A step-by-step guide to creating a DAO in 5 minutes
Decentralized autonomous organizations (DAOs) do not allow the centralization of power. The leadership is not centralized. They are simply an organization with everyone’s best interests at heart. Not just the CEO, not just the board, but the entire organization! It is time for everyone to act. It may only take five minutes. If you are just starting out with dao, then Aragon DAO is one of the ideal places to start. Here are some benefits and examples of Defi plays.
You can see a DAO as a highly democratic company that lives on the blockchain.
Blockchain has given us the ability to decentralize, the ability to transfer power from those at the top to those that would’ve relatively been at the bottom. Rather than having someone make the decision, every stakeholder gets a say.
If you’re reading this article, I want to assume you’ve read the previous one that talked about all you need to know about Decentralized Autonomous Organizations, and if you haven’t, I am going to leave you a link so you can go read it.
If you thought it was hard to create a DAO, you thought wrong! This article is for you if you like how DAOs work and want to create your own decentralized organization.
But before we continue, it is important to differentiate between a traditional organization and a DAO.
The Differences Between Traditional Organizations and a DAO
A Decentralized Autonomous Organization is similar to a traditional organization, but it also has its differences.
1. A traditional organization is structured in a hierarchy kind of way. You have the Executives, the board of directors, the management, the employees, and so on. Each of these people holds a different level of power. In fact, the employees are considered to be the ones with little/no level of power.
A DAO is not in any way like this. It doesn’t follow any hierarchy. It ensures the transfer of power from these ‘powerful’ people directly to the people that normally wouldn’t have a say. It is a fully democratic organization.
2. To make a decision in a traditional organization, only one person (or entity) is needed. The higher you are in the hierarchy system, the more powerful you’re likely to be, to effect a change. Here, voting is done amongst the powerful people and it’s manual and inefficient. Traditional board of directors often don’t represent the interests of the customers and employees.
In a DAO, voting from the group members is needed to approve a change. Every opinion matters here and voting is carried out. The decision is made based on what the majority of the group members agree on. The voting process is conducted automatically, without the intervention of any external person. This is possible through the smart contracts upon which the codes of a DAO are built.
3. A traditional organization is private and centralized.
The whole purpose of a DAO is to defeat the idea of ‘centralization’ and that is why it is called ‘Decentralized’. A DAO encourages transparency, unlike a traditional organization.
Now that we’ve gone through the differences between a traditional organization and a DAO, which one would you prefer? Would you prefer an organization in which you would be actively involved in the decision-making process or have a group of people make decisions for you?
Let’s be factual. If you were put in a powerful position, the type of decisions you would make would definitely be the one that would favor you more, right? This applies to everybody. We are all human. We are a bit selfish! This is one reason why DAOs are important. They eliminate that selfish personal interest and replace it with group interest and satisfaction. Through voting, you can all make decisions that are for the benefit of the organization.
Finally, DAOs can be created for a multitude of things. Some DAOs have multi-billion dollar treasury. Others may be created just to bring like-minded people together with the DAO power, which is the case of the RooftopDAO.
How to Create a DAO
If you like how DAOs work and you want to create one, for whichever reason or purpose, you are in the right place. Here, we are not going to be coding a smart contract from scratch. Some platforms have emerged to facilitate the creation of DAOs. Examples are Aragon, DAOstack, Open Zeppelin, and others. These platforms act as an interface between you and the blockchain and therefore facilitate all the smart contract deployments.
In this post, we will focus on using Aragon to create a DAO. I like to use Aragon because it allows you to have access to more options. It also has a very easy and user-friendly interface so I highly recommend it.
Prerequisites to create a DAO:
We can create DAOs for free by using a test environment instead of creating them on the real Ethereum blockchain. The test blockchain we will be using is the Rinkeby Testnet. The real Ethereum blockchain is the ETH Mainnet. The Rinkeby Testnet gives you free test Ether so that you can play around and test your DAO before moving forward and deploying it on the Ethereum mainnet.
Before you create a DAO, here is a list of things to have
- Metamask wallet — Assuming that you have already installed Metamask, make sure you have enabled the testnets. Details on how to do it here.
- Test Ether from Rinkby testnet — you will need it to pay the gas fees — you can get it from this faucet. If it doesn’t work, send me a message.
There are a lot of communities that are powered by Aragon. Aave is one of such. Aave is a DeFi lending platform on Ethereum.
Aragon allows you to create a DAO on the Ethereum and Polygon blockchain. We are going to focus mainly on how to create a DAO on the Ethereum blockchain by using the Aragon client. There are additional applications on Aragon client that allows you to automate things within your organization. Your community can perform actions like allowing voting, fundraising, agreements and so much more.
Let’s create our first DAO.
- The first thing to do is to go on to Aragon and click on ‘Create your DAO’
You will be able to select different mainnets and different testnets. Choose wisely 😝
Make sure to connect your wallet, by clicking on the ‘connect account’ button. Select Metamask, get approval, and then click on ‘create an organization’
As said earlier, we want to create our own organization from scratch and that’s exactly what we are going to do!
2. Select a template
They have templates such as Company, Membership, Reputation, Open enterprise, Dandelion, and Fundraising from which you can select. Know that each of these templates has different goals.
For example; The COMPANY template- allows the use of a transferable token to represent an ownership stake in your organization. Decisions are made based on stake-weighted voting.
The MEMBERSHIP template – allows the use of a non-transferable token to represent membership. Decisions are made based on one-member-one-vote governance.
The REPUTATION template – allows the use of non-transferable tokens to represent reputation. Decisions are made using reputation-weighted voting.
The OPEN ENTERPRISE template – entails a suite of apps for organizations, including project management, budget planning, and so on.
The DANDELION template – facilitates collaboration with an organization that makes it easy for contributors to part ways when disagreement occurs.
The FUNDRAISING template – which allows you to launch a transparent and accountable crowd-funding campaign.
For the purpose of this article, we are going to deploy a company. So that’s the template we would be selecting.
3. Then we go ahead to claim a name
This is the part where you name your organization. Name it whatever you want. It’s your call! Since Aragon uses the Ethereum Name Service (ENS), this means that the name you choose will be mapped to your organization’s Ethereum address and cannot be changed after you launch your organization.
4. Configure template
Here is where you choose your voting settings. You configure the percentage of votes that you need to approve a proposal and the vote duration here.
The support percentage is the percentage of tokens that is required to approve the voting in favor of a yes. For example, if the support percentage is set to say 50%, it means that you need more than 50% votes of the total votes to be a yes for a proposal to be passed.
Minimum approval percentage is the percentage of yes votes that is required to approve the proposal from the remaining pool of tokens
Vote duration is the duration within which the participating members can vote.
The support and minimum approval thresholds are very strict requirements such that votes will only pass if percentages greater than the set threshold is achieved. Nothing less!
You also choose your token settings here. You choose a token name, the symbol for your token, and the token holders here. If you are starting the company with a couple of other people, you will add members to define the initial distribution of the token by pasting their address into the ‘token holders’ section. Then allocate tokens to them.
5. Review information
This is the part where you have a last look at your settings and configurations before you launch your organization. If you’ve made a mistake somewhere, you can go back to change it.
6. Launch organization
Then we launch our organization. Our Metamask wallet is going to pop up for approval. Then we click confirm.
That’s it! 🥂
That’s how you create your own DAO. Amazing!
From here, you can do whatever you want. You can begin a voting process by creating your proposal question. You can invite members, distribute tokens (which will give them voting rights), the sky is the limit!