The vision for DAOs spans traditional corporate structures and communities. To achieve success, they must navigate both how to establish a thriving culture and how to find a viable business model. DAOs have the opportunity—and responsibility—to build the community first, which forms the layers upon which solutions for long-term viability can emerge.
The best DAOs actively nurture community well beyond the period of initial excitement towards a long-term sustainable culture. However, we see DAOs encountering a number of issues on this path, with limited solutions at the moment. The systems for forming cohesive organizations with both a viable business model and thriving culture are ripe for innovation.
In this piece, we'll explore the challenges faced by top DAOs and some of the best ways we've seen to keep up the community’s momentum. While we wade through the volatile early days of DAOs, we hope this shines a light on the opportunity ahead and gives you and your DAOs actionable ideas.
People need to feel trusted, valued, and accepted by the community in order to perform. This has proven true at both work and at home, especially as one’s basic survival needs are covered. Internal research at Google found that psychological safety is the leading factor in team effectiveness, while research into churches shows a direct correlation between the number of friendships formed and retention. We want to feel like we belong where we work and live—and interpersonal relationships are key building blocks.
Therefore, we should not be surprised to see this challenge surface in DAOs. DAOs are, in their barest form, a collective of people with a shared resource. And while a beefy treasury is considered by all to be a key factor in the operation of the DAO, everyone pointed to the strength of their community and culture as hyper-critical to achieve the potential of the organization—whether out of retention or emergence.
Culture determines social behavior. In an ecosystem like this, the engineering of monetary systems can only take you so far. There needs to be human behavior models that can produce desired results. By creating a culture, a set of norms, and mindsets that engage the individual on an ownership level, you set the tone for the rest of the ecosystem.
— Above Average Joe, BanklessDAO
Retention in most organizations is determined in large part by the culture and morale amongst members, as toxicity and the ensuing decline in participation are hard to recover from. The risk in DAOs is increased, as “there will always be another token that is hotter” (Mack McConnell, OrangeDAO) and the low barrier to liquidate ones under-utilized tokens only makes it easier.
At the core of it, DAOs want loyal members at the various rings of contribution. Loyalty comes not solely from rising token prices, but through community & connections—by being emotionally tied to a group of relationships.
“Everything else in web3 is replaceable—but humans are not copyable.”
— Louis, Twoplus DAO
DAO operators cited collective emergence—bringing together diverse individuals and cultivating bottoms-up inception of projects, squads, and strategy—as one of the traits they’re obsessed with solving. While many participants may seek straightforward paths for personal financial gain through clearly defined bounties and roles, DAOs champion members taking the initiative to improve the organization itself. Furthermore, the culture itself materializes out of the community formed, potentially evolving the culture past what the founding team envisioned. The increase in stakeholders’ meta-involvement stands in contrast to traditional hierarchies, where most aspects remain top-down.
That being said, DAOs have found themselves facing headwinds that limit the ability for members to form the aforementioned communal bonds. These are the top issues noted in our conversations with contributors and core team members.
The novelty of a “we’re going to _________ together” may interest and attract people, but the mission serves as the orienting glue that roots all activities. The lack of a clearly defined “why we’re here” can lead to this common community progression: People join with initial excitement, post their intros and gms, look around confused, and then, as interest wanes, migrate elsewhere. Buying into a tokenized community gains access—but then what?
As a group scales beyond Dunbar’s theoretical limit (~150), the harder it gets to gain deeper context and connection with other members. Compare a group chat of ten people with a server of two thousand, and you’ll quickly notice that the depth of conversation between members weakens. This can make communal interactions feel like walking into a crowded room, not seeing anyone you know, making a couple of laps, and walking out.
We tend to start with the tools we’re aware of (Discord) and try to hammer them into an organization, as opposed to identifying deeper needs and picking the tools. Misconfiguration of said tools can lead to further pain (e.g. prescribed channels) while a valiant attempt at fostering certain types of conversation, can artificially segment the population and inhibit emergence.
Communities rely on a boundary to help someone understand when they’ve crossed said barrier and are now a member. We strive to build welcoming and inclusive organizations, so publicizing a link to Discord or Telegram makes it easy for someone to start on the path to joining an organization. However, not establishing how one formally becomes a member, and when one is amongst members, weakens that boundary. The resulting lack of clarity over membership status and perceived level of investment makes it easy to disregard one's membership and move on to the next organization.
