How To Create DAO

2022-04-15, 03:49

A DAO is an online community for various groups and individuals that share similar goals.

Crypto investors, Fundraisers, charity organizations, and financial investors are among those that use the DAO.

DAOs are virtual communities where like-minded individuals meet and collaborate.

The creation and running of a DAO are based on a set of codes that makes up a smart contract.

Decisions made in a DAO community are based on consensus among all members who have voting power.

DAOs are strictly centralized but lack legal backing and can not be recognized as legal entities.

To create a DAO is simple; it involves the technical part and structure.

The code that will run the smart contract and the governance structure is key to running a DAO.

The blockchain network keeps getting flooded by individuals, developers, investors, and enthusiasts. These people are scattered across several communities.

The meeting point for all is online. As every internet user or developer has an online community, blockchain developers and crypto investors have theirs.

One such online community is Decentralized Autonomous Organization (DAO).

DAO is not strictly for blockchain app developers or crypto investors. Fundraisers, charity organizations, financial investors, and other communities can create their DAO and use it for their projects.

In this article, we shall explain what Decentralized Autonomous Organization (DAO) is, the functions of DAOs, and how to create DAO.

What Are DAOs

Decentralized autonomous organizations are online communities where you collaborate with link-minded individuals to achieve a similar goal.

DAOs are virtual communities collectively owned and managed with a set of rules and regulations that are written in computer code.

You have to create a Decentralized autonomous organization (DAO) and organize it with a set of rules on the blockchain. The running and management of this online entity will be via a smart contract.

In DAO, there is no centralized leadership, and the members make up the community that is eligible to make decisions.

The online community shows that DAO governance is mainly used for Decentralised Apps (DApps), virtual projects, and crypto investment funds.

Decision-making is strictly based on consensus. They are fully decentralized and can work with self-executing smart contracts.

Whatever your community needs and specifications, you can constantly tailor the DAO to your purpose.

The Ethereum Venture Capital of 2016 made Decentralized Autonomous Organizations (DAOs) very popular.

However, it took only three weeks for the project to be attacked. The attack was possible due to the vulnerability of the code that was powering the smart contract (then).

Today, the Decentralized Autonomous Organization (DAO) is the most popular and sophisticated governance model for Decentralized finance projects.

The DAO governance continues to receive global-wide attention. Day by day, the community keeps expanding.

What do you think makes this Decentralized governance protocol stand out? Let's take a look.

What Makes DAO Stand Out?

The following are some of the factors that make DAOs unique:

Fully Decentralized And Autonomous Nature
There is a management hierarchy in the traditional financial sector or corporate world. Every decision and work process is centralized.

The case is different in Decentralized Autonomous Organizations (DAOs). Management Hierarchy does not exist in DAOs.

Instead of having a board of directors and managers governing the DAO, it is a series of codes in a smart contract that execute decisions based on consensus by all members.

DAOs use blockchain technology, making it a fully decentralized management protocol. All activities and decisions made are transparent and based on popular opinion.

DAOs Are Not Recognized As Legal Entities
In most countries, DAOs have no legal and authority backing, limiting your project's activities, especially in fundraising using blockchain. We all know Government backing is essential, albeit you are free from sanctions and epileptic regulations.

For instance, in the United States, DAOs are not recognized as Legal entities. Due to this non-recognition, DAOs are neither entitled to corporate privileges or Government regulations.

If you create your online entity or join one, this might cause a mixed reaction. While it's an advantage that you are under no obligation to the government and can not be regulated; albeit, you are limited from entering specific contracts, especially with the government.

How To Create DAOs

Creating a Decentralized autonomous organization is quite simple. The entire process can be summarized into two components; the technical part and the setting up of the structure.

The technical part involves creating the smart contract. The smart contract consists of the code that runs and executes the decisions made by DAO actors.

The next step in the technical part is to develop the governance structure. The governance structure also contains codes and rules embedded in the smart contract.

The next step to creating a DAO is to raise capital for the launch of your project. Most times, DAOs raise money by issuing DAO tokens.

Those who buy the token automatically become members and give the voting right and decision-making power.

The last step is to implement the DAOs operation and transfer it into the blockchain. You can decide to go for any open-source solution to handle votes, proposals, and decision-making in your Decentralized Autonomous Organization (DAO).

Conclusion

A decentralized Autonomous Organization (DAO) is one of the most viable alternatives to the traditional way of managing corporations and projects.

DAOs are decentralized and open-source. They offer flexibility and ensure consensus decisions. Albeit, they lack legal recognition and are not entitled to government privileges.

Furthermore, Creating a DAO is relatively easy compared to running it, especially when most voting power stakeholders are anonymous.

If you want to create a DAO, Experts and industry players advise that you engage the service of an attorney experienced in DAO formation.

Author: Valentine A., Gate.io Researcher
This article represents only the researcher's views and does not constitute any investment suggestions.
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