A decentralized autonomous organization (DAO) is a blockchain-based governing structure introduced via the cryptocurrency industry. As such, DAOs offer decentralization, cryptographic security, and community-centric direction to assist in the development and progression of projects. Furthermore, there is an increasing amount of centralized entities wanting to learn how to create a DAO within their existing infrastructure. Learning how to create a DAO is easy, quick, and an in-demand skill during the Web3 evolution. Moreover, you don’t even need to be a blockchain developer or have any programming experience to accomplish this!
In this article, we are going to look at different ways of how to create a DAO. We’ll consider two options, including on-chain and off-chain voting mechanisms. Plus, we’ll discuss various things to consider before creating a DAO and why learning this skill is invaluable.
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What is a Decentralized Autonomous Organization (DAO)?
A decentralized autonomous organization (DAO) is a community-operating protocol as a form of globally distributed governance. To understand why DAO communities are revolutionary, it’s ideal to understand how legacy governing operations usually occur. Traditionally, a business or organization is run by an individual or a small collective of individuals. As a result, operational decisions affecting the mass market are deduced to centralized and often incentivized governing parties.
In addition, traditional governing bodies can adjust and alter parameters of business infrastructure, profit margin, or data collection without public knowledge. As a result, businesses have been known to carry out manipulative or exploitative hacks to boost profits. Moreover, it is also commonplace for entity profits to be extremely unevenly distributed, with the top one percent of workers taking the most significant cuts. So, to ameliorate the opportunities of centralized manipulation and management, businesses can integrate a DAO into their governing infrastructure.
Decentralized autonomous organizations (DAOs) operate on public blockchains (most of the time), allowing a community of like-minded enthusiasts to collaborate and vote on how a project should operate. Furthermore, DAO members can vote on how the distribution of funds should occur. DAOs usually require members to be holders of the project’s native asset, granting holders governing rights. Most commonly, assets allow for one vote per token held. However, this does vary with individual projects. Also, some projects allow token holders to submit proposals for updates.
Things to Consider When Creating a DAO
Now that we understand what a DAO is and why they are necessary, there are a few key things to consider before learning how to create a DAO. There are many nuances and options available for infrastructure design and operations management. However, every DAO should be mindful of the following essential elements.
A decentralized autonomous organization (DAO) is a decentralized, transparent, and secure way of organizing funds or managing a project. Each DAO, therefore, must have a sufficient, active, and engaging fundamental platform with frequent participation.
A decentralized autonomous organization (DAO) is nothing without a community. If you have a great underlying project, the next stage is to create a community of participants willing to join the DAO. The ethos of decentralization grows stronger and more secure the more people who partake and engage with the DAO.
Third, and most crucially, every decentralized autonomous organization (DAO) requires a form of voting mechanism. With the open-source nature of blockchain, it is easy for developers to copy or innovate on existing DAO models. In addition, there are third-party providers for non-developers wanting to know how to create a DAO. This means that setting up a DAO is easier than ever, without the need for learning any code! The type of voting mechanism can be implemented so that the mechanism itself can change later down the line if voted upon by the community. However, every DAO must have some form of reliable and secure voting mechanism in place to begin.
Once you have a voting mechanism in place, you’ll need some way to enable people to prove their eligibility to contribute to the DAO. Typically, projects will allow governing rights with a multi-utility token for holders of the asset. However, projects sometimes have separate governance tokens, such as Rarible (RARI) and the Rari governance token (RGT).
Not every decentralized autonomous organization (DAO) has its own treasury. However, every DAO needs some form of funds management. Ordinarily, a treasury is the holder of the DAO funds, requiring the collective security of multiple individuals to access and move funds. If a project doesn’t have a treasury, it can use a multi-signature wallet to complete a transaction. This means that at least two people must agree and provide their own private keys for the transaction to go through. Furthermore, all fund transactions are publicly viewable on-chain.
How to Create a DAO – What You Need to Know
There are many different ways to learn how to create a DAO. This article, however, will explore how to create a DAO if you have no programming experience. However, there is an assumption of base-level proficiency in blockchain terminology. Below, we will explore several avenues of how to create a DAO using third-party DAO creators.
Some decentralized autonomous organization (DAO) creators, such as the one below, require projects to have an Ethereum Name Service (ENS) domain. In addition, users must be in possession of a Web3 wallet with some ETH funds to cover the initial costs. MetaMask is the leading Web3 browser wallet compatible with the leading smart contract-compatible blockchain, Ethereum, and many more!
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The first way one can discover how to create a DAO is by using the “customizable off-chain voting mechanism”, Snapshot. On Snapshot, the DAO model is referred to as a “space”. Snapshot is a convenient choice for projects operating across multiple blockchains as the voting occurs off-chain. The mechanism picks a block at random within a set period and takes a snapshot of relevant token holders. Alternatively, the mechanism can view the number of tokens in a relevant staking protocol. This helps prevent users from increasing token holdings to have influence over an open vote.
