We want to take a closer look at the best DAO projects in 2024 and answer the question: “What’s the best crypto to buy right now?” Since tokens issued by protocols with communal governance often appear to be more trustworthy than traditional banks, loan sharks, and investment companies, the interest from the international community of libertarians, free market proponents, and simply practical people is growing all the time. According to Dune, the user activity in the DeFi sector grew by 279% quarter-by-quarter in 2024 indicating a much higher level of participation than ever before.
The advantages of crypto DAO projects
The issues with traditional economic systems are addressed by many protocols. While the crypto industry as a whole seems to be offering complex solutions, the true, seamless interoperability that will enable it in practice is still years away. However, a smart investor can use a variety of isolated or bridged tools to achieve their goals and manage finances without revealing personal data, avoiding huge fees for international transactions, and enjoying the benefits of self-custody.
The idea behind using decentralization as the foundation for the organizational structure and governance immediately became popular precisely because it means that individuals have the power to affect the economic system while abiding by the rule of many of which they are a significant part.
Here are some key advantages of how these organizations improve upon existing economic systems:
- Unique architecture. Let’s start by looking at the elephant in the room. The power in the best DAO crypto projects to invest in is not concentrated in the hands of several individuals. It is equally distributed with each token holder being able to vote on important decisions. Centralized systems do not have the same level of democratization even. Corruption and mismanagement are rampant.
- Full transparency. Blockchain technology promises to completely change the way we use and understand money by offering a unique system where everything is publicly recorded without compromising the personal information of any separate user. Centralized systems are intentionally obscure and often incomprehensive for a layman making them inefficient.
- True inclusion. According to the data from the World Bank, up to 70% of the global population remains unbanked as of 2024. The inability of free individuals to access simple services like banking severely reduces their economic mobility and potential. Centralized systems are often designed in a way that prevents people from climbing the socioeconomic ladder effectively. Many high-potential DAO projects emerging today make centralization virtually impossible.
- The removal of third parties. The absence of intermediaries can act as a powerful economic driver by reducing investment costs, improving relations between market participants, and ensuring that all operations remain transparent and immutable. The developers of Uniswap estimate that the global adoption of DeFi solutions can slash remittance costs by up to 80%.
- People are encouraged to be proactive. Centralized economic systems are often characterized by the general inertia of the participants many of whom are going through mundane motions without any incentive to actually contribute to the economy or think of ways to influence it. On the contrary, top DAO projects for investors in 2024 are all about facilitating user activity and involvement.
- Lower viscosity of the system. It takes years for regulators and policymakers to finally change something in a failing economy. Banks and investment companies are often very slow and cumbersome. Such platforms are better at adapting to the needs and requirements of their communities and can implement changes quickly. MakerDAO is an excellent example of a protocol where community voting matters.
- Higher security. The only real safety risk in this sector is technological since smart contracts and other elements of a digital infrastructure can be exploited or have critical errors. Other than that, people who follow general recommendations from the crypto community and store their data securely have nothing to worry about. Self-custody makes responsibility personal, but it also provides more safety measures to users who need them.
One has to remember other important advantages like constant innovation facilitated by fierce competition and the accessibility of financial services widely available to anyone. The democratic nature of many leading DAO crypto projects is what makes them valuable. Developers, enthusiastic power users, investors, and individual token holders come together to solve problems quickly and take on full responsibility for their actions.
How the best DAO platforms work
The style of governance not influenced by powerful minorities is a relatively new concept in general. Many people still do not understand how it works and why it matters. The key principle is simple: all participants of a community receive anonymous voting rights based on their ownership of tokens transparently recorded on an immutable ledger. This means that the public knows how many voters participate and with how many tokens allowing for higher trust levels.
The organization is flexible and fluid with members entering and leaving. However, various incentives can be used to ensure voting from invested individuals with the right long-term mindset. The collective of thousands or even millions of users makes decisions based on their preferences and requirements hoping to change the course of a DeFi protocol.
Voting can be implemented using different approaches. Many projects experiment with voting systems with the whole industry looking at the best examples of systems that produce the best results approved by the majority of users. Let’s take a look at some of the methods employed by this domain:
- Using tokens. Each token represents a vote making the distribution of power unequal. However, the issuance of a sufficient amount of tokens and the inclusion of a large group of users makes the problem of potential centralization less likely to bother the organization. Tokenized voting systems are the most straightforward and easy to understand for common folk.
