DAOs are considered the next big revolution in spheres like finance and business. But why??
The blockchain is all about decentralizing whether it’s assets, tokens, organizations, or decisions. This is when the idea and concept of Decentralized Autonomous Organizations (DAOs) came into existence.
The first DAO known simply as “The DAO” launched in 2016 and raised nearly $150M within a span of just 21 days from 11,000 investors through token sales.
And as per reports, the total market capitalization of all DAO tokens stood at over $21 Bn in 2022.
Let’s talk about Decentralized Autonomous Organizations and how to build a DAO in detail!
A decentralized autonomous organization (DAO) is an entity with no central leadership. The decisions are taken from the bottom up, governed by a community organized around a specific set of rules enforced on a blockchain. Members of a DAO own tokens belonging to the DAO and have the ability to cast votes on the entity’s initiatives.
Being ruled by computer code, DAOs are mainly managed through autonomous processes enabled by programmable smart contracts, helping run processes without any need for human intervention.
The core idea behind this concept is building digital entities that leverage blockchain technology and digital assets to develop a better way of managing resources, making decisions, and coordinating activities.
It takes a lot of faith in the individuals you’re dealing with to start a business that involves capital and money. However, it can be difficult to trust someone you’ve only ever communicated with online.
This is where DAOs come into play. You can completely trust the DAO’s code with DAOs because it is completely transparent and verifiable by anyone.
This creates a huge number of brand-new possibilities for international cooperation and coordination.
Here’s the difference between a DAO and Traditional Organization:
Decentralized autonomous organizations’ members cooperate in accordance with blockchain-encoded regulations. There are a variety of Dao initiatives available, ranging from finance to charity if you wish to join the space.
Let’s have a look at the different types of DAOs:
The most common type of decentralized autonomous organization is Protocol DAO. A protocol DAO, as its name suggests, concentrates on decentralized protocols for governance. Several DAOs make use of smart contract technologies to provide Defi services. The three most well-known protocol DAOs are Yearn Finances, Uniswap, and MakerDAO.
Owners of cryptocurrencies join forces in investing DAOs to fund new initiatives, businesses, and so on. They are formed using smart contracts to enforce governmental rights.
Grants DAOs have the same goal as Investment DAOs—to assist new initiatives—but these DAOs are only for DeFi projects. The most well-known DAO grants are the Uniswap Awards.
Social DAOs are websites that promote social networking within the cryptocurrency industry. A well-liked social DAO is Blockster. By enabling everyone’s opinions to be heard and enabling people to discuss their shared interests, such platforms offer digital democracy.
Non-fungible token (NFT) artists rely on collector DAOs to prove ownership of their creations. One such project is PleasrDAO, a DAO formed by NFT collectors, Defi promoters, and digital producers.
With the use of media DAOs, readers who own the content products can directly contribute in exchange for the native currency as payment for their labor. For instance, Forefront offers Defi enthusiasts a number of possibilities, including a crypto education center and expansion opportunities for incubated businesses.
This decentralized autonomous organization is much less common than protocol DAOs. These DAOs assist social responsibility initiatives as they navigate the Web 3.0 environment. The Big Green DAO, the first Philanthropy DAO, works to increase public awareness of the importance of food production.
The core of a DAO is its smart contract, which holds the group’s funds and establishes the organization’s rules. Once the contract has gone live on Ethereum, only a vote will allow for changes to the terms. Anything attempted and not permitted by the logic and principles of the code will fail.
Furthermore, as the smart contract also establishes the treasury, no one is permitted to use the funds without the group’s consent. DAOs are therefore not dependent on a centralized authority. Instead, decisions are made jointly by the group, and when votes are successful, payments are immediately issued.
A decentralized Autonomous Organization, or DAO, is a community-led organization that is transparent and autonomous and lacks a centralized government. This implies that all project participants equally govern a DAO, and all important decisions are made by them all at once.
Many cryptocurrency wallets, which can be controlled by businesses or individuals, can be used to create a DAO. The management of assets and votes is made possible without the need to go through conventional banking and legal procedures because all actions are carried out through code.
It can be challenging to trust individuals most of the time if you are working on a project that needs finance and involves transactions with a lot of unknown parties. Your company has a number of opportunities when using a decentralized autonomous organization blockchain.
Use the DAO blockchain development to govern an organization without any central management, handle services automatically in a standardized manner, with 100% transparency for all transactions, and with mandatory voting for future changes.
Let’s now go through all the necessary steps required to create a DAO from scratch!
If you’re trying to create a DAO from scratch, your first priority should be figuring out its basic structure. Keep in mind that a decentralized structure is not a magic wand that can be used by every project or organization. You should first decide on the structure of your DAO before contacting an Ethereum professional to write codes or use DAO tools.
Before starting the significant DAO creation task, consider the following questions:
The type of DAO should be your next step after deciding on the DAO’s structure. A comprehensive list of applications for DAO as a concept is not possible because it is still in the conceptual development stage. DAOs can create a revolution in a few respectable fields, though. The backdrop is crucial for outlining your DAO’s general structure, even though your DAO won’t necessarily operate under a governmental framework of a nation-state and city stage.
Do you know what token allocation is? If not, you’ll have to dig a little. You must distribute your token when you have determined your structure and type clearly. Getting this right from the start will help you raise money more effectively and win over the community and your initial supporters.
Using DAO tokens helps in:
The DAO development team must carefully select the token supply volume and distribute the tokens. To maximize business growth, it can be helpful to have a solid understanding of the DAO token’s use cases and its allocation. For users and the community, it helps build value.
While startups have the option of building their systems from scratch, a number of DAO development platforms are there which have templates and tools that are offered on the market to assist them.
They can help in everything from determining the DAOs legal framework to minting DAO coin and choosing the DAOs name.
Here are some most popular Ethereum blockchain building blocks for a DAO:
The cost to create a DAO on Ethereum isn’t fixed and changes in accordance with the ETH price. Approximately, $350 (or 0.2 ETH) is needed to set up DAO. Plus, the formation of DAO as an LLC will cost you $100 in fees.
Besides this, the cost can vary depending on any unique requirements for a project.
For instance, if you’re designing a Defi DAO, you’ll need a Defi platform with lending, staking, and borrowing features. A project with such features would typically have a budget of up to $200,000 to $240,000. (This would cover the creation of ERC-20 tokens, DEX, DeFi lending/staking, liquidity mining, wallet integration, and the setup of a liquidity protocol )
Now that you understand how to build a DAO, it’s time to execute your plan.
DAOs help establish fundamental connections with the world and like-minded individuals. Also, DAOs can be developed for charitable and non-profit causes. Altogether, the future of DAOs is bright, and investing in them is a smart choice.
If you’re looking for world-class DAO development services, get in touch with us today!
I am the CEO and founder of Blocktech Brew, a team of blockchain and Web 3.0 experts who are helping businesses adopt, implement and integrate blockchain solutions to achieve business excellence. Having successfully delivered 1000+ projects to clients across 150+ countries, our team is dedicated to designing and developing smart solutions to scale your business growth. We are focused on harnessing the power of Web 3.0 technologies to offer world-class blockchain, NFT, Metaverse, Defi, and Crypto development services to businesses to help them achieve their goals.
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