The decentralized autonomous organization (DAO) landscape has recorded steady growth since 2020, reaching a new all-time high of over $30 billion in December 2023. But as we head into 2024, what trends and developments can we expect to shape the future of DAOs?
Without further ado, here are seven predictions for the DAO space in 2024.
1. Increased Venture Capital Investment
In 2022 and 2023, venture capital investment into DAOs grew exponentially compared to previous years, and it is safe to say that these guys are just getting started. Although it is too soon to label early DAO experiments a success, we should expect more activity from the big guys in 2024.
For instance, in 2022, CreatorDAO raised a $20 million seed funding round led by a16z and Initialized Capital.
VCs are excited about DAOs because of the emerging new business models that are impossible to replicate in traditional companies with centralized structures. As more mainstream VCs invest, it will encourage innovative new DAOs to experiment with novel incentives and governance schemes. These early bets could pay off enormously in the long run, which is what VCs aim for.
2. Killer Dapps or let’s say DAOs
Similar to the early days of blockchain technology when explosive decentralized apps like CryptoKitties and decentralized finance created immense buzz, 2024 will likely see a few highly viral “killer Dapps” emerge that showcase the true capabilities of DAOs.
These killer Dapps will demonstrate new coordination mechanisms and incentive structures previously impossible with traditional companies and apps. For example, a few ideas that could gain traction include a gig economy platform owned entirely by workers via a governance token share, a fan-run media studio decentralizing entertainment production, or even experimental DAOs like a “World Bank for MicroGrants” managed by recipients.
The few DAOs that gain the most traction in 2024 will capture widespread public intrigue for their ingenious combinations of economic incentives and governance processes. They will successfully bootstrap engaged communities that contribute value in exchange for ownership via native governance tokens. But here’s the thing; while most early DAOs have focused on managing treasuries of tokens, NFTs, and other digital assets so far, the introduction of end-user utility will be the main factor that could exponentially expand interest in decentralized autonomous organizations. The Dapps that crack this code will be the ones that define the public conception of DAOs for years to come.
3. DAOs Managing Digital and Physical Assets
So far, most DAOs have formed to collectively manage pooled funds of crypto assets like tokens or NFT collections. But as the model matures in 2024, we will see more decentralized communities emerge to steward physical spaces and assets in the real world.
A few Web3 organizations such as City DAO and DeGods have barely scratched the surface of this potential. However, it is expected that more communities will be formed around this idea.
4. Evolution of Governance Structures
It is impossible to talk about decentralized organizations without the mention of governance and if we are truthful to ourselves, we’d agree that the current governance model in many DAOs is broken.
As DAOs begin managing more significant assets, larger treasuries, and more complex initiatives, the limitations of current governance models will become more apparent. Issues around voter apathy, low participation rates, unintended consequences from proposals, and general meta-coordination challenges will require the evolution of how DAO decisions get made to prevent disaster.
In 2024, we will see active experimentation around reputation-weighted voting schemes, delegate structures, hierarchical decision flow frameworks, and identity mechanisms to provide more accountability within DAOs. For example, having different tiers of community members with more voting influence if they have a history of engagement. Or perhaps groups assigned oversight roles specifically to analyze proposals, make recommendations, and monitor for issues afterward. Formalizing core teams while retaining community ownership.
5. Legal Clarity
One of the biggest open questions around decentralized autonomous organizations currently is their legal status and which regulations apply or don’t apply to their operations. This is because DAOs are a new kind of organizational structure without clear precedent.
We’ve already seen some legal plays in the DAO scenes. From BarnBridge DAO getting fined by the SEC to Ooki’s DAO legal battle with the U.S. CFTC, regulators are expected to catch up to provide clearer legal guardrails for DAO operations related to assets, taxes, and securities next year.
These guidelines will provide more confidence for traditional institutions to participate. However, regulations differing globally will still pose challenges.
6. DAO Platforms & Tools
Specialized software, frameworks, and services will continue popping up in 2024 to make launching a DAO easier for non-technical teams. Best practices and underlying infrastructure will standardize to lower the barrier to entry significantly.
Already startups like DAOstack, Aragon, and DAOhaus have emerged to enable faster deployment of standard smart contract templates for voting mechanisms, token distributions, treasury management, etc. But in 2024, these “Web3 operating systems for DAOs” will move towards interoperability, composability, and easy customization for configurable governance. End-to-end solutions will enable very quick launches.
7. Fallouts & Rage Quitting
A governance risk largely unanticipated in these early years of DAOs has been the potential for major disagreements and fallouts between founding teams and the communities that later coalesce around their projects. However, 2024 may see the highest profile examples yet of these conflicts.
As founders feel their creative vision or control slipping away to token holders with differing priorities, emotionally charged power struggles can emerge that lead to rage quitting, chain splits, and complex migrations. For example, NounsDAO was caught in a web of disarray early this year after hundreds of holders rallied to exit the group.
Those are my ten predictions for where the fast-moving landscape of decentralized autonomous organizations is heading next. As autonomous internet-native entities powered by engaged communities, DAOs represent a pivotal shift in how human coordination and incentives can create change. 2024 promises to be another breakthrough year for this movement.