Does it run on a one-person, one-vote model?or based on your number of tokens catch?
We do both – we have weighted voting, which measures your vote based on your share of the DAO. We do this to influence our constitution: who we are, our investment themes, how we allocate our investment funds, and so on.But we limit our distribution to ensure that no one person can have too much influence on the vote
We have the opportunity to start over and take the best parts of the existing structure and the new opportunities that Web3 offers.
And then in DAOs, we have many different domains that oversee things like investing in protocols and money management, and they are child DAOs that are given parameters that they can enforce.
So when an investment opportunity arises, we assess which group is best to evaluate it, and then they will have the right to go and meet the founders, do their due diligence, and then vote, and it’s on a per-person basis. As long as the group is 75% approval, they can invest up to $100,000 on behalf of the DAO.
Can anyone buy tokens in your DAO?
No, we only offer units by private invitation to those with whom we have a relationship. But if we’re going to build a rapport, build a relationship with someone and feel like they’re really going to join the DAO, if they have the relevant skills and they’re an experienced investor, they can be brought in.
Under current Australian law, you can’t actually structure a company as a “true DAO”. So how is the Upside DAO structured at the corporate level?
Our structure is a unit trust as that is the best fit for what we want to do at the moment. We want to be an extension of the traditional angel investor group, and we believe the funding will look very different technically, especially with Web3. But we recognize where we are today, and we use the best structure available.
Is your treasury fiat or cryptocurrency?
We hold funds off-chain and on-chain. Off-chain funds are funds that we use to pay for DAO services and overheads for generating transaction flows. We’ll spend off-chain to help find the best founders, and then we’ll invest on-chain. Our treasury is currently U.S. dollar-pegged dollar coins as we believe this is the safest stablecoin asset.
Isn’t this a risk? We’ve seen some stablecoins fall apart completely, and other instances where DAOs invest their treasuries in risky assets and lose all their assets.
We think USD Coin is very stable as it is backed by a 1:1 reserve asset (mainly USD). There’s always a risk, but it’s an acceptable risk and we feel it’s very low.
We do have a group at the moment that is looking at making the treasury work, thinking about whether we would generate farms or decentralize our assets and hold some other things like ethereum. We are honored to have Apollo Capital and others working as asset managers in The DAO to help create these strategies.
Cryptocurrencies have had a pretty rough time over the past 12 months, is that good for you as an investment group or will it make things more difficult?
Timing wise, it’s good for us. Other funding options have dried up, so being a group that invests capital strictly in Web3 projects is currently in favor of these founders. And our expectations for returns are much longer, which means we can better align with our founders and make our vesting period longer.
And then when those projects are launched, there are better prices and better expectations in the retail market, which is positive for everyone, more sustainable, and better for the overall space.
So do you think we will start seeing more DAOs in Australia in the future?
There is a lot of optimism that they can be a really effective structure – especially when it comes to investing, that they make sense and work well. We have the opportunity to start over and take the best parts of the existing structure with the new opportunities that Web3 presents, so I do think we’ll see DAOs become more prolific. I think we’re going to see a lot of other areas coming up where they work well.
At the same time, we are taking lessons on the strengths and weaknesses of DAOs. They are certainly not the solution for all business models.
My experience with DAOs over the past 12 to 18 months is that they are not yet very autonomous and very inefficient. So we’re certainly trying to figure out the right way to build a truly decentralized autonomous organization, and there’s a lot of optimism in the compliance space that they understand what we’re trying to achieve and will try to make sure the regulations are fit for purpose.
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