Are DAOs the future or just a passing fad?
How do you DAO? Can DAOs scale?
DAO: Decentralized Autonomous. Organization.
“The whole phrase is a misnomer. They're not decentralized, autonomous, or organizations,” says Monsterplay blockchain consultant David Freuden.
As part of the DAO initiative, Freuden coauthored a 51-page report in May 2020. “We need DAOs,” he says. “‘Shareholder first' is a 1980s/90s concept. Profits became the focus, not products.”
His predictions for DAOs have come true nearly two years later. DAOs had over 1.6 million participants by the end of 2021, up from 13,000 at the start of the year. Wyoming, in the US, will recognize DAOs and the Marshall Islands in 2021. Australia may follow that example in 2022.
But what is a DAO?
Members buy (or are rewarded with) governance tokens to vote on how the DAO operates and spends its money. “DeFi spawned DAOs as an investment vehicle. So a DAO is tokenomics,” says Freuden.
DAOs are usually built around a promise or a social cause, but they still want to make money. “If you can't explain why, the DAO will fail,” he says. “A co-op without tokenomics is not a DAO.”
Operating system DAOs, protocol DAOs, investment DAOs, grant DAOs, service DAOs, social DAOs, collector DAOs, and media DAOs are now available.
Freuden liked the idea of people rallying around a good cause. Speculators and builders make up the crypto world, so it needs a DAO for them.
,Speculators and builders, or both, have mismatched expectations, causing endless, but sometimes creative friction.
Organisms that boost output
Launching a DAO with an original product such as a cryptocurrency, an IT protocol or a VC-like investment fund like FlamingoDAO is common. DAOs enable distributed open-source contributions without borders. The goal is vital. Sometimes, after a product is launched, DAOs emerge, leaving the company to eventually transition to a DAO, as Uniswap did.
Doing things together is a DAO. So it's a way to reward a distributed workforce. DAOs are essentially productivity coordination organisms.
“Those who work for the DAO make permissionless contributions and benefit from fragmented employment,” argues Freuden. DAOs are, first and foremost, a new form of cooperation.
DAO? Distributed not decentralized
In decentralized autonomous organizations, words have multiple meanings. DAOs can emphasize one aspect over another. Autonomy is a trade-off for decentralization.
DAOstack CEO Matan Field says a DAO is a distributed governance system. Power is shared. However, there are two ways to understand a DAO's decentralized nature. This clarifies the various DAO definitions.
A decentralized infrastructure allows a DAO to be decentralized. It could be created on a public permissionless blockchain to prevent a takeover.
As opposed to a company run by executives or shareholders, a DAO is distributed. Its leadership does not wield power
Option two is clearly distributed.
But not all of this is “automated.”
Think quorum, not robot.
DAOs can be autonomous in the sense that smart contracts are self-enforcing and self-executing. So every blockchain transaction is a simplified smart contract.
Dao landscape
The DAO landscape is evolving.
Consider how Ethereum's smart contracts work. They are more like self-executing computer code, which Vitalik Buterin calls “persistent scripts”.
However, a DAO is self-enforcing once its members agree on its rules. As such, a DAO is “automated upon approval by the governance committee.” This distinguishes them from traditional organizations whose rules must be interpreted and applied.
Why a DAO? They move fast
A DAO can quickly adapt to local conditions as a governance mechanism. It's a collaborative decision-making tool.
Like UkraineDAO, created in response to Putin's invasion of Ukraine by Ukrainian expat Alona Shevchenko, Nadya Tolokonnikova, Trippy Labs, and PleasrDAO. The DAO sought to support Ukrainian charities by selling Ukrainian flag NFTs. With a single mission, a DAO can quickly raise funds for a country accepting crypto where banks are distrusted.
This could be a watershed moment for DAOs.
ConstitutionDAO was another clever use case for DAOs for Freuden. In a failed but “beautiful experiment in a single-purpose DAO,” ConstitutionDAO tried to buy a copy of the US Constitution from a Sotheby's auction. In November 2021, ConstitutionDAO raised $47 million from 19,000 people, but a hedge fund manager outbid them.
Contributions were returned or lost if transactional gas fees were too high. The ConstitutionDAO, as a “beautiful experiment,” proved exceptionally fast at organizing and crowdsourcing funds for a specific purpose.
We may soon be applauding UkraineDAO's geopolitical success in support of the DAO concept.
Some of the best use cases for DAOs today, according to Adam Miller, founder of DAOplatform.io and MIDAO Directory Services, involve DAO structures.
That is, a “flat community is vital.” Prototyping by the crowd is a good example. To succeed, members must be enthusiastic about DAOs as an alternative to starting a company. Because DAOs require some hierarchy, he agrees that "distributed is a better acronym."
Miller sees DAOs as a “new way of organizing people and resources.” He started DAOplatform.io, a DAO tooling advisery that is currently transitioning to a DAO due to the “woeful tech options for running a DAO,” which he says mainly comprises of just “multisig admin keys and a voting system.” So today he's advising on DAO tech stacks.
Miller identifies three key elements.
Tokenization is a common method and tool. Second, governance mechanisms connected to the DAO's treasury. Lastly, community.”
How a DAO works...
