DeFi
Decrypting DeFi is Decrypt’s DeFi email newsletter. (art: Grant Kempster)
The cumulative dollar amount across all DAOs hit a new milestone last week of $25 billion, per data from DeepDAO.
That’s some serious cash, with this figure pegged at only $10 billion at this time last year. The new milestone was certainly helped along by the launch of Arbitrum’s whopping $4.4 billion DAO two weeks ago.
Taking a closer look at the largest treasuries, in fact, reveals that three of the top five projects are all scaling plays such as Optimism, Arbitrum, and Polygon. The arrival of these infrastructure-centric crypto projects has also overtaken the previously dominant DeFi projects à la Lido, dYdX, and Uniswap. The latter DAO is still the third-largest, holding over $2.6 billion.
But beyond more token drops and DAOs joining the mix, how else will these organizations keep raising their war chests?
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“Considering that a very high percentage of DAO treasuries are in native tokens, they’ll easily cross the $50 billion mark once the market conditions improve,” DeepDAO’s head of growth Aman Deep told Decrypt. “We think the next real target is $100 billion or more.”
Native tokens in this case essentially mean non-stablecoins, like Optimism’s OP, Arbitrum’s ARB, and Polygon’s MATIC.
For these top DAOs, each treasury’s largest holding is the respective project’s native token. After that, it’s some mix of Ethereum or a stablecoin. And as Deep mentioned, as soon as the bull market is back, all of these treasuries are likely going to soar.
“If we make an assumption that these tokens would reach their highs in the next bull market, the top 10 DAOs alone would manage over $70 billion (based on their current holdings),” added Deep. “So, we might even see DAOs managing values closer to $100 billion in the next bull.”
While waiting for a massive boost from the next bull market, is there anything else that could boost this figure? Yes: usage.
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Lido Finance, the ultra-popular liquid-staking platform, generates revenue for its DAO by splitting 10% of users’ staking rewards between the treasury and node operators. Decentraland offers a similar model, with 2.5% of sales on OpenSea and another 2.5% from Decentraland’s marketplace going directly into the project’s DAO.
There’s also been chatter around DAOs raking in fees thanks to popular layer-2 sequencers.
Sequencers are essentially the bridge between speedy scaling solutions and Ethereum’s mainnet. For moving batches of transactions securely to Ethereum, they take a fee.
Optimism, for example, is going to point this fee at funding so-called public goods, at least until they decentralize that sequencer. And because both of these networks are key infrastructure plays rather than staking derivatives or metaverse markets, usage on each will likely balloon in parallel with the growing adoption of crypto.
Finally, beyond a new bull market and new users, governance controversy could be another way DAOs boost their treasuries.
BitDAO’s public liaison Igneus Terrenus told Decrypt contentious votes may inspire folks to scoop up a governance token to better voice their opinion for their favorite projects.
“The contentious Uniswap vote on which bridge to choose to deploy on BNB Chain that saw a16z battling Jump and everyone else, and the more recent Arbitrum AIP-1 saga where the ratification-not-request-espousing foundation eventually caved to community uproar, demonstrated a growing DAO consciousness among participants,” said Igneus.
The road to $100 billion for DAOs is going to be fueled by a speculative frenzy, increased usage, and token holders becoming more aware of their roles within a DAO.
Let the journey begin.
Decrypting DeFi is our DeFi newsletter, led by this essay. Subscribers to our emails get to read the essay before it goes on the site. Subscribe here.
