DAOs are absolutely a scam. The only difference between DAO and Herbalife is one is a pyramid scheme while the other is a pyramid scheme that pays taxes and at least has protein powder.
And just to ensure we are on the same page, here are a few DAOs I have personally participated in and/or worked with in some capacity:
- ++BitDAO ++– investing in DAOs
- ++Jump DAO++ – marketing club
- ++Krause House ++– trying to buy NBA team. Instead sells unlicensed NFT basketball court to members
- ++Blockbuster DAO ++– trying to buy Blockbuster IP
- ++gmgn Supply Co++ – consumer packaged goods DAO
- ++Internet Computer++ (Dfinity really stretches the word calling this a DAO)
- The DAO – defunct and caused Ethereum fork
- ++LexDAO ++– legal coop acting as DAO and doing legal for all other DAOs
- ++ASaaSin’s Guild ++– DAO for software as a service
- ++Club CPG++ – DAO for Consumer packaged goods
- ++Bankless DAO ++– investing in DAOs and creating new decentralized media
- ++LinksDAO ++– tried to buy a golf course and start a country club. So far has released merch
- ++Developer DAO ++– Decentralized developers
- ++DAO Central++ – not a DAO but sold me an NFT and tracks them.
Some of these DAOs are social clubs like the Elks, Rotary, and Stonecutters. These act as a networking event for people with similar interests.
Some act like a company, and these are a major problem we’ll dive into in a moment. Others act like investments, and this is an entirely different set of problems we can talk about.
Slave labor and other workplace violations
Let’s start with working for a DAO. Any DAO that needs work has a Discord channel with a task list (also known as a bounty list) located on either a Google Sheet, Slack channel, or Notion site.
You’ll notice that I just named four tools commonly used by DAOs, NFTs, and web3 companies, and not one single tool is in any way crypto/web3-based. Even the biggest supporters of web3 aren’t even relying on their own technology. They tell you Decentralized blockchain tools are the best, but they do it on Twitter because web2 Twitter is better than anything web3 came up with in the last decade.
But I digress – if you work tasks, you basically become a gig worker like an Uber driver. And like an Uber driver, that makes you a w9 independent contractor who receives no paid time off, no healthcare, no retirement, no benefits. And unlike an Uber driver, that DAO is not filing taxes, so you’re not even really a legal independent contractor.
If you get paid a bounty, it is in the DAO token. That DAO token is imaginary money that more often than not can not be converted to Bitcoin or dollars. You are basically getting paid in Super Mario coins. It’s fun to watch the number go up, but you can’t pay your bills with it. You are essentially doing a lot of work with zero legal protection for an entity that is doing its best to dodge any legal liability for your volunteer work.
Did you get racially discriminated against by a DAO? Were you sexually harassed or assaulted?
Good luck to you, because there is no Human Resources department, and there’s no EEOC nor OSHA making sure everything is safe because a DAO is not a real workplace. And you’ll have problems working for them in any capacity.
I was personally scammed by gmgn supply co who hired me as a third party vendor to do PR for NFT.NYC. Despite having 6 people involved all puffing themselves up as executives, that was the most incompetent nightmare I ever had working with a client. Gmgn Supply Co cuts every corner, didn’t even have a ticket for the event, and then refused to pay after wasting weeks of my time. They do terrible business, and I ended up reporting them to a dozen regulatory agencies in hopes I can get at least one of these con artists arrested.
The plague of empty promises
So you’re not legally working, and you can’t get paid. But all of your time and money is tied up in this DAO. You don’t have a pension, and if you walk away now, you get nothing. Maybe in ten years that worthless Super Mario coin will be worth something. But you need to pay your bills today.
I can’t sell you a picture of a steak and tell you to eat that for the next decade while I work on maybe getting you a real one. I can’t sell you a picture of a car and tell you that if I’m going to do my best to get you real car in 10 years but you can commute in that picture for now. It’s absurd, yet that is the best case scenario of a DAO is that they don’t pull the rug in the next 10 years while they try to accomplish their goals.
Assuming everything goes right, Krause House or Blockbuster DAO may deliver on their promise in 10 years. That’s the best case scenario, and even giants like Facebook and Google and Amazon and Microsoft don’t get their best case scenario. It is frankly stupid to believe that an unorganized DAO will get the best case. I’m laughing even thinking about it.
So yes. Every DAO is ultimately a scam. They are not young nor early nor new. Ethereum was launched a decade ago. It isn’t picking up because it is clunky, everybody is lazy and disorganized, and many are committing several layers of tax and labor fraud, even well-funded DAOs with the best intentions.
Krause House sold you an NBA team then a year later only provided unofficial unlicensed unauthorized fragments of an animated NFT court instead.
Gmgn Supply Co has been desperately cheating and cutting every corner to sell you ape cereal for a year, and nobody cares.
Blockbuster DAO took the better part of 6 months just brainstorming how to set up a meeting to buy the IP with zero plan what to do if they can’t buy it. Despite that, they’re talking about creating another streaming service. It’s absurd.
LinksDAO put their own logo on some Callaway merch, marks the price up, and sells to their NFT holders. The only perk so far of paying $3000 to join this club of the opportunity to overpay for merch you could buy from any YouTuber or Twitch streamer. It’s corporate logo merch you can find anywhere – this is the funniest golf joke I’ve heard since Caddyshack and Happy Gilmore.
If you enjoy slave labor, DAOs are for you. Or maybe you would rather invest. All you need to join a DAO like Club CPG is $5000. For that, you get a non-fungible token (NFT) representing a seat on the board of directors and share in profits. Now I know this sounds exactly like an investment, but they won’t call it that for fear of being held up by the SEC. So they cleverly hide everything in a private Discord chat instead.
NFTs are used by DAOs as stock, but they provide none of the same protections nor benefits. And if it’s stolen, you lose everything. Like any pyramid scheme, you make more money by selling downstream NFTs to friends to join than you would collecting bounties by performing work tasks.
Investing in a real company always has risks. But I fail to see how removing the regulation, allowing the founders to conceal their identity, and setting the American labor force back centuries is the answer. DAOs only seem to exponentially increase the rush on every level.
But that’s just been my experience over the years participating in over a dozen DAOs. I’m sure some crypto bro will happily sell you on how great they are.
And if you’re dumb enough to believe them, please send me $50,000. I will give you a picture of a $50,000 car in return with a promise to maybe try to give you a real car in 10 years. Because that is exactly how the fraudulent DAO economy works.
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