How to Start a Decentralized Autonomous Organization in 2023

A decentralized autonomous organization (DAO) is a community without a central authority based on blockchain. All the members of the organization are its owners and act for the sake of its common goal.

As of now, the total treasury of DAOs makes up $12.5 billion, so we can clearly see it’s not just a concert anymore. 

So, how to create a DAO? Why do it? How is it going to improve your business and make it more appealing? We at ProCoders have combined technical and analytical knowledge with our experience for this brief yet information-packed guide!

Key takeaways:

• DAO types include protocol, collector, venture, and others. They are used for collecting money for good causes, on valuable purchases, etc.
• The benefits of creating a DAO include transparency, decentralization, and global access.
• There are also challenges, including master nodes that create centralization, difficulty in decision-making due to a large number of participants, and shadow voting.
• To make a successful DAO, you need to consider the purpose and features and the type of organization, create a community, and hire a proper technical partner.

Types of DAOs

Before asking how to build a DAO community, you have to determine what type your business needs. By design, they are pretty much the same, but their in-built features decide their final purpose.

Protocol DAOs

These are the simplest ones in functionality, they are used as governing mechanisms in apps for lending money and other dApps (decentralized applications). The role of a protocol DAO is to ensure the app works as a decentralized, transparent entity.

When you want to create a DeFi app, using a DAO to govern it is a good idea.

Philanthropy DAOs

You can launch a charity DAO to raise funds for a good cause and get the advantages of low-cost speedy transfers for those in need. For example, it’s possible to collect money by selling non-fungible tokens to support a cause as UkraineDAO does.

Grant DAOs

The goal of such an entity is to accumulate funds from community members’ contributions. The people involved then vote to decide on the purpose of the money-raising. Usually, the sum is allocated to new-era decentralized finance projects.

Collector DAOs

These are communities for collectors. The members create a common fund to share it and buy more valuable NFTs and other assets in the Web3 realm. As a result, when the organization purchases something, each member becomes a co-owner.

Investment/Venture DAOs

These collect money to invest in startups and innovative protocols in the Web3 space. This is a great opportunity for investors to diversify their portfolios even with a limited budget, which is close to impossible in the traditional world.

Media DAOs

A replacement for ad-based income for content creators, media DAOs use token incentives to compensate people for their ownership.

Social DAOs

Essentially, these are organizations for networking. People with similar interests can join by, for example, purchasing a certain number of tokens, receiving a special invite, or purchasing an NFT.

Benefits of Creating a DAO in 2023

The main benefit of DAOs is, clearly, decentralization, as every member of the agreement has a say in every decision. Transparency is another trust-garnering factor, and global access can help you collaborate with people all around the world.

One more benefit is the prospective future of blockchain technology, which means your investment will be justified and the project will have a long life if successful.

DAO Governance Challenges You Need to Overcome to Build a Profitable Business

While the idea of decentralized governance is close to ideal, in reality, there may be the following challenges.

Master nodes

The people who have the most tokens in the DAO become master nodes. They have more power in decision-making and overall governance of the community. This makes such organizations somewhat centralized, which contradicts the name of the concept.

Multi-member systems

A community that has thousands of people who have to make mutual decisions often sounds unrealistic. The management of communication, facts presentation, and other processes may become an issue.

Shadow voting

Any organization that gives its token governmental power may experience attacks on its voter system. Dark DAOs can buy on-chain votes and influence important decisions elsewhere that aren’t what the majority really wants.

Top-Rated DAO Creation Technologies

To create a DAO, you need the main platform, a smart contract, and a range of DAO tools.

DAO Creation Software

You can use the following platforms to make your first DAO:

• DAOhaus
• Collab.Land
• Aragon

You may also need skilled engineers to create smart contracts to back your DAO. It has to be someone with experience in the Solidity programming language.

DAO Tools

To make a DAO functional, you’ll need tools for:

• Treasury management – Gnosis Safe
• Fundraising – Mirror, Juicebox
• Voting – Snapshot

With the right tools come the right steps for launching your first DAO.

