Investing in DAOs: What We Need To Know

Perhaps you're new to the blockchain ecosystem and haven't heard of DAO, or perhaps you've been considering investing in one but aren't sure what it is. That's fine, because this blog is just right for you.

Source: @michaelmaddof

After doing some digging myself, one could say a DAO is essentially a fancy phrase for a collection of people that band together to pursue a similar goal and share a bank account. DAOs are similar in some ways to investment clubs that gained popularity around a quarter-century ago, thanks to a group of women known as the Beardstown Ladies.

These ladies started an investment club and were picking stocks. Many people believe they have consistently outperformed the market. It turned out that they were underperforming the market because of the way they calculated investment returns. However, the concept of a group of individuals banding together to invest and using their collective intelligence and hive-thinking to do so is now well-known, and the DAO is essentially the same.

This time around, the plot has a new twist: DAOs are digital, as you can easily open a shared bank account using this technology. "The DAO," which began in 2016, was one of the earliest DAOs, and it was hacked! Isn't it a bad way to get started? For a few years, this occurrence put a stop to DAOs. After a few years, there were approximately 10 DAOs, and by 2021, there were approximately 200 DAOs. There were over 4000 DAOs at the time this piece was dropped.

-Technology and security have improved, which is one of the reasons why DAOs have expanded so much and become more secure. Back in 2016, there were just a few people that performed security checks on DAOs to ensure they weren't vulnerable to hacking. We now have over 50 security auditing firms, making the system substantially more safe!
-The infrastructure for generating a digital wallet, sharing it with others, and allowing individuals to vote on investment decisions has improved. This has also been greatly enhanced.
-Then there's the rise of cryptocurrency, with its erratic price increases, and the rise of NFTs, all of which have combined to make DAOs much more attractive.

DAOs are innovative new structures arising from web3 and blockchain technologies. DAOs have been compared to subreddits or chat groups with a bank account by a number of people. The concept is that a group of folks are meeting up online and want to take things to the next level. Instead of simply speaking with one another and forming close bonds, people want to use their money to buy NFTs, invest in businesses, and do a variety of other things. All members of the DAO are humans who are passionate about something, whether it's digital art, music, or fashion, and are looking to make an impact.

"Flamingo DAO," which invests in NFTs, is an example of a investment DAO and one of the most profitable. It cost roughly $20,000 to join when they first started. This means that you'd own around 1% of the firm or organization if it decided to invest in NFTs. It's incredible that joining the same DAO now costs almost $8 million.

Flamingo DAO; Source

In other words, they turned a $10 million portfolio into a $1 billion portfolio. They've done exceptionally well by purchasing a large number of crypto punks at an early stage. They also paid $18 for additional pieces of art known as "Chromie Squiggles" which are now worth around $30,000. Simply put, they are the most profitable DAO investment out there!

Chromie Squiggle; Source

Neon DAO, for example, was founded to focus on the Metaverse; yeah, the hazy concept of everyone living in a virtual universe! So far, they've purchased some virtual land and are really popular. When Neon DAO first started, it raised around $20 million in 45 minutes.

Noise DAO, a music NFTs centered organization, raised $7 million in just thirty minutes after launch. And RED DAO, a digital fashion start-up, raised $12 million. Incredible, right!

However, scams and fraud, among other things, are a significant risk. Rug pulls are at the top of the list, with people literally raising a lot of money. Maybe they'll join a group with a specific aim in mind, or maybe they'll buy a piece of rare art or anything else. Once funds are raised to purchase these works of art, the DAO's creators may be criminals aiming to scam others. They might simply walk away with the money once they've raised it. It's critical for anyone considering joining a DAO to thoroughly vet the persons who will be leading and coordinating it. Check to see if you're comfortable with their motives.

DAOs have been used on HIVE before, and I should write a blog post about my survey shortly! Friends, I'll see you in the future post!

Some Source Texts:
Where Are They Now: The Beardstown Ladies
Decentralized Autonomous Organization (DAO)
Understanding The DAO Attack
DAO 101 — All you need to know about DAOs
Flamingo DAO: An NFT Collective