How much does it really cost to run a DAO?
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How much does it really cost to run a DAO?
A breakdown of the operational costs of MakerDAO, Lido, and SushiSwap
In this article, we provide a breakdown of the operational costs of MakerDAO, Lido, and SushiSwap.
To drive transparency and accountability in the capital markets, traditional publicly-traded companies release quarterly financial statements that break down their financial performance for all relevant stakeholders. Investors are able to analyze both the revenue and the expense side of the companies through these reports.
For DAOs things are a bit different. Most DAOs manage smart contracts that are public by default. This means that the revenue side of these organizations is often relatively easy to track. However, the expense side of DAOs is often not public by default, as core contributors' salaries and other costs are managed via traditional offchain entities.
But there are a few exceptions. This article goes through the expense structure of three major DAOs that have made their operational costs public: MakerDAO, Lido, and SushiSwap.
Key takeaways:
While some of the contracts that a DAO manages may run relatively autonomously, there are often many areas of the business (smart contract development & growth/adoption) that require human input. As a result, running a DAO can be quite expensive, with average annual salaries at MakerDAO, Lido, and SushiSwap landing at $205k, $132k, and $256k, respectively.
MakerDAO currently hosts a public dashboard that tracks the ongoing Core Unit expenses, while SushiSwap is planning to release a similar dashboard in Q1 2023. Meanwhile, Lido has released their annual budgets through separate governance forum posts.
The majority of DAOs have yet to make their budget/expense data available to the public. We expect this to change, as tokenholders take on a more active role in DAO governance, and start demanding increased transparency around key business metrics.
1. MakerDAO
Total revenue (FY2022): $37.75m
Annual expenses (2022-2023): $34.09m
Annual salaries, incl. in expenses (2022-2023): $23.50m
Number of FTEs: 104.41
Annual expenses per FTE: $326.5k
Annual salaries per FTE: $256.3k
MakerDAO previously received some criticism for its generous Core Unit budgets, and is now in the process of off-boarding some of them, after MakerDAO founder Rune Christensen's Endgame governance proposal was passed in October 2022.
Through the off-boarding of e.g. the Strategic Happiness and Events Core Units, a reduction of ~$2.3m will be made to MakerDAO's annual expenses.
2. Lido
Total revenue (FY2022): $33.32m
Annual expenses (2022-2023): $24.51m
Annual salaries, incl. in expenses (2022-2023): $10.95m
Number of FTEs: 83
Annual expenses per FTE: $295.3k
Annual salaries per FTE: $132.0k
While the initial Core Contributors Provisional Budget, which was shared in July 2022, supported a headcount of 83, a follow-up governance post was shared in November 2022, which stated that the DAO's headcount was expected to grow to 96 within the next 6 months, suggesting a potential expansion of the core contributors budget.
Read the full article on tokenterminal.com for further analysis more projects.
This article is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.