In this post you're going to learn everything I think you really need to know about DAOs in cryptocurrency. A DAO stands for Decentralized Autonomous Organization. And the first thing I believe you should know is that Internet Computer Protocol has the number one DAO in the world. It has made the most updates and proposals through its DAO. In my experience, it is the only cryptocurrency that fully, automatically updates the blockchain using its DAO, and not things like developer backdoor keys and forks. So the first thing to know is what has the best DAO in crypto, the most technologically advanced, way beyond anything else: it's Internet Computer. And once you know that, all of crypto changes.
To better understand what a big deal this is, I actually paid a freelancer on Internet Computer Protocol, through OpenChat, a few ICP to make a nice background presentation about DAOs instead of me just rambling. So this is about the evolution of DAOs. I'm going to tell you how DAOs started and how the existing ways DAOs work — they work the same way everywhere besides Internet Computer — and then go into Internet Computer. So this will tell you where we came from and where we are today.
Traditional DAOs are usually just a polling mechanism
Traditional DAOs — so everything besides Internet Computer Protocol — most DAOs are nothing more than a polling mechanism. If I go on my YouTube channel and put up a poll and say, "Should I do this?", I have the real control over whether I actually do what you say I should do in the poll. And that's how everything besides Internet Computer DAOs are set up.
Why is that? It's because of the technology. Everything besides Internet Computer is hosted mostly off chain. For example, if a DAO is voting on some important decision, the majority of the code is not actually on a blockchain. It's on the website. It's in a database. And those are hosted off chain. So you have a gap.
Traditional DAOs, ideally, are a form where communities control something. But even if the DAO itself and the token are decentralized — which many of them are not — the developers or insiders have almost all the tokens. So even when the DAO itself doesn't matter because it's not actually decentralized, you still have the problem. And even when there are cases of real decentralized DAOs, there's a huge reliance, if not total dependence, on centralized infrastructure to actually execute what the DAO wants. And this comes down to simply how the technology works.
Internet Computer Protocol is the only place that's a full-stack crypto platform where you can build everything — your website, your database, your pictures, your NFTs, your videos, all of it — directly on chain. Nothing else does that. So the ideal for a DAO is that you and I can be real owners and make real decisions, that the token we hold can be kind of like a stock that gives us voting power. Unfortunately, everywhere besides Internet Computer, there are critical middlemen that stop that from being a reality — developers with backdoor keys, and so on.
This is what makes most DAOs in crypto right now, in my view, a lie. They're not honestly representing the real power. They're set up as DAOs in name only, while the developers or the owners keep complete, real control. We've seen this where some projects have had DAO votes where the community overwhelmingly voted one direction, and then the team literally did the opposite, and just said, "Well, that proposal was just us asking for your feedback." Really? Because it didn't look like that at the time. And yet so many people are unaware of this and go on buying these DAO tokens, which is why I'm sharing this with you.
Admin keys and the off-chain gap
What happens in everything besides Internet Computer is these DAOs have admin keys. They have developers with admin keys as backdoors, and the admin keys allow for changing the smart contracts. If the DAO votes on changes, the actual way that gets implemented is a developer with admin keys goes in and modifies things — assuming there's anything actually on chain. If it's a video game token and the DAO votes on it, the developers just change it in the game, which isn't on chain anyway. But if the resource is actually on chain, then you have the admin keys and the developers going in to make these changes the DAO has voted on. So for anything where the people and the developers disagree, it is not going to work out. And there have been security breaches because of this setup, time and time again, going back ten years.
Internet Computer Protocol shifts the entire paradigm of having a DAO, because it at least has the ability to do this properly. Not every developer actually uses that ability, and this is why I believe you really need to do your due diligence — even when investing in Internet Computer-based altcoins. Some altcoins hosted on Internet Computer make a big deal of using its tech, but they've got all this stuff off chain as well. So in many cases there's no real value, even though more of it is on chain, because it's really an all-or-nothing thing with being on chain.