They can be more than glorified Discord groups if they have a clear mission. This mission is a mix of financial speculation and utopianism. The spectrum is vast.
The founder of Dash left the cryptocurrency project in 2017. It's the story of a prophet without an heir. So creating a global tokenized evangelical missionary community via a DAO made sense.
Evan Duffield, a “libertarian/anarchist” visionary, forked Bitcoin in January 2014 to make it instant and essentially free. He went away for a while, and DASH became a DAO.
200,000 US retailers, including Walmart and Barnes & Noble, now accept Dash as payment. This payment system works like a gift card.
Arden Goldstein, Dash's head of crypto, DAO, and blockchain marketing, claims Dash is the “first successful DAO.” It was founded in 2016 and disbanded after a hack, an Ethereum hard fork and much controversy. But what are the success metrics?
Crypto success is measured differently, says Goldstein. To achieve common goals, people must participate or be motivated in a healthy DAO. People are motivated to complete tasks in a successful DAO. And, crucially, when tasks get completed.
“Yes or no, 1 or 0, voting is not a new idea. The challenge is getting people to continue to participate and keep building a community.” A DAO motivates volunteers: Nothing keeps people from building. The DAO “philosophy is old news. You need skin in the game to play.”
MasterNodes must stake 1000 Dash. Those members are rewarded with DASH for marketing (and other tasks). It uses an outsourced team to onboard new users globally.
Joining a DAO is part of the fun of meeting crazy or “very active” people on Discord. No one gets fired (usually). If your work is noticed, you may be offered a full-time job.
DAO community members worldwide are rewarded for brand building. Dash is also a great product for developing countries with high inflation and undemocratic governments. The countries with the most Dash DAO members are Russia, Brazil, Venezuela, India, China, France, Italy, and the Philippines.
Grassroots activism makes this DAO work. A DAO is local. Venezuelans can't access Dash.org, so DAO members help them use a VPN. DAO members are investors, fervent evangelicals, and local product experts.
Every month, proposals and grant applications are voted on via the Dash platform. However, the DAO may decide not to fund you. For example, the DAO once hired a PR firm, but the community complained about the lack of press coverage. This raises a great question: How are real-world contractual obligations met by a DAO?
Does the DASH DAO work?
“I see the DAO defund projects I thought were valuable,” Goldstein says. Despite working full-time, I must submit a funding proposal. “Much faster than other companies I've worked on,” he says.
Dash DAO is a headless beast. Ryan Taylor is the CEO of the company overseeing the DASH Core Group project.
The issue is that “we don't know who has the most tokens [...] because we don't know who our customers are.” As a result, “the loudest voices usually don't have the most MasterNodes and aren't the most invested.”
Goldstein, the only female in the DAO, says she worked hard. “I was proud of the DAO when I made the logo pink for a day and got great support from the men.” This has yet to entice a major influx of female DAO members.
Many obstacles stand in the way of utopian dreams.
Governance problems remain
And what about major token holders behaving badly?
In early February, a heated crypto Twitter debate raged on about inclusion, diversity, and cancel culture in relation to decentralized projects. In this case, the question was how a DAO addresses alleged inappropriate behavior.
In a corporation, misconduct can result in termination. In a DAO, founders usually hold a large number of tokens and the keys to the blockchain (multisignature) or otherwise.
Brantly Millegan, the director of operations of Ethereum Name Service (ENS), made disparaging remarks about the LGBTQ community and other controversial topics. The screenshotted comments were made in 2016 and brought to the ENS board's attention in early 2022.
His contract with ENS has expired. But what of his large DAO governance token holdings?
Members of the DAO proposed a motion to remove Millegan from the DAO. His “delegated” votes net 370,000. He was and is the DAO's largest delegate.
What if he had refused to accept the DAO's decision?
Freuden says the answer is not so simple.
“Can a DAO kick someone out who built the project?”
The original mission “should be dissolved” if it no longer exists. “Does a DAO fail and return the money? They must r eturn the money with interest if the marriage fails.”
Before an IPO, VCs might try to remove a problematic CEO.
While DAOs use treasury as a governance mechanism, it is usually controlled (at least initially) by the original project creators. Or, in the case of Uniswap, the venture capital firm a16z has so much voting power that it has delegated it to student-run blockchain organizations.
So, can DAOs really work at scale? How to evolve voting paradigms beyond token holdings?
The whale token holder issue has some solutions. Multiple tokens, such as a utility token on top of a governance token, and quadratic voting for whales, are now common. Other safeguards include multisignature blockchain keys and decision time locks that allow for any automated decision to be made. The structure of each DAO will depend on the assets at stake.
In reality, voter turnout is often a bigger issue.
Is DAO governance scalable?
Many DAOs have low participation. Due to a lack of understanding of technology, apathy, or busy lives. “The bigger the DAO, the fewer voters who vote,” says Freuden.
Freuden's report cites British anthropologist Dunbar's Law, who argued that people can only maintain about 150 relationships.
"As the DAO grows in size, the individual loses influence because they perceive their voting power as being diminished or insignificant. The Ringelmann Effect and Dunbar's Rule show that as a group grows in size, members become lazier, disenfranchised, and detached.
