Understand how DAOs make money so you can assess them

Like any organisation, a DAO needs to make money to cover costs and make a profit.

Profits are shared amongst community members. If you're joining or creating one, it's important to understand how DAOs make money.

Charge for access

A DAO can issue tokens and charge members for access. For example, FriendsWithBenefits requires members to own a token to access the community. The value of the DAO entirely depends on the value of the token unless there is another revenue stream. Members will always be disincentivized for future token issues (as it dilutes their value).

Charge for a service

DAOs can charge customers (other DAOs or companies) for a service. For example, BanklessDAO charges other customers for consulting. A DAO may might choose earn money through sponsorships.

Charge a commission

DAOs can charge a commission for completing an action. I wrote about a DAO for freelancers that charges a 5% fee for being the "platform".

Subscription model

The equivalent of the SaaS model in web2 but with tokens. A customer needs to hold the equivalent of $100 in $SAAS tokens for an annual subscription. These tokens are "burned" every year. The next year the customer needs to buy the $100 worth of $SAAS tokens again. The value of the tokens can go up (benefits the user) or down (user pays more in subsequent years).

Similarities to web2

The models of making money are not novel in web3. The tokens are the novelty - they help you own, govern and can increase in value.