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Pantera Partners Explain BitDAO: The DAO Fund That Drives Crypto Adoption

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BitDAO has raised more than $230 million in funding from well-known investors and teams. The treasury is democratically managed by DAO members and allocated to various projects throughout the DeFi ecosystem.

Original title: "Pantera Partners Interpret BitDAO: DAO Funding Pool to Promote Crypto Adoption

Original Author: Pap Veradittakit, Founding Partner of Pantera Capital

Original Translation: Lu Jiangfei, ChainNews

Decentralized Autonomous Organization (DAO) is a fully democratically managed organization built by community members in a trustless and transparent manner to help all members of the organization achieve a common mission. Typically, DAOs use smart contracts on public blockchains to automatically execute key organizational rules (such as voting on priorities and proposals, allocating resources and funds, etc.). Today, some of the most popular crypto protocols in the crypto world (such as Maker, Uniswap, and Dash) have begun to use the DAO governance model.

BitDAO is a new, DAO-based fund dedicated to promoting the mass adoption of cryptocurrencies across various blockchains and projects. Unlike protocol-specific DAOs (such as MakerDAO), in the crypto and DeFi space, BitDAO will work harder to organize and incentivize the community, such as supporting early projects and promoting cooperation between protocols. Their core growth approach has three key pillars:

Collaboration with crypto projects: BitDAO plans to launch token swaps with existing and emerging DeFi projects and provide them with R&D resources, liquidity, funding, and co-development opportunities. The goal is to accelerate BitDAO partners to become leaders in their respective verticals. BitDAO will hold the tokens of partner projects, supporting their success while also being incentivized.

Build various DeFi products: BitDAO also intends to launch various DeFi products of its own, including a crypto futures exchange (aimed at being a “decentralized version of Bybit”), a community portal (where token swaps can be proposed with promising early projects), and programmatic implementations for governance and treasury management.

Grow with Bybit: Bybit is one of the fastest growing crypto derivatives exchanges in the world, with over 1 million users and over 88% growth in volume between Q4 2020 and Q1 2021. Bybit is an early supporter of BitDAO and plans to allocate 2.5 basis points of its volume to the BitDAO treasury (approximately $258 million based on Q1 2021 volume) to support the DAO’s R&D efforts to achieve its mission.

BitDAO has received backing from some of the most notable investors and teams in the crypto/fintech space, including Pantera Capital, Founders Fund, Bybit, and Peter Thiel. To date, BitDAO has raised over $230 million to advance its mission.

BitDAO’s governance is based on its native token, BIT, and is fully decentralized. Essentially, BIT token ownership qualifies holders to become “members” of the BitDAO decentralized organization, where they can not only propose proposals for projects or funding allocations, but also vote on proposals from other members, a model that allows the crypto and DeFi communities — including users, developers, and investors alike — to work together effectively.

Ultimately, BitDAO hopes to become one of the most promising tools in the industry to accelerate the adoption of crypto and DeFi through collaborative, decentralized efforts across the organization. With initiatives such as token swaps and grants, the BitDAO treasury has become increasingly powerful (such as democratic governance and sufficient funding), so it has the ability to support early projects and promote effective collaboration between various products and protocols, pushing DeFi towards a more open and collaborative future governed by meritocracy.

Getting Started with DAO

A decentralized autonomous organization (DAO) is a member-owned community with a completely flat organizational structure. By design, every member of a DAO has a completely equal say in all decisions, in stark contrast to traditional centralized organizations governed by a leadership hierarchy. All operations in a decentralized autonomous organization are completely decentralized (no single entity is responsible for execution) and transparent (all decisions are public and publicly recorded), making it a completely democratic, highly accessible tool for achieving a common mission - any member anywhere in the world can easily participate in defining the priorities of the DAO and executing various projects within the organization.

Generally speaking, DAOs use smart contracts on a public blockchain to automatically enforce key organizational rules, and all execution operations are verifiable. DAOs typically have a treasury (which is itself a smart contract) and a voting-based mechanism (also implemented through smart contracts) to decide various organizational parameters, such as how funds should be allocated. No party can unilaterally change the goals or rules of the DAO, and if these smart contracts are to be updated or changed, they can only be executed with the approval vote of a majority of DAO members.

In the crypto world, DAOs have become a common model for managing and maintaining decentralized projects. Some popular DAOs include:

MakerDAO (manages the Dai stablecoin, with a market cap of $5.5 billion);

The governance protocol behind Uniswap (a decentralized cryptocurrency exchange with $5.36 billion locked);

LAO (a decentralized pool of funds that supports Ethereum BUIDLers).

It’s safe to say that the DAO model is the future of DeFi—a way for communities to achieve true democracy and work together to help maintain a fair, open, and useful financial ecosystem for everyone.

What is BitDAO?

BitDAO is a newly launched DAO-oriented fund dedicated to promoting mass adoption of crypto and blockchain technology. Funds in the treasury are democratically managed by DAO members and then allocated to various projects across the DeFi ecosystem - not specifically to a particular blockchain project or blockchain platform.

To support DeFi growth, BitDAO will allocate significant financial and talent resources to the ecosystem, focusing on the following areas:

R&D: BitDAO partners will establish R&D centers to develop the BitDAO core protocol (governance and treasury management), build BitDAO decentralized financial products, provide support to DeFi partners, and provide incubation services for emerging DeFi projects. BitDAO-affiliated R&D centers may employ hundreds of people over the next few years.

Liquidity: Through its treasury, BitDAO will control one of the most liquid DeFi asset pools, which can be used to provide liquidity to partner protocols, and can also help new platforms (such as DEXs, lending protocols, and synthetic assets) to self-fund.

