Ultimate DAOs’ Guide. WHAT, WHY and HOW to BUILD a DAO.

Why do I need a Decentralized Autonomous Organization (DAO) instead of a Traditional Organization? Where should I start my DAO? Should I use Discord or Telegram or Should I rather jump into new native web3 options?

MarBlueBucket.AI

Published in

Blockchain Biz

31 min readNov 9, 2022

Decentralized Autonomous Organizations (DAOs), are changing the world and are the next step in collective development, slated to transform life and work as we know it.

Next-generation decentralized organization that coordinates the resources of a community (human and capital) to sustainably deliver value for members.

Decentralized autonomous organizations are changing organization structures, how we collaborate and communicate. DAOs are the next tier of collective development.

Decentralization does not mean leaderless. Rather, more people are empowered to take initiatives towards shared goals.

DAOs are the hottest topic in Web3, in 2018 we had no more than 10 unique DAOs, Today in 2022 we have more than 10.000 unique DAOs and $ 9.8 billion total treasury according to DeepDao.

If you are familiar somehow with DAOs, and you want to go straight to the point, “How to Build a DAO. Practical example and tools.” Skip to num 8 on the list below.

In this Guide:

Who is this Guide for?

2. What is a DAO? And DAOs vs Traditional Companies.

3. Why you should care about DAOs?

4. Types of DAOs. Different perspectives and Examples.

5. Top DAOs’ Directories.

6. DAOs and NFTs, the perfect “match”.

7. DAO’s Pros and Cons.

8. How to Build a DAO. Challenges & Tools. Building Our OWN DAO.

9. Endnote.

*Thank You. Sources & DAO’s people I follow on Twitter.

1. WHO IS THIS GUIDE FOR?

Before we jump into all this DAO’s content, and from the very beginning, I want to make clear that this guide does not pretend that every organization should be a DAO, so that I will always be transparent about DAO’s and Traditional Organization’s different options.

“DAOs will in some cases have to accomplish specific complicated tasks, and some use of corporate-like forms for accomplishing those tasks may well be a good idea.” Vitálik Buterin (Ethereum Co-Funder)

Here you will read the Ultimate and Updated DAO’s Guide, breaking down the latest and updated DAOs tools ecosystem for you. After going through this article you will fully understand, What are they and why DAOs are radically different from traditional organizations, why you should care about DAOs, main DAO’s indicators of growth , DAOs’ types and how to build your Own DAO, with the best tooling infrastructure, web3 native new ones included.

This article is for anyone who are curious about DAOs, want to learn all about the impact of DAOs in the new web3 ecosystem and might consider to build a DAO by answering for example these questions:

Why do I need a DAO instead of a Traditional Organization?

Where should I start my Decentralized Autonomous Organization (DAO)?

Should I use Discord or Telegram, or Should I rather to jump to web3 native options?

DAOs are a new way of organizing people , seeking — the creation of value — by relying on a decentralized framework in which workers, users, and other stakeholders have true ownership of the entity.

DAOs are now a reality thanks to Blockchain technology and Blockchain infrastructure (Tools). Blockchain protocols and tools are going to enable to automate decision-making allowing DAOs to make decisions in a collective decentralized organization.

Nevertheless to realize their potential and to gain in mass adoption, DAOs need to become easier to set up and use, so that tools and its user experience, are a key factor for mass adoption.

2. WHAT IS A DAO? and DAOs vs TRADITIONAL COMPANIES.

“A DAO is formed when people make binding decisions together, regarding mutually owned assets.” DeepDAO

A DAO stands for Decentralized Autonomous Organization, is a self-governing, internet-native community with no central leadership. A DAO works without hierarchical management and can have a large number of purposes.

It is completely what a traditional company isn’t.

The community bring contributors with a shared bank account and a purpose, the creation of value through decisions made from the bottom-up by the community and a set of rules enforced on a blockchain.

DAO’s automate out centralized powers through code called smart contracts, that automatically enforced theirs rules. So the protocols distribute ownership and decision-making power via novel token distribution mechanisms. Platforms rewarded users with a direct ownership stake that aligns their success with that of the platform.

The rules would be transparent to all, as anyone could see how the code was written. And the bot would moderate the community using these agreed upon rules. More on this later.
And if people disagree, there is always recourse — put the issue to a vote. If enough people agree, the bot’s rules would change, and a user could get unbanned, or an unfair law reversed. Michael Lin

Essentially, a DAO is built on a smart contract, which is taking the place of all of those structures and positions within a traditional organization that we see today. The smart contract eliminates the need for trust and intermediaries.

