DAO – With the help of DAOs, the Blockchain has given us the ability to decentralize, the ability to transfer power from those at the top to those at the bottom. Instead of having someone make the decision, each stakeholder has a say.
Previously we talked about DAO and all you need to know about it but just in case you’re having a problem with how to create a DAO, this article will guide you by the hand to creating your DAO with a few easy steps.
What Is a DAO?
DAO is an acronym that stands for Decentralized Autonomous Organization. A DAO, as the name implies, is an organization that is automated by computer code and open to anyone who meets some basic requirements.
Being autonomous means that smart contracts assist in running the majority of processes without the need for human intervention. A DAO is created and managed by a community that manages its funds and projects collectively.
DAOs rose to prominence following Ethereum’s 2016 venture capital fund “The DAO.” Unfortunately, the project was attacked three weeks into the token sale due to a code vulnerability. A hard fork later restored the funds. Despite its early difficulties, the DAO concept has evolved and is now one of the most popular governance models for Decentralized Finance (DeFi) projects.
Each DAO is unique, but they all adhere to the same fundamental principles. Anyone who owns the governance token of the DAO has voting power proportional to the number of tokens they own. Holders may also propose changes to the DAO’s operations.
Examples of DAO Tokens
DAO tokens are an important part of DAO design and an essential part when you create a DAO ecosystem. Some of the biggest DAO tokens in the blockchain space today are:
- Aave – AAVE tokens are used in the world’s third-largest dApp and Ethereum’s second-largest lending protocol. It facilitates lending and borrowing on the Aave platform, which already boasts having a TVL of $13 billion.
- Maker – MKR is used in MakerDAO, DeFi’s largest lending platform. It allows users to vote on MakerDAO’s parameters, including business logic and risk management systems.
- Uniswap – The Uniswap (UNI) token and DEX are widely popular. This platform has about $10 billion in TVL currently and is the second-largest DEX on Ethereum. Users holding the UNI token can vote on new proposals. However, developers still have a significant say on Uniswap decisions, making it less decentralized than others.
How To Create a DAO
The best way to create a DAO is through an established platform. Applications like Moralis offer code templates, which you can copy and paste to quickly set up your project.
Aragon is one of the most popular choices for decentralized autonomous organizations. We’ll show you how to create a DAO on Aragon through the following steps. Firstly, set up a crypto wallet. You’ll need it to pay for the setup fees. Metamask is by far the best option for this type of transaction.
Step 1: Create Your Account
Go to Aragon and click on Create Your DAO. This will take you to the welcome page where you will see two options: Create an organization and open an existing organization.
You will be able to select different mainnets and different testnets. Choose wisely
Make sure to connect your wallet, by clicking on the ‘connect account’ button. Select Metamask, get approval, and then click on ‘create an organization’
As said earlier, we want to create our own organization from scratch and that’s exactly what we are going to do!
Step 2. Select a template
They have templates such as Company, Membership, Reputation, Open enterprise, Dandelion, and Fundraising from which you can select. Know that each of these templates has different goals. For example;
The COMPANY template- allows the use of a transferable token to represent an ownership stake in your organization. Decisions are made based on stake-weighted voting.
The MEMBERSHIP template – allows the use of a non-transferable token to represent the membership. Decisions are made based on one-member-one-vote governance.
The REPUTATION template – allows the use of non-transferable tokens to represent reputation. Decisions are made using reputation-weighted voting.
The OPEN ENTERPRISE template – entails a suite of apps for organizations, including project management, budget planning, and so on.
The DANDELION template – facilitates collaboration with an organization that makes it easy for contributors to part ways when disagreement occurs.
The FUNDRAISING template – allows you to launch a transparent and accountable crowd-funding campaign.
For the purpose of this article, we are going to deploy a company. So that’s the template we would be selecting.
Step 3. Claim a Name
This is the part where you name your organization. Name it whatever you want. It’s your call! Since Aragon uses the Ethereum Name Service (ENS), this means that the name you choose will be mapped to your organization’s Ethereum address and cannot be changed after you launch your organization.
Step 4. Configure template
Here is where you choose your voting settings. You configure the percentage of votes that you need to approve a proposal and the vote duration here.
The support percentage is the percentage of tokens that are required to approve the voting in favor of a yes. For example, if the support percentage is set to say 50%, it means that you need more than 50% votes of the total votes to be a yes for a proposal to be passed.
The minimum approval percentage is the percentage of yes votes that is required to approve the proposal from the remaining pool of tokens
Vote duration is the duration within which the participating members can vote.
The support and minimum approval thresholds are very strict requirements such that votes will only pass if percentages greater than the set threshold are achieved. Nothing less!
You also choose your token settings here. You choose a token name, the symbol for your token, and the token holders here. If you are starting the company with a couple of other people, you will add members to define the initial distribution of the token by pasting their address into the ‘token holders’ section. Then allocate tokens to them.
Step 5. Review information
This is the part where you have a last look at your settings and configurations before you launch your organization. If you’ve made a mistake somewhere, you can go back to change it.
Step 6. Launch organization
Then we launch our organization. Our Metamask wallet is going to pop up for approval. Then we click confirm.
Things to Consider Before You Create a DAO
Creating a DAO isn’t just an easy-pizzy task for there are some things to consider before creating a DAO like;
- Members of a DAO may face unlimited liability.
- DAOs are not corporations. They don’t follow any of the legal formalities expected of an official company. You might be risking more than just your capital investment.
- DAOs face many legal challenges.
- Due to decentralization, DAOs aren’t recognized as legal entities, especially in the United States. They do not enjoy corporate privileges or protection from the government. In other words, legal disputes within a DAO are extremely difficult to resolve.
- DAO members are anonymous.
- The structure of a decentralized autonomous organization allows associates to withhold their identity. KYC suddenly becomes a luxury. You won’t know anything about the people you work with except for their wallet addresses.
What Is A Smart Contract?
A smart contract is an automated transaction, or any substantially similar analogue, comprised of code, script, or programming language that executes the terms of an agreement and may include taking custody of and transferring an asset, administering membership interest votes with respect to a decentralized autonomous organization (DAO), or issuing executable instructions for these actions, based on the occurrence or nonoccurrence of specified conditions.
How does a DAO Differ from a Regular LLC?
Unlike a standard LLC which is managed by human members/managers, a DAO can be
managed by a combination of human members/managers and algorithmically.
Does a DAO Need to have a registered agent?
Yes, just like all other LLCs, you must have a registered agent in order to register a DAO.
How Much Does it Cost to Form a DAO?
The initial filing fee is $100.
Note: An annual report is due every year thereafter; the fee for which is a minimum of $60.
The fee is calculated based on all assets located and employed in Wyoming. The tax is
$60 or two-tenths of one mill on the dollar ($.0002), whichever is greater.
Conclusion
That’s all there is to it! This is how you make your own DAO. You can do whatever you want from here. Create your proposal question to start the voting process. You can invite members, and distribute tokens (which give them voting rights), the possibilities are endless!
Technically, creating your own DAO is simple, but successfully running one is difficult. As you can see, there are many simple tools available to get you up and running quickly. The key to creating your DAO, however, will be your project and community.
