As of October 2022, there are 4,826 DAOs with a combined treasury value of $11.2 billion.

According to the analytics site DeepDAO, there are 4.5 million governance token holders, and just over 700,000 active voters and proposal makers. 

Those numbers are only growing at an exponential rate with 379,000 governance token holders added over the course of one week, and 536,000 governance token holders added over the course of one month. 

DAOs, or decentralized autonomous organizations, are growing as a community organizing model in the world of Web3.

So what exactly is a DAO?

They are more than a crypto buzzword. Let’s take a look at what they are, and how to start one.

What is a DAO?

The first DAO (pronounced “Dow” as in Dow Jones), is pretty much exactly what it sounds like: a decentralized autonomous organization, or an assembly of people with a shared goal who decide to form a group without a single leader. 

DAOs aren’t your typical organization of people. There is no top-down hierarchical structure or one person at the top dictating action or inaction. 

DAOs empower each member of the group with an equal say when it comes to making decisions. They are fully autonomous and transparent when it comes to acting on the will of the group.  

They are built on the blockchain using smart contracts (and formally written onto the blockchain) that establish the code of actions and ethics, and how decisions are executed by the group. The smart contracts or protocols for each DAO can be publicly audited at any time by any member of the group. 

Members typically buy into a DAO through the sale of governance tokens which enable them to vote on decisions that dictate the future of the group, the project, or how DAO funds are spent and managed. The sale of tokens raises funds and fills the DAO treasury. 

Once a DAO is deployed and the smart contract is pushed into production, all changes must be done through member voting and consensus. 

The very first DAO was established in 2016 on Ethereum, and was called “The DAO.”

Why Start a DAO?

Most DAOs are established around a particular mission or project.

And unlike traditional corporations and organizations, there is no central figure who dictates decisions for the entire group. 

The DAO structure works well when working with a large, disparate group of people from all over the world who have come together to manage funds around a particular project or idea. 

It’s hard to trust a complete stranger on the internet. With a DAO, members simply need to trust and believe in the DAO’s code, which is transparent and auditable by each member of the group. 

DAOs are ideal for situations including investments, charity, fundraising, and buying NFTs. 

How to Start a DAO

Starting your own DAO is not as intimidating as it may seem. Many tools can help streamline the process.

Here are the steps involved with forming a DAO:

  1. Establish the objective of your DAO
    Perhaps the most important step in starting a DAO is determining your goals and creating a mission statement. This will create the foundation upon which you build your DAO. Think of this as your business plan. It will also be the reason people choose to join your DAO. 
  2. Find and build a community
    A DAO does not exist without a community. This might be the hardest step in the process. Decide if your DAO will be big or small, which will dictate how much work you need to do to build the community. Choose the communication channels in which you will begin to build interest for your DAO and attract your people. Think Twitter, Reddit, and Discord.
  3. Develop your smart contract
    Developing your smart contract goes hand in hand with creating a DAO token. This involves laying out the governance properties for your token. You can use a simple DAO creator tool, such as Aragon or DAOhaus, both of which walk you through the process of setting up and governing a DAO on the Ethereum blockchain. They will also create a DAO token as part of the process. During this process, you will establish your protocols, token assignments, and voting power. Customizing your DAO will mean creating your own code, which is a lengthier process. 
  4. Consider DAO connectivity
    Consider how your DAO’s smart contract will connect to other systems, including crypto wallets, the main dApp, and a voting portal. DAO members will need to connect their crypto wallets in order to cast their votes. And at some point, the DAO will need to set up a treasury to store and securely manage funds. There are several options to choose from with the most popular being Gnosis Safe, which leverages multisig wallets requiring multiple people to sign transactions. Once you’ve established your treasury, you’ll need a way for members to vote. Snapshot is the most popular tool being used as a decentralized voting system. 
  5. Deploy your DAO
    Now that you’ve done all the prep work, you’re ready to deploy and introduce your DAO to the world. 

Now the difficult work begins recruiting members to your community. 

Building and supporting a community is the most critical factor that will determine the success of your DAO.

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