As we heard repeatedly, the more one finds themselves active in Discord, attending town-halls, and reading proposals, the more one feels a sense of connection to the larger entity. However, the initiative to participate is almost entirely on the individual. Providing a welcoming environment to channel initiative is thus crucial. Without it, prospective contributors can feel spurned and will ultimately leave. We’ve found this ourselves in our current season—as we narrowed down our focus to a few core workstreams, eager participants interested in other domains suddenly felt they didn’t have a place in the DAO.
In our conversations, DAOs have developed a few arrows in the quiver, beyond the random Discord bots and introduction channels. While using these as a starter pack for your DAO, it’s worth noting the undercurrent of dissatisfaction that operators have shared with the current solutions.
While initially surprising to see IRL meetings rank so high given the continued erasure of physical location from our online identities, relationships are built through shared experiences and in-person connections achieve this better than most. Numerous FWB members and operators reported that the primary value of FWB was meeting others IRL at oft-legendary events. One of their first products, Gatekeeper, bridges on-chain/IRL. Cabin is taking it further by inviting other DAO contributors on-site.
If you can’t connect IRL, connect online. While asynchronous chat is the easiest to implement, it’s also the lowest-fidelity. This is why many DAOs establish a regular set of virtual town halls and coffee chats. “Go towards human voice/video to create stronger connections. Written words can have a difficult time connecting in real-time,” suggests Greg A, Blank Foundation. While Zoom is a commonly used tool, Gather, Zed Run, Discord voice chat, and Twitter Spaces may be better for psuedo-anonymous contributors.
gm. OK, we need a bit more than that. Rituals are repetitive behaviors that reinforce cultural values. “The things that are culturally encouraged are the things that should return energy back into the social system itself,” notes Above Average Joe, BanklessDAO. As an example, PizzaDAO opens every meeting with the same greeting. As we’ve written before, rituals can shine the most in onboarding.
We’ve all seen the Discord and Telegram links that have superseded all others as the de-facto link-in-bio. Some DAOs however, including Twoplus and CryptoPackagedGoods, add personal referrals as a governor. While this has pros and cons, this increases the likelihood that a new entrant has at least one interpersonal relationship within the DAO.
The concept of sub-DAOs taking on a set of responsibilities within the greater DAO opens up the opportunity to narrow the group one is expected to integrate with to a more intimate number. Fractalizing of the larger DAO into micro-communities resembles that of larger organizations, that counter the limit of Dunbar’s number with intense sharding. Within that tighter bound and more defined mission of a particular team, one may find a more regular cadence and purpose by engaging with a smaller group. In addition to focusing on bonds within a particular team/guild, others noted that the intermingling of people across different parts of the organization was critical to fostering a greater sense of belonging to the whole, as well as serendipitous connections.
Bringing on a diverse set of people and cultivating serendipitous connections is perfect for the emergence of sub-cultures. Looking beyond the obvious Web3-related fodder of memes and NFTs, some DAOs have cultivated sub-cultures that, in turn, retain and attract like-minded folk. For example, GoodWork, through attracting creatives that, almost by definition, didn’t fit into the mainstream culture, has fostered the environment of a recovery program where members share their own struggles. Cabin is cultivating a fierce D&D community. FWB, amongst its many cozy corners, is home to people swapping Zillow listings, flexing their coffee game, and shilling their parenting tips. We also spoke to some DAOs that intentionally chose to avoid this, keeping all communication on-topic to the mission of the DAO. As you set up the cultural framework, consider deciding which direction to take.
We’d be remiss if we didn’t stress again that, like most aspects of Web3, it’s still incredibly early. As the next billion people join or create DAOs themselves, there remains an incredible opportunity to build rituals, tools, and initiatives that welcome and retain a stable pool of active contributors—the substrate that nourishes the creation and fulfillment of the stakeholders vision.
As a final note, this is a challenge we’ve witnessed ourselves within DAO Masters. The first season was the spark that got us excited (which, like many, began as a simple Twitter thread and ensuing Mirror campaign), our second season was a Cambrian explosion of initiatives and teams, and our current third season has been an attempt at harnessing the energy into repeatable processes.
Throughout our third season, we found ourselves in a tender time where searching for long-term viability has brought up different challenges. Our core contributors have been open about how our desire to focus on a sustainable business model has hampered our culture and community. Work is being done, but you can feel the vacuum of a quiet community. The one north star at DAO Masters is continual experimentation and reflection. While some experiments are bound to fail, we are always operating with the goal of producing insights to serve the greater DAO community.
Thank you to the operators at Twoplus, OrangeDAO, BanklessDAO, PizzaDAO, PieDAO, Arweave, DAOMasters, mClub, pubDAO, and Friends With Benefits for contributing their experiences and insights to this piece.