Decentralized autonomous organizations (DAOs) have been generating a lot of noise lately. Collector DAOs like FlamingoDAO are buying NFTs from blue-chip projects like Bored Ape Yacht Club and Crypto Punks. ConstitutionDAO raised almost $47 million in order to buy a copy of the US constitution. It was minutes away from succeeding before being outbid by a billionaire.
These DAOs showed how quickly people on the Internet can align and organize themselves, and self-govern for a common purpose. This could be towards a specific cause, building out a project, or just wanting to have a common interest community with events and such. If you want to learn more about DAOs, make sure to check out our in-depth guide here.
A big part of the DAO scene are also investment DAOs, and today, we’re taking a look at perhaps the largest of them all - BitDAO.
What is BitDAO?
BitDAO is an investment DAO created in 2021, and supported by Peter Thiel, Founders Fund, and Bybit. It has the world's largest DAO-directed treasury with around $2.5 billion worth of assets under management. BitDAO's goal is to support the growth of open finance and help decentralized token-based economies.
Before its launch, BitDAO raised $230 million in a private sale. It obtained funding from investors such as Peter Thiel, Founders Fund, Pantera Capital, and Dragonfly Capital. Institutions like Jump Capital, Spartan Group, Fenbushi, Alan Howard and Kain Warwick of Synthetix, support BitDAO. The DAO later raised another $365 million upon the launch of its governance token, BIT.
In addition to the fundraises, Bybit, a large crypto exchange, has pledged to provide 2.5bps of all futures trading volume to BitDAO's treasury which currently stands at around $1B per year. Bybit's contribution will decrease over time. This contribution is meant to provide the initial capital to kick off the DAO.
Since July 2021, ByBit has contributed more than $400 Million in the form of digital assets like ETH, USDC, and USDT to the BitDAO treasury. Most of it is currently composed of BIT and ETH but will slowly diversify with token swaps.
BitDAO has attracted tons of token holders and contributors. Currently, more than 15,000 people own its governance token - BIT.
How does BitDAO plan to grow its ecosystem?
BitDAO will expand its ecosystem by funding different projects in the crypto space. They will support projects and initiatives in the following ways:
1. Investment grants
BitDAO will provide grants to teams who work on products or research that would further develop and benefit the crypto industry.
2. Partner with projects and token swaps
Projects that align with BitDAO’s interests will receive funding in the form of token swaps. These swaps will incentivize BitDAO to support the projects and help them become category leaders. One of the areas the DAO wants to fund via token swaps and partnerships is spot and derivatives DEXes.
3. Developing a few of their core products
BitDAO will also develop its own products that will focus on making DAO management easier and more effective. Some of them include on-chain and off-chain governance solutions.
Here are a few DAO related tools that are currently in the works:
Onchain Governance - To allow proposals to be actioned without operators. Likely to be battle-tested with a portion of the current BitDAO Treasury.
Risk Management - To incentivize experimental ideas while managing economic risks to BitDAO, especially for partnering with Autonomous Entities. Likely solutions include bonding and insurance mechanisms.
Governance Suite - A public repository of solutions, policies, best practices and references around governance and treasury management. This can be referenced by future DAOs and autonomous entities for fast creation.
What is the BIT Token?
BIT is BitDAO's governance token. When BitDAO was established, its governance token launched on MISO, a launchpad for crypto projects on SushiSwap. BIT has a fixed supply of 10B tokens. 60% of those are reserved for Bybit, 30% for the BitDAO treasury, 5% for launch partners and 5% were allocated through a private sale. While ByBit received the largest initial allocation, it has subsequently delegated some of its voting power to partners such as Windranger Labs and Pentagon Labs.
You can buy BitDAO's native token from crypto exchanges like Bybit, FTX and Gate.io.
BIT token holders have to delegate their voting rights to an address, so they can create proposals or vote. They can delegate to a single address, including their own, only once. When delegating, the tokens are neither locked nor transferred. That way, when a delegate's wallet gets compromised, the BIT tokens won't be lost.
The BIT token holders govern BitDAO. They can create different proposals about the DAO's activities and vote on them.
Some of the key contributors to BitDAO are:
He found his passion for blockchain way back in 2013 as an active Bitcoin trader. Jonathan co-founded Blockchain at Berkeley to help empower creators in the crypto space. He is now a managing partner at Mirana Ventures and has submitted a successful proposal for the creation of EduDAO.
