What Is A DAO?
We can go on and on about what DAOs are but we added a short video to explain everything perfectly!
DAOs are an effective and safe way to work with like-minded folks around the globe.Think of them like an internet-native business that's collectively owned and managed by its members. They have built-in treasuries that no one has the authority to access without the approval of the group. Decisions are governed by proposals and voting to ensure everyone in the organization has a voice.There's no CEO who can authorize spending based on their own whims and no chance of a dodgy CFO manipulating the books. Everything is out in the open and the rules around spending are baked into the DAO via its code.
DeFi or decentralized finance is a movement that aims at making a new financial system that is open to everyone and doesn't require trusting intermediaries like banks. To achieve that defi relies heavily on cryptography, blockchain and smart contracts.
There are a variety of use cases for DAOs that pose their own unique advantages/disadvantages compared to centralized organizations. Every DAO is created with a specific purpose or strategy in mind. The list below shows some of today's most common use cases for DAOs.
- "Investment clubs"
- Members pool their money together (funds held by the DAO)
- Members vote on which crypto projects to back
- Returns are redistributed proportionally to members
- Members can pool together funds to purchase NFTs
- Once the NFT is purchased members decide how to use it
- Using as collateral/lending
- Creating content or leveraging IP rights
- Display in gallery
- Used for facilitating DeFi transactions
- DAO's can be set up to collect & distribute funds
- Transparency + anonymity are very advantageous
- Makes non-profit organizations more feasible due to lower overhead cost
- Social DAOs can bring together communities of any niche and build their online presence and help members network with each other
Before jumping into what's required to start a DAO, it's important to note that there is no minimum size requirement. DAOs can range anywhere from 3 to +10,000 members as long as everybody has a shared goal, group chat, and voting system in place.
DAOs have 3 main requirements:
- 1.A set of rules to operate under
- 2.Tokens for the DAO to spend or reward members with
- 3.Voting rights with tokens
In other words:
- 1.Strategy / Code
- 2.Treasury (bank account)
- 3.Voting method
We've already discussed how DAOs are coded through smart contracts and are created with a specific goal in mind so it would be redundant to explain this again.
There must be a treasury to hold the DAO's native governance tokens and all the crowdfunded money. This is the "bank account" that all DAO members share and vote on how it's money should be used. The treasury's funds can only be spent after group approval due to rules embedded in the DAO's smart contracts.
Most organizational discussions for DAOs currently take place on Discord or a forum. Because of this, it's convenient to set up a voting method on whichever platform hosts the majority of the DAO's discussions.