62. How to Create Your Own Decentralized Autonomous Organization (DAO)?

Online, you can find many tips on how to create your own DAO. Some sources indicate that it can be done in a few steps, and others that it takes a little more commitment. We also favour the latter option.

In today’s lesson, we’ll recall in a few words what decentralized autonomous organizations (DAOs) actually are, and then we’ll look at how to build one, step by step. Let’s get started!

Decentralized Autonomous Organizations (DAOs)

We have already written to you about autonomous organizations. The link to this lesson is under today’s article. Knowledge is always worth updating.

Let’s now delve into the topic and clarify what exactly this DAO we want to build entails. Essentially, it is an organization constructed on open-source software, run by smart contracts, and distinctly lacking the conventional hierarchical structure found in nearly all corporations.

DAOs operate completely transparently, according to specific rules and written in the code. An important element of decentralized autonomous organizations are its users, especially those who hold its native tokens. It is the owners of these tokens who vote on proposals, facilities or improvements to the network, all of which are intended to benefit the community as a whole.

Also, the DAO usually has something like a treasury. It keeps its reserves there. It is through these that the community’s ideas are implemented. Just like in corporations, where they reinvest their profits in order to develop their core functions.

Key Features of Decentralized Organizations

The very idea was born in 2013. Of course, a key feature of the DAO is decentralization. In these structures we will not find third parties with exclusive decision-making power.

Blockchain technology forms the foundation of decentralized, autonomous organizations. To put it completely simply, a DAO is an application deployed on a distributed network (blockchain). The most popular blockchain on which a DAO is created is, of course, Ethereum. However, it would seem that Solana and NEAR will soon change these statistics.

Before Creating Your First DAO: What You Need to Know

There are several key points to consider before you create your organization. Firstly, DAOs are not corporations. Corpo-rats will certainly not find themselves comfortable within this structure. Decentralized autonomous organizations do not adhere to formalities and do not entertain unnecessary phrases. There is no room for unnecessary paperwork, which, however, causes some problems. It is the DAO members who bear full responsibility for the network. Thus, by opting for this type of organization, you may be losing a lot more than just your capital.

Secondly, decentralized autonomous organizations are not regulated by law. Because of their decentralization, they are not recognized as legal entities in most countries. In practice, they do not enjoy the privileges of traditional corporations or government protection. Any legal disputes that arise within this structure are extremely difficult to resolve.

Another issue is identity. The DAO’s decentralized structure allows members of the organization to remain anonymous. There is no KYC verification here, which may be particularly important to some. There are no coffee breaks or banana Thursdays. You won’t learn anything about the people you work with. Well, except for the addresses of their wallets.

How to Build Your Own Organization?

OK, you already know all about DAOs and what to pay special attention to. Now it’s time to put things into practice. So how do you build your own decentralized organization?

1. First, define the structure of your organization.

Before you write to a developer that you would like code for your organization, think carefully about what you actually expect from it. Answer a few questions for yourself:

• What is your goal when creating a DAO?
• What do you want to achieve with it? What decisions will it make?
• Will the DAO solve some problem?
• Will the community benefit from your organization?
• What technical and programming resources will you need to get the organization running?
• What vision do you have in your mind when you think about your DAO?
• Are you ready for all the challenges the crypto market brings?

2. Second, choose your DAO type.

Once you’re past the choice of structure, it’s time to choose the type of your DAO.  We have several of them:

• DAO in the form of a protocol. That is the most common form of organization. It focuses on management through decentralized protocols. The most well-known DAO protocols include MakerDAO, Uniswap and Yearn Finance.
• Investment type. Here the name is very suggestive. In this kind of DAO, investors come together to support new projects that emerge in the market.
• The Next Type of DAO: Grant DAOs. These are very similar to investment DAOs as their purpose is to support new projects and ideas. So, what’s the difference? Grant DAOs are specifically designed for DeFi projects.
• Social DAOs, organizations that support social media and other social networks within the cryptocurrency community. An example of such a DAO is Blockster.
• Collectible DAOs, linked with NFTs. An example of this type of DAO is PleasrDAO.
• DAOs designed for entertainment. As the name suggests, they provide decentralized entertainment. This type allows developers to implement their ideas while maintaining full decentralization. Flufworld is a very popular entertainment DAO.
• And finally, philanthropic DAOs. They are very rare. They are designed to support projects that operate in the Web3 world. An example of this type of decentralized organization would be the BigGreen DAO.

3. You have to decide on the token!

Supply, allocation, incentives, rewards – these are all things you need to consider. This stage allows you to effectively raise funds, as well as gain support from your DAO’s supporters and community. Why do you need tokens in your organization? Well:

• They are an indispensable element, for granting rewards or other benefits to the entire community.
• They help vote and manage the organization.
• SThey are a great way to develop communities.

4. Create your DAO!

A DAO is not a startup, so you will find many templates and tools on the market to help you create your organization. Here are the most popular blockchain tools for building a DAO: Aragon, Colony, Syndicate, OpenLaw, DAOstack, Orca Protocol.

After creating a DAO, you need to go to the treasury. It is important if we are talking about effective token handling or crowdfunding.

5. Treasury!

The supply and allocation of the token is complete. Now you need to secure it and all the funds you received in the ICO, for example. For this we need a treasury. Popular DAO Treasury tools include:

• Gnosis Safe,
• Multis,
• Juicebox,
• LIama,
• Parcel,
• Utopia,
• Commonwealth,
• Paladin,
• Snapshot,
• Sybil,
• Boardroom.

6. Community

In essence – the most important factor of a DAO. An engaged, supportive and trustworthy community is the basic and strongest pillar of the entire ecosystem of a decentralized autonomous organization. An engaged community will help expand the project.

Summary

The whole process of creating a decentralized autonomous organization (DAO) is not that complicated. The important thing is that you have your DAO structure and vision in your head. All the while, with the development of decentralization, DAO innovation will increase.

DAOs are great when it comes to decision-making, voting and their decentralized nature.  Many believe that they are the catalyst for the future growth and widespread adoption of blockchain technology and cryptocurrencies.

Complete today’s lesson!

What is blockchain and how does it work? [BEGINNER LEVEL]

Smart contracts – what are they? [BEGINNER LEVEL]

Basic differences between ICO/IEO and STO. [BEGINNER LEVEL]

What are decentralized DAOs and how do they work? [BEGINNER LEVEL]