Original text: “DAO Tools and DAO Governance | Comparative Analysis of DAOLens, Aragon, and Tally”
This research report focuses on the relationship between DAO tools and DAO governance, specifically involving:
- On-chain/off-chain governance, and comparison of governance models
- Introduction to DAO Tools
- Selection of DAO Tools
- The Future Evolution of DAO Tools
PART 1. About DAO governance
1.1. On-chain governance
On-chain governance refers to the decentralized governance process that takes place in a blockchain network. It involves a way for all participants in the network to reach consensus on issues such as protocol parameters, software upgrades, and resource allocation. The goal of on-chain governance is to achieve a network that is fair, transparent and not controlled by a single entity. On-chain governance is generally implemented through the Governor governance contract.
The Governor smart contract is a commonly used open source governance contract that allows token holders to control the DAO using entirely on-chain based voting. Smart contracts can be designed to automatically execute proposals based on the results of on-chain voting, eliminating the need for a trusted third party or core team to formulate voting results. Proposals can do anything on-chain:
- Send funds from treasury
- Update the parameters of the DeFi protocol
- Change the permissions of the child DAO
- Minting NFTs
- Or modify the Governor’s own rules
Decentralized protocols have been in constant development since their public release. Typically, the initial team retains control of this evolution during the initial stages, but eventually delegates it to the stakeholder community. This process by which the community makes decisions is called on-chain governance, and it has become a core component of decentralized protocols, driving various decisions such as parameter adjustments, smart contract upgrades, integration with other protocols, financial management, appropriations, and more.
1.2. Off-chain governance
Off-chain governance refers to the governance process that takes place outside the blockchain network. It usually involves the way community members, project teams, core developers, etc. discuss and reach consensus on non-blockchain platforms.
Key features and benefits of off-chain governance include:
- More flexibility: off-chain governance is not restricted by blockchain technology, and can be flexibly discussed, negotiated and made decisions, facilitating manual intervention and rapid response.
- Diverse participants: There are more diverse ways to participate in off-chain governance, which can include different stakeholders such as community members, project teams, and core developers.
- Multi-channel communication: Off-chain governance may involve various communication methods such as offline communication, forum discussion, discord, telegram, etc., which helps to collect more opinions and suggestions.
However, off-chain governance also has some disadvantages:
- Less transparency: The off-chain governance process may not be transparent enough to be tracked and audited in real time.
- Easily affected by centralization: The decision-making process of off-chain governance is easily influenced by centralized entities such as project teams and core developers, which may lead to abuse of power and transfer of benefits.
- Governance decisions may not be implemented according to proposals and consensus: The decision-making results of off-chain governance need to be implemented manually, and the execution process is not very controllable and reliable, and is easily affected by human factors.
1.3. Comparison of governance models
Governance does not mean that the higher the degree of chaining, the better. Governance is a means, not an end. DAO should choose the appropriate governance model according to the actual situation.
Both on-chain and off-chain governance have their pros and cons. On-chain governance is characterized by a high degree of transparency, automatic execution, and extensive participation, but it may face challenges such as low participation and insufficient incentives. Off-chain governance provides more flexibility for manual intervention and quick response, but its decision-making process may not be transparent enough and vulnerable to centralization.
In fact, many blockchain projects and decentralized applications have adopted a combination of on-chain governance and off-chain governance to achieve more efficient, fair and sustainable governance. For example, some projects make core decisions on-chain, leaving specific implementation and detailed discussions to the off-chain environment. Such a hybrid governance model makes full use of the advantages of on-chain and off-chain governance, which not only ensures the transparency and wide participation of the governance process, but also retains a certain degree of flexibility and human intervention capabilities.
PART 2. Introduction to Comprehensive DAO Tools
Tally (on-chain governance)
- 2.1.1 Positioning: On-chain Governance Dashboard
Tally includes a voting dashboard, proposal creation wizard, real-time research and analysis, and educational content. Users can see what’s happening on Tally, then delegate voting rights, create or pass proposals to spend DAO funds, manage agreements, or upgrade smart contracts. All operations are done on-chain. The Tally team believes that governance should be like Lego. In standard shapes and sizes, there are an infinite number of construction possibilities.
