A DAO is a Blockchain structure (like a secure database), that any member can leverage to self-govern through participation; A DAO sets rules – baked into code – and permits voting through digital tokens (a form of cryptocurrency) — all while leveraging smart contracts. Only that DAO’s Token holders have the power to vote.
In essence, a DAO allows groups of participants to create organizational forms beyond the hierarchical, top-down corporate firm (which must be responsive to the needs of a board and shareholders). DAOs essentially eliminate or minimize the roles of executives and managers in the organization, relying instead on transparent rules that apply to all members and participants
The primary aim behind the creation of a DAO is to create a virtual entity to replace the central management of previous forms of organization. A decentralized autonomous organization (DAO), is an organization, particularized by rules encoded as a computer program, that is transparent, and controlled by the organization members. In terms of decision making a DAO is, in effect, unable to be influenced by any outside party including any central government.
DAOs are particularly prevalent in the Ethereum blockchain ecosystem, combining ideas about organizational forms, coordination, network effects, blockchain, and smart contract technology. A DAO allows a group to organize around a mission or goal and to coordinate the mission via smart contracts, enforced immutably and autonomously on the blockchain. DAOs represent an evolution in how people coordinate with one another, as the organization itself is autonomous from any third party intermediary’s influence and goals.
The main reason a DAO is formed is to decentralize and automate the governance of an organization. The rules by which a DAO operates are encoded as a computer program that is accessible via the blockchain, and controlled by all of the organizing members, rather than by a central governing board. Since the blockchain is essentially a public record, the DAO seeks to provide total transparency, requiring that all of its financial transaction records be recorded by a public facing blockchain. There is no top-down hierarchal structure to a DAO; A DAO depends almost entirely on the operation of autonomous smart contracts to enliven the rules and carry out the decisions made by/within the organization.
How to Form a DAO
There are typically a number of steps involved in the formation of a DAO. You’ll need to
- Define the structure of the project eg What do you expect your DAO will achieve? What are your goals?
- Decide on the type of DAO you want to create (eg a Grant DAO? Or an Investment DAO? Or a Social DAO? Or a Collector DAO? Or a Media DAO? Or an Entertainment DAO? Or a Philanthropy DAO?)
- Decide what features are to be included in the Tokens that you issue to persons wanting to be part of your DAO (eg Voting rights, Incentives/rewards, Executive participation opportunities etc)
- Create your DAO (there are several DAO startup templates one can access on the Blockchain + tools are also available in the market to help you. They can help in ascertaining the legal infrastructure of the DAO, DAO coin minting, Building teams, Finding members etc)
- Encode your rules: Get your DAU rules encoded in a smart contract (which renders the rule immutable/unable to be changed). Rules can be encoded using easy to purchase DAO tools or by simply hiring a blockchain developer to do it for you
- Create your DAO Treasury (After you’ve completed your DAO token’s ICO supply and allocation, it’s essential to guarantee that you can secure the collected funds. There are now numerous popular east to access DAO Treasury Tools including Gnosis Safe- Platforms, Juicebox- Juicebox, Llama, Parcel, Utopia etc
- You’ll need to decide on what Governance tools you want/need (eg you’ll need to implement systems for holding discussions, conducting voting, and managing funds and for depositing/managing/lending governance tokens etc).
- You’ll need to create a community (a trustworthy, independent community is the strongest pillar of a DAO ecosystem. An interactive, engaged, and strong community can help in the constant expansion of the DAO project. Moreover the success of a DAO project largely depends on how freely the community is able to participate in the decision-making and management of the DAO project).
There are a ton of resources out there that can help you sort out the above and more. Here are some examples:
https://blog.liquid.com/create-dao
https://www.blockchain-council.org/dao/how-to-create-run-a-dao-a-comprehensive-guide/
https://academy.binance.com/en/articles/how-to-create-a-dao
https://sensoriumxr.com/articles/how-to-create-a-dao
I’m guessing you’ve already made the above-referred decisions which means the next thing you need to decide is what kind of legal form do you want your DAO to take? There are a number of options worthy of consideration in that regard… and OCI is fully across ALL the options!
Would you like to know more? Then please Contact Us:
info@offshorecompaniesinternational.com
DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.
