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One of the first businesses to be run entirely by a decentralized autonomous organization (DAO) opened a coffee stand in Seattle last weekend. TheCafeDAO is a DAO that wants to be the first business to run entirely through a DAO.

The small coffee stand was in front of the Seattle NFT Museum. It only sold pour-over coffee for $5 a cup, and it was very simple.

This is how the DAO wants to be seen: as "the cafe everyone owns." Customers and employees get "coffee tokens," which give them voting rights and discounts with each purchase. The DAO wants to be seen as the cafe everyone owns. The tokens are still in the alpha stage and haven't been connected to any blockchain. The DAO used last weekend's pop-up as a test run for the tokenomics.

It's the latest in a long line of DAO experiments that started with the ConstitutionDAO, which was a big show but didn't work out. It showed many people how DAOs could be used in real-life situations, but also how hard it was to make them work.

Idea for TheCafeDAO came from Dan Car, one of the DAO's founding members. He made a Reddit post about the DAO last August. His question: "What if we made a Starbucks that wasn't in one place?"

The idea quickly caught on, with the group's five other core members all seeing the post and volunteering to lead the project.

In recent months, the group's main focus has been on the Seattle pop-up shop. The DAO, the group's creators, want it to grow into a bigger, self-sustaining business one day.

At this early stage, they also know that decisions aren't as decentralized as they could be. That will likely change as more people join the DAO and the community grows even more so.

Founder Dustin Tong: "Our goal is for Discord to grow so much that we no longer have to make decisions about the future of the DAO." This is what he meant. "Just yesterday, someone suggested that the DAO run a hot dog stand. That would be great.

A cup of coffee with a side of government

Back in the DAO's coffee token, there is a more complicated set-up than you'd find in a reward coin.

The value of each token is $5, which is how much a 12-ounce cup of coffee costs. Every time someone buys a cup of coffee from the stand, a new token is made.

Afterwards, a chunk of that token is burned to pay for the costs of running the business. The customer, employees, and the DAO treasury get the rest of the money. One cup of coffee is worth one vote in the DAO's decisions. Token holders can either exchange their coins for money or hold them for governance rights.

The tokens are backed by loans, and the people who make the loans are promised that they will get more tokens in the future. Group members have talked to lawyers to make sure they don't run into problems with the law, says Tong.

Last weekend, the DAO made 61 of its fake coffee coins, with 12.2 of them going to pay for operating costs, 6.1 going to customers, and 36.6 going to the treasury. This is how it worked:

For customers, the tokenomics work like a decentralized punch card. Every time they buy something, they get closer to having a full coffee token.

"In terms of governance, we want to come up with a list of standard operating procedures and then have our members vote on them," Tong told the crowd at the event. When someone spills coffee, we don't want the whole DAO to vote on who cleans it up. This is not very efficient, and it takes too long.

DAO members want to raise money to open a permanent storefront somewhere in the Seattle area. The pop-up store was only open for two days.

TheCafeDAO isn't the first DAO to think about using physical places as an extension of its online community. Plans are in the works for NFT (non-fungible token)-based projects like LinksDAO and PizzaDAO to use the DAO structure to both raise money and run full-fledged, real-world operations.

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