“new ownership economy, wherein networks are built, operated, and owned by their users.” The Ownership Economy

2. WHY YOU SHOULD CARE ABOUT DAOS?.

Before moving forward, just a little bit of historical context about DAOs.

DAOs aren’t a new concept. They were actually first proposed back in the 1990s and referred to in the context of the Internet-of-Things environment but it faced a number of hurdles the principal one was the technology.

Stephan Tual, former CCO Ethereum, wrote this article in 2016 as an intention to be an introduction, as a high-level, to the standard DAO framework.

A DAO isn’t a legally recognized structure in most countries, though that too is set to change thanks to the US state of Wyoming. Wyoming has been a pioneer of Blockchain regulation over the last few years and in July 2021 they became the first state to legally recognise DAOs as a Limited Liability Company.

Before Ethereum was even launched, DAOs were mentioned in the Ethereum whitepaper in 2013.

The thing is that, the rule enforcement was not possible till Blockchain technology arrived to our lives at scale and with Ethereum and its smart contracts.

If you understand blockchain fundamentals, you will easily get it. Blockchain is a digital ledger that keeps a record of all transactions taking place in a peer-to-peer network. All information transferred via Blockchain is encrypted and every occurrence is recorded, meaning that the information cannot be altered as everyone/ every node has a copy of this data base.

Ethereum, the first and largest Smart Contract platform, brought through these smart contracts, automated rules that no one can change.

“A DAO could then just follow the rules as dictated by this program. Anyone can look at the code and verify that it does what it says. Nobody can tamper with these rules because everyone owns a copy of it. Even the creators of the initial rules can’t change them. If you tried to co-opt the rule, you’d have to convince everyone else to change it with you. And it’s unlikely to happen if the members don’t agree to change it with you.”Michael Lin.

While DAOs it not a new thing, what it is really new is that now thanks to Blockchain technology and Smart Contracts Platforms, like Ethereum, DAOs are possible to run and so that a new completely renewed way of governance is already here.

“Entrepreneurs are using DAOs to fundraise globally and hand over ownership to their communities. Axie Infinity, in Vietnam, launched a blockchain-based game that reached a multi-billion coin cap by engaging communities from around the world. We are also working with the Astana International Financial Center in Kazakhstan, which has a national crypto strategy, to innovate in setting up a world’s first investment DAO incorporation framework.” Weforum.org.

Decentralized autonomous organizations, are enabling entrepreneurs to rapidly raise funding and reach global markets in countries where traditional structures might not be effective or even available.

DAOs are the hottest topic in Web3 due to its surprisingly growth, in 2018 they were about 10 DAOs, but now in 2022 there are more 10.000 unique DAOs ( according to DeepDAO) by the time his article is written.

DAOS TOP KPIs

Here the top KPIs that DeepDao display in its website regarding to the all DAO ecosystem:

. 10.000 unique organizations.

. $ 9.8 billion total *treasury ( the total assets that the DAO may use at its own discretion, excluding DAO managed but not owned assets such as reward fees or staking accounts)

. 4.5 M Governance token holders. ( I will explain later on what “governance tokens” are)

. 700.2 k Active Voters & Proposal Makers.

Regarding to DeFi DAOs, these are top Indicators by CoinMarketCap:

. Market Cap $16.7 B

. Trading Volume $1.6 B

Top 10 DAO Tokens by Market Capitalization.

3. TYPE OF DAOS AND EXAMPLES.

DAOs can be divided into many different perspectives.

David Phelps, in a great twitter’s thread broke down thirteen ways of looking at a DAO.

The Generalist give us two big categories as put forward by technically-oriented and socially oriented;

. Technically-oriented. DAOs focus more on building in the crypto space and keeping their governance on-chain.

. Socially-oriented. DAOs primarily aim at bringing like-minded people together and creating a community for them to easily interact and brainstorm. Governance is likely off-chain, or non-existent.

Also another way to classify DAOs is by Hierarchy. Nothing to do e.g Japan’s DAO, with a small group of DAO friends with a very specific purpose. This is very relevant and take us back to the Microsolidarity framework “Five Scales of Microsolidarity” , that one day in a DAO’s conversation Flávia Macêdo, Social Media Common Ground’s builder, shared with me.

By the time I am writing this article, the only tool for DAOs that takes Hierarchy of communities into account is Common Ground.

From the largest, to the smallest:

. Network State. Highly-aligned community with diplomatic recognition.

. Society. Large community sharing a broad general interest.

. Community. Large group of people sharing a project or goal or interest.

