DAO Tokenomics: Incentivizing participation and collaboration

Karolina

17 May 2023
DAO Tokenomics: Incentivizing participation and collaboration

In the ever-changing world of blockchain technology, Decentralized Autonomous Organizations (DAOs) have risen as influential models for decentralized cooperation and decision-making. By harnessing the transparent and secure nature of blockchain, AI, and cryptocurrencies, DAOs establish self-regulating communities centered around common objectives and values. Tokenomics, which encompasses the creation and application of token-based economic systems within these organizations, lies at the core of DAOs. This article delves into the importance of tokenomics in DAOs and its crucial role in promoting involvement and encouraging cooperation among community members.

Are you interested in DAO security? Be sure to check out our article on The DAO Hack

DAO tokenomics involves using digital tokens to stimulate and reward ecosystem participants for their contributions. These tokens act as both a medium for exchange and a symbol of value, allowing individuals to partake in the governance, decision-making, and development processes within the DAO. By syncing community members' interests with the organization's success, tokenomics in DAOs serve as a potent tool for instigating active engagement and collaboration.

Understanding Tokenomics in DAOs

DAO tokenomics is a critical aspect in the functioning and management of decentralized autonomous organizations. In this segment, we study the core principles of DAO tokenomics, commencing with an examination of DAO tokens. Symbolizing ownership or membership within a DAO, the digital assets called DAO tokens are spread among participants and hold considerable worth in their ecosystem. They act as a governance mechanism for DAOs by giving holders specific rights, tasks, and decision-making authority.

1. Token Distribution

Several crucial factors should be taken into account when discussing DAO tokenomics. Primarily, token distribution is essential. To disseminate tokens among participants, DAOs utilize various techniques such as token sales, airdrops, or reward-based contribution programs. Establishing a fair and inclusive environment hinges on the equitable allocation of tokens, making certain that everyone has equal chances to engage and contribute.

2. Token utility

Token utility is another vital element, pertaining to the use of DAO tokens within their ecosystem. Such tokens can possess multiple functions – they might work as a medium of exchange or provide access to services and features, or they could represent voting rights. By improving the value and usability of tokens, these utility aspects promote their integration into the community.

3. Governance and Voting

Tokenomics also heavily influences governance and voting mechanisms in DAOs. Token-driven governance models permit holders to partake in decision-making procedures, suggest and vote for proposals, and affect the course of the DAO. Different voting systems and decision-making methods can come into play – from straightforward majority votes to delegated voting setups – based on a specific DAO's layout and goals.

4. Incentive Mechanisms

Moreover, incentive structures are central components of DAO tokenomics that encourage active involvement and cooperation within the community. Those who devote their time, resources, or knowledge to a DAO are often rewarded accordingly. Incentivizing active engagement results in a dynamic ecosystem where members are inclined to collaborate and strive toward shared objectives.

Benefits of Effective Tokenomics in DAOs

A variety of advantages arise from efficient tokenomics in DAOs, contributing to the flourishing and expansion of these decentralized entities. Enhanced community involvement and engagement is a notable benefit. DAOs can cultivate a feeling of membership and responsibility among individuals by developing tokenomics that reward substantial contributions and active participation. This encourages members to actively offer their talents, expertise, and assets, knowing they will be acknowledged and compensated. Such intensified involvement results in a thriving and energetic ecosystem where community members join forces, exchange thoughts, and strive towards shared objectives. Moreover, DAO tokenomics allows for effective resource distribution. Moreover, through utilizing tokens as a means for funding and managing resources, DAOs can allocate resources in a transparent, decentralized manner. This guarantees the best use of funds and input, enabling the DAO to carry out projects adeptly, create new features, and foster innovation.

Successful DAO Tokenomics Models

1. MakerDAO

One of the most prominent DAOs in existence, MakerDAO, employs a unique dual-token model that has contributed to its success. The system includes the Maker (MKR) token and the DAI stablecoin.

