How to create a DAO?
9 min read
I recently joined Developer DAO, and so far, the experience has been fantastic. In less than a month, I've met a lot of wonderful people and learned a lot. You must hold the Genesis NFT to join. The NFT will provide you with permanent access to the community and governance rights. Most DAOs use discord because it provides a central location for DAO members to communicate. Discord also supports "Token Gating" (via third-party bot implementations), which can be applied to entire servers or specific channels to gate access based on particular cryptocurrency wallet holdings.
In this post, I talked about DAO. To refresh your memory, DAO is an acronym for Decentralized Autonomous Community, which is simply a term for a group of people who agree to follow specific rules to achieve a common goal. Smart contracts—algorithms that run when particular criteria are met—are used to write those rules into the organization's code.
Members of a DAO community create proposals for the protocol's future operations and then vote on each proposal. Proposals that achieve a certain level of consensus are then accepted and enforced by the smart contract's rules.
Why create a DAO
The DAO's creators believed that by putting decision-making power in the hands of an automated system and a crowdsourced process, they could eliminate human error or manipulation of investor funds. If there is one thing that stands out and impresses about the Developers DAO community, it is how structured and organized it is, even though it is not accountable to any real identity. This, I believe, is what sets DAO apart: the idea of running an organization without a centralized authority.
A DAO, in essence, enables a group of people with similar interests to efficiently organize themselves using technology that ensures integrity. Finally, for its functionality in organizing people, a DAO is a low-cost option. You can set one up for free or for a small fee.
What exactly is a DAO in Web3?
The entire concept of Web3 is decentralization, which means removing Big Tech's central authority and monopoly over our data and giving power to the community.
This is the same ideology that DAOs are attempting to promote: giving power back to community or organization members rather than a central authority. Decentralized Finance's use of DAOs to allow platforms to become fully decentralized is a great example of this. This is evident in decentralized exchanges such as Uniswap and SushiSwap. The internet is evolving, and decentralization is at the heart of this transformation. NFTs, DAOs, and the Metaverse are the new technologies driving this change. They all share characteristics such as user self-sovereignty and asset ownership via the use of cryptocurrencies, community governance, and unconventional fundraising practices that do not necessitate the intervention of traditional VCs.
What does a DAO require? A successful DAO should address the following five points:
A DAO needs a goal. DAOs are simply a method of organizing projects or funds. Your DAO will not be able to function without a solid underlying project and reason.
A DAO requires a voting mechanism. This is the primary interface through which people interact with the DAO and make changes. You can create a custom voting mechanism or use a third-party provider. Your DAO may vote to change the mechanism later, but you must start somewhere.
Users get a utility token known as a governance token to represent their stake in the DAO. A governance token is frequently a utility token as well. A share system is more common in funds, where users deposit cryptocurrency with the DAO to be invested.
A decentralized autonomous organization (DAO) necessitates community formation. Decentralization becomes more robust as more people join and contribute to the governance of your DAO. This method ensures an even distribution of power.
A DAO must have a mechanism for managing its funds, like a treasury. Your DAO should also be able to raise funds through some form of crowdfunding and store these funds in a multi-signature wallet. This ensures that people can spend funds only when acknowledged by all signers.
Now that we understand what DAOs are all about let us evaluate the different membership models that typically dictate how a DAO's voting works and its outcomes.
- A token-based membership model is one of the most common types of DAO. Users only need to hold the DAO's governance token under token-based memberships to vote on critical decisions, such as which projects to fund or changes to the governance rules. Permissionless decentralized exchanges are distributing these tokens.
- These types of memberships govern human-involved efforts like charity, fundraising, investments, etc. DAOs based on shares are more permissioned, but they are still very open. Any potential member can submit a proposal to join the DAO, usually in exchange for tokens or work. Shares represent direct voting power and ownership.
DAOs and Blockchain
DAOs rely on blockchain technology to secure their smart contracts. Smart contracts manage the organization's rules. These rules can be changed only through voting mechanisms in which all DAO members can participate. Open-source blockchains form the base of DAOs, which means that anyone can inspect the code. When a member submits a proposal, audits the group's treasury, or takes any other action within the DAO, that action is permanently recorded on the blockchain, maintaining a transparent record.
Creating our own DAO and approving transactions with Aragon and MetaMask.
