Decentralized autonomous organization (DAO) – Does this new model in the Web3 world work?
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Web3 is still a fairly new term for internet users today, but its applications are mentioned a lot by everyone from cryptocurrency exchanges to the activities of DeFi organizations.
The Decentralized Autonomous Organization (DAO) is one of these models of business. Let’s find out in this article with FinFan whether this new model in the Web3 world works with the new DAO model named CoffeeDAO in Hong Kong.
What is DAO?
According to Investopedia's explanation DAO the abbreviation of Decentralized Autonomous Organization, is an emerging form of legal structure that has no central governing body and whose members share a common goal to act in the best interest of the entity. Popularized through cryptocurrency enthusiasts and blockchain technology, DAOs are used to make decisions in a bottom-up management approach.
Although it is no longer unfamiliar with previous successful models, MakerDAO with stablecoin DAI is a platform to provide capital for blockchain projects on the Ethereum platform, or DAO Maker with DAO coin created in the form of Launchpad where the new project is used to distribute tokens to the community through token sales, most DAOs have been incapable of proper governance, or have been kidnapped by speculative insiders.
What is CoffeeDAO?
CoffeeDAO is an established organization for coffee lovers, in which the participants (coffee shop owners) must bring gifts to their customers by selling a single espresso for just 1 $COFFEE. This project was created by Cheney Cheng, co-founder and CEO of Apoidea and RadicalxChange (RxC).
*For now, the experiment is far more modest. CoffeeDAO’s foundation has just completed its alpha test with the four participating coffee shops. The scheme relies on affiliated marketing techniques.
The foundation minted 2 billion CoffeeDAO tokens, called $COFFEE. Each token represents one espresso shot, courtesy of a participating store. Apoidea’s digital custody arm, ADAM Vault, holds these in cold storage.
The four coffee shops were each granted 1,000 tokens to give to their customers as loyalty gifts. Stores get another 200 tokens if they bring in another shop to participate. The coffee shops relied on gifts as well as local influencers (who get a token for every paying customer they bring to the store).
The shops aren’t trading $COFFEE, and the tokens are not listed on crypto exchanges. ADAM Vault charges a fee of 1 percent of the tokens it holds in custody, but it doesn’t cash this out: it uses this pool to make markets and keep the token liquid.*
Why do they choose coffee to establish DAO?
The practicality of coffee
We also know that coffee is a popular drink around the world. Choosing coffee, especially espresso, is the most popular drink in the world because it not only helps you stay alert and more energetic but is not too heavy coffee made from Robusta beans can make you dizzy for a certain period because of coffee intoxication.
Furthermore, coffee is also a drink for all classes of people. If you build a business model around this drink, it can make your business grow stronger through affiliate marketing or word-of-mouth marketing.
Imagine, your friend told you: "That shop over there offers espresso coffee, let's try it." Would you visit the shop? Bet you won't be able to miss the opportunity to enjoy a free cup of espresso, right?
Coffee value is low and not suitable for speculators.
“An espresso isn’t worth enough to attract speculators: it’s only coffee drinkers who would care”. That was the assertion of the founder of this project when he attended an interview with DigFin.
The reason why other DAO projects are subject to market manipulation and speculation is because they solve too large problems with extremely high amounts of money.
For that reason, their creators often set up a hedge for their own projects by turning the project currency into a stablecoin or not listing those coins on the exchange but just keeping them for the founders or participants.
Opportunity for shop owners to upsell.
Does anyone go to a cafe just for a cup of coffee? At that time, the shop owner will have the opportunity to sell other dishes such as cakes, croissants, or some other drinks when customers come with their friends.
Dangers of the CoffeeDAO project and other DAO projects that participants need to consider if they come to Vietnam.
Fear of price manipulation
Although the project is nominally trying to equate 1 $COFFEE with a cup of espresso, however, we will not know when the project expands how much money that 1 $COFFEE will become because maybe the founder used the word "coffee" to refer to another type of coffee or other foods, or maybe to the entire cafe, for example.
Not to mention, currently, the value of the 1 $COFFEE coin is still quite small, and the model has not spread widely and received much support from users. Imagine what it would be like if the model expanded to 1 million members. At that time, the value of $COFFEE will reach a very high number and the owner of the model will be able to take the money away.
Fear of Ponzi Pyramid module scam
In Vietnam, there also exist many Ponzi pyramid models using the name DAO to develop and profit illegally. The most typical and most specific is the scam reported by VTV about a project called MyAladdinz, which was also created as a DAO model for online shopping and also created a virtual currency - Point to perform actions to exchange items on this site.
However, gradually, the Ponzi model has begun to show its true form in the form of purchases that are refunded up to 80% of the price.
In addition, the appearance of the policy, with which the more participants invited to participate in the downline, the more commission calculated by Points upline ones can receive, is further evidence that this project is a scam.
In short, in Vietnam, if the CoffeeDAO model is to develop, it must also rely on the price of a cup of robusta coffee that Vietnamese people often use :))
Furthermore, the model must run for a while to comply with the commitment that the price of 1 $COFFEE is completely staked with the price of 1 cup of iced milk coffee in Vietnam, for example, and can only be used in cafes. but not for other exchange purposes.
With the advancement of technology, hopefully, in the future, there will be a technology company applying this CoffeeDAO model in Vietnam.