MKR tokens serve governance purposes, enabling holders to cast votes on proposals, such as adjustments to the system's parameters. Additionally, the tokenomics of MKR aims to promote responsible governance. As the system operates efficiently, MKR holders reap benefits due to a decrease in MKR's total supply through a process known as "burning." Conversely, during times when the system

DAI, on the other hand, is a stablecoin pegged to the US dollar. It's generated by locking up collateral in the form of other crypto assets. This dual-token model has proven successful, ensuring stability in the system and encouraging active participation from its members.

2. Aragon

Aragon is a platform that allows users to create and manage their DAOs. It uses the Aragon Network Token (ANT), a utility token that provides holders with voting rights within the Aragon network.

Aragon's tokenomics model is centered around the concept of decentralization and democracy. ANT token holders can vote on various aspects, such as changes to the network's settings and dispute resolution. This creates a self-sustainable ecosystem where the community directly influences the platform's direction and future development.

3. Compound

Compound is a decentralized lending platform governed by its users through the COMP token. In this DAO, users earn COMP tokens as they interact with the platform, borrowing, or lending assets.

The Compound's tokenomics model has been designed to distribute governance power proportionally to those who use the platform the most. COMP tokens give holders the right to propose and vote on changes to the Compound protocol. This model has been successful because it ensures that those who are most invested in and knowledgeable about the platform have the most significant say in its operation and future direction.

4. Yearn.Finance

Yearn.Finance represents a paradigm shift in the way DAO tokenomics models are structured. This platform aims to simplify the ever-growing DeFi space for investors by automating yield farming strategies. At the core of its governance is the YFI token.

Yearn.Finance's success lies in its unique approach to token distribution, incentives for holding tokens, active community participation, and a founder committed to the platform's success. Its tokenomics model ensures that the platform remains decentralized, democratic, and in the best interest of its most active users. This case study highlights how an innovative approach to DAO tokenomics can lead to a successful, thriving ecosystem in the DeFi space.

Conclusion

To sum up, DAO tokenomics is critical in motivating engagement and cooperation within decentralized autonomous organizations. Through the usage of tokens for value exchange, governance, and incentive structures, DAOs can foster dynamic communities in which members actively participate and pursue shared objectives. The core components of successful DAO tokenomics include token distribution, token utility, governance and voting systems, and incentives. Nevertheless, ongoing challenges such as decentralization, sustainability, and legal concerns must be tackled as this field continues to progress.

Do you need the help of specialists to create a tokenomy? Contact us!

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AI-Driven Frontend Automation: Elevating Developer Productivity to New Heights

Gracjan Prusik

11 Mar 2025
AI-Driven Frontend Automation: Elevating Developer Productivity to New Heights

AI Revolution in the Frontend Developer's Workshop

In today's world, programming without AI support means giving up a powerful tool that radically increases a developer's productivity and efficiency. For the modern developer, AI in frontend automation is not just a curiosity, but a key tool that enhances productivity. From automatically generating components, to refactoring, and testing – AI tools are fundamentally changing our daily work, allowing us to focus on the creative aspects of programming instead of the tedious task of writing repetitive code. In this article, I will show how these tools are most commonly used to work faster, smarter, and with greater satisfaction.

This post kicks off a series dedicated to the use of AI in frontend automation, where we will analyze and discuss specific tools, techniques, and practical use cases of AI that help developers in their everyday tasks.

AI in Frontend Automation – How It Helps with Code Refactoring

One of the most common uses of AI is improving code quality and finding errors. These tools can analyze code and suggest optimizations. As a result, we will be able to write code much faster and significantly reduce the risk of human error.

How AI Saves Us from Frustrating Bugs

Imagine this situation: you spend hours debugging an application, not understanding why data isn't being fetched. Everything seems correct, the syntax is fine, yet something isn't working. Often, the problem lies in small details that are hard to catch when reviewing the code.

Let’s take a look at an example:

function fetchData() {
    fetch("htts://jsonplaceholder.typicode.com/posts")
      .then((response) => response.json())
      .then((data) => console.log(data))
      .catch((error) => console.error(error));
}

At first glance, the code looks correct. However, upon running it, no data is retrieved. Why? There’s a typo in the URL – "htts" instead of "https." This is a classic example of an error that could cost a developer hours of frustrating debugging.

