Gaming DAOs - The Future of Gaming or Doomed To Fail?
‘Gaming DAO’ - not a Greek word at all if you have been constantly following the Web3 gaming industry for quite a while. The gaming DAOs started making waves in 2021, but their impact in gaming has thus far been overshadowed by the rise of NFTs and the advent of "play-to-earn" business models. In 2022 and beyond, DAOs are expected to have a meaningful impact on the way gaming organizations operate, fundraise, build communities, and even develop new games.
Going forward, we will explore the fundamentals of DAOs, their relevance as an organizational structure, their current utility in the Web3 gaming industry, and their future outlook.
As a matter of fact, DAOs are not an entirely new phenomenon. In 2021, DAOs garnered immense cultural and commercial relevance, as prominent DAOs quickly created communities around a variety of interesting and non-traditional causes, such as:
Reviving the Blockbuster brand
Buying a copy of the U.S. Constitution
Purchasing an ownership stake in an NBA team
Sequencing our genomes
Despite these ambitious cases, DAOs are yet to command increased attention and still seem to be in a cliffhanger state at times.
However, what’s with the eyeballs is that the top 5 largest DAOs today hold a combined total treasury north of $15B
What is a DAO?
DAO stands for ‘Decentralized Autonomous Organization’. Simply put, it is an organization with no centralized leadership and the decisions get made from the bottom-up. The direction of the organization is decided by the community limited by a specific set of rules enforced on a blockchain.
These organizations are owned and managed by their members collectively, usually with treasuries that are accessible only with the approval of the members. Proposals are used to make major or minor decisions and then the community votes on a specific period of time.
DAOs operate using smart contracts – pieces of code that are automatically executed when the criterias under the contract are met. Smart contracts are used to establish the DAO rules. Although the brainchild of Ethereum, multiple blockchains are now deploying smart contracts.
Those who have a stake in the DAO have voting rights and the power to influence the direction of the organization by deciding on governance proposals. Since DAOs are open-source blockchains, transparent and autonomous, anyone can view the code or audit the treasuries because the blockchain records all financial transactions.
What does DAO mean for the Future of Gaming?
In a usual scenario, games are developed and managed by the company that made it. The gaming community simply just has to accept the whims and fancies and whatever direction the company takes for the game. Very selected chunk of individuals have the power to make decisions.
But if a game is a DAO, it confirms that the power lies within the community, wherein the community members can influence the major decisions of the organization, including the direction of the game.
Axie Infinity allows players to stake their $AXS tokens in the organization. (SLP which is the digital currency earned through the game is exchanged for $AXS; $AXS can be bought and sold in any cryptocurrency platform such as Binance.). Read about staking in Axie Infinity here.
But why Gaming DAOs?
Many web3 skeptics point to blockchain as an “ ultimate solution in search of a problem”. Just because something can be decentralized doesn’t mean that it must be – especially if it’s already working exceptionally well. In the Web3 gaming domain, where venture capital dollars are flowing freely and the industry is growing at a healthy clip, many would argue that things are going just fine.
Let’s understand it this way - if a community of like-minded people forms around a shared love of games, why would they – whether player or creator – go ahead to form a DAO instead of an LLC, fan club, or subreddit?
Check out 5 reasons why DAOs are a suitable fit when compared to traditional organizational structures:
Tokenized Ownership
Decentralization by Design
Automation via Smart Contracts
Increased Transparency
Ease of Capital Formation
1- Tokenized Ownership
We are all aware that decentralization is core to web3, but it is ownership that truly differentiates this movement from web2. It takes center stage when talking about the transformative power of DAOs.
DAO investors and contributors take equity in the form of governance tokens, instead of taking equity in the form of company stock in a traditional corporate structure.
These tokens also provide additional benefits such as voting rights, access to special groups, airdrops, and can be freely bought and sold on secondary markets. Therefore, it gives investors a greater access to liquidity than might otherwise be available with equity grants or RSUs.
Furthermore, many DAOs have built-in “rage quit” functions, enabling members to leave with their tokens whenever they want, without any approval of other members.
This does sound like a risky proposition from an organizational standpoint (what if the biggest holders all decide to dump their tokens on the open market at once?). But, the brighter side is that it allows freedom to “vote with dollars” and ensures that the DAO keeps its incentives aligned with those of the token holders.
DAOs provide a structural framework for communities to form and further develop. This concept has even taken hold among incumbent social platforms like Reddit, which allows any subreddit to create its own token and distribute it to its community contributors.
2- Decentralized by Design
The decentralized aspect of DAOs can take many forms. For example, DAOs rely heavily on remote work, enabling contributors worldwide to participate. Wondering what’s the big deal?
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