So ICP at least has the technology to have a fully functional product. For example, there's an app called Tagger, and it's controlled by a DAO, and since all of it's built on chain, the DAO has real control to make code changes. This architecture negates the need for traditional cloud services, admin keys, and developer Amazon accounts, allowing for true decentralized autonomous organizations to exist. And that's what's really exciting to me about ICP, because DAOs are an awesome way that we all can collectively work together and take ownership of things we've previously not been able to own — like all these social media apps we use and have no ownership over, including YouTube, Twitch, and the rest.
The Network Nervous System: the most sophisticated DAO in crypto
The DAO in Internet Computer is called the Network Nervous System, which is intended to act as a brain for the entire system. It's abbreviated NNS, and I'll refer to it that way most of the time. In my opinion the NNS is the most sophisticated DAO in existence in crypto by far. There's nothing that even comes close, except the DAOs that it creates on Internet Computer.
The NNS automatically governs ICP. When proposals are voted on, the Network Nervous System executes them automatically and directly makes changes in the code. It's a very sophisticated system. The proposals range all the way from technical updates to network governance. We've seen people make proposals, for example, to change the way the token operates and is created, and they got voted down pretty hard — but if the proposal had passed, it would have changed the entire way the token operated on the whole network. ICP has a variety of proposal types — I think there are thirteen categories — anywhere from critical changes to launching new sub-DAOs on ICP. This allows for a dynamic and responsive blockchain infrastructure.
For those of you who've asked which crypto is best prepared for quantum computing, in my view it's ICP, because the Network Nervous System is the most technologically advanced, fastest, most adaptive governance system in the world. It can constantly make changes to be ahead of things like quantum computing, whereas you've got things like Bitcoin that evolve very slowly — the way they're set up, they're not prepared for quantum computing, and they really can't be.
On ICP, what makes the smart contracts special is that you can put up to 400 gigabytes of data in a smart contract environment and execute it in a very fast way. That allows you to do everything from host jerrybanfield.com on ICP to put a crypto game completely on ICP, and then have it all executed and run through smart contracts. And this means all these applications can then be run by a DAO. In theory, I could launch a token that controlled my website as a DAO, set it up so the DAO could vote on real changes for my website, and you could literally change the code on my website through the DAO. That's real technology, and it adds real value to the token.
Because if tokens don't have real value on some level, users know it on some level, and that's why so much of crypto is just scams and rug pulls and lies and pump and dumps and copy-and-paste chains. That's why a lot of people don't even believe in crypto — they're just gambling, because they realize almost everything in crypto doesn't have any real value, and whoever figures that out last ends up broke.
ICP introduces a novel governance mechanism where the whole protocol is controlled by the Network Nervous System. The way you vote on the Network Nervous System is to lock the token up — ideally for eight years for the maximum voting power — and that gives you voting power. This promotes a form of dynamic and inclusive governance that's very transparent and gives the token massive utility. If you want to see exactly how the locking and staking side works, I walk through it in my ICP NNS staking tutorial. This is also a big part of why I believe ICP has the best tokenomics in crypto.
If you want to talk about how well this actually works: ICP's DAO model has proven to be so secure and efficient in managing the most complicated blockchain network in existence that it has not stopped running a single day since its inception. Keep in mind this is the most advanced tech in crypto — the only full-stack crypto development platform — and it also has never gone down. Compare that with some other stuff out there.
SNS: launching real DAOs with the Service Nervous System
What's even more amazing about this DAO system is that the Network Nervous System has the ability to create little mini-DAOs that are backed by tokens, called Service Nervous Systems, or SNSs. These tokens operate similar to the Network Nervous System — you can hold them all in the same wallet — and the Service Nervous System lets projects create tokens that have the same basic operating DAO system the NNS has.
This is currently one of the biggest value propositions I see for Internet Computer Protocol, because if you want to launch a project, being able to launch it on the Service Nervous System through the ICP launchpad gives you what I think is the best launchpad in crypto. It gives you a real DAO with a real token that actually has real control — depending on how the app is set up. Again, developers have built apps in the past where the most valuable resources are hosted off chain, and they've sold lots of the tokens, and people didn't think that was a big deal. I did, though, and so you need to research each project. I'm not saying everything that does an SNS launch is magic and the next 100x.
