Non-custodial wallet platforms are perhaps the least discussed innovations in the crypto industry, yet they play one of the most fundamental roles: enabling access to the DeFi and NFT ecosystems.
For context, MetaMask alone facilitates around 30 million monthly active users, while up-and-coming account abstraction wallets such as Ambire enjoy a market base of over 115K registered users.
But what’s even more intriguing is the diverse clientele that these Web3 wallets serve. From users in advanced economies to developing countries, anyone who wants to interact with DeFi requires at least one non-custodial wallet.
This richness in culture, professionalism, age, tech-savviness among other factors such as ethics, blends very well with the concept of Decentralized Autonomous Organizations (DAOs) through governance tokens.
The Rise of DAOs
DAOs, as the name suggests, are decentralized governing bodies that have become synonymous with the crypto sector.
Unlike the typical traditional corporate governance structure, where decisions are mostly made by a handful of individuals, DAOs introduce a framework where a larger community participates in the governance of a particular protocol or DeFi ecosystem by voting for proposals suggested by other participants or stakeholders.
The first DAO was launched in 2016, and although not a success, it led to the infamous Ethereum Classic hard fork and went on to set the precedent for DAO operations. Today, there are over 50,000 aggregated governance organizations, managing close to $40 billion within their treasuries.
Web3 Wallets: The Perfect Use Case for DAOs
As mentioned previously, Web3 wallets, unlike the traditional finance offered by banks, investment firms, or other financial intermediaries, have very minimal requirements for entry. In most cases, the only procedure is to download a web browser extension, after which an account is generated, and the user is provided with private keys which they will use as the logins. Fairly simple compared to the KYC barriers in tradfi.
Therefore, it should not come as a surprise that most DeFi users are based in jurisdictions where accessing a bank account is cumbersome. Countries such as India and Nigeria contribute to a significant share of this market. Additionally, it is worth noting that over 60% of DeFi users are below 35 years old, as per a report by Finder. What better composition to drive decision-making?
Of course, we cannot ignore the role that experts have played in building the existing global markets, but at the same time, we cannot overlook the corporate governance mishaps such as the Enron scandal and the 2008 banking crisis. All these happened with financial gurus at the helm of the industry.
On the brighter side, DAOs are gradually finding a space in the future of finance. Most of the DeFi ecosystems that exist are run through DAO governing structures; a good example is the Compound lending platform, which was among the first protocols to launch a governance token. This platform has been governed to date through DAO proposals, where $COMP token holders occasionally vote on development proposals.
If you’re a keen follower of the DeFi ecosystem, then you probably understand the success that such DAOs have yielded in decentralizing governance. More intriguing, however, is the potential that lies within Web3 wallets such as Ambire, which is governed through the WalletDAO. This non-custodial wallet leverages a native token dubbed ‘$WALLET’ to enable owners to vote on proposals to improve or make changes to the Ambire wallet ecosystem.
Recently, the community floated a proposal to bridge Ambire’s $WALLET token to the Optimism and Base layer 2 networks. This is just one of the few proposals that the community has voted on. But more important is the diverse nature of participants that have contributed to Ambire’s developments and integrations over time through decentralized governance.
MetaMask had also signaled that it would launch a native token back in 2022, but the ConsenSys-developed wallet is yet to launch one. Of course, this would be a game-changer on a bigger level given that MetaMask commands the largest market share in the DeFi wallet ecosystem.
Looking Ahead
Non-custodial crypto wallets will continue to be an integral part of the DeFi and NFT market, serving as the primary entry platforms. That being the case, it goes without saying that they ought to technically and fundamentally mirror the ethos of permissionless economies, one of which is decentralized governance.
While it might be a little hard to immediately start off with a native token or establish a DAO at the get-go, transitioning is also an option. This is what MetaMask had hinted at, while other DeFi projects such as the Ethereum Name Service (ENS) have implemented a successful shift from a centrally governed ecosystem to a DAO-driven community.
After all, what matters is the ultimate effectiveness of DAOs, whether they were started in the initial stages or launched a bit later.
“DAOs are not products, they are frameworks for decision making about products/projects. If your DAO is successful you shouldn’t even know it’s there, it’ll just be a well-functioning community” – Eva Beylin, Director of The Graph Foundation.
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