Funding: Through grants (similar to Gitcoin), BitDAO will provide financial support for new blockchain technologies and support DeFi projects through token swaps.

According to the project: "With billions in assets and regular contributions, BitDAO will continue to build partnerships, accumulate the best DeFi assets, and build the most useful DeFi products. Our partners and products will then contribute assets to the BitDAO treasury, creating a trend of continuously compounding value."

Pantera 合伙人解读 BitDAO：推动加密技术采用的 DAO 资金库

Above: BitDAO's growth flywheel

BitDAO is mainly built around three key pillars of growth, which are:

Bybit's growth: Bybit, a crypto derivatives exchange, is BitDAO's first supporter and partner. Bybit is one of the top 5 derivatives exchanges in the world by daily trading volume, with over 1 million active users and 10% of the total crypto futures market share. Bybit is also one of the fastest growing exchanges, with Bybit trading volume increasing by 88% from Q4 2020 to Q1 2021, and the exchange has pledged to allocate 2.5 basis points of its trading volume to the BitDAO treasury (approximately $258 million based on Q1 2021 trading volume) to support various R&D efforts of the DAO, greatly increasing the amount of funds within the BitDAO ecosystem. Bybit has a large network of retail users, industry thought leaders, and a skilled R&D team, all of which can also help BitDAO refine its goals and help BitDAO achieve its mission.

Build partnerships with other DeFi and CeFi crypto projects: One of BitDAO’s main goals is to conduct token swaps with different DeFi protocols and CeFi cryptocurrency exchanges to enhance liquidity and capital scale in the market. The organization is already exploring partnerships with large protocols such as SushiSwap. In addition, BitDAO also plans to provide funding (democratically determined) to DeFi protocols in the early stages of development to help them gain a foothold, while helping these DeFi protocols expand to a wider industry market and providing market research services and support for some pioneering ideas.

Build DeFi products and protocols: BitDAO plans to launch a variety of DeFi products, including:

Build decentralized versions of some popular Bybit products (such as decentralized futures)

Provide an effective high-yield farming fund pool on partner DeFi platforms

Build a portal where the community can exchange tokens with promising early projects

Programmatic implementation of governance, including staking, time-weighted voting, and time-weighted rewards for BitDAO members.

How to manage the fund pool?

The key primitive of BitDAO decentralized governance is the BIT token - as long as you hold a BIT token, you can become a "member" of BitDAO; BIT holders can propose new initiatives (for example, new token swaps or various R&D efforts) and vote for other proposals of the DAO (for example, granting rewards), allowing the crypto community and the DeFi community - including users, developers, and investors alike - to effectively collaborate.

The total token supply of BIT is fixed at 10 billion tokens, with the following distribution ratios:

30% will be held by the treasury to facilitate ecosystem swaps

5% will be allocated through private sales

5% will be provided as rewards to initial partners at the launch of the project

60% will be allocated to Bybit to establish an R&D center to support BitDAO and support Bybit's growth (which in turn will help the BitDAO treasury grow). Of these, 15% of the token supply is available for immediate use, and the remaining 45% of the token supply will be locked for 1 year and gradually released over 2 years after the lock-up period ends.

Who is supporting the BitDAO project?

In addition to Bybit, BitDAO has also received support from some well-known "big names" and funds in the fintech and crypto industries. So far, DAO has raised a total of US$230 million from Pantera Capital, Peter Thiel, Founders Fund, DragonFly Capital and several other early investors.

Many people may wonder: Why are venture capital funds interested in decentralized autonomous projects like BitDAO? In fact, we usually have some stereotypes about traditional venture capital funds, thinking that they are more inclined to invest in projects with centralized control characteristics. But in fact, as an investor, we value how start-ups can maximize their growth potential and long-term value. In many cases, DAO is an excellent tool to achieve these goals because DAO can:

Align incentives between decision makers

Drive for more radical transparency

Prioritize open networks over closed networks

All of these advantages are important factors in creating value in the new market environment and are the main reasons why BitDAO is favored by venture capital funds.

Although DAOs are a powerful new tool, traditional venture capital still plays an important role in this field. We can think of capital as a commodity, but we cannot think of talent, thought leaders and strategic partners as a commodity. DAOs will give project founders greater power and greater choice, which will encourage them to launch more and higher-quality projects in the field of decentralized finance - DAOs are becoming more and more important to project founders, and in this way of adding value, venture capital firms will also be "forced" to adapt to this shift.

Final Thoughts

The rapid pace of growth in the DeFi industry over the past few years is a testament to the power of decentralized governance and management; protocols like Uniswap and Maker that handle billions of dollars worth of assets are largely governed entirely by community members who are committed to advancing a common mission - to make our financial system better. As more and more projects emerge in the DeFi space, there needs to be a decentralized mechanism to more broadly support early work and promote collaboration across different crypto ecosystems in order to drive mass adoption of crypto.

BitDAO is uniquely positioned to help achieve this goal as it has already secured significant funding from high-profile investors. Not only that, BitDAO has also established a flagship partnership with Bybit, a fast-growing crypto derivatives exchange, which will further expand its treasury. Most importantly, BitDAO has begun to provide high-quality products and services to the crypto community, such as:

A fully decentralized tool

Supports token swaps with some of the hottest DeFi protocols

Grant funding for early crypto projects

A key general mechanism for defining and executing priorities.

Many early-stage decentralized autonomous organizations have similar goals to BitDAO, namely: creating a decentralized venture capital fund, but these DAOs have many problems, such as:

Self-profit

Lack of governance plan

Inadequate preparation

For Pantera Capital, we believe BitDAO can use its capital strength, technical knowledge and deep industry relationships to realize this dream, and we look forward to BitDAO's ability to promote DeFi towards a more open and collaborative future governed by meritocracy.