But what this mechanism does is give real democratic, community-driven DAO governance to a project. When you launch a DAO token on Internet Computer through the Service Nervous System, you have the ability to fully control an application — to remove canisters (which is where code and data are stored), to transfer from the treasury, to mint new tokens. You have real technological control and ownership, and that's what's missing in almost every token. This is why I've done hundreds of negative reviews of tokens — if you have any token you like or are interested in, search it with "Jerry Banfield" and see what I have to say about it — because the critical flaw nearly every token has is that it does not have real control or ownership over valuable assets. There are lots of great applications and great ideas, but because the tokens aren't on a Service Nervous System and aren't on chain, the real value isn't there. You don't have real ownership anywhere outside the Service Nervous System, and even some of those can be questionable.
Decentralization sales and treasuries
The way Service Nervous Systems are launched, they have a decentralization sale, where usually a small amount — maybe 20 to 30 percent of the tokens — is sold on the launchpad on ICP, and it gives you transparency and ownership. This is the most transparent launchpad in crypto. But we've also seen on ICP where some projects yanked huge amounts of the treasury out of the Service Nervous System with their voting power as soon as they got it, leaving the whole community up in arms — which is funny, because this is just so normal everywhere besides ICP that people don't even know about it or pay attention to it. This level of technology provides better transparency, which is essential for DAOs, and it has led DFINITY — the team launching and the lead contributor to Internet Computer — to put some hard code in place so these future SNS projects can't automatically just take all the money out of their treasury. This model also gives real value to tokens that can be backed by a treasury full of ICP from the decentralization sale. If you want to see what actually participating in this looks like, I share my own experience in submitting five SNS DAO proposals on Internet Computer.
Open internet services and funding in developing countries
Because of this setup, ICP's model supports the creation of open internet services run under community control, extending the principles of the open-source movement to web services and infrastructure. And this could be huge in developing countries especially, where it might be very hard to get funding. If you learn how to develop, put a little team together, and launch a Service Nervous System token, you could get funded to build something like valuable infrastructure for your country directly from the system. You could go directly on chain and have a token and real ownership behind it. The ICP model enhances security and aligns with the Web3 vision of distributed ownership and control. The basic idea behind a DAO is that you don't just have one person sitting there with 90 percent of the supply, because then the other 10 percent is often meaningless — that one person's vote just lets them do what they want; it doesn't allow anything else to happen.
Tagger: real decentralized social media
What I find really exciting on ICP is an application called Tagger, T-A-G-G-E-R, which I've covered in multiple videos in the past. This is real decentralized social media, because Tagger is hosted fully on ICP. They've created a DAO that actually controls the project and the treasury, and nobody in Tagger — unless they have multiple wallets — holds more than about 14 percent of the supply in a single wallet, and the exact wallet holdings are extremely transparent. I also have a Tagger profile, so you can go to jerrybanfield.com and click on my Tagger profile and see for yourself. And this is not even built on the Service Nervous System — this is built directly on chain. Tagger is even setting it up so that if you want to build your own version of Tagger, they're going to make that easier for you.
This is a huge deal, because when you have people who can build things like Tagger where it's all really on chain — and therefore the community and the token have real value to control the project — that's special. I pick Tagger as my number one altcoin gem behind ICP, of course. ICP is 90-plus percent of my portfolio, and then Tagger is my next-largest position, even though it's still a tiny, tiny cap at like three or four million, and that's not fully diluted — fully diluted maybe we're looking at around 18 million at this point. This is a project that's got a thousand active users every week already, and with it all being on chain, the tokens have real value. And then you've got OpenChat, which you can go to on my website, and that has a Service Nervous System coin with it. So you're seeing different ways to run these DAOs directly on ICP, and a variety of value being created, which is really exciting to me.