- 2.1.2 Functions and Features
Tally is a front end to the Governor Contract, a commonly used open source governance contract that allows token holders to control the DAO using entirely on-chain based voting. Token holders use the Governor to formulate, pass and execute proposals. Proposals can do anything on-chain: send funds from the treasury, update the parameters of a DeFi protocol, change the permissions of a child DAO, mint NFTs, or modify the rules of the Governor itself.
Tally API: Makes it easy to query on-chain data about the Governor DAO. Lists the governance, on-chain proposals, and delegation accounts. Use the API to build notifications, mine voter data, or build governance into your game or app.
- 2.1.3 Compatibility and adaptability
Tally has good compatibility and supports DAO governance contracts on Ethereum, Polygon, Optimism, Arbitrum, Avalanche, BSC, Gnosis and various test networks.
Tally is more suitable for the on-chain governance of mature business modules. You need to deploy the governance contract with the OpenZeppelin governance contract module, and then import tally, which is not friendly to non-professional technicians.
- 2.1.4 Funding and Adoption
Financing status: In March 2021, 1.5M financing was obtained, led by lemniscap & 1kx. In August 2021, Tally announced a financing of US$6 million, led by Blockchain Capital and Placeholder. About 25% of the funds came from DAO organizations such as The LAO, MetaCartel Ventures, Fire Eyes DAO, and angel investors associated with DAO (including Bankless Founder Ryan Sean Adams).
Tally has been adopted by many large projects, most of which are relatively mature projects, including arbitrum, sudoswap, nouns, op, uniswap, gitcoin, ens, hop, fei, etc. In the past few months, in the WEB3 30 selection initiated by Alchemy, after thousands of nominations and votes from web3 enthusiasts around the world, Tally won the top three in the 2023 Web3 30 selection regarding DAO and DAO tools, which are: Guilds, Snapshots, and Tally.
2.2. Aragon (on-chain governance)
- 2.2.1 Positioning: One-stop on-chain DAO Tool
On-chain DAO governance and plug-in DAO OS can be started without coding.
- 2.2.2 Functions and Features
Aragon App: User-friendly application to start on-chain DAO governance without coding. The app provides your community with an easy-to-use on-chain homepage for creating proposals, voting and onboarding new members.
Aragon OSx: By lean design, our smart contracts provide the foundation for organizations we can’t even imagine today. Plugins make it easy to customize your governance. Build DAOs, dApps, or anything you can imagine on top of the Aragon OSx protocol with our governance plugin. Governance function plug-in, one-stop DAO governance operating system!
1) Build and manage DAO
Programmatically deploy and run custom DAOs directly within your dApp.
2) Customize your organization
Extending the functionality that a DAO can perform using governance plugins (not yet available).
3) Evolution and adaptation
Our permission management system grants and revokes permissions so your organization can grow with your needs.
- 2.2.3 Compatibility and adaptability
Aragon is an old project in the ico era, and the exploration and route of intermediate products have undergone many changes. The current new version products (Aragon App and Aragon OSx) are only compatible with Ethereum, Polygon mainnet and Polygon/goerli testnet for the time being.
Also on-chain governance, Aragon is a comprehensive and easy-to-use on-chain comprehensive governance tool, suitable for both beginners and professionals.
- 2.2.4 Funding and Adoption
Aragon conducted an ico token sale in May 2017, crowdfunding 275,000 eth (worth about $500 million at current Ethereum prices). Therefore, Aragon has always been well-funded and has time and funds to try various products and routes.
According to Aragon’s official website, it claims:
5,000 DAOs Created;
+300,000 Community Members;
+$6B InAragon DAOs;
+$200M in Aragon Treasury…
However, the actual adoption of the new version of the system is relatively seldom, probably because it will not be launched until February and March 2023.
2.3. DAOlens (off-chain governance)
- 2.3.1 Positioning: One-stop off-chain DAO Tool
Founded in January 2022, it aims to help companies with onboarding, contribution management, etc. to simplify the operation process of DAO. B2B business company, Indian team.