- Delegation. Just like the US political system, any voting structure that involves picking delegates and giving them the power to vote on your behalf has upsides and downsides. It is slower than conventional direct voting and can feel unfair depending on the overall number of delegates and whom they represent.
- Quadratic approach. This method is used to infuse users with the most incentives to benefit from a system to have the biggest impact on the outcome. Instead of accounting for the direction of your vote, it relies on the strength of preference which can be expressed in many ways including monetary. The system is not designed to become centralized but makes sure that voters are incentivized to actively participate.
All three methodologies have merits and offer unique forms of will expression to a wide range of crypto users. Some of the most promising DAO tokens are issued by protocols where users have true power and motivation to implement changes. In some cases (i.e. Arbitrum), it can lead to severe criticism from the community where many feel left out or voted against. In others (i.e. MakerDAO), each time a community expresses its preferences, an actual change is made.
Understanding the utility and value of governance tokens is incredibly important for contemporary investors entering the DeFi sector where many platforms offer staking rewards and other incentives to users who are willing to support them. In some cases, these digital assets have high market value and trading volumes to be a good target for a crypto trading bot or staking strategy. Learning as much as possible about these types of coins is essential for any responsible investor.
Challenges and risks in the sector
Decentralized autonomous organizations have many advantages over traditional systems, but they also have challenges and risks hindering adoption rates. In some cases, these risks materialize into catastrophes that simply destroy any chances of an organization to survive and keep going. Understanding the dangers associated with investing in these platforms is hugely important for contemporary crypto users. Let’s talk about some of the issues.
Smart contracts
Any DeFi protocol relies on them for utility and overall functionality. Tokens are self-executing programmable entities with rules embedded into the code itself. In theory, you don’t need any intermediaries and the whole system can operate on a trustless, permissionless basis without the need for oversight.
Here are two main risks associated with this particular setup:
- Imperfect development. Having a small bug that would be inconsequential in other scenarios can lead to catastrophic failures and asset losses when it appears in a financial ecosystem that makes sure to make recorded changes immutable. In 2016, a group of hackers managed to steal over $60 million in ETH due to a security vulnerability of a smart contract.
- The immutability. While many people love the idea of permanently recording all transactions, this approach makes it close to impossible to quickly address issues resulting from using faulty smart contracts.
Organizations can address this issue by setting up generous bug bounties and working with experienced auditors while putting effort into building excellent, bug-free smart contracts. However, even the strictest measures may still let some errors through.
The issue with governance
Even the most profitable DAO tokens issued by huge organizations face challenges when it comes to overall management and governance. The push for democratization is a valiant attempt at fixing many contemporary grievances of people tired of being a cog in a machine. However, the same effort to make everything as democratic as possible through the implementation of voting can be detrimental when not approached appropriately.
- People can be apathetic. A whole lot of token holders may not participate in voting at all allowing a small minority of active users to decide everything. Some investors are in the game of buying tokens just to make money through staking and reselling their them if prices appreciate. An independent study conducted in 2021 revealed that less than 10% of all eligible voters participate in governance.
- The majority attack. Since tokens represent votes, very small groups of people can take control over 51% of all digital assets. One of the biggest examples of an attack like this is the Beanstalk fiasco in which $182 million of funds were lost due to a voter borrowing enough tokens to simply overrule everything and extract money from the organization.
The future of regulatory frameworks
This particular issue is discussed every time someone talks about the state of affairs in the crypto world as a whole. Governments do not have the necessary rules and laws to effectively address issues related to including the position of such entities in the juridical landscape of traditional economies and legal practices.
- You can be framed for any mishap. Active members of any DeFi protocol with decentralized governance can be held personally accountable for any problems caused to other investors. At the time of writing, regulators do not recognize even the best high-growth DAO projects as exempt from common law.
- Sanctions and bans. Participation in organizations can be dangerous for many investors if they find themselves invested in a platform banned in their country. This particular risk is quite real and has already become a reality in China.
Shaky economies
Despite the most intense efforts from the community and developers, many DeFi protocols are struggling to keep their value high and services popular. These platforms rely on cryptocurrencies and various mechanisms employed in the DeFi sector (lending, borrowing, staking, etc.) in regards to using digital assets.
Consider the following dangers for top DAO tokens:
- Market volatility. Treasuries comprised of crypto holdings can be dramatically affected by price swings. With some founders tinkering with the foundational economic structures of their projects, any significant change in the market can lead to massive losses like in the case of Terra Luna famous for its spectacular collapse in 2022.
