DAOs as Risk-Pooling Vehicles

The Premise:

There are certain professions with high risk high reward:

- Pro gamers
- White hat hackers
- Youtube/TikTok creators
- Musicians
- Story writers
- Drug developers

A DAO of gamers/hackers/creators/musicians/etc could be a perfect vehicle for these professionals to share risks while maintaining the same expected reward. It’s no coincidence that the first generation of DAOs are investment DAOs. Entrepreneurship and investments are high risk high reward activities.

These DAOs would serve three primary functions:

- Curation: they scout for and admit high potential members.
- Risk sharing: they invest in new members in exchange for future financial upside. Members optionally share each other’s upside.
- Support: they provide support to each other, such as marketing and distribution.

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Why DAOs vs. traditional legal entities?

Fundamentally, DAOs could reduce frictions associated with the traditional legal framework. DAOs could be a better alternative than traditional legal entities if

- Members change frequently: imagine the amount of paperwork involved!
- Members are global: multiple jurisdictions mean leading with more legal and banking complexities.

Members want to stay pseudonymous: KYC/AML are required to set up traditional legal entities.

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For inspiration, take a look at this list of DAOs and Communities projects that have won Solana global hackathons in the past.