. Group. Small community, friends, family, gamer crew…

As interest in DAOs has increased, DAOs have begun to diversify and experiment with the boundaries of what’s possible. We will find DAOs with different type of Purposes for; investing, DAOs for building new products, DAOs for socializing, and many other iterations.

The main list:

Protocol DAOs.
Investment DAOs.
Grant DAOs.
Philanthropy DAOs.
Social DAOs.
Collector DAOs.
Media DAOs.
Creators DAOs.
Talent DAOs.
SubDAOs.

(1) Protocol DAOs.

These protocols allow the transition of power from the hands of the core team to that of the community.

governance tokens provide token holders with certain rights that decides a protocol’s direction, like which new products or features to develop, which integrations or partnerships should be pursued, how to spend a budget, and more.

Protocols DAOs examples:

Popularized by Compound and Uniswap protocols in 2020, governance tokens were the standard in DeFi ( decentralized finance) , governance tokens have exactly what the name sounds like–governance rights over the protocol, they have no economic rights, there are no cash flows, but the right to vote. There is obviously some value in having influence over protocols as in the future, there is an assumption, hat these tokens will eventually vote in economic rights to the protocol.)

(2) Investment DAOs

DAOs were originally created as non-profit communities.

Protocol DAOs introduced a new class of tokens with secondary market value, and groups started to gain interest to invest in them.

An investment DAO allows its members to decide when and where to invest its funds. Traditional models put investment power in the hands of a relatively small group of money managers like; VC funds, family offices, or hedge funds. But Within a DAO the whole investment process is decentralized by offering anyone holding its governance token the ability to make decisions regarding its investments.

There are a variety of advantages and disadvantages when comparing VCs and investment DAOs. However, when it comes to Web3, investment DAOs have some significant advantages.

Investment DAOs have become a hot topic since the last crypto boom in 2020, We will see how the relationship between VCs and investment DAOs will develop, as the concept is still in an early stage, and if you decide to experiment with investment DAOs, research first and fully understand the risks.

Investment DAOs examples:

DuckDAO is a crosschain Incubator for crypto projects.

CityDAO is building a network of assets on chain, starting with a single parcel of land in Wyoming. Each parcel of land is an NFT that can be owned collectively by the DAO collectively or by individuals.

(3) Grant DAOS.

The first real application of DAOs was in grants. Online communities will donate funds and then use a Decentralized Autonomous Organization to vote on how that money is allocated to various contributors in the form of governance proposals.

Grant DAOs are designed to facilitate nonprofit donations, strategically deploy capital assets throughout the web3 ecosystem, and are either a charitable extension of a larger project or an entirely separate entity in the DeFi space.

Grant DAOs examples:

Gitcoin. The Gitcoin community uses web3 technology to fund and build digital public goods projects that serve everyone and solve our most immediate problems. The Gitcoin DAO is governed by the GTC token, which is required to both submit and vote on proposals. Stewards are community members who help manage the proposal process and function as voting delegates. Gitcoin DAO consists of a primary Gitcoin DAO governing body and several Gitcoin workstreams that sit below it. workstreams have a budget, leadership structure, tools, and processes.

Sevens Foundation. Is a non-profit organization empowering artists, by creating avenues to increase their visibilities.

(4) Philanthropy DAOs

Philanthropy DAOs aim to help progress social responsibility by organizing around a shared purpose to create impact in the world of Web3. Philanthropy DAOs create a meaningful impact at record-breaking speed.

Philanthropy DAOs examples:

Big Green DAO, The first nonprofit philanthropic DAO, teaches people how to grow food to improve nutrition security, mental health, and climate impact.

UkraineDAO, uses the ENS domain, ukrainedao.eth, to send donations to Ukrainian soldiers, and support the Ukrainian organization. Coordinated by members of PleasrDAO, Trippy Labs, and Russian art collective Pussy Riot.

(5) Social DAOs

Social DAOs are changing the landscape by focusing on social capital, where friends become co-workers working towards a common goal.

They are focused on the self-organizing community aspect of DAOs by bringing together like-minded individuals such as builders, artists, and creatives.

Social DAOs challenge the traditional social community set up, and its aims is to create digitally native true collaboration.

Social DAOS examples:

Rekt is the dark web of DeFi journalism.

As a curiosity is a misspelling of “wrecked” “Getting rekt” refers to a cryptocurrency trader who is utterly ruined and destroyed due to losses from a recent price crash.

