What is Working Capital?
Working Capital is fully liquid funds that DAOs use to fund day-to-day operations, defined in TradFi as an organization's current assets - current liabilities.
Working Capital is crucial for the functioning of a DAO. It allows DAOs to incentivize, reward, and compensate key activities, including (but not limited to):
- Platform development
- Community engagement
- Purchase of services from other organizations
For ease of use, it's often optimal for DAOs to have access to Working Capital in the form of stablecoins or ETH / BTC to allow maximum flexibility of deployment (e.g. contributors may prefer to be paid in stablecoins vs. native DAO tokens). For DAO tokens with low prices or limited liquidity on exchanges, this can present a major operational issue. See here for more information on how the DebtDAO platform addresses this issue.