TL;DR
A DAO or Decentralized Autonomous Organization is an entity that is autonomous, open-source, and exists autonomously, without any central controlling authority. DAOs are managed through smart contracts on a blockchain. A smart contract is a computer program that automatically executes the terms of a contract when certain conditions are met.
Introduction
DAOs use blockchain technology to enable participants to collectively govern the operations of a distributed system. DAOs emerge from the re-thinking of the fundamentals of organization, as humans voluntarily delegate their roles, responsibilities, and rights to anonymous systems and adopt pseudonymous identities.
There are a few things you need before you start one which include: technical knowledge, a good plan, and a community, among other things. But before, we delve into all the essentials let's take a look at what is needed and how you can set up your DAO.
What is a DAO?
DAO stands for decentralized autonomous organization. This is an organization that's mostly automated, with smart contracts that run most of the pertinent processes and deal with record-keeping and management of its funds. DAOs are guided by a community of volunteers who share goals and cooperate to achieve them.
Despite earlier setbacks by the vulnerability of the code, DAOs have emerged as the preferred mode of governance for many Decentralized Finance(Defi) projects. DAOs can be different, but most follow the basic principle. Anyone holding the DAOs governance token automatically has voting power proportional to the total amount of tokens they hold. Holders can also make proposals for changes to the DAO's operations or for funding future projects.
Why should you create a DAO?
Recently, much attention in the blockchain space has been given to decentralized autonomous organizations (DAOs), a model which has been called the most powerful innovation blockchain technology has to offer. These models provide more transparency and allow for new kinds of ventures and digital commons we haven’t thought of yet.
Creating a DAO is great if you want to organize a community under a specific project. Since the identity of people in DAOs is mostly anonymous you have to trust someone you don’t know. DAOs are a great way to fix the latter issue since they allow complete anonymous strangers to organizing themselves efficiently with technology that guarantees integrity. It is much easier to create a DAO than it is an entity, and it is very common for members of a DAO to have international teams. It is also very cheap to set one up and you can even do it free.
Another thing to keep a mind if you decide to start a DAO is that the DAO will hold you accountable. Once you decided to start it you would have effectively decentralized its power. If you break the rules, there will be consequences.
What do you need for a DAO?
A successful DAO should cover at least five points below:
A DAO needs a purpose. As a DAO, you need a purpose that a team can focus on and build towards. Without a purpose, your DAO will have nowhere to go.
A DAO needs a voting mechanism. This is a crucial component in any DAO. A DAO must have some form of consensus mechanism that allows members to vote on solutions or funding. There are different ways to set this up, either through 3rd-party providers or by creating your own.
A DAO needs a governance token. Governance tokens allow a DAO to be run by individuals who have and share a common interest. A token is very common in DAOs and it allows holders to be invested within the DAO.
A DAO needs a community. Probably one of the biggest conditions is a community. Without a community and no holders of tokens, a DAO simply would not work. Decentralization only gets stronger as more people partake in this system. Therefore, power and voting are spread across multiple people instead of a few.
A DAO needs a method by which to manage its funds. It is very important for DAOs to have access to funds. This allows them to continue working on the project and building it. Most DAOs have a multi-sig wallet in which all key participants need to sign off in agreement in order to access the funds.
So Minute Crypto, How do I create a DAO?
In the most simple terms — a “decentralized autonomous organization” is a lot like a company. It has people and decision-makers, some kind of product or service, and people who work in the DAO receive some kind of compensation for their work. But unlike a traditional structure, it doesn’t have any centralized point of control. Everything happens on a blockchain — and full transparency is maintained thereby monitoring all transactions. Normally, this allows open collaboration that isn’t possible within a traditional company or corporation.
There exists a selection of open source solutions online, particularly GitHub. Argon is another great resource for Ethereum blockchains. Snapshot is another popular choice that users can use. They will provide a similar structure in establishing your DAO.
Another thing to keep in mind is transactions fees with deploying your DAO over to the blockchain. This will usually be a one-time thing.
Aragon
Aragon is a project run by the DAO and has created its own non-profit organization to manage Argon’s funds.
As mentioned earlier Aragon is a popular source to establish a DAO on Polygon, Ethereum, and Harmony, among others. This project has some really nice features. For one, it provides you with open source software through its Aragon client enabling customizable DAOs.
To create an Aragon based DAO, follow these steps:
Own an Ethereum Name Service (ENS) domain.
Ensure that you have enough crypto to pay for the DAO’s creation(Usually around 0.2 Eth plus any gas fees)
You will need to also create an organization that is linked to the ENS domain. Aragon can assist you in doing this.
You then need to configure your settings such as vote duration and the percent of support needed to launch the DAO.
After you finish these steps you can then launch your DAO.
For further inquiries please direct yourself to their FAQ by clicking here.
Examples of DAOs
There exists a multitude of successful DAOs that have been created over the years. If you need inspiration take a look at the following projects that have established themselves in the blockchain community.
Uniswap is a multi-chain Automated Market Maker (AMM) that has positioned itself as one of the best-decentralized exchanges and Defi projects. Owning UNI, the official token for Uniswap enables you to vote and create proposals. To be allowed to submit proposals you at least need to hold 0.25% of UNI’s total supply. They have also launched a forum where holders can debate any changes to the protocol.
Dash is an open-source peer-to-peer [1] cryptocurrency that offers all the advantages of Bitcoin while also allowing instant transactions. It stands apart from other so-called "altcoins". The network is made up of thousands of distributed nodes hosted by volunteers around the world. It uses a Proof of Work algorithm and is decentralized, meaning it's not controlled by any government or business.
Final Thoughts
Creating a decentralized autonomous organization (DAO) is easy to do technically speaking. It’s a process that you can put together in less than a day. But running one successfully is difficult. Running one that will get traction and make progress towards your goals over the long haul is even harder. The answer to running a successful DAO will come down to the community.
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