Friends with Benefits (FWB) DAO is a token-gated community dedicated to fostering culture and creative agency using Web3 tools. The FWB token enables ownership and participation in the community. Acquiring membership is by application. If accepted, an FWB token holder can become a Global Member by holding 75 FWB tokens which grant them unrestricted access to all of the FWB ecosystem or holding 5 FWB tokens to gain limited access to FWB Cities and Events as a Local Member.

(6) Collector DAOs

Whatever reasons you might have to own a NFT, sometimes is just not possibly for its price, so that Collector DAOs. collector DAOs can make asset acquisition of all kinds easier and more accessible.

Some DAOs serve the purpose of giving high-spending investors, known as whales, the power to operate like a hedge fund. Other DAOs allow groups of more conservative investors to bond together and purchase NFTs, like an index fund. But because it occurs on the blockchain, it functions as a transparent Web3 version of investing that gives power to the DAO members, fractionalizing NFTs and distributing their value across a whole community.
Harmon Leon, Superrare Magazine.

Collector DAOs examples:

Pleasr DAO acquires, funds and fractionalizes culturally significant NFTs for its community.

FlamingoDAO is an NFT-focused DAO that aims to explore emerging investment opportunities for ownable, blockchain-based assets.

An “NFT collective that supports and collects premium NFTs,” was the first, and is the largest, of these art collector DAOs. Flamingo has amassed pieces from influential NFT artists such as Pak, Hackatao, and XCopy, and the ultra-rare CryptoPunk #2890 NFT.

(7) Media DAOs

Media DAOs reinvent traditional media platforms by creating content driven by the community, while traditional media content is produced with a central agenda or influenced by advertisers.

In web2 social media platforms, eg. Facebook, Instagram, TikTok, Pinterest…the content is created by the community, there is a corporate central organization governing the profits, meanwhile in web3 Media DAOs individuals in the media network are actively earning a piece of the decentralized organization’s profit.

Media DAOs examples:

BanklessDAO mission is to help the world go Bankless by creating user-friendly onramps for people to discover decentralized financial technologies through education, media, and culture. Anyone can participate in Bankless DAO, but membership is acquired by holding at least 35,000 BANK tokens.

Decrypt empowers users to vote on what types of content they want to see.

(8) Creator DAO

A creator fractionalizes an NFT that represents a valued asset they created and distributes the ownership to a number of fans and supporters.

The entire f-NFT space explained.

F-NFTs are a type of NFT that enable people to own part of an NFT that would, otherwise be unaffordable. This process…

medium.com

This finances the asset’s production. The new owners can co-create, promote, market, and distribute the creation to give collective ownership, identity, and experience.

Creator DAOs examples:

Mirror The home for web3 publishing, I am myself part of this community https://mirror.xyz/marfernandez.eth

Zora Their mission is to make Zora available to as many creators as possible. They are building a new creator and community-owned economy.

(9) Talent Allocation DAOs

Talent Allocation DAOs are basically blockchain-native talent agencies.

They create decentralized working groups for individuals to work for web3 projects.

Talent Allocation examples:

Opolis They are a member-owned digital employment cooperative empowering solopreneurs to take control of their work and lives. Whether you consider yourself an independent contractor, gig worker, solopreneur, sole-practitioner, digital nomad, Opolis can support you. They are a next-generation employment cooperative offering payroll, employment benefits, and membership perks that go beyond the basics. If you want to know more or ask them anything, you can join its community.

DAOhaus is the community of contributors working together directly to design, build, and communicate the actual product. Is an open-source code of Moloch for launching and running DAOs, a hub from which each working group requests its budget.

(10) SubDAOs

A SubDAO is a subset of DAO members to manage specific functions such as operations, partnerships, marketing, treasury, and grants.

4. TOP DAOS’ DIRECTORIES.

These are, in my opinion, the three most well known lists of DAOs:

DeepDao and Messari are both marketing intelligent DAO’s data tools, both great for any research related to DAOs. The list of DAOs is BanklessDAO’s official list ( the MediaDAO that I wrote about above)

Now let’s see DAO’s ranking by its Treasury and its Tokens provided by DeepDao.

. Top 21 DAO Organizations listed by its Treasury. ( by the time this article is written)

. Top 10 Organization’s Tokens listed by balance USD.

At DeepDao you also can find a directory of verified DAO´s people.

5. DAOS AND NFTs. THE PERFECT “MATCH”.

If you are thinking about launching a NFT project, read this first, as you may consider to build also a DAO for your NFT project.

As I said some lines above, the real power behind NFTs and DAOs is in the smart contract coded into them. By using the smart contract, businesses can cut out a lot its cots. Smart contracts, as they are automatized, they work on triggers and actions like: if this, then that. In other words, if this trigger happens, then this action happens no human or middleman is needed, and so that, we save human mistakes, amazing isn’t it?.