When we ask AI to refactor this code, not only will we receive a more readable version using newer patterns (async/await), but also – and most importantly – AI will automatically detect and fix the typo in the URL:

async function fetchPosts() {
    try {
      const response = await fetch(
        "https://jsonplaceholder.typicode.com/posts"
      );
      const data = await response.json();
      console.log(data);
    } catch (error) {
      console.error(error);
    }
}

How AI in Frontend Automation Speeds Up UI Creation

One of the most obvious applications of AI in frontend development is generating UI components. Tools like GitHub Copilot, ChatGPT, or Claude can generate component code based on a short description or an image provided to them.

With these tools, we can create complex user interfaces in just a few seconds. Generating a complete, functional UI component often takes less than a minute. Furthermore, the generated code is typically error-free, includes appropriate animations, and is fully responsive, adapting to different screen sizes. It is important to describe exactly what we expect.

Here’s a view generated by Claude after entering the request: “Based on the loaded data, display posts. The page should be responsive. The main colors are: #CCFF89, #151515, and #E4E4E4.”

Generated posts view

AI in Code Analysis and Understanding

AI can analyze existing code and help understand it, which is particularly useful in large, complex projects or code written by someone else.

Example: Generating a summary of a function's behavior

Let’s assume we have a function for processing user data, the workings of which we don’t understand at first glance. AI can analyze the code and generate a readable explanation:

function processUserData(users) {
  return users
    .filter(user => user.isActive) // Checks the `isActive` value for each user and keeps only the objects where `isActive` is true
    .map(user => ({ 
      id: user.id, // Retrieves the `id` value from each user object
      name: `${user.firstName} ${user.lastName}`, // Creates a new string by combining `firstName` and `lastName`
      email: user.email.toLowerCase(), // Converts the email address to lowercase
    }));
}

In this case, AI not only summarizes the code's functionality but also breaks down individual operations into easier-to-understand segments.

AI in Frontend Automation – Translations and Error Detection

Every frontend developer knows that programming isn’t just about creatively building interfaces—it also involves many repetitive, tedious tasks. One of these is implementing translations for multilingual applications (i18n). Adding translations for each key in JSON files and then verifying them can be time-consuming and error-prone.

However, AI can significantly speed up this process. Using ChatGPT, DeepSeek, or Claude allows for automatic generation of translations for the user interface, as well as detecting linguistic and stylistic errors.

Example:

We have a translation file in JSON format:

{
  "welcome_message": "Welcome to our application!",
  "logout_button": "Log out",
  "error_message": "Something went wrong. Please try again later."
}

AI can automatically generate its Polish version:

{
  "welcome_message": "Witaj w naszej aplikacji!",
  "logout_button": "Wyloguj się",
  "error_message": "Coś poszło nie tak. Spróbuj ponownie później."
}

Moreover, AI can detect spelling errors or inconsistencies in translations. For example, if one part of the application uses "Log out" and another says "Exit," AI can suggest unifying the terminology.

This type of automation not only saves time but also minimizes the risk of human errors. And this is just one example – AI also assists in generating documentation, writing tests, and optimizing performance, which we will discuss in upcoming articles.

Summary

Artificial intelligence is transforming the way frontend developers work daily. From generating components and refactoring code to detecting errors, automating testing, and documentation—AI significantly accelerates and streamlines the development process. Without these tools, we would lose a lot of valuable time, which we certainly want to avoid.

In the next parts of this series, we will cover topics such as:

Stay tuned to keep up with the latest insights!

The Ultimate Web3 Backend Guide: Supercharge dApps with APIs

Tomasz Dybowski

04 Mar 2025
The Ultimate Web3 Backend Guide: Supercharge dApps with APIs

Introduction

Web3 backend development is essential for building scalable, efficient and decentralized applications (dApps) on EVM-compatible blockchains like Ethereum, Polygon, and Base. A robust Web3 backend enables off-chain computations, efficient data management and better security, ensuring seamless interaction between smart contracts, databases and frontend applications.

