What is a blockchain DAO and why it is a good model for a venture capital fund.

In the world of blockchain, a DAO is an organization that is run by code rather than humans. A DAO’s primary purpose is to fundraise and invest in projects that are aligned with its mission.

In the traditional VC model, a group of human partners come together to form a fund. They then solicit money from limited partners (LP) – typically institutions like endowments, pension funds, or foundations – and use that money to make investments in early-stage companies.

The LP model has a few drawbacks. First, the LPs are typically large organizations with their own agendas. They also have a lot of power over the VCs, and can make decisions that are not in the best interest of the fund or the portfolio companies. Second, the LPs are often geographically disparate, which makes it difficult to build consensus around investment decisions. Third, the LPs are not always aligned with the goals of the fund. For example, an LP might want to exit an investment early in order to generate a return for its shareholders, even if that means sacrificing long-term value creation.

The blockchain DAO model solves all of these problems. First, because DAOs are run by code instead of humans, they are not subject to the same biases and agendas as traditional VCs. Second, because DAOs can be global in nature, they can easily build consensus around investment decisions. Third, because DAOs are powered by tokens that give investors voting rights proportionate to their investment size, they are aligned with the goals of the fund. Token holders have an incentive to hold their tokens for the long term so that they can maximize their returns.

The first blockchain DAO was launched in 2016 by Melonport AG. The Melon protocol is an open-source software platform that enables asset managers to launch and manage decentralized hedge funds on the Ethereum blockchain. Melonport AG raised $3 million from investors in a public token sale and used those funds to build the Melon protocol and launch the Melonport hedge fund.

Since then, several other blockchainDAOs have been launched, including Coinfund, BlockTower Capital, and Polychain Capital. These firms have raised millions of dollars from investors and have used those funds to make investments in cryptocurrency protocols and startups.

One of the benefits of investing in a blockchain DAO is that you can align your interests with those of other token holders. For example, if you believe that a particular protocol will grow in popularity over time, you can buy tokens in that protocol’sDAOin order to increase your exposure to it. And because you have voting rights proportionate to your investment size, you can influence the direction of theDAOand help shape its strategy.

Blockchain DAOs offer a number of advantages over traditional venture capital firms: they are global in nature; they are powered by tokens that give investors voting rights; and they are aligned with the goals of the fund. If you’re looking for a new way to invest in early-stage companies, consider investing in a blockchain DAO.

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