If the work is finished, then the money gets transferred into their wallet without having to wait for someone to read over and approve an invoice or banks to process their fees.

And one of the amazing things that work in this DAOs and NFT match is that they can help one to each other.

You can code the smart contract of your NFT to help fund your DAO, for example, if your NFTs are sold, a percentage of the proceeds is automatically sent to the DAO. Therefore this founds can help your DAO managing different issues that funds are needed.

When you combine NFTs with a DAO and a vault, you can collaborate with your community to reach your goals and develop projects. Crypto staking is is the process of locking up NFTs holdings, allowing the smart contracts to work, in order to obtain rewards or earn interest.

For example, say an NFT project is putting 50% of its proceeds into a vault in a DAO, and the goal of the project is to grow the vault to $100 million in 7 years by investing portions of the money in the vault in Decentralized Finance (DeFi), Web 3.0 projects, metaverse projects, NFT projects, and so on.
Every member of the community who owns one of the NFTs and stakes it to the vault is able to vote on how the vault funds are used.
As the investment plays out, any yield is returned to the vault, thereby increasing its value. This scenario encourages people to hold onto their NFTs so they can continue to be part of the project. via Michael Stelzner.

Other example is from artists or authors perspective, theirs NFTs arts or NFTs content may have a better support and engagement with theirs Communities ( DAOs)

From the buyer perspective, thanks to a community around a piece of artwork that few singular individuals could afford, is possible the accessibility to rare and expensive NFTs.

Go to this article, number seven section, if you are interested in going deeper into DAOs as a vehicle in NFTs investments.

I personally know Ideagoras, as a real example on how a NFT Project and a community goes together, a branding in the web3 age, they help brands and personal brands to evolve in web3 through tokenized models, you can join its community and have special rights owning its tokens $IDGRS.

They are based in Spain, and if you are new in this space and you need help in building your own web3 brand, tokens and community, contact its founder Ángel González.

credits Common Ground. Ideagoras community.

6. DAOS’ PROS AND CONS.

If you are here and you start wondering about building a DAO, start by asking yourself these two questions:

Why do you want to form a DAO and what would it mean for your industry?

2. What kind of mission do you want to accomplish with a DAO?

Despite every business is going to want to benefit from a smart contract, some businesses may not work with or even want a DAO.

Before starting a DAO, always consider if it works for your project.

“You can’t just have a DAO to be a DAO. You need a DAO to do something.” Vitálik Buterin ( Ethereum’s co-creator)

Some examples:

For social DAO’s. If you are not goin to benefit from the main web3 native functionalities, just a chat group could be like a good starting point.
For business DAO’s. If your project needs speed and you have a clear vision where to go, a company with a typical C-level structure may be your option, instead of having a headless org.
For crowdfund DAO’s . If are looking for funds, maybe using a crow-fund platform like GoFundMe could be an option.

Also I heavily recommend to listen this 45min talk WHY DAOs by @tracheopteryx as he says that “This question may be one of the most profound of our time.”

Vitálik refers to three types of situations where decentralization is key, these are:

Decentralization for making better decisions in concave environments: This is where pluralism and even naive forms of compromise are on average likely to outperform the kinds of coherency and focus that come from centralization.
Decentralization for censorship resistance: Applications that need to continue functioning while resisting attacks from powerful external actors.
Decentralization as credible fairness: Applications where DAOs are taking on nation-state-like functions like basic infrastructure provision, and so traits like predictability, robustness and neutrality are valued above efficiency.

PROS

There are many benefits that DAO’s provide, as blockchain technology becomes more user friendly, users will be able to actively participate in DAO’s without no having technical knowledge. Although, as I mentioned before, there is still room to improve in user experience, also many technical terminology and its acronyms are not for everybody. And this is why many contributors we are doing our best to land all this issues.

Benefits:

. Incentive alignment with its members.

A DAO’s main power lies in its ability to distribute its value out to its own members. Whereas in web2, the users work (eg making videos, writing reviews…) only benefits the centralized org, a DAO’s main advantage is in automating out this central org and distributing the rewards out to its members.

DAO’s are like virtual co-ops. As the co-op grows, you directly benefit as a member of the co-op because you capture all the value of your work. By far it has better economic incentive alignment than existing web2 structures.

. Decentralized Ownership.