Unlike traditional Web2 applications that rely entirely on centralized servers, Web3 applications aim to minimize reliance on centralized entities. However, full decentralization isn't always possible or practical, especially when it comes to high-performance requirements, user authentication or storing large datasets. A well-structured backend in Web3 ensures that these limitations are addressed, allowing for a seamless user experience while maintaining decentralization where it matters most.

Furthermore, dApps require efficient backend solutions to handle real-time data processing, reduce latency, and provide smooth user interactions. Without a well-integrated backend, users may experience delays in transactions, inconsistencies in data retrieval, and inefficiencies in accessing decentralized services. Consequently, Web3 backend development is a crucial component in ensuring a balance between decentralization, security, and functionality.

This article explores:

  • When and why Web3 dApps need a backend
  • Why not all applications should be fully on-chain
  • Architecture examples of hybrid dApps
  • A comparison between APIs and blockchain-based logic

This post kicks off a Web3 backend development series, where we focus on the technical aspects of implementing Web3 backend solutions for decentralized applications.

Why Do Some Web3 Projects Need a Backend?

Web3 applications seek to achieve decentralization, but real-world constraints often necessitate hybrid architectures that include both on-chain and off-chain components. While decentralized smart contracts provide trustless execution, they come with significant limitations, such as high gas fees, slow transaction finality, and the inability to store large amounts of data. A backend helps address these challenges by handling logic and data management more efficiently while still ensuring that core transactions remain secure and verifiable on-chain.

Moreover, Web3 applications must consider user experience. Fully decentralized applications often struggle with slow transaction speeds, which can negatively impact usability. A hybrid backend allows for pre-processing operations off-chain while committing final results to the blockchain. This ensures that users experience fast and responsive interactions without compromising security and transparency.

While decentralization is a core principle of blockchain technology, many dApps still rely on a Web2-style backend for practical reasons:

1. Performance & Scalability in Web3 Backend Development

  • Smart contracts are expensive to execute and require gas fees for every interaction.
  • Offloading non-essential computations to a backend reduces costs and improves performance.
  • Caching and load balancing mechanisms in traditional backends ensure smooth dApp performance and improve response times for dApp users.
  • Event-driven architectures using tools like Redis or Kafka can help manage asynchronous data processing efficiently.

2. Web3 APIs for Data Storage and Off-Chain Access

  • Storing large amounts of data on-chain is impractical due to high costs.
  • APIs allow dApps to store & fetch off-chain data (e.g. user profiles, transaction history).
  • Decentralized storage solutions like IPFS, Arweave and Filecoin can be used for storing immutable data (e.g. NFT metadata), but a Web2 backend helps with indexing and querying structured data efficiently.

3. Advanced Logic & Data Aggregation in Web3 Backend

  • Some dApps need complex business logic that is inefficient or impossible to implement in a smart contract.
  • Backend APIs allow for data aggregation from multiple sources, including oracles (e.g. Chainlink) and off-chain databases.
  • Middleware solutions like The Graph help in indexing blockchain data efficiently, reducing the need for on-chain computation.

4. User Authentication & Role Management in Web3 dApps

  • Many applications require user logins, permissions or KYC compliance.
  • Blockchain does not natively support session-based authentication, requiring a backend for handling this logic.
  • Tools like Firebase Auth, Auth0 or Web3Auth can be used to integrate seamless authentication for Web3 applications.

5. Cost Optimization with Web3 APIs

  • Every change in a smart contract requires a new audit, costing tens of thousands of dollars.
  • By handling logic off-chain where possible, projects can minimize expensive redeployments.
  • Using layer 2 solutions like Optimism, Arbitrum and zkSync can significantly reduce gas costs.

Web3 Backend Development: Tools and Technologies

A modern Web3 backend integrates multiple tools to handle smart contract interactions, data storage, and security. Understanding these tools is crucial to developing a scalable and efficient backend for dApps. Without the right stack, developers may face inefficiencies, security risks, and scaling challenges that limit the adoption of their Web3 applications.

Unlike traditional backend development, Web3 requires additional considerations, such as decentralized authentication, smart contract integration, and secure data management across both on-chain and off-chain environments.

