What are DAOs?

Decentralized Autonomous Organizations (DAOs) are a revolutionary concept in the blockchain and digital asset space, offering a new way to organize collective decision-making, manage shared resources and act towards a common purpose. 

DAOs enable governance and business in a future where software applications would be trustless (there is no middleman to manage data, charge fees etc.), decentralized (there is no “system admin” to change data without permission) and transparent (decisions, voting and discussions are open for all to witness). DAOs can potentially be completely fair and promote 100% accountability. DAOs are powered by blockchain based smart contracts and typically financed by digital assets. 

DAOs have innovated in many areas

• Governance (form consensus among strangers): DAOs bring governance theories from academia (game theory, mechanism design etc.) into real life in the form of voting and other decision-making mechanisms. Tokens on the blockchain enable this by encoding and executing concepts such as ownership, rights, power etc. For e.g. Various voting types, voting strategies and validation strategies can be combined in hundreds of different ways to suit any organization. 
• Community (action, not just words): While online communities have existed for a while, they have been oriented around communication – for e.g. social media, discussion forums, chat rooms etc. DAOs innovated on how a community can come together for a common purpose by adding new possibilities such as voting, ownership, profit sharing, fund raising, fund disbursement etc. For e.g. grants for developing public goods,  governing a trillion-dollar financial service, philanthropy etc. 
• Money (for the real world): Many DAOs have digital asset treasuries which could be automated to be spent (or replenished) towards the common purpose of the DAO. DAOs have shown incredible speed in fundraising (UkraineDAO raised $7M in 5 days) and very deep pockets (Optimism DAO had about $8B in March 2024) 
• Accountability (for the public): The fundamental nature of a public blockchain transaction is that it can be audited/verified by anyone in the world. This is enabled by a combination of digital signatures (who did it), timestamps (when did it happen), logic in the form of code (what exactly happened) on an immutable ledger. DAOs utilize these principles in varying degrees which provides unprecedented levels of transparency and security to processes. 

Here is a real life example which illustrates these concepts – A proposal was discussed to check if there is basic interest from the community, then a refined version was put up for vote with the end action proposed being a transfer of 5.33M ARB tokens to a certain recipients, the proposal fulfilled the governance rules, passed, and finally 5.33M ARB tokens (whose value was around $2.5M) were indeed sent to the recipient wallets. 

All of this makes DAOs a powerful tool for any community driven, impact generating, real world public good. 

DAOs can deliver significant value for public sector organizations

• DAOs can maintain transparency and accountability to donors and the public
• DAOs can foster better collaboration between multiple stakeholders, especially in contexts of coordinating collective action (e.g. programs involving local governments, implementing partners etc.)
• DAOs present the opportunity to plug into innovative fund-raising mechanisms utilizing digital assets thus widening the possibilities of fund raising
• DAOs can allocate funds towards specific goals while enhancing existing project governance and decision making 
• DAOs powered by digital asset treasuries, compliant with the latest digital asset regulations (such as KYC, Travel rules, Sanction lists etc.) can reduce the fees incurred when funds are transferred across counties. 
• DAO tooling and the blockchain space is dominated by open-source, modular software tooling which can be combined into a powerful digital public good 

While the popular DAOs are primarily powered by digital assets, one does not need to wait for institutional adoption of digital assets before trialing out certain components of typical DAOs - e.g. digital signatures, off-chain governance mechanisms etc. 

UNICEF is home to the first digital asset mechanism in the UN – the UNICEF Cryptofund - where digital assets are received, held and subsequently transferred out as payments to vendors or grants to early-stage startups aligned with the UNICEF Venture Fund. 

DAO tooling is predominantly open source, modular and simple to build on. They can be tested, deployed and integrated to create a coherent solution with relatively less effort compared to building a brand-new tool.  

In this spirit, the Ventures team in collaboration with a UNICEF CryptoFund portfolio company developed a prototype DAO, to test mechanisms for supporting public goods, learn from them and iterate this platform further. 

The first DAO prototype – Primero DAO

The Venture’s team collaborated with Primero and Xcapit, supporting the development of a DAO with the objective of bringing together the community to govern, allocate funds and take collective action for  Digital Public Goods with a proven track record of contributing towards SDGs. 

Primero is a widely deployed digital transformation tool for social workers supporting children and survivors of violence. Primero is not only used in more than 80 countries but is supported by multiple agencies who deal with child protection and gender-based violence, including UNICEF. The solution is available as an open-source DPG with a broad user base, community and thousands of stakeholders, making it an ideal candidate to leverage the benefits of a DAO. 

The Primero DAO is designed on the following premise:  

• Retaining relevance – Being a multi-agency, multicountry tool with thousands of stakeholders, can the central Primero think tank make relevant decisions by involving their community in an open DAO discussion forum? 
• Technical sustainability – While Primero has benefitted from hundreds of altruistic contributions of time/effort to develop their code/content base, can this be made more sustainable and focused by incentivizing contributions from the wider developer community (through mechanisms such as bounty programs) in exchange for digital asset rewards? 
• Financial sustainability – If Primero is enabled with a digital asset treasury, can we explore options to benefit financially from tapping into the various sources of funding for public goods available in Web3? 

We have supported Xcapit in October 2023 to develop this prototype and continue to explore its potential. 

Read more about the Primero DAO pilot here.