Freuden says a DAO requires “understanding human relationships.” He believes DAOs work best as investment funds rooted in Cryptoland and small in scale. In just three weeks, SyndicateDAO enabled the creation of 450 new investment group DAOs.
Due to SEC regulations, FlamingoDAO, a famous NFT curation investment DAO, could only have 100 investors. The “LAO” is a member-directed venture capital fund and a US LLC. To comply with US securities law, they only allow 100 members with a 120ETH minimum staking contribution.
But how did FlamingoDAO make investment decisions? How often did all 70 members vote? Art and NFTs are highly speculative.
So, investment DAOs are thought to work well in a small petri dish environment. This is due to a crypto-native club's pooled capital (maximum 7% per member) and crowdsourced knowledge.
While scalability is a concern, each DAO will operate differently depending on the goal, technology stage, and personalities. Meetups and hackathons are common ways for techies to collaborate on a cause or test an idea. But somebody still organizes the hack.
Holographic consensus voting
But clever people are working on creative solutions to every problem.
Miller of DAOplatform.io cites DXdao as a successful DAO. Decentralized product and service creator DXdao runs the DAO entirely on-chain. “You earn voting rights by contributing to the community.”
DXdao, a DAOstack fork, uses holographic consensus, a voting algorithm invented by DAOstack founder Matan Field. The system lets a random or semi-random subset make group-wide decisions.
By acting as a gatekeeper for voters, DXdao's Luke Keenan explains that “a small predictions market economy emerges around the likely outcome of a proposal as tokens are staked on it.” Also, proposals that have been financially boosted have fewer requirements to be successful, increasing system efficiency.” DXdao “makes decisions by removing voting power as an economic incentive.”
Field explains that holographic consensus “does not require a quorum to render a vote valid.”
“Rather, it provides a parallel process. It is a game played (for profit) by ‘predictors' who make predictions about whether or not a vote will be approved by the voters. The voting process is valid even when the voting quorum is low if enough stake is placed on the outcome of the vote.
“In other words, a quorum is not a scalable DAO governance strategy,” Field says.
You don't need big votes on everything. If only 5% vote, fine. To move significant value or make significant changes, you need a longer voting period (say 30 days) and a higher quorum,” says Miller.
Clearly, DAOs are maturing. The emphasis is on tools like Orca and processes that delegate power to smaller sub-DAOs, committees, and working groups.
Miller also claims that “studies in psychology show that rewarding people too much for volunteering disincentivizes them.” So, rather than giving out tokens for every activity, you may want to offer symbolic rewards like POAPs or contributor levels.
“Free lunches are less rewarding. Random rewards can boost motivation.”
Culture and motivation
DAOs (and Web3 in general) can give early adopters a sense of ownership. In theory, they encourage early participation and bootstrapping before network effects.
"A double-edged sword," says Goldstein. In the developing world, they may not be fully scalable.
“There must always be a leader,” she says. “People won't volunteer if they don't want to.”
DAO members sometimes feel entitled. “They are not the boss, but they think they should be able to see my calendar or get a daily report,” Goldstein gripes. Say, “I own three MasterNodes and need to know X, Y, and Z.”
In most decentralized projects, strong community leaders are crucial to influencing culture.
Freuden says “the DAO's community builder is the cryptoland influencer.” They must “disseminate the DAO's culture, cause, and rally the troops” in English, not tech.
They must keep members happy.
So the community builder is vital. Building a community around a coin that promises riches is simple, but keeping DAO members motivated is difficult.
It's a human job. But tools like SourceCred or coordinate that measure contributions and allocate tokens are heavily marketed. Large growth funds/community funds/grant programs are common among DAOs.
The Future?
Onboarding, committed volunteers, and an iconic community builder may be all DAOs need.
It takes a DAO just one day to bring together a passionate (and sometimes obsessive) community. For organizations with a common goal, managing stakeholder expectations is critical.
A DAO's core values are community and cause, not scalable governance. “DAOs will work at scale like gaming communities, but we will have sub-DAOs everywhere like committees,” says Freuden.
So-called holographic consensuses “can handle, in principle, increasing rates of proposals by turning this tension between scale and resilience into an economical cost,” Field writes. Scalability is not guaranteed.
The DAO's key innovation is the fragmented workplace. “Voting is a subset of engagement,” says Freuden. DAO should allow for permissionless participation and engagement. DAOs allow for remote work.”
In 20 years, DAOs may be the AI-powered self-organizing concept. That seems far away now. But a new breed of productivity coordination organisms is maturing.
More on Web3 & Crypto
Faisal Khan
3 months ago
4 typical methods of crypto market manipulation
Market fraud
Due to its decentralized and fragmented character, the crypto market has integrity difficulties.
Cryptocurrencies are an immature sector, therefore market manipulation becomes a bigger issue. Many research have attempted to uncover these abuses. CryptoCompare's newest one highlights some of the industry's most typical scams.
Why are these concerns so common in the crypto market? First, even the largest centralized exchanges remain unregulated due to industry immaturity. A low-liquidity market segment makes an attack more harmful. Finally, market surveillance solutions not implemented reduce transparency.
In CryptoCompare's latest exchange benchmark, 62.4% of assessed exchanges had a market surveillance system, although only 18.1% utilised an external solution. To address market integrity, this measure must improve dramatically. Before discussing the report's malpractices, note that this is not a full list of attacks and hacks.