6 Steps on How to Start a DAO

So, how to create a decentralized autonomous organization? Here, we present the essential steps to perform.

Step 1. Consider the structure of your DAO

Before you actually create a DAO, think about its purpose. What kind of community fits best for your business? What’s its goal? How is it going to help you acquire new customers or increase brand awareness?

Think about the decisions you’ll make with the help of the DAO and what benefits the members will get from participating in the project.

Step 2. Choose the right type of DAO

There are multiple types to choose from, with the most frequently used begin protocol, grant, venture, and collector DAOs. Based on your needs and requirements, pick a type that will represent them.

Step 3. Gather the community

If you already have a business and want to have a DAO as a reinforcement and innovation, gathering a community shouldn’t be a problem. However, if you start from scratch, some marketing and networking are necessary.

Consider promoting on social media such as Twitter, Reddit, or Discord.

Step 4. Hire developers

To create a crypto token to support your DAO and the organization itself, you need skilled developers. These people will be responsible for creating the smart contract as the base of the DAO, the token, the frontend of the app, etc.

We recommend using the staff augmentation method. This implies that you get the needed specialists that are already hired with an outstaffing agency. No HR hassles, no additional costs and office space.

Step 5. Consider the voting mechanism

While discussing the project with your outstaffing partner, consider the type of voting you want to implement. Every member of the community should be able to vote to make changes to the organization. 

The most popular type is token-based, where people use their DAO tokens to place a vote.

Step 6. Deploy the DAO and maintain it

Starting your DAO involves the placement of your smart contracts on Ethereum, for example. This is the mainnet where the app will operate for real, while during the development engineers use test nets.

Then, the voting system is deployed, and all there’s to do then is maintenance. In case you need to replace the smart contract, it’s possible but prepare to do some serious explanation as to why.

The frontend part needs new functions at times and attention to feedback in case something goes wrong.

DAO and Smart Contract Regulations to Keep in Mind During Development

In the United States, there are no consistent laws and regulations regarding smart contracts and DAOs. Some legal protection is recommended because otherwise, all members risk unlimited liability, which may cause serious problems should a legal issue occur.

That being said, Tennessee, Vermont, and Wyoming have some working regulations for DAOs, which makes legal operations a lot easier.

How Much Does It Cost to Build a DAO?

If you want to create a DAO for free, we can assure you it’s impossible if you want a legal entity. You’ll have to generate tokens, and Ethereum (if you choose this platform) has an always-changing price. Plus, creating your community as an LLC will cost $100. 

Besides, if you choose to turn to specialists, consider that an average blockchain developer’s monthly salary is around $8,580 if we’re talking about the US.One way to save money is to outsource product development successfully to professionals. ProCoders knows the best way to start a DAO and has all the resources to help you! We work with Central European specialists who have lower salary expectations yet top-tier blockchain development skills.

How Can ProCoders Assist You in Creating a Successful DAO?

As a staff augmentation company with over 7 years of experience in IT outstaffing, here’s what ProCoders has to offer:

• IT professionals of medium and senior levels
• Expert business analysts who can study your company goals and align them with the tech ones
• Dedicated teams of developers, testers, designers, etc.
• Total technical support even post-launch
• Honest communication and process transparency, and much more

All you have to do is schedule a call with our specialists and find out which service you need to launch your DAO sooner and more cost-efficiently and achieve all business goals.

We will discuss all the details, time, budget, functionality, purpose, members, tokens, and everything else to ensure a fruitful collaboration. Upon agreement, we’re going to execute the search for an ideal developer or team to help you start a DAO.

Conclusion

Launching a decentralized autonomous organization allows for transparency, multifunctionality, and trustworthiness. The trust in centralized institutions becomes lower and lower every year due to understandable reasons.

So, a DAO will enable you to collect money for good causes, finance Web3 solutions, and more, given you hire the right people to create the project. By turning to ProCoders, you opt for top experience and honest communication, results guarantee, and high security of your data.