A Step-by-Step Guide on Transforming a Community into a decentralized autonomous organization (DAO)

A Step-by-Step Guide on Transforming a Community into a decentralized autonomous organization (DAO)

Understanding the functioning of a decentralized autonomous organization (DAO) is the initial step to introducing an existing community into Web3.

Decentralized autonomous organizations (DAOs) transform how communities organize and run in Web3. This term refers to a group with a mutual goal governed without a conventional centralized leadership structure.

DAO members vote on critical matters concerning organizations, such as how to develop new products or allocate funds. DAOs are designed to provide a more democratic process to firms, projects, and communities, ensuring improved coordination among developers, creators, and investors.

Groups do not necessarily have to start as DAOs. However, there are ways to incorporate these concepts into a community structure.

Inspiration from DAO Success Stories

Since forming the first DAO in 2016, the idea has spread across sectors such as fashion, journalism, finance, and others. DAOs depend on smart contracts to automatically implement tasks when specific conditions are attained, eradicating the need for mediators.

Various successful DAOs have risen recently, illustrating multiple use cases. For instance, Decentraland developed the Decentraland DAO to manage MANA, its native cryptocurrency, and LAND, its virtual real estate parcels. 

DAO members can bring forward and vote on proposals, allowing the community to mold the platform’s future collaboratively. Further, the virtual world discarded the key that managed MANA’s smart contract, wholly decentralizing its governance token. 

Some DAOs develop decentralized community fundraisers via a mutual objective. For instance, ConstitutionDAO sought to purchase a copy of the United States Constitution at auction. 

LinksDAO sold memberships of its future club as NFT, raising millions of dollars without owning a golf course.

Start Developing your DAO

Aligning the DAO Identity

The initial step entails setting a DAO purpose and mission statement and uniting the community around a mutual goal or interest. It also entails working closely with the founding team to develop a community where individuals want to be and prioritizing engagement overgrowth.

Picking the Best Blockchain Relative to One’s Needs

Picking which blockchain to utilize is critical in establishing the organization’s direction. Since DAOs lack central leadership and voting happens on-chain, blockchain ledgers promote the immutability and transparency of the organization’s inner workings. 

Polygon and Ethereum are examples of famous blockchain alternatives for DAOs. When deciding, a person must consider gas fees and the network’s scalability and security. 

Defining the Governance Process

Defining how the DAO will make decisions and the person behind them is critical. Developing an efficient structure will establish the extent to which the community is engaged and the safety of the process.

DAOs permit members to vote based on the number of tokens they hold or through their crypto wallets. Tokens are an excellent means to create weighted voting, meaning the higher the number of tokens a member has, the more their vote is weighted. 

Minting and Managing DAO Governance Tokens

When one opts to utilize a token-founded voting system, they must mint and manage their tokens. Some projects sell nonfungible tokens to allocate membership, while others make a native token to simplify the process.

One must determine the number of tokens to mint. After minting, they can be offered to particular people or purchased and sold on a primary or secondary exchange.

Developing a Forum and Proposal

Proposals must be wholly developed ideas that have moved past the brainstorming stage and are ready for evaluation by the community. 

DAOs must set a minimum participation of votes to be present for a vote to be valid.

Determining DAO Tools

DAO tooling is the software, apps, and smart contracts a DAO uses. A community cannot send money, communicate, or organize legal documents in its absence. Examples of tools that can be used include Discord and Gnosis Safe.

Final Thoughts

After making critical decisions for the DAO, one must work with the community to attain the mutual goal. Voting on critical decisions will become difficult as the community grows; thus, there is a need to organize and adapt strategies early. 

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Eric Lozano
About Author

Eric Lozano

Eric Lozano, a notable expert in crypto journalism, possesses a keen eye for blockchain trends and digital currency analysis. His articles delve deep, elucidating complex crypto topics with precision and flair. As the crypto realm expands, Eric remains an influential and trusted voice for enthusiasts and professionals alike

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