DAOLens was founded by Vikram Aditya and Apoorv Nandan in January 2022, aiming to help companies with onboarding, contribution management, etc. to simplify the operation process of DAO.
- 2.3.2 Functions and Features
DAO Manager is the product name of DAOLens. It has a complete off-chain governance infrastructure such as: snapshot, bounty, proposal, events, library, space, etc. It can connect to discord, wallet, authority management, crypto payment, etc.; it has token and nft gates control etc.
In the early stage, in order to get as many users as possible, DAO can design its own requirements regardless of the existing functions of DAO Manager, and hand them over to DAOLens, who will customize and implement them in DAO Manager. The basic version of DAO Manager is free, and in the future, it will rely on AI services and full solutions including consulting to solve revenue.
- 2.3.3 Compatibility and adaptability
Because DAOLens is an off-chain comprehensive governance tool, it is a relatively centralized system that can access various governance gadgets, so it has good flexibility and can support various on-chain tokens and NFTs for off-chain auxiliary governance. It is suitable for beginners and professionals. Compared with comprehensive governance tools on the chain, it is simpler and more friendly, and has strong applicability. It is suitable for various community organizations and non-chain governance DAO organizations.
- 2.3.4 Funding and Adoption
Web3 startup DAOLens announced the completion of $5 million in financing, led by Nexus Venture Partners, Better Ventures and iSeed II, Coinbase board member Gokul Rajaram, Polygon co-founder Sandeep Nailwal, Solana co-founder Raj Gokal, Animoca Brands vice president Simon Doherty and Tribe Capital co-founder Arjun Sethi and others participated in the investment. Funds raised will be used for product development, talent acquisition, and to fuel subsequent rollouts of its tool stack.
DAOLens is a B2B business company with strong business development capabilities. The DAOLens team will take over almost all projects that Indians participate in and let them enter the DAO Manager. Including the Polygon Foundation has negotiated, Polygon DAO has already settled in, and will support the projects invested by the foundation to settle in; the Solona Foundation has also negotiated.
The DAOLens team is also lobbying BanklessDAO (the core members of BanklessDAO are almost the same as Polygon DAO).
Because of the late start, there are not many famous projects using it yet. However, DAOLens has a wide range of applications, and its commercial prospects are optimistic by many people.
2.4. Zora (on-chain governance)
- 2.4.1 Positioning: A one-stop on-chain governance tool serving Nouns DAO
Zora is a decentralized protocol where anyone can buy, sell and create without permission. A collection of tools has been created to make it easy to start building. Zora is a governance tool for Nouns DAO, allowing users to create their own style of Nouns DAO. Nouns-style DAO has the characteristics of distributed governance, composability and upgradeability, and continuous financing.
- 2.4.2 Functions and Products
1) Zora stack
- Nouns Builder: Deploy Custom DAOs in Minutes
- Creation: Easy to deploy contracts for NFT projects
- API: Retrieve metadata and market data for any NFT on ERC-721
- Zora V3: ZORA’s on-chain market functionality
- ZDK: A development kit for interacting with ZORA’s API
- NFT Hooks: The easiest way to interact with ZORA’s API
- NFT Rendering: A tool to easily display NFT data
2) Modular Architecture
ZORA V3 uses an architecture that allows Zora DAO to deploy new market types and updated versions. Each deployed version of the marketplace module is permissionless and can never be changed, but the DAO can deploy modules into Zora’s approved space. This helps developers choose which modules they use and easily use new versions without a full migration (like we did from V2 to V3), and lowers the overall gas cost.
3) Create a DAO with Nouns characteristic style through Zora
Distribution Mechanism: Creating NFTs at consistent intervals allows communities to form at a healthy rate, rather than distributing governance through airdrops.
Composable and upgradeable: all contracts can be upgraded individually, which means that the DAO is not static, but evolves over time.
Ongoing Funding: The DAO creates sustainable funding by continuously issuing new NFTs over time.
- 2.4.3 Compatibility and adaptability
Zora is currently only compatible with the Ethereum mainnet and the Goerli testnet. Zora is a governance tool for Nouns DAO with a narrow range of applications.