Indeed it is the first benefit. By design, decentralized autonomous organizations emphasize being driven by the collective rather than any one individual. The power is for everyone, with DAOs, participants have a much stronger say in the organization’s direction. Everyone is a stakeholder and no one is the supreme holder of funds or a decision-maker.

Generally, in a traditional company, the CEO and perhaps board ultimately call the shots and the rest of the organization or customers might not have much say.

Take for example this, that has just happened with Elon Musk and his recent Twitter acquisition:

As a CEO he, unilaterally, has just decided to charge $8/month and full stop.

Although vote power can be weighted in DAOs, power is significantly reduced compared to more traditional businesses, like this example above, in which leadership determines the company’s direction.

. Autonomy.

As DAOs are not governance like traditional organizations, the governance and rules of each DAO are coded in the smart contracts, and therefore they are not in CEO’s hands.

. Transparency.

Companies today are under more pressure than ever before to demonstrate transparency in how they do business.

We had recent decades of corporate financial scandals; in 2007 US energy giant Enron, in 2018 Britain’s second-largest construction company Carillion and in 2020 German financial firm Wirecard.

What they all have in common is that the checks and balances that were supposed to provide transparency, ultimately failed.

. Anonymity

DAOs will not ask or force you to keep your identity public. Nowadays we have web3 native tools, that I will detail later on, like Common Ground that allows you to prove that you are human, so that, your identity is not relevant.

Each and every decision within the DAO is proposed, discussed, voted on, and documented publicly, on top to its transparency.

. Less Corruptible.

With centralization, people are easily corrupted when it comes to matters of money and power. Therefore for introducing trust and transparency, middle-man are needed such as auditors, brokers, and clearinghouses. And eventually once those parties are part of the process, as humans, they are as corruptible as anyone else.

So that, DAOs.

DAOs operate under the governance of anyone who holds their native token. Tokens bestow voting rights, effectively handing over decision-making capabilities to a decentralized group of holders. Moreover, every proposal, decision, and vote is recorded completely transparently on the blockchain, offering a transformational way of doing business.

. Security.

Due to Blockchain nature, while Traditional organizations need audited from a security perspective, from the Blockchain technology perspective the security is at the protocol level, there is no need to have a third party verify transactions because everything’s witnessed by the blockchain network.

CONS

. The succession problem.

“Perhaps the greatest problem in the design of successful governance systems for sovereigns is what Samo Burja calls “the succession problem”: how to ensure continuity as the system transitions from being run by one group of humans to another group as the first group retires”
DAOs will need to solve the succession problem eventually (in fact, given the sheer frequency of the “get rich and retire” pattern among crypto early adopters, some DAOs have to deal with succession issues already) Vitálik Buterin.

. Slowness.

Imagine how slow-moving if everything in an organization required a vote. DAOs needs to be run by Smart contracts to solve this or otherwise, traditional organizations with a centralized power (eg a CEO) will move faster.

Rayne Steinberg a Forbes contributor, while overall bullish on DAOs, said “Many DAOs “fall flat in coordination, efficiency, governance and scaling — not surprisingly. Change of this magnitude is difficult to institute quickly.”

. No need for decentralization.

As I mentioned before, most things operate just fine in the web2 version.

Sometimes without a strong moderator, the community could have too many spammers, leading to a degradation in community quality over time.

. No recourse for issues.

Because DAO’s don’t have a single power responsible, there’s no one to turn to if something goes wrong. For example, for financial DAO’s, what if I accidentally send funds to the wrong person? Or want a refund?

. Customer service is a big plus of centralized businesses.

DAO’s can’t have that when there is no single person responsible. In fact the responsibility is even more dispersed, because everyone could be anonymous — you might not even know who your fellow DAO members are! The only thing unifying you with others is the automated rules enforced by the smart contract of a DAO.

. Treasury in a a rug-pull.

Many DAO’s use multi-sig wallets, requiring several leaders to agree to move the funds.

Although it is decentralized in that several people have the power, if this minority decided to collude together, they could siphon off the money from the community treasury in a rug-pull.

This is Changpeng Zhao, CZ (Binance CEO) thoughts about DAOs

“DAOs are a great concept but a critical flaw is their rules must be set from Day One: Those rules must take all the business implications into consideration; that must be built into the protocol; and it must be bulletproof so that competitors cannot attack the structure easily.” Binance CEO CZ

7. HOW TO BUILD A DAO. CHALLENGES, SETTING OUR OWN DAO-PRACTICAL EXAMPLE- & TOOLS.

After taking into consideration all the content written above, let’s see how to build a DAO. Ready? Go!

CHALLENGES

Any DAO is susceptible to the same high-level challenges as they grow.