The first thing to do when creating a DAO with Snapshot is to connect your ENS domain with the Snapshot application. There are two ways of doing this. Users can connect on Snapshot by clicking on the “[+]” icon in the sidebar and selecting the relevant ENS address. Alternatively, users can link from the Ethereum Name Service site and manually set the ENS text record for their “space”.
At this stage, users can customize their “space” and complete several mandatory details and features about their project and voting strategies. Compulsory fields include; project name, token symbol, token network, description, avatar (logo), and skin. Users can either opt for default skins or customize skins. After this, users can add their GitHub and Twitter accounts. Also, users can link the website domain of the project and the terms and conditions of the “space”.
Once all configurations are complete, users will need to verify their “space” to be on the official Snapshot list. To do so, a “space” must have an avatar image, at least 1,000 members, and “a minimum threshold for proposal validation”. In addition, each “space” must have a link to the project’s website or GitHub. At this stage, a project can reach out to the “#helpdesk” channel on Discord and ask to become verified.
For projects or individuals who do not have an ENS domain, a more apt alternative to Snapshot is DAOstack Alchemy. With zero need for coding knowledge or technical expertise, DAOstack Alchemy presents a super easy-to-use tool for creating a DAO. By following four simple steps, users can learn how to create a DAO on Ethereum and Gnosis Chain (formerly xDAI) in under five minutes! It is worth bearing in mind that the cost of creation is 0.2ETH at the time of writing. Make sure to have sufficient funds in your wallet with enough to pay for gas fees before starting!
The first prompt will be to fill in the “Name” and “Symbol” text fields for the title of your DAO. Make sure to choose a name that is representable, relatable, and scalable for growth. Neither the name nor symbol of the DAO is adjustable upon deployment of the organization.
Next, users can encode the voting mechanisms and decision-making processes for their DAO. DAOstack Alchemy presents users with a list of default configurations with the option to adjust the relevant toggle bar. Options include rewarding the successful proposer and the ability to “reward correct voters and penalize incorrect voters”. Also, creators have the option of choosing the speed of the decision-making process (slow, medium, fast).
Moreover, by clicking on “[Advanced]”, a further wealth of configurations is available covering funding and voting power, alongside a plugin manager. Accordingly, creators who wish to add certain nuances to their DAO infrastructures have more flexibility to do so using application plugins.
After completing all the necessary configurations, the next step is to add members to the DAO. Users can add their own wallet addresses by clicking on the “[Add Your Wallet]” button. Also, users can paste in the crypto wallet address of any other member they would like. Simply type in the address, then click on “[Add Member]”. Alternatively, for adding several members at once, users can import a CSV file. After adding all the relevant members, click on “[Set Members]”.
Finally, the last stage will require users to select “[Install Organization]”, which will prompt MetaMask (or another connected Web3 wallet) to sign a transaction. This will first show the cost of 0.2 ETH plus the current gas fee. Click on “[Confirm]” and wait for the transaction to go through. The DAO will become immutably recorded on the chosen network once the transaction is confirmed.
Note: Choosing to deploy your DAO on Gnosis Chain will likely incur less gas fees than on Ethereum.
Why Learn How to Create a DAO?
There are several good reasons why you should learn how to create a DAO. First, for entrepreneurs and business CEOs, integrating a decentralized autonomous organization (DAO) model into an existing centralized infrastructure is easy. Plus, it will attract a new market of Web3 users, familiar with and attracted to cutting-edge technologies. Second, it allows users and consumers to become more involved with their favorite projects and brands. As a result, this increases the likeliness of return business, alongside community-centric business developments pre-approved by target consumers.
Another benefit of learning how to create a DAO today is gaining the first-mover advantage, as the application of this model is still relatively small within traditional industries. Alongside this, individuals who can understand, articulate, and implement the creation of a DAO gain a niche skill in a highly in-demand industry. Readers who successfully learn how to create a DAO will gain an unfair advantage in the job market as blockchain utility expands sector-wide.
Exploring How to Create a DAO – Summary
Congratulations! If you have been following our article closely, you will have successfully learned how to create a DAO! For readers wanting to learn how to create a DAO for a multi-chain project, Snapshot is an ideal choice. Alternatively, for readers wanting to create a DAO without an ENS domain, DAOstack Alchemy is the perfect solution.
Learning how to create a DAO takes less than 20 minutes and really isn’t too difficult! Even if you are not a programmer, by following this article, you can discover how to create a DAO in no time! For readers wanting to get their teeth into something more technically challenging, check out our Ethereum Game Programming course! At Moralis Academy, we teach students how to deploy their own NFT assets and gaming applications. Also, see our academy blog articles, “Most Expensive NFTs Sold” and “Top Crypto YouTube Channels”, for further insights into the crypto industry!