The rapid emergence of DeFi, NFT and Web3 protocols in recent months has resulted in the almost ripple-like development of Decentralised Autonomous Organisations (DAOs), which are essentially communities with a collective ownership of a particular blockchain project.
Today, DAOs are used for a vast range of use cases and face various challenges in terms of scaling, governance, and maintaining a balance between the interests of investors, builders and the community. In this case, these organizations would benefit greatly from a suite of customised DAO tools.
In this report, we will explore the different DAOs and the rising vertical of DAO tooling within the Solana ecosystem. As we explore existing DAO tools, this report will also highlight the possible advancements we can see to enhance the day-to-day operations of DAOs in the near future. Before we dive in, a quick primer into the types of DAOs and how they benefit from DAO tools.
DAOs and their Use Cases
The organisations operating DAOs include DeFi protocols like Solend and Mango Markets, NFT Protocols like Metaplex and for a first, humanitarian projects like Aid For Ukraine. From a general perspective, DAOs typically handle a number of use cases such as the following:
Governance Proposals, in the case of DAOs, refer to the system to implement any form of change to the protocol owned by the DAO. Changes are usually proposed through updates on the protocol’s smart contracts and members of the DAO typically have to own a certain amount of the token before making any proposal. These changes are passed or rejected based on the overall vote provided by members of the DAO.
For instance, Solend DAO’s first governance proposal, SLND1, was implemented to enable emergency authority for the project owners when they foresaw that their protocol was at risk. The proposal was open to voting by all members of the DAO i.e owners of the Solend (SLND) Token.
Management of Treasuries
It is no surprise for protocols within Solana, particularly DeFi protocols, to manage treasuries holding large amounts of capital. Treasury management is a crucial aspect of the DAO as it maintains transparency within the organisation. Hand-in-hand with governance proposals, every member can then see the where funds within the treasury are moving towards and how they are diversified.
For example, as seen on the figure above, Serum’s DAO manages 4 Treasury accounts with the biggest account handling over 19.8M Serum (SRM) tokens. With the use of governance proposals, the Serum DAO can disburse grants (in SRM tokens) to support the building of new projects, with the approval of the community. Some projects receiving SRM grants include Zeta Markets, Vyper Protocol, OpenSerum and Mango Markets.
The Need for DAO Tooling
Is there even a need for DAO tools?
As the number and size of decentralized organizations grow, the ecosystem would require a ‘standard’ for the creation and management of DAOs (similarly with the case of Metaplex for NFT platforms and Serum for DeFi protocols). Additionally, day-to-day operations would become increasingly complex or time-consuming — For instance, transferring funds within a DAO of 5 members would be a fairly straightforward process; however, a DAO of over 40 people would see this process very time-consuming if the transfers were done manually.
Thus, there is an inherent need for robust tools to manage these operations more effectively. With that, let us take a look at some of the existing DAO tools on Solana.
Current DAO Tools in Solana
Within the Solana ecosystem, different DAO tools are used to facilitate the various unique use cases of DAOs — these include the creation of DAOs, the collective management of wallets and treasuries, and the automation of bulk fund transfers. In this section, we will be diving into three extensive protocols in detail; Realms, Squads and Streamflow Finance.
Realms is a platform that enables communities to easily create and manage DAOs. The platform serves as the frontend for building and maintaining DAOs for DeFi, NFT and Web3 organizations alike (as seen in the section above).
In recent months, Realms appeared to be the point of assembly for many of the biggest DAO communities in the ecosystem like Solend DAO, Serum DAO and MonkeDAO. As seen in the figure above, the platform enables DAO members to keep track of changes to their protocol, as well as manage their treasury funds and DAO programs. Users can view the ongoing proposals that are in the pipeline and view recent activity of accounts in the DAOs treasury. Acting as the front-end for SPL Governance, Realms provides a “flat” hierarchical structure where every member/token holder has a say in the community’s direction.
Squads is a management protocol for DAOs where users can organise themselves in a “Squad”. Its infrastructure is designed for participants to democratically manage their on-chain assets. Members can engage in activities like providing services to DAOs, pool and co-invest their funds and participate in proposals on their Squads’ roadmap. What binds the Squad together is a multisig (multi-signature) wallet in which transactions require the authorisations of every member. Each Squad member can contribute funds to the wallet and carries a vote on how the funds can be utilised.
As an alternative to multisig, users can also opt to form the Teams option. When creating a Teams wallet, members operate with a wallet where membership votes are “weighted” i.e. votes of certain individuals will carry a heavier significance depending on their role in the DAO.
The figure above shows the overall information of an individual Squad. We managed to build a multi-signature wallet with 2 owners within minutes, setting the threshold (i.e number of signers required to authorize a transaction) to be any 1 out of the 2 owners. This means once a transaction is initiated, the threshold of 1 vote is needed in order for the transaction to be authorised. Thresholds in Squads can also be changed. In every case, DAO members must connect their Solana wallet with the Squads App. Fulfilling the essential functions of DAO tools, users can always refer to transaction history, information on co-owners and activities in the vault.
The Vault is a core feature of Squads. At essence, the Vault is a separate shared wallet that can be accessed by any wallet connected to the squad. The feature allows teams to deposit tokens and NFTs into the vault, allowing them to collectively initiate and approve transactions based on the Squad’s threshold. This serves as a more flexible method for smaller DAOs to make payments without the trouble of creating multiple governance proposals.