Here’s an overview of the essential Web3 backend tech stack:

1. API Development for Web3 Backend Services

  • Node.js is the go-to backend runtime good for Web3 applications due to its asynchronous event-driven architecture.
  • NestJS is a framework built on top of Node.js, providing modular architecture and TypeScript support for structured backend development.

2. Smart Contract Interaction Libraries for Web3 Backend

  • Ethers.js and Web3.js are TypeScript/JavaScript libraries used for interacting with Ethereum-compatible blockchains.

3. Database Solutions for Web3 Backend

  • PostgreSQL: Structured database used for storing off-chain transactional data.
  • MongoDB: NoSQL database for flexible schema data storage.
  • Firebase: A set of tools used, among other things, for user authentication.
  • The Graph: Decentralized indexing protocol used to query blockchain data efficiently.

4. Cloud Services and Hosting for Web3 APIs

When It Doesn't Make Sense to Go Fully On-Chain

Decentralization is valuable, but it comes at a cost. Fully on-chain applications suffer from performance limitations, high costs and slow execution speeds. For many use cases, a hybrid Web3 architecture that utilizes a mix of blockchain-based and off-chain components provides a more scalable and cost-effective solution.

In some cases, forcing full decentralization is unnecessary and inefficient. A hybrid Web3 architecture balances decentralization and practicality by allowing non-essential logic and data storage to be handled off-chain while maintaining trustless and verifiable interactions on-chain.

The key challenge when designing a hybrid Web3 backend is ensuring that off-chain computations remain auditable and transparent. This can be achieved through cryptographic proofs, hash commitments and off-chain data attestations that anchor trust into the blockchain while improving efficiency.

For example, Optimistic Rollups and ZK-Rollups allow computations to happen off-chain while only submitting finalized data to Ethereum, reducing fees and increasing throughput. Similarly, state channels enable fast, low-cost transactions that only require occasional settlement on-chain.

A well-balanced Web3 backend architecture ensures that critical dApp functionalities remain decentralized while offloading resource-intensive tasks to off-chain systems. This makes applications cheaper, faster and more user-friendly while still adhering to blockchain's principles of transparency and security.

Example: NFT-based Game with Off-Chain Logic

Imagine a Web3 game where users buy, trade and battle NFT-based characters. While asset ownership should be on-chain, other elements like:

  • Game logic (e.g., matchmaking, leaderboard calculations)
  • User profiles & stats
  • Off-chain notifications

can be handled off-chain to improve speed and cost-effectiveness.

Architecture Diagram

Below is an example diagram showing how a hybrid Web3 application splits responsibilities between backend and blockchain components.

Hybrid Web3 Architecture

Comparing Web3 Backend APIs vs. Blockchain-Based Logic

FeatureWeb3 Backend (API)Blockchain (Smart Contracts)
Change ManagementCan be updated easilyEvery change requires a new contract deployment
CostTraditional hosting feesHigh gas fees + costly audits
Data StorageCan store large datasetsLimited and expensive storage
SecuritySecure but relies on centralized infrastructureFully decentralized & trustless
PerformanceFast response timesLimited by blockchain throughput

Reducing Web3 Costs with AI Smart Contract Audit

One of the biggest pain points in Web3 development is the cost of smart contract audits. Each change to the contract code requires a new audit, often costing tens of thousands of dollars.

To address this issue, Nextrope is developing an AI-powered smart contract auditing tool, which:

  • Reduces audit costs by automating code analysis.
  • Speeds up development cycles by catching vulnerabilities early.
  • Improves security by providing quick feedback.

This AI-powered solution will be a game-changer for the industry, making smart contract development more cost-effective and accessible.

Conclusion

Web3 backend development plays a crucial role in scalable and efficient dApps. While full decentralization is ideal in some cases, many projects benefit from a hybrid architecture, where off-chain components optimize performance, reduce costs and improve user experience.

In future posts in this Web3 backend series, we’ll explore specific implementation details, including:

  • How to design a Web3 API for dApps
  • Best practices for integrating backend services
  • Security challenges and solutions

Stay tuned for the next article in this series!