- 2.4.4 Funding and Adoption
Zora, an NFT trading market, completed a $50 million financing at a valuation of $600 million, led by Haun Ventures. Zora founder Katie Haun was the first female general partner of a16z. Zora previously conducted auctions including TikTok-related NFTs and Andy Warhol Art Foundation NFTs.
Since its launch, the Zora platform has achieved certain influence in the NFT field. Many artists, creators, and collectors publish and trade NFTs on Zora.
Zora’s new no-code tool makes it easier to create DAOs funded by NFT auctions, following a model established by popular project Nouns. Making it easier for creators to use without requiring engineers to fork and modify existing code enables almost anyone to create NFT-powered DAOs for almost any project. Purchasing an NFT allows each owner to become a member of a DAO, or Decentralized Autonomous Organization, essentially a tokenized community with a shared treasury. Over time, Nouns has put its greater focus on advancing open source intellectual property, and has used its ample funding to put Nouns imagery into Bud Light commercials and independent films, for example, and other community-approved initiatives .
2.5 Summary of DAO Tools
In this report, we analyze four major on-chain and off-chain governance tools: Tally, Aragon, DAOLens, and Zora. Each tool has its own unique advantages and applicable scenarios. Depending on the needs of an organization or project, it is critical to choose the right governance tool.
Tally is suitable for on-chain governance tools that require a mature and support multiple blockchain networks, but it may not be friendly enough for non-professionals. Aragon is a comprehensive and easy-to-use on-chain governance tool that is highly customizable, but still needs further promotion and application. DAOLens provides a rich off-chain governance infrastructure and integrates with multiple tools, but there is no known DAO or community adoption yet. Zora is a governance tool for Nouns DAO. It has an innovative governance model and strong upgradeability, but is limited by Nouns DAO style and network support.
It is recommended that when choosing a governance tool, fully consider the actual needs and goals of the project to ensure that the selected tool can bring the greatest value to the project.
PART 3. Selection of DAO Tools
3.1. DAO Tool of different types of DAO
3.2. References of other DAO Tools to SeeDAO OS
1) Governance function plug-in (reference: aragon)
2) Governance Dashboard visualization (reference: tally)
3) The functional modules involved in unconventional users should be hidden as much as possible to improve interaction friendliness (reference: DAOLens)
PART 4. The future prospect of DAO Tools
1) Large DAOs will choose to develop their own DAO Tool, and small DAOs will choose a more general DAO Tool
With the development of DAO ecology, large DAOs will customize and develop governance tools according to their own needs to meet their specific business processes and governance models. In contrast, small DAOs tend to use common DAO tools to reduce development costs and improve efficiency.
2) Various application-specific plug-in DAO Tools will emerge in the market for integration by all parties
In the future, there will be more plug-in DAO tools for specific applications to meet the needs of different types of DAOs. These plug-in tools will facilitate the integration of all parties and improve the overall flexibility and customizability of DAO Tool.
3) Large DAO Tool will integrate more external DAO Tool plug-ins
With the continuous expansion of the DAO ecosystem, large-scale DAO tools will integrate more external plug-ins to provide richer functions. Large-scale DAO tools will provide users with a more complete governance experience.
4) The proportion of on-chain governance will become higher and higher, and the hybrid governance model will become more and more popular. With the advancement of blockchain technology, the proportion of on-chain governance will gradually increase.
At the same time, the hybrid governance model, which combines on-chain and off-chain governance, will become the choice of more and more DAOs to improve the effectiveness and adaptability of governance.
5) The increase of on-chain governance data will promote the emergence of more DAO Tools that research and analyze on-chain data
With the rapid growth of on-chain governance data, more DAO tools for on-chain data research and analysis will emerge. These tools will help DAOs better understand the data in the governance process and provide strong support for decision-making.
6) The composability of the DAO Tool on the chain will promote the integration of user identities and reputations in different projects, ecologies and organizations
In the future, the composability of DAO tools on the chain will promote the unification of user identity and reputation among different projects, ecologies and organizations. This trend will promote the development of decentralized identity (DID), providing a more efficient, secure and reliable identity authentication and management method for the entire blockchain ecosystem.
Article source: DAO Tools Frontier Research Group