Finding investors is every founder’s dream. This dream, while opening multiple avenues of innovation and business scaling for the entrepreneurs, usually comes with a seat for investors as board members.
While the focus of founders is to gather known people across their boardroom table, these members can start a power game of egos to show who is in control. In such cases, founders understandably find it difficult to put their foot down and get pressured into making wrong decisions for their business.
Between these ego clashes and the inability to put a strong voice ahead, the everyday operations of a business and its future stand in jeopardy.
If you are here reading this, it is safe to assume that you already know how DAO on blockchain are 100% automated democratic communities which run on anonymous participation and voting. They rely greatly on smart contracts that decide the decision-making capabilities among the users having voting powers (typically, the one holding more tokens has more voting power).
How to build DAO on blockchain?
At its center, DAOs are made up of four critical elements – Objective, Governance, Voting, and Rewards. Understanding them is crucial to get a grasp on the process to build a DAO.
To start with, the basics of how to create a DAO lies in having a deep understanding of DAO smart contracts as they would construct all the rules set by the community members and determine how the protocol would operate. This is where governance becomes very important.
The next step to build a DAO would be to figure out financing and how to impart governance after the rules have been inscribed on the blockchain. Typically, a token issuance method is introduced here where the protocol sells tokens for replenishing DAO’s treasury. Here, the token holders get voting rights proportional to their amount of holdings.
1. Determine the purpose and build a foundation
The primary step to build a DAO is determining why it is required, the role it would play and its working. It would be important for you to find the opportunity, run a market validation test on the need of having the DAO and finalize processes that can be put into smart contracts.
Once this foundation is set up, you will need to create:
- An encrypted wallet for allowing token storage and transactions
- A smart contract with automated processes
- A community of interested members
- A specified voting timeline
- A forum or chat room option for members to know what is going on
2. Plan out ownership and voting mechanism
After agreeing on the goal of the DAO, the next step that comes is on the front of establishing ownership and deciding on the voting mechanisms among members. Typically, when you create a DAO, you will need to transfer ownership to the members – something that can be achieved through three ways – Airdrops, Rewards, and Token purchase.
In case of airdrops, the tokens are given to members on the basis of their contributions in the community. Rewards, on the other hand, are bonuses paid to members that achieve their goals or duties. The third option is to list your tokens on decentralized exchanges and allow members to buy them.
3. Establish a governance structure
This is the most critical aspect when answering how to create a DAO. This stage details how decisions will get made once the DAO is set up. It will have information around the voting mechanism, multiple use cases around the process, and clarifications around the essential components of the DAO network including the exchange, which will hold the transaction, validator – the one who will verify all the transaction, the developers who will build the code, and the users who will participate in the community.
4. Set up rewards and incentives
The last step of how to start a DAO lies in setting up rewards for the DAO members towards their contributions. Typically, native governance tokens get distributed to contributors who use the DeFi protocol for consideration. These represent the ownership rights they carry. You can also reward them through cryptocurrencies such as USD Coin (USDC), ETH, Tether (USDT), or through grades and titles.
5. Launch the DAO
Once you have covered all the steps, you will come to a stage where you have answered how to build a DAO and are now ready for its launch. While there could be multiple ways to address this, the quickest one will be to set up a Discord and Telegram community to grow awareness and then direct members to your DAO platform.
Learn more: https://appinventiv.com/blog/how-to-build-dao-on-blockchain/
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