Clean Trading
An investor buys and sells concurrently to increase the asset's price. Centralized and decentralized exchanges show this misconduct. 23 exchanges have a volume-volatility correlation < 0.1 during the previous 100 days, according to CryptoCompares. In August 2022, Exchange A reported $2.5 trillion in artificial and/or erroneous volume, up from $33.8 billion the month before.
Spoofing
Criminals create and cancel fake orders before they can be filled. Since manipulators can hide in larger trading volumes, larger exchanges have more spoofing. A trader placed a 20.8 BTC ask order at $19,036 when BTC was trading at $19,043. BTC declined 0.13% to $19,018 in a minute. At 18:48, the trader canceled the ask order without filling it.
Front-Running
Most cryptocurrency front-running involves inside trading. Traditional stock markets forbid this. Since most digital asset information is public, this is harder. Retailers could utilize bots to front-run.
CryptoCompare found digital wallets of people who traded like insiders on exchange listings. The figure below shows excess cumulative anomalous returns (CAR) before a coin listing on an exchange.
Finally, LAYERING is a sequence of spoofs in which successive orders are put along a ladder of greater (layering offers) or lower (layering bids) values. The paper concludes with recommendations to mitigate market manipulation. Exchange data transparency, market surveillance, and regulatory oversight could reduce manipulative tactics.
Sam Hickmann
10 months ago
Nomad.xyz got exploited for $190M
Key Takeaways:
Another hack. This time was different. This is a doozy.
Why? Nomad got exploited for $190m. It was crypto's 5th-biggest hack. Ouch.
It wasn't hackers, but random folks. What happened:
A Nomad smart contract flaw was discovered. They couldn't drain the funds at once, so they tried numerous transactions. Rookie!
People noticed and copied the attack.
They just needed to discover a working transaction, substitute the other person's address with theirs, and run it.
In a two-and-a-half-hour attack, $190M was siphoned from Nomad Bridge.
Nomad is a novel approach to blockchain interoperability that leverages an optimistic mechanism to increase the security of cross-chain communication. — nomad.xyz
This hack was permissionless, therefore anyone could participate.
After the fatal blow, people fought over the scraps.
Cross-chain bridges remain a DeFi weakness and exploit target. When they collapse, it's typically total.
$190M...gobbled.
Unbacked assets are hurting Nomad-dependent chains. Moonbeam, EVMOS, and Milkomeda's TVLs dropped.
This incident is every-man-for-himself, although numerous whitehats exploited the issue...
But what triggered the feeding frenzy?
How did so many pick the bones?
After a normal upgrade in June, the bridge's Replica contract was initialized with a severe security issue. The 0x00 address was a trusted root, therefore all messages were valid by default.
After a botched first attempt (costing $350k in gas), the original attacker's exploit tx called process() without first 'proving' its validity.
The process() function executes all cross-chain messages and checks the merkle root of all messages (line 185).
The upgrade caused transactions with a'messages' value of 0 (invalid, according to old logic) to be read by default as 0x00, a trusted root, passing validation as 'proven'
Any process() calls were valid. In reality, a more sophisticated exploiter may have designed a contract to drain the whole bridge.
Copycat attackers simply copied/pasted the same process() function call using Etherscan, substituting their address.
The incident was a wild combination of crowdhacking, whitehat activities, and MEV-bot (Maximal Extractable Value) mayhem.
For example, 🍉🍉🍉. eth stole $4M from the bridge, but claims to be whitehat.
Others stood out for the wrong reasons. Repeat criminal Rari Capital (Artibrum) exploited over $3M in stablecoins, which moved to Tornado Cash.
The top three exploiters (with 95M between them) are:
$47M: 0x56D8B635A7C88Fd1104D23d632AF40c1C3Aac4e3
$40M: 0xBF293D5138a2a1BA407B43672643434C43827179
$8M: 0xB5C55f76f90Cc528B2609109Ca14d8d84593590E
Here's a list of all the exploiters:
The project conducted a Quantstamp audit in June; QSP-19 foreshadowed a similar problem.
The auditor's comments that "We feel the Nomad team misinterpreted the issue" speak to a troubling attitude towards security that the project's "Long-Term Security" plan appears to confirm:
Concerns were raised about the team's response time to a live, public exploit; the team's official acknowledgement came three hours later.
"Removing the Replica contract as owner" stopped the exploit, but it was too late to preserve the cash.
Closed blockchain systems are only as strong as their weakest link.
The Harmony network is in turmoil after its bridge was attacked and lost $100M in late June.
What's next for Nomad's ecosystems?
Moonbeam's TVL is now $135M, EVMOS's is $3M, and Milkomeda's is $20M.
Loss of confidence may do more damage than $190M.
Cross-chain infrastructure is difficult to secure in a new, experimental sector. Bridge attacks can pollute an entire ecosystem or more.
Nomadic liquidity has no permanent home, so consumers will always migrate in pursuit of the "next big thing" and get stung when attentiveness wanes.
DeFi still has easy prey...
Sources: rekt.news & The Milk Road.
