How to Create & Run a DAO Step-by-Step Guide

Published on: 22.01.2023
How to Create & Run a DAO Step-by-Step Guide

In most cases, when we discuss organizational structures, we envision a hive-like central hub from which orders radiate outwards in a strict chain of command. Discipline within the company is guaranteed by this system. However, it stifles individuality, especially among the younger demographics. When DAOs were on the scene, business tycoons naturally became curious about them as a possible tool for control and management.

What is a DAO?

DAO refers to a group that operates independently of a central authority. A decentralized autonomous organization, or DAO, is an organization that is run entirely by computer code and welcomes participation from anybody. When a system is autonomous, it indicates that most of its processes can be run with little to no intervention from humans. The members of a community form a DAO and oversee its finances and projects as a whole.

Members of a DAO blockchain network make all of the important choices about the project, from allocating resources to deciding how to enhance the technology behind it. Future enhancements to the protocol are submitted by community leaders and voted on in a group setting. To reach a specified point of agreement with total transparency, smart contracts establish requirements that are decided upon in advance.

The DAO, a venture capital fund launched on Ethereum in 2016, brought widespread attention to DAOs. Unfortunately, an attack was launched against the project 3 weeks into the token sale because of a flaw in the coding. After some time, a hard fork allowed the funds to be recovered. As time has passed, the DAO concept has evolved into one of the very popular governance models for DeFi initiatives, despite the difficulties it initially faced.

While no two DAOs are exactly alike, they all operate on the same foundational principles. Each DAO governance token gives its holder one vote in DAO governance elections. Shareholders can suggest operational improvements to the DAO.

Why Should I Create a DAO?

Blockchain initiatives can benefit greatly from DAOs. The use of smart contracts is central to the model. DAOs become more automated with the help of these on-chain pieces of code. The outcomes of a proposal, for instance, may be broadcast on the blockchain, thereby immediately enforcing the modification made in the original document. There is no way to stifle discussion or manipulate the outcome of a vote on a fresh proposal.

DAOs are a great tool for organizing groups of people that choose to remain anonymous. You have to put your faith in people you’ve never met because they can’t be traced back to their genuine identities. They can now work together effectively using trust-preserving technology thanks to a DAO. Many projects already have foreign teams, making this a simpler option than forming a new organization. Finally, a DAO is an affordable choice for its usefulness in human organizations. There’s no cost involved in creating one, and some services even offer it as a free perk. Keep in mind that a DAO will require you to take responsibility for its choices. Delegating authority means giving up some say in how things get done. Ignoring governance decision-making virtually always ends badly.

Steps to Create a DAO

There must be a system in place to keep track of votes and suggestions from a technological standpoint. You can choose from several open-source options. As an alternative to Ethereum, Aragon has gained a lot of traction. Another solution that can be used with many blockchains is a snapshot. Each one will offer the same framework, albeit in different ways. On-chain polling is used by some DAO systems, whereas off-chain is used by others. Which one you pick depends on the priorities set by your DAO.

1️⃣Define the DAO Project

If you’re starting from scratch with a DAO, you should prioritize figuring out its fundamental structure. Keep in mind that the benefits of a decentralized structure are not universally applicable. You should figure out your DAO’s structure before consulting with an Ethereum specialist to write programs or diving into DAO tools.

2️⃣Decide the type of DAO

After settling on a DAO structure, determining the DAO type is the next step. Since DAO is still an evolving idea, it would be premature to specify all the possible applications. On the other hand, DAOs can legitimately cause a revolution in certain fields. Although a nation-state and city-state framework is not required for your DAO to function, it is useful for setting the stage as you develop the overall structure of your DAO.

3️⃣Decide about DAO Token

Can you tell me what token allocation is? If that’s not the case, you’ll have to do some additional research. The token allocation comes once you’ve nailed down your structure and kind. To maximize the effectiveness of your fundraising efforts and maintain the backing of your core audience, you need to get this correct from the start.

It is vital for the DAO engineering team to decide on the total number of tokens and how they will be distributed. To maximize profits, it’s important to have a firm grasp of how the DAO token will be used and distributed. Customers and the community as a whole benefit from this.

4️⃣Create Your DAO

Entrepreneurs can, of course, design their systems from scratch, but there are also numerous DAO startup models and tools out there to speed up the process.

These are the most popular Ethereum blockchain resources for constructing a DAO:

  • Aragon
  • Colony
  • Syndicate
  • OpenLaw
  • DAOstack
  • Orca Protocol

Once your DAO is up and running, you’ll need to get your DAO treasury tools working so that you may issue tokens, run a successful crowdfunding campaign, and manage other financial matters.

5️⃣Create a Community

The foundation of a DAO ecology is a reliable, autonomous community. Building a sense of community is essential when designing a DAO cluster. The constant growth of the DAO project can be aided by an active, involved, and robust community. How openly the community is invited to take part in the DAO’s administration and decision-making processes is crucial to the project’s success.

Conclusion

Due to the trend toward decentralization, DAO development is likely to increase over time. Large sums of money are being spent by businesses to implement Web3, Blockchain, and DAOs to change their working methods and make them community-centric.

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