He is the founding partner of Dekrypt Capital, a blockchain investment firm. Ronen is also a strategic partner with Forte, an end-to-end blockchain platform focused on gaming and NFTs.
This person remains anonymous but claims to be a managing partner at Windranger Labs. The Lab is one of the partners Bybit delegated some of its votes. Windranger Labs is a research and development center that’s working on protocols for BitDAO.
How has BitDAO allocated its funds so far?
BitDAO's first partner was SushiSwap's DAO. It provided support for governance and treasury operations in exchange for 2.6% of BIT's total supply.
Also, BitDAO has made some notable investments such as:
1. Allocating $33M in EduDAO in partnership with Mirana Ventures (a venture partner of Bybit)
EduDAO has university partners such as Penn Blockchain, Harvard Blockchain Club, UC Berkeley, Oxford Blockchain Society, and Tsinghua University Students Blockchain Association. BitDAO will allocate $33M to Education DAO in three years, so that would be around $11M per year.
EduDAO will focus on connecting university ecosystems to improve blockchain education. It's an independent committee that funds projects, working on standalone product development. The funding EduDAO got from BitDAO, and other partners will be allocated to different university DAOs in the form of grants.
Each project will be completely independent, having control over its funding. This process will provide the teams with creative freedom. In exchange for that, the projects will participate and contribute to BitDAO's governance. EduDAO will fund different education programs in the crypto space.
BitDAO will support the different university DAOs by:
Creating proposals for product adoption, Autonomous Entity (AE) creation, token swaps, grants or additional funding.
Building tools for DAOs.
Sourcing talent from BitDAO’ AEs or partners.
2. Providing zkDAO with $200M worth of crypto assets
zkDAO is created in partnership with Matter Labs, the organization behind Ethereum's layer 2 solution zkSync. BitDAO will fund zkDAO with $200M worth of crypto assets in over 5 years to help expand the zkSync ecosystem. This makes around $40M in funding, which would be released from BitDAO in the form of milestone rewards.
zkDAO will use the funds to work on better infrastructure, security, and research and development grants. zkSync has been working to fix the high network fees on Ethereum.
They will also fully decentralize the governance of the platform and open source all development, making zkSync fully aligned with the crypto’s ethos of decentralization. zkDAO wants to support active contributors, so they are making a clear separation between Partner and Voting rights.
People or entities that contribute funding or other resources will get partner rights while those who make meaningful contributions to zkDAO will get voting rights.
3. Seed investing $400M for the creation of Game7
BitDAO has invested in it in partnership with Forte, a company focused entirely on crypto game development. Its team has members that have worked in big game developers like Riot Games, Unity, Sony and Rockstar Games.
Forte has raised more than $400m from experienced crypto investors like Andreessen Horowitz, a16z Crypto, Griffin Gaming Partners, Griffin Union Grove Venture Partners, and more.
Game7 will receive around $500M in funding to focus on enabling blockchain game economies. $400M of the money will come from BitDAO while the remaining $100M will come from Forte.
Game7 will focus on three different things to further blockchain game adoption:
Funding open-source public goods.
Providing strategic capital with industry know-how to promising gaming projects.
Game7 will also fund different player DAOs, which would be player collectives that will manage assets and invest in new games. They will likely have marketing incentives that are funded by the game token treasuries.
Is BitDAO a revolutionary step in funding crypto projects?
Markus Winkler | © Unsplash
BitDAO shows that there's a different way to fund projects than your typical VC/investor fund. BIT token holders can create and vote on proposals that determine the future of the project. If they are unable to actively participate they can also delegate their governance votes to another community member.
BitDAO has managed to secure big venture partners who are investment experts and a large treasury of more than $2.5 billion in decentralized assets. This is an exciting start, and also interesting that they are willing to deploy their funds through different mechanisms and structures to achieve their goals. Only time will tell if these bets will pay off, and whether the early investors and BIT holders will be handsomely rewarded for their capital. But BitDAO has an enormous potential to be a real disruptor in the crypto investing space.
Tanyo is a freelance crypto and blockchain writer. He loves writing, crypto, and Big Macs. Follow the author on Twitter @TanyoGochev