OnChain Wizard
1 year ago
How to make a >800 million dollars in crypto attacking the once 3rd largest stablecoin, Soros style
Everyone is talking about the $UST attack right now, including Janet Yellen. But no one is talking about how much money the attacker made (or how brilliant it was). Lets dig in.
Our story starts in late March, when the Luna Foundation Guard (or LFG) starts buying BTC to help back $UST. LFG started accumulating BTC on 3/22, and by March 26th had a $1bn+ BTC position. This is leg #1 that made this trade (or attack) brilliant.
The second leg comes in the form of the 4pool Frax announcement for $UST on April 1st. This added the second leg needed to help execute the strategy in a capital efficient way (liquidity will be lower and then the attack is on).
We don't know when the attacker borrowed 100k BTC to start the position, other than that it was sold into Kwon's buying (still speculation). LFG bought 15k BTC between March 27th and April 11th, so lets just take the average price between these dates ($42k).
So you have a ~$4.2bn short position built. Over the same time, the attacker builds a $1bn OTC position in $UST. The stage is now set to create a run on the bank and get paid on your BTC short. In anticipation of the 4pool, LFG initially removes $150mm from 3pool liquidity.
The liquidity was pulled on 5/8 and then the attacker uses $350mm of UST to drain curve liquidity (and LFG pulls another $100mm of liquidity).
But this only starts the de-pegging (down to 0.972 at the lows). LFG begins selling $BTC to defend the peg, causing downward pressure on BTC while the run on $UST was just getting started.
With the Curve liquidity drained, the attacker used the remainder of their $1b OTC $UST position ($650mm or so) to start offloading on Binance. As withdrawals from Anchor turned from concern into panic, this caused a real de-peg as people fled for the exits
So LFG is selling $BTC to restore the peg while the attacker is selling $UST on Binance. Eventually the chain gets congested and the CEXs suspend withdrawals of $UST, fueling the bank run panic. $UST de-pegs to 60c at the bottom, while $BTC bleeds out.
The crypto community panics as they wonder how much $BTC will be sold to keep the peg. There are liquidations across the board and LUNA pukes because of its redemption mechanism (the attacker very well could have shorted LUNA as well). BTC fell 25% from $42k on 4/11 to $31.3k
So how much did our attacker make? There aren't details on where they covered obviously, but if they are able to cover (or buy back) the entire position at ~$32k, that means they made $952mm on the short.
On the $350mm of $UST curve dumps I don't think they took much of a loss, lets assume 3% or just $11m. And lets assume that all the Binance dumps were done at 80c, thats another $125mm cost of doing business. For a grand total profit of $815mm (bf borrow cost).
BTC was the perfect playground for the trade, as the liquidity was there to pull it off. While having LFG involved in BTC, and foreseeing they would sell to keep the peg (and prevent LUNA from dying) was the kicker.
Lastly, the liquidity being low on 3pool in advance of 4pool allowed the attacker to drain it with only $350mm, causing the broader panic in both BTC and $UST. Any shorts on LUNA would've added a lot of P&L here as well, with it falling -65% since 5/7.
And for the reply guys, yes I know a lot of this involves some speculation & assumptions. But a lot of money was made here either way, and I thought it would be cool to dive into how they did it.
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Navdeep Yadav
5 months ago
31 startup company models (with examples)
Many people find the internet's various business models bewildering.
This article summarizes 31 startup e-books.
1. Using the freemium business model (free plus premium),
The freemium business model offers basic software, games, or services for free and charges for enhancements.
Examples include Slack, iCloud, and Google Drive
Provide a rudimentary, free version of your product or service to users.
Google Drive and Dropbox offer 15GB and 2GB of free space but charge for more.
Freemium business model details (Click here)
2. The Business Model of Subscription
Subscription business models sell a product or service for recurring monthly or yearly revenue.
Examples: Tinder, Netflix, Shopify, etc
It's the next step to Freemium if a customer wants to pay monthly for premium features.
Subscription Business Model (Click here)
3. A market-based business strategy
It's an e-commerce site or app where third-party sellers sell products or services.
Examples are Amazon and Fiverr.
On Amazon's marketplace, a third-party vendor sells a product.
Freelancers on Fiverr offer specialized skills like graphic design.
Marketplace's business concept is explained.
4. Business plans using aggregates
In the aggregator business model, the service is branded.
Uber, Airbnb, and other examples
Marketplace and Aggregator business models differ.
Amazon and Fiverr link merchants and customers and take a 10-20% revenue split.
Uber and Airbnb-style aggregator Join these businesses and provide their products.
5. The pay-as-you-go concept of business
This is a consumption-based pricing system. Cloud companies use it.
Example: Amazon Web Service and Google Cloud Platform (GCP) (AWS)
AWS, an Amazon subsidiary, offers over 200 pay-as-you-go cloud services.
“In short, the more you use the more you pay”
When it's difficult to divide clients into pricing levels, pay-as-you is employed.
6. The business model known as fee-for-service (FFS)
FFS charges fixed and variable fees for each successful payment.
For instance, PayU, Paypal, and Stripe
Stripe charges 2.9% + 30 per payment.
These firms offer a payment gateway to take consumer payments and deposit them to a business account.