A DAO need to map these areas:

Join the DAO. Membership Token.
DAO organizational Model.
Communication and coordination.
Membership tracking and platform gating.
Voting and decision making, proposals for rule changes in the DAO.
Contributor rewards and Treasury management.
Broadcasting.
Legal.

DAOS’ Organizational Design by Nichanank

Another big challenge for DAOs is its Governance, DAOs are not monolithic and the decision space is by far, vast. Efficiency and decentralization sometimes have a fine line, to ensure this balance, DAOs have adopted patterns of distributed authority and constrained delegation, where token holders empower groups of active contributors with executive decision-making authority within a discrete domain.

Constrained delegation allows individuals with the expertise and intimate contextual knowledge to perform their jobs autonomously, while still being held accountable to the DAO. Working group leaders are often nominated or elected, and can be voted out by the community.

An example of a DAO organizational Model is the one published by Willy Wonka for ShapeShift ( Updated May 10, 2022 , view original), and if you want to go deeper into it, he published the slides and recording from the Intro and AMA hosted in Discord on July 28, 2021.

Credits Willyogo *Updated May 10, 2022.*

Another example of DAO Governance is Uniswap Governance.

Fortunately, tools have emerged to automate and decentralize all these issues. To enable DAOs to flourish, an ecosystem of tooling has developed to support their growth.

HOW TO BUILD A DAO & TOOLS.

The new DAO’s tool ecosystem is the backbone to help building novel governance and management mechanisms and lower frictions to interact with governance processes. Given the open nature of most frameworks, there are countless iterations that projects have to puzzled to fit the needs of their communities.

This is the largest DAOS’ map tool with more than 350 DAO’s tools.

Nevertheless, thanks to Nichanan Kesonpat here I share with you an updated version of the “more well-know DAO’s tools”, that she published just a few days ago with some of the most common tools used by DAOs today:

By this point, if you are overwhelmed. “Keep it simple” this is Vitalik’s advice:

The communication layer goes first, then the “formal governance” secondly.

SETTING OUR OWN DAO- PRACTICAL EXAMPLE-.

To land all this better let’s imagine, as an example of DAO “DAO for Rescuing abandoned Dogs”, that we want to form a crowdfund DAO where members all pool their money together for this specific common cause, to help dogs that’s have been abandoned to rescue them for a better live with a new caring family.

As members of this common purpose, together we can vote on how the money gets used for rescuing abandoned dogs and then, looking for them a new caring family to get recovered. So we need to program some conditions in a smart contract, and once a simple majority vote is met, the funds automatically get transferred to the agreed upon projects.

We can manage admissions by only allowing people that care about “dogs abandoned rescue“ and wants to contribute to the fund to join. The way DAO’s do this, is by issuing tokens to represent the euro or dollar contribution somehow, the issue of this token, is like a ticket representing your share of the fund.

At this very point, you need a Tool to tokenized this membership by setting a condition in a smart contract, that puts it in the communal treasury and issues you a token where, for example €1 EUR or $1 USD = 1 token $ADR (ADR is the token’s name that stands for Abandoned Dog Rescue ) . Therefore as soon as you contribute with $1 or €1 a 1 $ADR is issued to you ( that token will be displayed in your wallet) and since this very moment, you’re a member of the DAO.

So let’s see what kind of tools do we need to accomplish for setting of our own DAO up.

. FrameWorks DAOs’ tools.

As the tooling stack might be a “serious” ecosystem, we have Frameworks Tools, like ALL-in-ONE very convenience option, they are new web3 native solutions, rather than the web2 options communities tools that communities are using right know.

These tools are presenting themselves like “the Discord web3 alternatives” and on top of that They cover other DAOs’ needs

Why a web3 option?

Web3 enhances the internet as we know it today with a few other added characteristics. web3 is:

Verifiable
Trustless
Self-governing
Permissionless
Distributed and robust
Stateful
Native built-in payments
get rid of bots…

Check out Common Ground tool by allowing:

Web3 native: Token-gating, Digital Identity gating and support.
Conversation: Real-time group chats, end-to-end encrypted voice chats and DMs, Moderation tools.
Productivity: Quests, Bounties, Notification management.
Governance: Votes, Polls.
Growth: Articles, Announcements, Airdrops and Events display.

“In Common Ground you can handle your community, reach and increase your audience, discover and network, collaborate and chat with friends, all in an environment custom-made and co-owned by web3 builders. No more losses and harm due to lack of security, trust, and fragmentation.

