A decentralized autonomous organization is an organizational structure where control is spread out rather than hierarchical.
DAOs use smart contracts on a blockchain, with participants using governance tokens to vote on proposed actions.
It is not difficult to launch a new DAO; the hardest part is getting people to join them and keeping them.
The term DAO (short for “decentralized autonomous organization”) has become a crypto buzzword in 2021, but the concept has real value. As of June 2022, the DAO ecosystem had a combined cash value of $8.7 billion, according to analytics site DeepDAO.
DAOs continue to grow as a model of community organization, a way to quickly raise and distribute funds for social causes or to decentralize blockchain-based protocols.
Here are the basics to start one. (This explainer is not financial or legal advice.)
What is a DAO?
Decentralized autonomous organizations use shared treasury, smart contracts (programs that run once criteria are met), and tokens to vote.
The first DAO, called “The DAO”, was launched on Ethereum in 2016. Although it is possible to establish a DAO on any blockchain that supports smart contracts, most of them operate on Ethereum.
Setting up a DAO
Creating a DAO requires several steps:
Name the DAO
Create a mission statement
Run a Discord Server
Create a Twitter account
Invite people to join
Launch governance token
Create a funding mechanism
Set up Snapshot or other tools to vote and log member contributions
Each DAO needs a name that sums up its mission, such as ConstitutionDAO, FreeRossDAO, Ukraine DAO and AssangeDAO.
For this lesson, let’s say we want to start a DAO explorers club. Decrypt went ahead and set it up.
Last name: CAD exploration
CAD type: Formation/Club
Mission statement: Funding and facilitating the exploration of unknown places and preserving historical objects, works and sites. DAO Exploration is dedicated to funding individuals and organizations working to explore and preserve history. The DAO will donate all funds raised outside of operating costs to charities, schools, museums and global organizations.
Next, we want to set up where the DAO will live for member engagement, community building, and advertising. The most used platforms are:
Twitter: Love it or hate it, Twitter is the public square. The DAOs use Twitter to announce their plans to the world.
Discord: If one Web2 app has remained in Web3, it’s Discord, which built its base with gamers but has now also become the home of DAOs. DAO executives love Discord for its ability to organize thousands of people into different roles and workgroups.
Telegram: DAOs can also use Telegram to create groups and gather members, perhaps before forming a Discord.
What tools are available to launch a DAO?
Here are some popular sites for launching a DAO:
DAOhaus is a DAO protocol for joining existing DAOs and creating a new DAO based on the Moloch framework. DAOs can be launched by defining a few parameters: 1. The type of DAO launched: Guild (works collectively to provide services); Clubs (little or no financial decisions); Ventures (for big financial decisions; Grants (spread wealth); and Products (govern a product or protocol); 2. Member addresses; 3. Fill in DAO metadata like name, social media and link of the website.
Not specifically a tool for launching a DAO, Collab.Land is a popular tool used by DAOs to moderate membership. It does this by verifying that each member currently holds the DAO token, allowing access to the DAO’s various Discord channels, and kicking out members who no longer hold the token.
Aragon is an open-source platform for launching and maintaining a DAO on the Ethereum blockchain. Aragon offers two main products: Aragon Client, a toolkit for developers to build online organizations that aim for more transparency and personalization, and Aragon Govern, a DAO governance framework with chain execution and plug-in dispute resolution. -in.
Cash management tools
Eventually, a DAO will need treasury to store its funds and manage its tokens. The choice of which tool to use depends on the needs of the group and the size of its cash position. The DAO will need a compatible wallet like MetaMask, WalletConnect or Portis.
Gnosis Safe is an Ethereum wallet that requires a minimum number of people to approve a transaction before it can take place. When a DAO wants to pursue a course of action, it is voted on by DAO members (see snapshot below) and then executed by a core group of signatories, known as the multi-sig (multi-signature ). With Gnosis Safe, users can define a list of signer accounts and the required number of signers so that no DAO member can independently move funds.
Syndicate Web3 Investment Clubs
To start a Web3 investment club on Syndicate, founders will need to connect a wallet like Metamask to the Syndicate network. Deposits are collected in this wallet and all existing assets in the wallet will be visible to all club members. After the founder of the investment club chooses a name, the platform assigns a club token symbol. Syndicated investment clubs can then become the treasury of a DAO built around it.
After setting up a treasury, a DAO will need a way for members to vote on proposals. Snapshot is by far the most popular tool. It is a decentralized voting system that allows users to create proposals and vote off-chain, meaning votes are cast – no cryptocurrency is exchanged – using ERC-20 tokens or even NFTs to show voting power.
Think of Juicebox as a Web3 version of Kickstarter. Projects use Juicebox to raise funds from their communities through smart contracts on Ethereum. Projects can design a fundraising page and funding structure and define how funds and rewards will be distributed.
Mirror is best known as a blogging platform based on blockchain technology. But in addition to posting articles, DAOs can also use Mirror for crowdfunding projects that use Ethereum smart contracts and to turn posts into NFTs.
The future of DAOs: what next?
As DAOs become mainstream, more tools will become available to offer more one-stop solution tools like Superdao and DAOhaus, where with just a few clicks, a new DAO is launched. But as the number of tools available to launch a DAO continues to grow, the most crucial piece of the puzzle is the ability to organize and motivate DAO members to act and work for the mission and purpose of the CAD.
Want to be a crypto expert? Get the best of Decrypt straight to your inbox.
Get the biggest crypto news + weekly digests and more!