Fintech business model
7. EdTech business strategy
In edtech, you generate money by selling material or teaching as a service.
edtech business models
Freemium When course content is free but certification isn't, e.g. Coursera
FREE TRIAL SkillShare offers free trials followed by monthly or annual subscriptions.
Self-serving marketplace approach where you pick what to learn.
Ad-revenue model The company makes money by showing adverts to its huge user base.
Lock-in business strategy
Lock in prevents customers from switching to a competitor's brand or offering.
It uses switching costs or effort to transmit (soft lock-in), improved brand experience, or incentives.
Apple, SAP, and other examples
Apple offers an iPhone and then locks you in with extra hardware (Watch, Airpod) and platform services (Apple Store, Apple Music, cloud, etc.).
9. Business Model for API Licensing
APIs let third-party apps communicate with your service.
Uber and Airbnb use Google Maps APIs for app navigation.
Examples are Google Map APIs (Map), Sendgrid (Email), and Twilio (SMS).
Business models for APIs
Free: The simplest API-driven business model that enables unrestricted API access for app developers. Google Translate and Facebook are two examples.
Developer Pays: Under this arrangement, service providers such as AWS, Twilio, Github, Stripe, and others must be paid by application developers.
The developer receives payment: These are the compensated content producers or developers who distribute the APIs utilizing their work. For example, Amazon affiliate programs
10. Open-source enterprise
Open-source software can be inspected, modified, and improved by anybody.
For instance, use Firefox, Java, or Android.
Google paid Mozilla $435,702 million to be their primary search engine in 2018.
Open-source software profits in six ways.
Paid assistance The Project Manager can charge for customization because he is quite knowledgeable about the codebase.
A full database solution is available as a Software as a Service (MongoDB Atlas), but there is a fee for the monitoring tool.
Open-core design R studio is a better GUI substitute for open-source applications.
sponsors of GitHub Sponsorships benefit the developers in full.
demands for paid features Earn Money By Developing Open Source Add-Ons for Current Products
Open-source business model
11. The business model for data
If the software or algorithm collects client data to improve or monetize the system.
Open AI GPT3 gets smarter with use.
Foursquare allows users to exchange check-in locations.
Later, they compiled large datasets to enable retailers like Starbucks launch new outlets.
12. Business Model Using Blockchain
Blockchain is a distributed ledger technology that allows firms to deploy smart contracts without a central authority.
Examples include Alchemy, Solana, and Ethereum.
Business models using blockchain
Economy of tokens or utility When a business uses a token business model, it issues some kind of token as one of the ways to compensate token holders or miners. For instance, Solana and Ethereum
Bitcoin Cash P2P Business Model Peer-to-peer (P2P) blockchain technology permits direct communication between end users. as in IPFS
Enterprise Blockchain as a Service (Baas) BaaS focuses on offering ecosystem services similar to those offered by Amazon (AWS) and Microsoft (Azure) in the web 3 sector. Example: Ethereum Blockchain as a Service with Bitcoin (EBaaS).
Blockchain-Based Aggregators With AWS for blockchain, you can use that service by making an API call to your preferred blockchain. As an illustration, Alchemy offers nodes for many blockchains.
13. The free-enterprise model
In the freeterprise business model, free professional accounts are led into the funnel by the free product and later become B2B/enterprise accounts.
For instance, Slack and Zoom
Freeterprise companies flourish through collaboration.
Start with a free professional account to build an enterprise.
14. Business plan for razor blades
It's employed in hardware where one piece is sold at a loss and profits are made through refills or add-ons.
Gillet razor & blades, coffee machine & beans, HP printer & cartridge, etc.
Sony sells the Playstation console at a loss but makes up for it by selling games and charging for online services.
Advantages of the Razor-Razorblade Method
lowers the risk a customer will try a product. enables buyers to test the goods and services without having to pay a high initial investment.
The product's ongoing revenue stream has the potential to generate sales that much outweigh the original investments.
Razor blade business model
15. The business model of direct-to-consumer (D2C)
In D2C, the company sells directly to the end consumer through its website using a third-party logistic partner.
Examples include GymShark and Kylie Cosmetics.
D2C brands can only expand via websites, marketplaces (Amazon, eBay), etc.
D2C benefits
Lower reliance on middlemen = greater profitability
You now have access to more precise demographic and geographic customer data.
Additional space for product testing
Increased customisation throughout your entire product line-Inventory Less
16. Business model: White Label vs. Private Label
Private label/White label products are made by a contract or third-party manufacturer.
Most amazon electronics are made in china and white-labeled.
Amazon supplements and electronics.
Contract manufacturers handle everything after brands select product quantities on design labels.
17. The franchise model
The franchisee uses the franchisor's trademark, branding, and business strategy (company).
For instance, KFC, Domino's, etc.
Subway, Domino, Burger King, etc. use this business strategy.
Many people pick a franchise because opening a restaurant is risky.
18. Ad-based business model
Social media and search engine giants exploit search and interest data to deliver adverts.
Google, Meta, TikTok, and Snapchat are some examples.
Users don't pay for the service or product given, e.g. Google users don't pay for searches.
In exchange, they collected data and hyper-personalized adverts to maximize revenue.
19. Business plan for octopuses
Each business unit functions separately but is connected to the main body.