- Risks associated with the sector as a whole. Investing in many protocols is a dangerous venture altogether considering impermanent loss (opportunity cost), sudden liquidation, smart contract issues, and more.
Other challenges and issues
Running a collective of individuals in a way that is efficient and fast can be extremely challenging. It seems that many old and new DAO projects in 2024 struggle with effectively coordinating their communities. The issue is showing through due to the slow implementation of important changes and low participation.
The lack of individual responsibility is also a big downside. Since all organizations are mostly anonymous, accountability is not something on the mind of any given individual participating in voting or trying to manipulate the outcomes.
Addressing these issues can be a slow and painful process for the crypto industry which has to go through yet another bear period before it stabilizes or enters a new bullish era. At the moment, market circumstances are unfavorable for DeFi protocols as TVLs fluctuate and prices generally go down across the industry. Investors must remember that reliable platforms will continue developing and evolving even during times of hardship like the recent “crypto winter” that was survived quite well by a large cohort of chains.
The best DAO investments for 2024
Despite the overall depression in the crypto market, many protocols are doing quite well. Many investors enjoy high yields and generate profits. Let’s talk about several interesting investment avenues in this sector.
Uniswap
As one of the most popular DEX platforms offering a wide range of features including staking, liquidity provision, and participation in governance on top of core exchange functionality, this protocol is still the most valuable among finance-oriented Dapps. As of the time of writing, the market capitalization is $3.9 billion with daily volumes exceeding $100 million routinely. The TVL number is quite healthy ($4.06 billion) with partial relocation of funds into ETH and despite the slight decrease since April 2024.
Uniswap is an excellent example of a reliable DEX platform that wants to deliver a genuinely good product with the help of its enthusiastic community. It is still one of the biggest DEXs with a massive list of supported tokens and staking rewards in $UNI giving users voting rights.
Internet Computer
The $ICP token has fallen massively since its initial launch and the hype has been slowly dying down. However, it is still a valuable token with over $3.41 billion market capitalization and close to $66 million TVL. Trading volumes are healthy with around $60 million worth of tokens swapped daily. ICP is a cool example of a real-world infrastructure project in the blockchain sector.
Investors should use fundamental and technical analysis techniques to determine whether to invest in this particular platform since it offers real-world consumer products and tries to connect everything using the fabric of blockchain technology. The approach seems to be working, but investors must be aware of increasing competition in the cloud computing sector.
Bittensor
Investors interested in allocating capital to industries focused on innovation will find this particular platform very curious. It is an AI-centered organization that wants to make the development of artificial intelligence technologies democratic and accessible to the general public. The idea sounds very exciting to many people who have already interacted with the latest products like generative image generators, large language models, AI crypto trading bot systems, and more.
TAO, the native token of Bittensor, has an over $2 billion market cap and close to $55 million in daily trading volume. These metrics may seem low compared to mainstream tokens, but they indicate a healthy level of interest from the community of developers and hopeful investors.
MakerDAO
Often cited as a project doing the decentralized governance right, Maker is strongly focused on providing actual value and utility to the cryptocurrency market thanks to its communally managed stablecoin DAI. The token is used for a wide range of purposes in the DeFi ecosystem and can be staked, lent, borrowed, and utilized in other ways. However, the governance is based on using the $MKR token which is also a valuable digital asset traded on any CEX.
MKR has a $2 billion market capitalization and the protocol itself can show off its massive $4.99 billion TVL number. Since the protocol continues offering great value to the whole market, it has a competitive edge over any future DAO projects that may try to push it out of the market.
The main takeaway
Contemporary retail crypto investors can access a wide range of opportunities when seeking adequate investment avenues for efficient capital allocation. Many believe that simply staking their holdings or actively trading to generate returns is not enough if you are invested in the blockchain industry as a whole. It is also important to participate in governance and individually influence the course of history.
Among the best DAOs to buy in 2024, many offer members genuine opportunities to be proactive and vote on a variety of game-changing issues. We have already mentioned that up to 90% of all members may be inactive and some organizations don’t even reach quorum requirements consistently. People who take on responsibility and feel the need to be active participants are quite valuable to the DeFi sector.
We strongly believe that the future of the industry depends heavily on the level of engagement from investors who want to invest in governance tokens to receive rewards and passionately vote for what they think is the best course of action.