What is Aragon?
Aragon is an Ethereum decentralized application that simplifies launching a DAO; the Aragon one foundation team is leading the open-source project.
The Aragon project was created to remove the middleman from the process of creating and maintaining organizations. The Aragon project believes that everyone should have equal access to governance and collaboration regardless of age, gender, or race. Luis Cuende and Jorge Izquierdo began working on the project in November 2016.
Aragon provides essential financial tools such as tokenization, but it can also create replicable and broadly applicable templates for defining the boundaries of a community and transferring value to contributors over the internet without using traditional intermediaries.
First, you must own an Ethereum Name Service domain and then use the Aragon DApp to create an organization linked to the ENS domain. You can choose from several predefined organizational structures. Finally, before launching the DAO, you will configure your settings, such as vote duration and required percentage support.
For this sample, we will deploy our DAO on the Rinkeby Testnet and utilize a QuickNode Rinkeby Node to enable faster transaction confirmations. You can obtain a trial Rinkeby Node from QuickNode and configure it in MetaMask for free.
Rinkeby is an Ethereum test network that enables testing blockchain development before deploying on Mainnet, Ethereum's main network. In April 2017, the Proof-of-Authority test network was established. It is based on the Clique PoA consensus protocol and is developed and maintained by the Geth development team.
There is a need for some test ETH now. Go to the Rinkeby faucet, follow the instructions, and have some test ETH in your account in minutes.
Developing our own DAO
Go to the Aragon dApp and do the following:
- Step 1: In your MetaMask wallet, select your QuickNode Rinkeby Node (You should have test ETH in your wallet at this point, at least 0.2 test ETH is needed to proceed).
- Step 2: Click the 'Connect account' button, select 'MetaMask' and approve the MetaMask request.
- Step 3: Go to the ‘Ethereum Testnet (Rinkeby)’ tab.
- Step 4: Select 'Create an organization.'
Choose a template for your organization; we'll use the 'Company' template in this example.
Choose the template and then click 'Use this template,' then enter the name of your DAO.
Set the following now.
- Support percentage: This is the percentage of tokens required to approve voting in favor of a yes; for example, if you set the support percentage to 50%, more than 50% of the total votes must be yes to pass the proposal.
- Minimum approval percentage: The percentage of yes votes needed to approve the proposal from the remaining token pool.
- Vote duration: This is the amount of time participating members have to vote.
- Set these values according to your preferences, or see the image below for example values. Proceed to the next step to configure the token.
Enter a name and a symbol for your token. Then enter the DAO token holders/members and assign tokens to them. After reviewing the information, click 'Launch your organization.'
Now, the MetaMask window will appear for transaction approval; confirm the transaction twice.
Note: During transaction processing, do not select the speed-up option in MetaMask and do not refresh the window.
Once the network confirms both transactions, you should see a window that looks like this:
Click on get started, and now we'll create our first proposal question to start the voting process.
- From the left menu, select 'Voting,' then 'New vote,' to create a new proposal question and open it for voting (this will be counted as a transaction/write operation).
- Once the proposal is live, members can vote yes or no, and the voting window will remain open for the period specified in the previous steps. It is 14 days in our case.
For a quick reference, please visit: quicknode.com/guides/web3-sdks/how-to-creat..
Snapshot is a decentralized voting system. It allows for greater flexibility in determining voting power for a vote. To meet the needs of organizations, Snapshot supports a variety of voting types. Creating proposals and voting on Snapshot is simple and does not cost gas because it is off-chain. This is due to the clever use of the decentralized storage network known as IPFS.
To create your space on Snapshot, you will need an ENS domain. This must be on the Ethereum mainnet regardless of what blockchain your project operates on.
Snapshot and your ENS domain should be linked. Customize your space settings, such as admins, voting power strategies, terms, and so on. Finally, verify your space. This will require at least 1,000 members and proof of ownership of the related project. For more details on how to configure Snapshot, please visit docs.snapshot.org.
DAOstack Alchemy is a DAO creation tool for Ethereum and Gnosis Chain. You can use their UI to create a simple DAO, add DAO members, and open your organization. There's usually a fee to pay – I can't put a figure to it because these things change often. But you don't need an ENS domain this time.
To create a DAOstack DAO, Connect your wallet to their DApp,, follow the four steps shown, and pay your fee.