Bankless Card: A New Way to Fund Communities

Despite being in the depths of a bear market, DAOs continue to proliferate and grow. reports 12,764 DAOs operating, more than double the number at this time last year. During this same period, the number of people in the space has more than tripled to ~7M.

People come to DAOs for different reasons, but whatever brings them here, they tend to find fulfillment not available in traditional organizations. DAOs are more than just workplaces; they are communities. They are collections of individuals that become more than the sum of their parts through their shared purpose.

Shared purpose is powerful. So powerful, in fact, that many DAO contributors would jump at the chance to work on their DAOs full-time…except that most DAOs have neither the funding nor revenue to employ full-time contributors.

Bankless Card could change that. By harnessing payment card interchange revenue for communities, Bankless Card could allow any DAO to fund itself through community building.

Purpose has a Price

Of the 12,764 DAOs mentioned above, a very small number (likely <1%) have sustainable revenue models. This shouldn’t be surprising; most DAOs are founded through member donations towards some shared purpose. Others have private investment from VCs to chase some future revenue model. Either way, the money that is funding the DAO ecosystem is borrowed, not earned.

The state of DAO funding makes sense when you look at the big picture. We’re still early in the technology adoption lifecycle and DAOs are just one more wave of blockchain adoption. We’re in the awkward phase where the excitement for the future exceeds the present reality.

This leaves DAOs in a place where they have to scramble for funding. This is particularly hard for purpose-driven organizations who want to build things that are good for society, and not just for revenue. As a result, web3 grant programs have become a mad dash for funding. The last Gitcoin Grants round disbursed $4.4M to ~3,361 communities - that’s an average of $1,300/community. You can’t run an organization on that amount.

The worst part? This environment has focused DAOs towards grant writing rather than pursuing their purpose. DAOs are vehicles for community building, but instead of focusing on that strength, many are forced to lean on a weakness: capital generation.

Luckily, there is a better way.

The Secret Sauce: Interchange Revenues

It’s no secret that banks make their money by charging individuals fees, and in most cases these fees are unavoidable. One such fee is the “interchange fee”.

Every time you use a debit or credit card, the network operator (i.e VISA, MasterCard) charges the merchant a small fee (usually 1-2% of the purchase price). The network operator keeps a very small portion of that fee, and gives the rest to the card issuer and payment processor (typically banks).

This is a huge revenue driver for banks. In fact these fees provide hundreds of billions of dollars of revenue worldwide.

What if we could take a piece of that revenue and direct it towards DAOs?

Bankless Card: Feeding the Flywheel

Borrowed from mechanics, the concept of a flywheel is used extensively in the blockchain industry. Put simply: it takes a lot of energy to get a flywheel moving, but once it’s moving, it continues to do so because of its virtuous cycle.

As an example, here’s Amazon’s renowned flywheel:

Image source: Amazon Web Services, Inc.

In this example, you can see how customer experience is the key driver to draw in customers, which attracts more sellers, who create more selection, which increases customer experience. This is the virtuous cycle. More buyers = more sellers = more selection = better experience = growth. But this flywheel needed something to get it moving: lower prices. Amazon raised a ton of money, and it funneled that money into creating cost savings (and outright subsidies) for customers. The result is the company you see today.

If you look at the blockchain industry as a whole, the flywheel looks like this:

images courtesy of @ᴛʀᴇᴡᴋᴀᴛ.ᴇᴛʜ 🏴
images courtesy of @ᴛʀᴇᴡᴋᴀᴛ.ᴇᴛʜ 🏴

The virtuous cycle you see is, like Amazon, centered around user experience. Better experience leads to more users. More users create market opportunities (i.e. demand), which entices builders to create products which increase experience.

Grants and VC funding are providing the lever to get the flywheel moving, but this is a web2 approach to web3. If we truly want to create a new paradigm in web3, we need a new approach to funding. What if, instead of seeking external capital to fund new communities, there was a way for communities to fund themselves?

Bankless Card will enable any community to fund itself using the interchange revenue from its members. Communities will ask their members to use Bankless Card for their spending, and the interchange revenue that would have gone to a bank will instead be directed to their favourite DAOs:

images courtesy of @ᴛʀᴇᴡᴋᴀᴛ.ᴇᴛʜ 🏴
images courtesy of @ᴛʀᴇᴡᴋᴀᴛ.ᴇᴛʜ 🏴

For the average North American, interchange revenues will amount to $5-10/month. Imagine a 1000-person community having $10,000/month to fund their mission. Imagine what we could build when our biggest stakeholders are our community members.

Realizing Web3’s True Value

Blockchain is more than just cryptocurrency, it’s a fundamental change in the concept of ownership. The traditional startup ecosystem created world-changing organizations, but web2 startups have suffered by not including users as owners. They inevitably must prioritize profit over user experience, resulting in degradation of the platform for the very users that made it successful. This is a process Cory Doctrow has called enshittification.

In a way, you could say this is web3’s true promise: to create more resilient organizations by giving ALL stakeholders a seat at the table. But this can only be true when you leverage web3’s strengths: community, transparency, and incentive alignment.

In addition to supporting their favourite causes, users of Bankless Card can accumulate DAO social tokens in exchange for their interchange revenue. The more you contribute, the more tokens you get. These tokens can be used to govern your favourite DAO, finally giving users and members a say in how their organizations are run.

Speaking of which, if you’d like to have a say in how Bankless Card runs, you’re welcome to join us. We’re a DAO, and as such we share ownership with our users, contributors, and investors. Sign up for our pre-launch list or come find us on Discord.

Article written for Bankless Card by @almithani

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