Step-By-Step Guide: How to Start a DAO

Marcel Deer
By Marcel Deer
Joel Taylor
Edited by Joel Taylor

Published April 8, 2022.

A torn piece of material revealing the words 'your journey starts here'

A decentralized autonomous organization (DAO) is a group of individuals who collectively vote to decide about potential projects, rather than a central leader or large company dictating all decisions. These DAOs use smart contracts built on a blockchain.

Members of the DAO will often request to join and offer some type of contribution, buying their way into the group. In addition, purchasing governance tokens for that particular DAO usually gives them the ability to vote for decisions regarding how the pool is managed and spent, among other things.

These members are often highly diverse, consisting of individuals from around the globe who communicate via various online channels.

Why Create a DAO?

The idea behind creating a DAO was to eliminate human error, attempting to create an efficient, more reliable system. DAOs are mindfully designed to prevent the purposeful manipulation of investors' funds by placing the power to make decisions into the hands of an automated system.

Being fueled by ether, DAOs allow investors to send money from across the globe anonymously. After contributing their payment, they receive tokens that would enable them voting rights in upcoming projects.

A DAO allows individuals to organize their projects efficiently with technology, ensuring you don’t have to lose sleep at night wondering if it’s trustworthy or not. Guaranteed integrity is a significant bonus of creating a DAO, and many people want to join a DAO for its functionality in organizing groups of people.

Decentralized autonomous organizations are more effective than creating a traditional organization since many projects operate with international teams.

DAOs focus on the importance of a community. The unique structure of DAOs focuses heavily on communal participation and allows each member to benefit and prosper.

Smart contracts (think of these as one-time virtual agreements) are another benefit of DAOs since they do not require brokers or other intermediaries to validate deals, further eliminating the risk of third-party manipulation. The cost to make a DAO is also reduced since this intermediary is not necessary.

What Your DAO Will Need

To create a successful DAO, you’ll need to consider the following requirements:

  • A project and purpose
  • A voting method
  • A governance token or share system
  • Community and membership
  • A plan to manage funds

Without purpose, your DAO likely will not work out very well. However, you can use a DAO to effectively organize your funds, team members, and projects.

Aside from purpose, a voting mechanism will also be required if you want to make and deploy a DAO on a crypto network. This will allow members of the organization to vote on upcoming projects and other essential matters.

Governance tokens or share systems will also be necessary. Governance tokens are bought to provide members with certain voting rights. Share systems are typically used when members deposit cryptocurrencies to be invested.

Without a solid community, your DAO won’t succeed. The more individuals who participate in governing your organization, the better. Decentralization grows stronger, and power is spread even further.

A plan to manage your funds is just as important as any other steps listed. Most decentralized autonomous organizations have a treasury or access to crowdfunding. Multi-signature wallets are also a common occurrence, as it only allows for use if all participants agree on the matter.

Creating Your Very Own DAO

Creating your very own DAO is relatively easy. Just follow the steps below:

  1. You’ll need to own an Ethereum Name Service domain.
  2. Make sure you have enough crypto to pay a DAO creation fee.
  3. Create the organization linked to the ENS domain through the Aragon DAO Dapp.
  4. Configure all of your settings, i.e., vote duration time and percentage of support required.
  5. Then it's time to launch your DAO.

Are There Examples of Successful DOAs to Follow?

There are plenty of real-life examples of a DAO. For instance, on Solana, Honey DAO is a decentralized VC focused on assisting early DeFi projects MakerDAO is the most successful and oldest DAOs on the market.

Aave is another DeFi lending platform on Ethereum, and Uniswap is one of the largest decentralized exchanges and is a multi-chain AMM (automated market maker).

The Key to Your DAO’s Creation and Success

DAOs are built on projects and community. It allows each member to have some skin in the game, permitting them to vote on the future of their projects and any issues that may arise. Decentralized autonomous organizations are the future of online communities.

Creating a DAO is technically pretty straightforward; however, running one is different. It can be challenging. Remember that the key to running a strong, successful DAO is your project and your community.