What is Investment DAO? | OpenPad Web3 Investment
A Pooled & Trustless Way of Investment - The Leverage of Collectivity
TL;DR:
Investment DAO is a more democratized way of pooled investment, collectively raising and investing the capital into digital or physical assets (with the legal entity), allowing a large part of the population to join and be a part of the trust-minimized decentralized autonomous organization.
The decentralization of VC funds lowers the barriers of early-stage investment to the public or retail investors to take the advantage of risk-high-risk-reward assets.
Oh DAOs, My Complicated Darlin
A Decentralized Autonomous Organization (DAO) is a blockchain-operated organization running by pre-defined software rules. As DAOs are decentralized (!), any member can propose changes to the organization’s direction and the way members cooperate, and the community and all members can vote on those changes.
A DAO is, in its most basic form, a collection of smart contracts that allow people to exchange money, services, or property without the involvement of a third party.
DAOs make use of smart contracts, which are simple bits of code that run automatically when a set of conditions is met. The DAO’s rules are established by these smart contracts.
Decentralized Control and Governance
DAOs are a new way of thinking about how we operate as humanity, business, and organizations. The corporation is administered by code, and its structure is based on smart contracts rather than a single board of directors.
As a result, having a CEO is superfluous because everything is automated (!), and the members are involved in the decision-making process collectively. As a result, everyone who has acquired the cooperation means of DAO - tokens or shares - in the company owns the control.
Hence, DAOs are internet-native organizations that are member-owned and governed. They have built-in repositories that only their members can access, and they make decisions by voting on proposals that influence the organization over a certain period of time.
Who Says What?
NFTs, or tokens, are used by DAO to coordinate itself. Holders of these structures eventually get voting power. Members can make suggestions to improve the organization, and other members can vote on which suggestions are the most popular or beneficial. Furthermore, having more organization tokens increases the voting power of members in these ballots. To be entitled to a DAO, someone must validate possession of the organization’s tokens in their wallet; inactive holders may have their membership re-delegated.
Individuals with a stake in a DAO have voting rights and the ability to influence how the organization functions by forsaking some value for a period of time. They have the power to decide on or propose new governance suggestions as a result of their investments.
Investment DAO
Investment DAO is a more democratized way of pooled investment, collectively raising and investing the capital into digital or physical assets (with the legal entity), allowing a large part of the population to join and be a part of the trust-minimized decentralized autonomous organization.
It’s where the financial collectibility and network effect are embodied into something useful, allowing individuals to combine their purchasing power to own assets collectively with a shared account that would normally not be available individually.
These corporations use blockchain technology, which creates a secure digital record for the distribution of data and wealth. Moreover, they operate based on a data economy and data-compulsive monetary policies. Whoever owns self-sovereign data can monetize it in the data economy. Interior capital is used to incentivize organization members to maintain the organization and guarantee that procedures function smoothly in a trust-minimized environment. Let’s look at a high-utility use case of Investment DAOs - VC funds.
A Decentralization Whip to VCs
General partners (GPs) establish and administer a venture capital fund that is allocated to fund mostly early-stage corporations and startups with the end objective of capital investment.
GPs are in charge of identifying investment opportunities, conducting due diligence, and closing investments in their portfolio companies.
However, these VC funds are a highly exclusive form of investment as only high-capital investors can join. We can model this capital deployment as a one-to-many, meaning that a centralized capital power (one) invests their capital into many startups; hence they leverage the power of being early, which directly correlates with the potential return on investment. Another thing we can mention is that these capital deployment models are mostly illiquid; it’s hard to cash out when needed. They can cash out their VC-based shares by selling these allocations to another investor privately or if the startup goes public.
Things change when barriers are lower…
The decentralization of VC funds lowers the barriers of early-stage investment to the public or retail investors to take advantage of risk-high-risk-reward assets. Individuals pool their capital to form a community-run fund to invest their capital into high-barrier and exclusive startup assets. Since the necessity of VC-based capital is reduced, everyone can deploy their capital at the cost of their best interest, making it inclusive.
In community-run VC funds, investors can liquidate their positions in the fund before the startups are acquired as it’s now publicly traded assets after public IDO/ICO/IEO rounds which makes it liquid.
We can model this capital deployment as a many-to-many, meaning that a decentralized capital power (many) invests their capital into many startups.
A decentralization in capital treasuries is not just related to the size of investors investing in the assets; it’s about the decision-making and the way capital deployment works.
Needless to say, Investment DAO is more than community-run VC funds, and there are many more Investment DAO models; for example, DAO-operated investment clubs, fractionalized NFT clubs, and reserve currency protocols are just three examples of Investment DAOs.
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