Instance: Oyo
OYO is Asia's Airbnb, operating hotels, co-working, co-living, and vacation houses.
20, Transactional business model, number
Sales to customers produce revenue.
E-commerce sites and online purchases employ SSL.
Goli is an ex-GymShark.
21. The peer-to-peer (P2P) business model
In P2P, two people buy and sell goods and services without a third party or platform.
Consider OLX.
22. P2P lending as a manner of operation
In P2P lending, one private individual (P2P Lender) lends/invests or borrows money from another (P2P Borrower).
Instance: Kabbage
Social lending lets people lend and borrow money directly from each other without an intermediary financial institution.
23. A business model for brokers
Brokerages charge a commission or fee for their services.
Examples include eBay, Coinbase, and Robinhood.
Brokerage businesses are common in Real estate, finance, and online and operate on this model.
Buy/sell similar models Examples include financial brokers, insurance brokers, and others who match purchase and sell transactions and charge a commission.
These brokers charge an advertiser a fee based on the date, place, size, or type of an advertisement. This is known as the classified-advertiser model. For instance, Craiglist
24. Drop shipping as an industry
Dropshipping allows stores to sell things without holding physical inventories.
When a customer orders, use a third-party supplier and logistic partners.
Retailer product portfolio and customer experience Fulfiller The consumer places the order.
Dropshipping advantages
Less money is needed (Low overhead-No Inventory or warehousing)
Simple to start (costs under $100)
flexible work environment
New product testing is simpler
25. Business Model for Space as a Service
It's centered on a shared economy that lets millennials live or work in communal areas without ownership or lease.
Consider WeWork and Airbnb.
WeWork helps businesses with real estate, legal compliance, maintenance, and repair.
26. The business model for third-party logistics (3PL)
In 3PL, a business outsources product delivery, warehousing, and fulfillment to an external logistics company.
Examples include Ship Bob, Amazon Fulfillment, and more.
3PL partners warehouse, fulfill, and return inbound and outbound items for a charge.
Inbound logistics involves bringing products from suppliers to your warehouse.
Outbound logistics refers to a company's production line, warehouse, and customer.
27. The last-mile delivery paradigm as a commercial strategy
Last-mile delivery is the collection of supply chain actions that reach the end client.
Examples include Rappi, Gojek, and Postmates.
Last-mile is tied to on-demand and has a nighttime peak.
28. The use of affiliate marketing
Affiliate marketing involves promoting other companies' products and charging commissions.
Examples include Hubspot, Amazon, and Skillshare.
Your favorite youtube channel probably uses these short amazon links to get 5% of sales.
Affiliate marketing's benefits
In exchange for a success fee or commission, it enables numerous independent marketers to promote on its behalf.
Ensure system transparency by giving the influencers a specific tracking link and an online dashboard to view their profits.
Learn about the newest bargains and have access to promotional materials.
29. The business model for virtual goods
This is an in-app purchase for an intangible product.
Examples include PubG, Roblox, Candy Crush, etc.
Consumables are like gaming cash that runs out. Non-consumable products provide a permanent advantage without repeated purchases.
30. Business Models for Cloud Kitchens
Ghost, Dark, Black Box, etc.
Delivery-only restaurant.
These restaurants don't provide dine-in, only delivery.
For instance, NextBite and Faasos
31. Crowdsourcing as a Business Model
Crowdsourcing = Using the crowd as a platform's source.
In crowdsourcing, you get support from people around the world without hiring them.
Crowdsourcing sites
Open-Source Software gives access to the software's source code so that developers can edit or enhance it. Examples include Firefox browsers and Linux operating systems.
Crowdfunding The oculus headgear would be an example of crowdfunding in essence, with no expectations.
Niharikaa Kaur Sodhi
8 months ago
The Only Paid Resources I Turn to as a Solopreneur
4 Pricey Tools That Are Valuable
I pay based on ROI (return on investment).
If a $20/month tool or $500 online course doubles my return, I'm in.
Investing helps me build wealth.
Canva Pro
I initially refused to pay.
My course content needed updating a few months ago. My Google Docs text looked cleaner and more professional in Canva.
I've used it to:
product cover pages
eBook covers
Product page infographics
See my Google Sheets vs. Canva product page graph.
Google Sheets vs Canva
Yesterday, I used it to make a LinkedIn video thumbnail. It took less than 5 minutes and improved my video.
In 30 hours, the video had 39,000 views.
Here's more.
HypeFury
Hypefury rocks!
It builds my brand as I sleep. What else?
Because I'm traveling this weekend, I planned tweets for 10 days. It took me 80 minutes.
So while I travel or am absent, my content mill keeps producing.
Also I like:
I can reach hundreds of people thanks to auto-DMs. I utilize it to advertise freebies; for instance, leave an emoji remark to receive my checklist. And they automatically receive a message in their DM.
Scheduled Retweets: By appearing in a different time zone, they give my tweet a second chance.
It helps me save time and expand my following, so that's my favorite part.
It’s also super neat:
Zoom Pro
My course involves weekly and monthly calls for alumni.
Google Meet isn't great for group calls. The interface isn't great.
Zoom Pro is expensive, and the monthly payments suck, but it's necessary.
It gives my students a smooth experience.
