Decentralized Autonomous Organizations DAOs are digital organizations that are owned and governed by community members. All actions are computerized and automated through computer codes called smart contracts. These smart codes are geared to reduce the interference of humans and foster transparency. As a decentralized organization, members of a DAO have equal rights as they all collectively manage its funds, projects and other affairs. The smart contracts and blockchains are the mitochondria of DAOs. This is where the governance rules are written, automated and implemented using the software.
To start a DAO, some boxes need to be checked by the creators to ensure the success of the DAO. Some of these are:
Build a strong foundation
The first box to check in creating a DAO is to build a strong foundation. This has to do with engaging with peers to discuss and know why a DAO is required, what role will the DAO play and how it will work. This decision-making process involves human beings and it is geared to identify and plan the blueprint of the whole DAO and clarify its goal with other DAO enthusiasts. This is to avoid any chance of disagreement in terms of DAO’s governance structure. This is just the craving out of a plan.
Determine ownership
After the blueprint of the DAO must have been created, it is also important to establish ownership for DAO’s members. This helps to develop and grow decentralized autonomous organizations. Ownership of DAOs can be transferred to its members through diverse means since its ownership is tokenized. This is mostly done through airdrops and rewards.
Establish a governance structure
The next box that ought to be checked is the establishment of a governance structure. This involves how decisions will be made once a DAO is set up. The most common method is “Token weighted voting.” This is where users get to pull more voting power based on the number of tokens they own. Voters are token holders and they are actively involved in governance and decision-making. Each of their tokens represents one vote.
Set up rewards and incentives
One of the ways DAOs build trust is by setting up rewards and incentives for members to benefit from. The distribution of native governance tokens to the members and contributors who have ever used the Defi protocol is a form of reward for members’ contributions. Some of these tokens represent ownership rights, and some have no liquidity
However, some DAOs also reward members for their contributions using tokens like ETH, Tether (USDT), or USD Coin (USDC).
Steps to Setup a DAO
to set up a DAO, there are different types of open-source solutions available. This article seeks to examine two because of their wide acceptance. These two are Aragon and Snapshot. Aragon is popular and it’s strictly for DAOs based on the Ethereum blockchain while Snapshot is compatible with various blockchains.
Creating on Aragon
To create one, these 4 steps should be followed:
1. You must own an Ethereum Name Service domain.
2. Ensure you have some ETH to pay as the DAO creation fee. This fee is mostly around 0.2 ETH.
3. Create an organization linked to the ENS domain through the Aragon DApp and connect your wallet.
4. Customize your settings and add the various functions or peculiarities of your DAO. Once this has been done, you can then launch the DAO.
Creating on Snapshot
1. You must own an ENS domain. This must be on the Ethereum main net irrespective of the blockchain your DAO will be based on.
2. The next step is to link your Snapshot to your ENS domain.
3. Once this is done, you proceed to customize and configure your community settings to fit your dream DAO in terms of admins, voting power strategies, terms, etc.
4. When all three have been done, you proceed to verify your DAO. To verify your DAO on snapshot, you must have at least 1,000 community members and proof of ownership of the related project. Once all these have been met, the project is then launched.
The creation of DAOs is an easy thing to do. The challenge with its creation is its sustainability. The success of a DAO lies in the community and how solid the foundation laid by the pioneers is.
Examples of existing DAOs are Aave, Uniswap, and Maker DAO.
