An eye-watering number by any measure, 4000 %, is basically chump change. In the last week, I’ve spent a lot of time researching these projects and seeing returns of 500,000 % to 4 million % feels like I’m looking at Internet pop-up ads from 1998., and these organizations have become the newest way to lure eager investors into rug pulls. But I don’t want to ignore the space completely, because the tech at play here could go so far as redefining not just finance, but the way we organize communities in general. So we’re going to look at some of the most popular DAOs and analyze risk factors that you must consider And note Just because I mentioned a DAO project in this video does not mean I’m recommending you invest.
They are simply real-world examples: Okay, now to define what a DAO actually is. I’M not talking about Dragon Age Origins. This is a Decentralized Autonomous Organization. You can think of this kind of as the blockchain equivalent of a horizontally structured community, a blockchain commune if you will or as Forbes describes it an Internet community with a shared bank account. The idea is a community where no one member influences what the organization does without the consent of the majority.
Most DAOs have their own governance tokens, which acts as a sort of voter’s ID in currency form, And this might sound fairly familiar because many kinds of crypto, including Bitcoin, are effectively ran by the community who contribute to the blockchain without any central authority. But a DAO takes this a few steps further Here developers can propose changes to the protocol itself and members of the community can vote to to accept or to reject these changes. This use of blockchain tech leveraging the power of smart contracts has attracted many entrepreneurs in this space Even Mark Cuban wants in on this, he says, DAOs are what all corporations will eventually become In a traditional business, there’s, usually a very clear line between decision makers and Contributors, managers and employees – The idea is, you potentially get rid of a lot of the inefficiencies and politics that come with this organizational hierarchy.
Do it five four three: two: Do it give me control Michael? However, I do foresee issues here as well As someone who’s owned, my own businesses, my entire life and employed hundreds of people over the last eight years.
I have to say that I’d be willing to say that 90 % of decisions make sense to just about everyone, but You can see this in products of large corporations. You know they often feel uninspired and just boring like how nearly every single SUV looks. The exact same There are just too many decision makers and too large of focus groups at these huge corporations and due to sheer numbers, anything especially lovable or different, gets voted out and you’re left with the least offensive product possible, and this will be a feature that Daos will eventually Have to overcome. Now, generally, there are two kinds of DAOs: First, the investment firm model where major decisions involve deciding on which assets to buy An example of this is PleasrDAO, who paid $ 4 million for the sole copy of a Wu-Tang Clan album And the other kind manage blockchain Projects together, Many of these kinds of projects use stable coins and earn revenue by issuing bonds or allowing users to stake their holdings.
Using stablencoins allows the market in general to focus on the performance of the protocol, rather than worry about whether the token that they’re using is going to just tank Now on to the top projects.
Olympus Dao was a project that piqued. My curiosity sending me down a rabbit hole of Reddit threads They’ve been one of the few successful projects. Putting some credibility into the DAO market Prior to Olympus. Daos were mostly seen as Ponzi schemes Now they’re. Arguably, better Ponzi schemes, [ Laughs, ] Olympus, implemented a few tweaks to their protocol.
That kind of changed the game.
The most important change is the OHM token. This is the token native to Olympus DAO and it doesn’t use a dollar peg. This decision was in part due to the depreciation of US dollar peg stable coins Olympus Dao uses a model of bonds liquidity pools and staking to incentivize. Adoption of their protocol.
Stackers in Olympus are given a portion of newly minted OHM tokens every 8 hours, and this drives the promise of their 4000 % APY According to their FAQ page. Each OHM is backed by at least one Dai stable coin at all times, And it’s important to note that Now part of the magic here is something called rebases.
This is a DAO-initiated injection or contraction of the token supply within the market. This helps to defend a price point or to manage inflation in this ecosystem. Now, even though the rebases often put new token supply directly into holder’s wallets, they aren’t the same thing as staking rewards which are more consistent, And the thing is this: isn’t perfectly trustless right now Only about 20 people, which I decided to call “, The Knights of The DAO table” are involved in these strategic price manipulations for Olympus.
They intend to make this process decentralized in the future. However, this is what I mentioned earlier.
Some decisions will be tough to have a majority vote on, and it’s kind of ironic that something touted as decentralized and algorithmic became successful through human intervention, but this might be necessary, at least in the beginning, to get to a point of stable growth. A number of projects have forked from Olympus DAO making use of its staking mechanism and even the OHM token itself.
And this has led some experts to think that OHM could become a standard for DeFi in the future.
But of course only time will tell And a note of caution here. Several other projects, like Spartacus Finance, have forked from the Olympus protocol, but that doesn’t mean that they’re the same project or that the teams are the same and your earnings could be wildly different.
