23.2 billion in their treasuries; only about $3.3 billion of that money is being actively vested in income-yielding programs. That leaves about $19.9 billion of cash on hand. DAOs can donate some of this money, but beyond donations, the structure and governance models that crypto philanthropy DAOs follow could disrupt how we think about charitable giving.
A DAO is a crypto-native entity without a centralized authority in which governance is managed by members. DAOs deliver representative bottom-up governance through community-driven rules enforced by smart contracts on blockchain networks.
DAOs employ collective ownership, which means that members collectively own and control their assets. Ownership is typically established through the use of governance tokens, multisig wallets and open DAO treasuries.
Likewise, DAOs employ collective decision-making. The management of DAOs follows a democratic process in which members vote on decisions. This contrasts with traditional organizations, where a small group of people often makes decisions for the majority.
How philanthropy DAOs can enhance charity
As Mark Cuban puts it, DAOs are “the ultimate combination of capitalism and progressivism.” DAOs hold immense potential to create new paradigms for how we work, make group decisions, allocate resources, distribute wealth, and solve some of the world’s biggest problems.
When applied in the philanthropy industry, the trustless governance model of DAOs can improve the effectiveness of philanthropic organizations. Specifically, philanthropy DAOs, social DAOs, and grant DAOs can directly help improve democratization, transparency, and efficiency in philanthropy.
According to Vox, charities are increasingly reliant on “just a handful of wealthy donors who are making 10-figure gifts.” This trend could create a world where philanthropy reflects the preferences of the 1%, or even the 0.1% percent, rather than regular folks.
DAOs are a potential antidote. If many small donors aggregate their desires through a philanthropy DAO, they can rival even the largest donors in size and influence. Because DAOs use democratic, transparent voting mechanisms, charities can feel confident that DAOs are accurately representing the will of broad swaths of society. For instance, impactMarket, a philanthropy DAO that creates Unconditional Basic Income programs, among other programs, uses an on-chain voting system to have its members make proposals, debate such proposals and vote for or against decisions to be made.
DAOs manage their treasuries on open ledgers. Everybody can see transaction inflows and outflows from the treasury. DAOs can let members know that their money is being put to good use in real time without needing to wait for annual reports or account audits. Giveth, a DAO for setting up and canvassing support for charitable projects, does a great job implementing this transparency. They provide a public view of its treasury where you can see how much is pledged and how much funding each project gets.
Transaction costs eat away at donations. Crypto DAOs may be able to reduce transaction costs because they manage their finances with cryptocurrencies, which enable the direct peer-to-peer transfer of value. Admittedly, this isn’t always the case:currently, charities still need to convert received crypto donations to cash before they can meaningfully use the money in real life. But the potential is there, and interesting progress is being made. Endaoment now enables people to give directly to charity using crypto and empowers charities to accept cryptocurrency donations without worrying about converting crypto to cash.
Hurdles that crypto DAOs need to overcome to work in philanthropy
Crypto DAOs have the potential to improve the world of philanthropy; nonetheless, there are still some hurdles that the broad crypto industry must overcome to unlock the full potential of DAOs.
The regulatory environment around crypto is unsettled. For example, only six countries have clear regulatory frameworks on using stablecoins for payments; the framework is pending final legislation in the US, UK, and UAE. Other areas lack regulatory clarity.
Crypto is still hard to use for regular folks. For DAOs in particular, the process of setting up a wallet, keeping governance tokens, and taking a balance snapshot as part of the voting process is complex and time-consuming. All these factors combined could lead to member apathy and hinder the widespread adoption of DAOs.
There’s still a lot of debate on whether all DAO members should have the same vote or whether voting power should be proportional to the number of tokens held. Some DAOs are experimenting with innovations like quadratic voting to limit the power of the wealthiest users, but there is no clear consensus about the best way to manage this problem yet. Also, truly democratic participation requires that each person be counted once and only once, i.e., that one participant can’t create, and vote with, multiple identities. But balancing this goal with the pseudonymity that Web3 enables, which many crypto natives cherish, is challenging. How these issues get resolved is an open question.
An alternate method of crypto philanthropy with Glo
It would be great to see the emergence of philanthropy DAOs, social DAOs and grant DAOs to contribute to making the world a better place. But even today, it is already possible for other crypto DAOs to get involved in philanthropy with the Glo Dollar.
Glo is a stablecoin that empowers crypto DAOs to donate to charity without reducing the value of their treasuries. It’s not-for-profit, dollar-pegged and backed by fiat reserves. With Glo, crypto DAOs can apply their treasury toward ending extreme poverty without actually spending the money in their treasuries.
How exactly does this work? Like USDC, Glo is fully backed by a mix of cash and Treasury Bills. T-bills provide a yield, and we give our portion of that yield away to GiveDirectly, which, in turn, distributes it as basic income to people living in extreme poverty.
End extreme poverty with Glo
The more money held in Glo, the more people we can lift out of extreme poverty. If DAOs put half of their current $23.2 billion treasury into Glo, they would lift hundreds of thousands of people out of poverty every year. This comes at no cost to the DAO: in the form of Glo, the treasury funds remain intact and available for the use of each DAO toward its original mission. By keeping their treasuries in Glo rather than for-profit stablecoins, DAOs can do a lot of good with the money in their treasuries. (Read more about the numbers here.)
Learn more about how Glo aims to end extreme poverty
DAOs have a huge untapped potential to revolutionize philanthropy. On the one hand, we could have more philanthropy DAOs, social DAOs and grant DAOs functioning as member-driven philanthropic organizations. On the other hand, all other crypto DAOs can still generate income to lift millions of people out of poverty simply by holding their reserves in Glo while still staying true to their primary goals.