The future: DAOs and AI governance
Where we're looking in the future, the futures of DAOs and AI governance are really important. Right now, AI is hosted off chain. It's on private servers, which means you can't know what it's been trained on, which means you can't have confidence. For example, if you want to make a medically-based AI or a legal AI, you don't know what it's trained on, so you can't have confidence in the answers. AI off chain is not easy to control, transact, be transparent about, or be accountable for to us as humans.
On-chain AI is possible currently in small models on ICP, and in the future AI could potentially run fully on chain on ICP. Then you could have fully on-chain governance of that AI, which could add massive value to AI projects on ICP and give real people real control and accountability over AI. To me, that's the most positive outcome we could have for AI in the future, and a huge narrative for why I believe ICP is valuable.
Chain-key cryptography and cross-chain DAOs
If you're wondering how ICP can do all this, it has innovated. It has the largest research and development team in crypto, and they've made all kinds of breakthroughs. One of them is Chain-Key Cryptography, where you have smart contracts that interact with other blockchains — Bitcoin, Ethereum Layer 2s. This is making it possible for coins that are currently on something like Ethereum — where, because of how Ethereum is set up, they can't have a real functioning DAO that actually controls the code and assets — to potentially move on chain with ICP while keeping their existing Ethereum coin, and then adding massive value in terms of real control and real decentralization for their existing token holders.
So this is very exciting to me for so many coins that look like very questionable investments today. They may be better investments in the future. And with all the cross-chain interoperability for ICP, you can have ICP running DAOs even on other chains, which is absolutely incredible — just another massive narrative for Internet Computer Protocol. Combined with decentralized identity, where you create an internet identity and have one single crypto wallet you can use to manage all of this, it makes everything so much easier than anything else you've ever done in crypto.
This is actually how I came to ICP. I was into all these different altcoins a year ago myself, and by using all of them, I realized how superior ICP's technology was, which fueled my research, and that's how I figured out what I think of as ICP's blockchain singularity. There's nothing else like it. But it all started because, unlike the majority of people in crypto, I was actually using all kinds of different wallets, had my crypto off of exchanges, and was swapping and using dApps. Through doing that, you could feel that ICP is a whole other level, and the decentralized identity login was one of those key points that made me see: this is the future. If you want to go deeper on any of this, I keep these conversations going in my ICP Crypto playlist.
Identity, environment, and regulation
If you look at the environmental impact, Bitcoin mining uses a lot of resources just to do something relatively simple. Compare that to Internet Computer, which is extremely efficient in using its computation power and very environmentally friendly with the node machines, while being able to execute everything fully on chain and set up true decentralization. To me, that's just much more logical to build on.
On the regulatory side, one of the biggest issues DAOs can have is regulatory compliance. Because everything is on chain with ICP, that could really make ICP ideal for being regulatory compliant. With these other DAOs, the development teams are always going to be on the hook, because they have physical control over the real assets — they have real control over the web services account, or wherever it's hosted, and often the blockchain itself. So they are very clear targets for regulatory attack. But having DAOs on Internet Computer, where it's actually on chain, could be much more ideal — a safer DAO to participate in, one that's regulatory compliant, and that can handle things like GDPR with the European subnet that's on ICP.
Why education matters
To realize the full potential of DAOs, I believe we need education, because there are so many people in crypto who just don't understand the very basic technology and how it operates. Like that you have these node machines communicating with each other, running protocols to create a blockchain — and only on Internet Computer does everything have the potential and the technology to be all on chain. That's a basic thing everybody should know in crypto that most people don't. They don't know that when they're buying an NFT, the NFT is not on the chain, unless it's on Internet Computer.
My goal is to contribute to creating a world full of wealthy people, and to do that through education. The more educated crypto investors become, the more — at least from what I see — they continuously get drawn to ICP because of the tech, and the DAO is one of the most attractive parts of it. If you'd like to learn alongside me and the rest of the community as we figure this out together, you're welcome to join the Jerry Banfield Family. I'm here every day to help share the message that life is awesome, you're the creator, and you can make the life that you want today.