For bigger teams like DAO Venture Capitals (VCs) making regular payments to members within the DAO, it would be a hassle to make individual transfers to multiple addresses. Streamflow solves that issue.
Streamflow is a distribution tool that effectively streamlines common financial processes like batch payments, vesting and proper storage of financial records.
Apart from saving DAOs a large bulk of time by facilitating these workflows, tools like Streamflow serve as a building block for many other potential payment-related verticals; customer loyalty programs or a gig economy within the Solana ecosystem, to name a few.
Future Developments in DAO Tooling
(Disclaimer: a fairly speculative section.)
The tools we observe above provide the ground layer for increased efficiency within DAOs in Solana. However, DAO tooling is still a fairly nascent vertical and there is still plenty of room for more innovation to take place on the fronts of treasury management, interoperability and accommodation of the masses.
With the development of DAOs picking up rapidly, we can expect the unraveling of many novel ideas revolving around tooling. Some developments that may take place in the (very) near future include direct access to DeFi strategies for DAO treasuries, cross-platform collaboration with Web3 applications and more steps being taken towards mass adoption.
Yield Strategies for DAO Treasuries
Currently, DAO interfaces like Realms provide lending options for DAO Treasuries to earn a small interest rate as seen in the figure below.
However, these large sums of capital could be earning substantially more if other DeFi yield-generating strategies (such as Orca Whirlpools, Tulip Farms or automated option strategies like Katana Vaults/Friktion Volts) were available on the platform.
The figure above is a mockup interface taken from the suggested ideas (DAO Category) from the Solana Riptide Hackthon. The interface shows a Mango DAO treasury with a diverse range of available strategies to earn interest on top of the Mango Lending Pool — namely the Katana MNGO Covered Call Vault and the Orca MNGO Aquafarm. The future may also see the integration of additional Paired LP (Liquidity Pool) strategies accessible to DAO treasuries.
Cross-Platform Collaboration Within DAO Tools
As it stands, DAO tools are effective on their own. However, it is important to look beyond the individual functionalities of these tools — with composability and interoperability being a crucial premise for building on Solana, DAO tools could look to integrate with other Web3 apps. One example that can be used to visualise this is the interoperability between multi-signature tools like Squads and Web3 content publishing platforms like Wordcel.
Wordcel allows individual users to connect their wallet and publish their articles on the platform. On top of that, would it be possible to have multiple users collaborate on an article?
Since Squads allow multiple users to connect their wallets to a Squad Vault, the interoperability between Squads and Wordcel could enable collaboration on text documents, almost like what we would see on Web2 applications such as Google Docs or Notion.
Though this case study is purely hypothetical, similar ideas can open up a range of possible integration opportunities between DAO tools and Web3 applications in the ecosystem.
Steps Taken Towards Mass Adoption
For this season’s Summer Camp Hackathon, one of the suggested ideas under the DAO category highlighted efforts to ‘onboard normies to a DAO’ as seen in the figure below.
The purpose of these developments cannot be emphasized more; in order for mass adoption in Web3 to take place, these platforms have to be made to cater to the average Joe. In this case, DAOs appear to be an effective way to replicate the standard Web2 organization and serve as a bridge between Web2 and Web3. (Click here to stay up-to-date with the Summer Camp developments in Singapore.)
Based on the cases above, it is inherent that DAO tooling has not seen its best potential yet. With ideas under the DAO category being more prominent within Solana Hackathons, we would not be surprised to see the emergence of high-quality DAO tools in the coming months. These developments can possibly result in a continued knock-on effect — in other words, DAO tools developed in the future would then require even more tools in the form of analytics, and the cycle goes on.
If DAOs and their tools continue to progress at this pace, it will only be a matter of time before traditional corporations see the benefits of a DAO structure and its efficiency in making executive decisions. The rise of this vertical is a big step towards industry-level adoption of Solana.
Governance Proposal SLND1: https://app.realms.today/dao/SLND/proposal/HuaL6cDtuNtfnJgvwMnYiZDHVCoLAuDtVFgJD8kYChJ4
Serum DAO’s Treasuries: https://app.realms.today/dao/SERUM/treasury
Mango DAO on Realms: https://app.realms.today/dao/MNGO
Serum Zeta Markets Grant Proposal on Realms: https://realms.today/dao/SERUM/proposal/BZx7ve2azLXWFyuZh5ABcKHuetmw9q3wewMv3UMkFGEr
Serum Vyper Protocol Grant Proposal on Realms: https://realms.today/dao/SERUM/proposal/BT8YjMrD777UVoeTKJdUErSPEqYabQXeTP3WpqfbbBM8
Serum OpenSerum Grant Proposal on Realms: https://realms.today/dao/SERUM/proposal/6w5fM9Rxb6ZZRuRq3r5BoayBYYh6s8aZiAn4zXJ8xBk
Serum Mango Markets Grant Proposal on Realms: https://realms.today/dao/SERUM/proposal/G3XgEF41vJHT9M2FU8xcB3SD7pvPjosVU2dBJzndzDoF
Streamflow Finance: https://streamflow.finance/
Solana Riptide Hackathon Ideas: https://solana.com/riptide/ideas
Solana Summer Camp Hackathon Ideas: https://solana.com/summercamp/ideas