If you invest in a fork Now, something you may be interested in investing in is a membership to my Patreon community. There you’ll find all my buy and sell alerts, live streams and additional content that is not posted on YouTube. It really is the best darn deal on the Internet, That’ll be linked in the description below
Now the main competitor to Olympus at the time of this video is called Wonderland.
They use a token called TIME, Both Olympus and Wonderland have staking as their core functionality and go through supply rebases to bring the price of the token up or down. However, there are a few key differences:
First, Wonderland’s TIME token is based on the Avalanche blockchain. While Olympus is based on Ethereum
The benefit of going with Avalanche is that the fees are substantially lower and it can handle more transactions at a time. This is very useful, considering how many transactions can happen in a single day on DAO protocols, Where Olympus DAO was offering 4,400 % APY Wonderland is currently around 80,000 %. The first is whether the price of the token will hold its value for the course of the year.
If the price of the TIME token falls by the time you reach that 80,000 % gain of tokens, your total gains will be less than 80,000 %.
Potentially a lot less if it falls all the way down to its backed price. So let’s say you bought two TIME tokens and paid $ 7,000 for the trouble If they remained at $ 3,500 per token over the course of the year, and you were given staking rewards of an additional 1600 TIME tokens (, an 80,000 % return ). Well then, you’d be rolling in it. You’D have five and a half million dollars before you hit your next birthday.
This is insane
I know It’s also important to note that APYs will decrease over time as these projects get larger.
Now, on the other hand, worst case scenario, if the DAO absolutely plummets to its backed value of $ 1, then you would have net earnings after staking rewards rewards of negative $ 5,400 on your $ 7,000 investment. Now something this dramatic, usually only happens in a scam, but it’s important to consider both best and worst case scenario in any investment. Now, looking at the price trends and considering the amount of tokens getting minted every 8 hours, I can feel the spirit of Jerome Powell telling me to watch out for inflation And an important question to ask yourself with these DAOs is: are they Ponzi schemes? The answer is yes, but, depending on your definition of Ponzi scheme, Even the founder says that it could be
Is it a Ponzi?
Well, I guess Depends on your perspective. [ Laughs, ]. We all love the Ponzi right. If you look at it as an investment, where you make money as a result of other people joining then absolutely Yes, it’s a Ponzi. But if you look at it as a new way to distribute tokens to holders similar to an Airdrop or an ICO, then it may not be a Ponzi.
The line here is extremely blurred, But either way this is high risk high reward potential territory, And I recommend researching this even further before making any crazy decisions, And this brings me to the next section How to lose money with DAOs. I could go on and on talking about interesting DAO projects, but with information on these projects being pretty limited to forums and Reddit threads. It’S pretty hard to decipher whether a project has real value or if the shills are simply screaming louder than the truth, And because of this, I’ve created a checklist that you can use to help determine if a DAO is a scam.
This will be free in the description. All I ask for is a subscribe on the channel for the hassle.
I made this checklist because DAOs are a bit different from tokens. You have to get creative here. Usually you can see whether a coin or a token is worth holding long term based on the founder’s credibility or a white paper or just other information available.
Daos, don’t always have this information For the most part you’re taking an anonymous team’s word for whatever they say they are going to do, and you read million percent, APY figures or tech, breakdowns or light papers or just lack of information. In fact, if you check isthiscoinascam Com for Olympus and Wonderland both get poor ratings because of how limited the information is – and those are the biggest DAOs right now So here are a few red flags to look out for First, the team has not released a growth Strategy or the strategy seems too simple.
Second anonymous founders or influencers might say that there is a fortune waiting if you just go ahead and buy their token And we’ve found in this channel before that, many influencers will say just about anything for the right price.
*Lindsay Lohan* third: is there little information on how the protocol decisions are made?
4 ): The code is not audited 5 ), The crypto isn’t backed by any asset 6 ). The team has not created other crypto projects before This one’s kind of up to you, but the risk that you’re taking on is huge. If the anonymous developers have no provable experience, 7 ) There’s a decline in social activity, and this is one of my lookouts for crypto in general.
But it’s especially important for DAOs, who rely on new investors to expand the treasury, enabling those really high staking rewards that DAOs are now famous for At this point. There are already many DAOs which have ended up as flat out rug pulls So high caution is necessary if you’re trying to go full on Degen investor.
I think this is a space that will evolve with much more credibility and transparency over time, but for now it’s the Wild West Can investor demand keep up with staking rewards
The only answer is yes: until it can’t, And from here I recommend you check out my channel sponsor BlockFi BlockFi allows you to earn interest, not 4 million % interest, pretty good interest on your crypto and you’ll get up to $ 250 in free Bitcoin by using The link below to sign up, I also recommend, checking out this video of mine on the highest stable coin returns possible. I would like to thank you so much for watching and I hope you have a profitable day.