Scan to Download ios&Android APP


M&A to be a norm for DAOs, says Chainalysis

12:00, 27 June 2022

Share this article

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
M&A in wooden blocks
M&A expected to be the norm in DAO treasury management – Photo: Shutterstock

Mergers and acquisition (M&A) in DAO treasury management has not occurred but is likely to happen soon as means for decentralized autonomous organizations to get into adjacent areas.

Chainalysis, in its report published today, said they suspect M&A to become a norm as the DAO model, led by protocols including Uniswap, Maker DAO and AAVE matures.

UNI to USD

According to Bankless, a specialised M&A advisory DAOs could help with:

  • Valuation of DAO assets and intangibles

  • Financing acquisition

  • Negotiation of terms with governance and large stakeholders

  • Execution of protocol level merges when token holders of both communities approve the merger

Treasuries could make early investments in promising projects that emerge from grants programmes; start to diversify into blue-chip crypto assets such as BTC and ETH.

What is your sentiment on ETH/USD?

1985.02
Bullish
or
Bearish
Vote to see Traders sentiment!

ETH to USD

Or they could consider purchasing insurance or short-dated put options that can help the protocol during stressed periods like contract hacks, economic exploits, and market drawdowns.

DAOs have also been limited in terms of the types of instruments they use and hold, such as loans or credit, perhaps due to their uncertain legal status.

As DAOs mature, Chainalysis said, it is likely to see more standardised regulations – such as those recently proposed by Australia – management strategies, and reporting practices.

What is a DAO?

Decentralized autonomous organizations, also known as DAOs, are an internet based business that is owned and managed by its members.

USDC to USD

According to Chainalysis, the most commonly held cryptocurrency by DAO is the stablecoin USD Coin (USDC), with over half of the 184 DAOs analysed holding a balance of the collateralized stablecoin.

They have built-in treasuries that nobody, including the CEO or CFO, has authority over it without the group’s approval. Decisions governed by proposals and voting to make sure the organization’s members have a voice.

DAOs on the down?

Everything is transparent and the rules are in the DAO via its code.

DAOs come in different types and sizes, most of their on-chain treasuries hold similar cryptocurrencies.

While DAO’s have been touted as a central solution to decentralization a number have experienced problems during the ongoing crypto winter.

The Tron Network (TRX), which completed full decentralization at the end of 2021 and is now a community-governed DAO, recently had to deploy 700m USDC in order to defend the peg of the stablecoin linked to the DeFI lending platform.

TRX to USD

M&A to happen soon

Chainalysis’ views are supported by Johnny Lyu, CEO of cryptocurrency exchange KuCoin, who recently told Capital.com that the current market shake-up will see stronger players snap up their weaker rivals in the coming months.

According to consultants PWC, the total value of cryptocurrency M&A increased from just over $1bn in 2020 to $55bn in 2021.

Read more

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Read next

Still looking for a broker you can trust?


Join the 427.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account

2. Make your first deposit

3. You’re all set. Start trading