A Decentralized Autonomous Organization (DAO) is a web3 idea. It allows communities, corporations or organizations to be governed without any centralized leadership. Uniswap, MakerDAO, and Decentraland are some of the leading crypto projects that are governed by DAOs. In 2022, we saw the decentralized autonomous organizations market heating up. At present 20 of the leading DAOs hold digital assets worth $6B and these are being used to attract new investors. However, the recent trend in the space is DAO in Real Estate. Let us understand how DAO helps real estate.
Today’s real estate market consists of many siloed and independent networks. These networks suffer from transactional friction and opacity because none of the centralized networks trusts the other with its data. While real estate has always been considered one of the safest investments, yet, the transactions and the organizational structure render the sector relatively illiquid. Real estate DAO aims to resolve these issues by transforming the way a real estate property is:
A core community of the real estate organization or network establishes the rules of the DAO which are then implemented in the smart contract on the blockchain of choice. In decentralized autonomous organization Platform development, smart contracts lay the foundational rules. This setup makes a Real Estate DAO publicly verifiable and auditable. Once the smart contracts are set, the next step is to build a funding and governance mechanism.
A DAO in Real Estate typically achieves this by token issuance. These tokens are sold to raise funds and the token holders are also given some voting rights. These funds raised by selling the tokens fill the DAO treasury and are used for DAO future development.
Once the rules are set and the smart contract is deployed, the rules can be updated only using DAO member voting if a consensus is reached.
DAO in Real Estate enabled tokenization of real estate. Thus, ownership of the interest in a Real Estate DAO is represented by the virtual DAO tokens. These always qualify as security tokens under state and federal law.
During the decentralized autonomous organization Platform development, the core members of the organization need to decide on the way an investor can enter the DAO. There are two ways for that:
A token-based DAO is a simpler method as it allows anyone with the native DAO token to join the DAO. This method is completely permissionless and allows the token holders to participate in the governance voting. The weight of the participant’s vote generally depends on the number of DAO tokens he holds.
Unlike a token-based DAO, share-based DAOs do not allow all token holders to become a part of the governance body. In fact, share-based DAO has a higher barrier of entry and requires a participant to submit a proposal of interest to join the DAO. If the proposal is accepted, the participant receives shares based on the financial contribution he has made to the DAO treasury.
Once admitted into the DAO, members are then given shares based on their contributions. These shares represent the voting power of an individual and the members can choose to exit the DAO at any time. In return, they get their percentage contribution from the DAO treasury.
A DAO can be well worth the investment. Different ways in which a Real Estate DAO can earn money are:
The DAO can enable fundraising by selling tokenized properties as NFTs or a token. With the increasing popularity of DAO, the price of the NFT or the token can increase just like any other blockchain project.
No law prohibits DAOs from owning real estate. A DAO can own a commercial block and lease out commercial spaces. The rent earned from these spaces can be distributed as rewards among the DAO governance token holders.
We see token exchange platforms charge fees from the token traders. In the same way, the DAO platform can earn by charging transaction fees from the token traders.
If you have been following the growth of DAOs for a while, you know how they have been successful in grabbing investor attention and trust by mobilizing community ownership. At Antier, we are constantly exploring different ideas to build successful Real Estate DAOs. Do you have an idea in mind? Connect with us now!