Previously, we'd do 40-minute meetings and then reconvene.
Zoom's free edition limits group calls to 40 minutes.
This wouldn't be a good online course if I paid hundreds of dollars.
So I felt obligated to help.
YouTube Premium
My laptop has an ad blocker.
I bought an iPad recently.
When you're self-employed and work from home, the line between the two blurs. My bed is only 5 steps away!
When I read or watched videos on my laptop, I'd slide into work mode. Only option was to view on phone, which is awkward.
YouTube premium handles it. No more advertisements and I can listen on the move.
3 Expensive Tools That Aren't Valuable
Marketing strategies are sometimes aimed to make you feel you need 38474 cool features when you don’t.
Certain tools are useless.
I found it useless.
Depending on your needs. As a writer and creator, I get no return.
They could for other jobs.
Shield Analytics
It tracks LinkedIn stats, like:
follower growth
trend chart for impressions
Engagement, views, and comment stats for posts
and much more.
Middle-tier creator costs $12/month.
I got a 25% off coupon but canceled my free trial before writing this. It's not worth the discount.
Why?
LinkedIn provides free analytics. See:
Not thorough and won't show top posts.
I don't need to see my top posts because I love experimenting with writing.
Slack Premium
Slack was my classroom. Slack provided me a premium trial during the prior cohort.
I skipped it.
Sure, voice notes are better than a big paragraph. I didn't require pro features.
Marketing methods sometimes make you think you need 38474 amazing features. Don’t fall for it.
Calendly Pro
This may be worth it if you get many calls.
I avoid calls. During my 9-5, I had too many pointless calls.
I don't need:
ability to schedule calls for 15, 30, or 60 minutes: I just distribute each link separately.
I have a Gumroad consultation page with a payment option.
follow-up emails: I hardly ever make calls, so
I just use one calendar, therefore I link to various calendars.
I'll admit, the integrations are cool. Not for me.
If you're a coach or consultant, the features may be helpful. Or book meetings.
Conclusion
Investing is spending to make money.
Use my technique — put money in tools that help you make money. This separates it from being an investment instead of an expense.
Try free versions of these tools before buying them since everyone else is.
Nick Nolan
8 months ago
How to Make $1,037,100 in 4 Months with This Weird Website
One great idea might make you rich.
Imagine having a million-dollar concept in college that made a million.
2005 precisely.
Alex Tew, 21, from Wiltshire, England, created The Million Dollar Homepage in August 2005. The idea is basic but beyond the ordinary, which is why it worked.
Alex built a 1,000,000-pixel webpage.
Each website pixel would cost $1. Since pixels are hard to discern, he sold 10x10 squares for $100.
He'd make a million if all the spots sold.
He may have thought about NFTs and the Metaverse decades ago.
MillionDollarHomepage.com launched in 2005.
Businesses and individuals could buy a website spot and add their logo, website link, and tagline. You bought an ad, but nobody visited the website.
If a few thousand people visited the website, it could drive traffic to your business's site.
Alex promised buyers the website would be up for 5 years, so it was a safe bet.
Alex's friend with a music website was the first to buy real estate on the site. Within two weeks, 4,700 pixels sold, and a tracker showed how many were sold and available.
Word-of-mouth marketing got the press's attention quickly. Everyone loves reading about new ways to make money, so it was a good news story.
By September, over 250,000 pixels had been sold, according to a BBC press release.
Alex and the website gained more media and public attention, so traffic skyrocketed. Two months after the site launched, 1,400 customers bought more than 500,000 pixels.
Businesses bought online real estate. They heard thousands visited the site, so they could get attention cheaply.
Unless you bought a few squares, I'm not sure how many people would notice your ad or click your link.
A sponge website owner emailed Alex:
“We tried Million Dollar Homepage because we were impressed at the level of ingenuity and the sheer simplicity of it. If we’re honest, we didn’t expect too much from it. Now, as a direct result, we are pitching for £18,000 GBP worth of new clients and have seen our site traffic increase over a hundred-fold. We’re even going to have to upgrade our hosting facility! It’s been exceptional.”
Web.archive.org screenshots show how the website changed.
“The idea is to create something of an internet time capsule: a homepage that is unique and permanent. Everything on the internet keeps changing so fast, it will be nice to have something that stays solid and permanent for many years. You can be a part of that!” Alex Tew, 2005
The last 1,000 pixels were sold on January 1, 2006.
By then, the homepage had hundreds of thousands of monthly visitors. Alex put the last space on eBay due to high demand.
MillionDollarWeightLoss.com won the last pixels for $38,100, bringing revenue to $1,037,100 in 4 months.
Many have tried to replicate this website's success. They've all failed.
This idea only worked because no one had seen this website before.
This winner won't be repeated, but it should inspire you to try something new and creative.
Still popular, you could buy one of the linked domains. You can't buy pixels, but you can buy an expired domain.
One link I clicked costs $59,888.
You'd own a piece of internet history if you spent that much on a domain.
Someone bought stablesgallery.co.uk after the domain expired and restored it.
Many of the linked websites have expired or been redirected, but some still link to the original. I couldn't find sponge's website. Can you?
This is a great example of how a simple creative idea can go viral.
Comment on this amazing success story.