Common Ground is a web3-native, e2e-encrypted, messaging and voice chat platform, built as a public good. On Common Ground, communities chat, discuss and organize themselves with tools that work and play better with web3 technologies.

Even though it’s designed as the Home of Web3, our inclusive and gentle onboarding experience allows any human to be part of the next generation of digital coordination. We are happy to welcome you into this journey, register here for a demonstration. Common Ground.”

Others frameworks tools: Colony, Aragon, DAOStack.

Tools for Joining our DAO & Membership Token.

Following our DAO example, We are only goin to mange admissions by allowing people that care about dogs that had been abandoned and for that purpose, and helping our DAO with funds and unlocking votes others decisions making rules, they have to contribute to our fund with €100 so that $100 DRA tokens will be issued to theirs wallets, as we said before that €1 EUR or $1 USD = 1 token $DRA (DRA is the token’s name that stands for Dog Rescue Abandoned)

At this point, therefore we need Tools for joining our DAO & Membership token:

A tool for minting ours $DRA tokens could be:

. TryRoll is a social token infrastructure for the creator economy.

. Coinvise is a no-code tool that make it simple to distribute tokens, monetize with NFT memberships and launch community tokens.

. Communication DAOs’ tools.

The next step that we need to accomplish for setting our DAO, is to communicate and coordinate with our members, most DAO’s communicate through a combination of web2 Telegram/Discord/Twitter, in our DAO we are going to communicate with existing members thorough Common Ground as we “only” want human to belong to our DAO and for us to reduce noise in managing also, because in our DAO bots are no wanted, but for general communication and gaining potential members will might have Twitter and Telegram.

. Treasury Management:

Our next step is to look for a tool for funds management. One way is to use JokeDao or Gnosis Safe or to split control of the treasure over many different people. That way if you have 20 people, you could require 13 people together to agree to ever do anything with the funds.

If we can afford to have a full-time team managing this fund, we can support employee payroll from the treasury using Superfluid, and for treasury KPI´s reports, dash-boarding, and insights into the state of the treasury we could use Llama.

. Voting:

Now as members have to decide what to use the money in the treasury for by submitting a proposal for what to use the project for, and allow a way to vote. This vote counting can be done via the tokens, where each token translates to a single vote. The most well-known decentralized tools for both proposals and voting exist are Snapshot or Automata.

Imagine our DAO but with a Traditional Organization instead, imagine the treasury only in my hands, or imagine that I am the only person who controls all communication and if I don’t like someone for whatever reason, Could I banned or censor him or her? Indeed all these things could happen, If I were the only one with the power.

DAO’s eliminate these risks by decentralizing and automating the major parts of the organization.

If you want to know about another practical example, this one is by Stephan Tual ( Ethrereum’s CCO):

“Let’s take a practical example: in the context of a Proposal Slock.it UG could submit to a suitable DAO, we will offer the development of the Ethereum Computer, a consumer electronics product making it possible to rent or share connected objects. The incentive to the DAO will take the form of products the DAO Token Holders will then leverage for their own use, or charge non token holders for using them. Slock.it UG would act as contractor to the DAO…” more info.

8. Endnote.

By 2018 we were early when it comes to DAO infrastructure, today at 2022 blockchain technology is becoming day by day more user friendly and more users will be able to actively participate in DAO’s as not having technical knowledge is not longer a limitation.

DAOs have many of the same needs as corporations, Blockchain must often deal with greater complexities given their technical stack and new “life paradigm” . That necessitated the emergence of tooling for formation, communication, collaboration, voting, payments, and more. Fortunately DAOs nowadays have a handful tools, that we covered for setting a DAO whatever its Hierarchy might be.

“Building a DAO is more like building a country, than Building a company” @Jihad

Not every business is going to need to think about NFTs or DAOs, take some time to really think about what a DAO would do for your personal brand, your industry, your vision or mission of what that DAO would accomplish.

DAOs will in some cases have to accomplish specific complicated tasks, and some use of corporate-like forms for accomplishing those tasks may well be a good idea. Vitálik Buterin.

Good UX designers are needed for gaining mass adoption, and although web3 frontends still need to work hard in UX, we are starting to see great examples of social composability design. I personally know two projects that perfectly reflects this concept, Coinvise and Common Ground, if you are interested in this topic, you can follow Dominic Emanuel Horn Common Ground’s UX designer.

DAOs are democratizing the ecosystem by giving decision-making power to all its members on equal footing.

Remember that a DAO is governed by code and people. That’s a big paradigm shift. Non-fungible tokens (NFTs) and decentralized autonomous organizations (DAOs) are going to turn the business world upside down.