What Is a Blockchain DAO (and Should You Join It)?
Cryptomania has made decentralization mainstream, but Bitcoin is just one example of how the blockchain can create new structures that are not controlled by corporations or centralized organizations. (Although it’s ubiquitous, many people still don’t even know what a blockchain is. If you’re one of them, stop and read the explanation here .)
The latest technological trend is the formation of Decentralized Autonomous Organizations or DAOs. Artists, charities, and businesses create DAOs, but anyone can do it. Recently, the Republic of the Marshall Islands even passed a law giving them the same legal status as an LLC. There are benefits to starting or joining one, and doing so may be easier than you think.
What is DAO?
DAOs are non-hierarchical organizations whose members can vote on their direction and directly influence how they are run. Organizations are accountable to members and shareholders and, in fact, managers and leaders are not needed. Members still have jobs that are based on their skills and the goals of the organization as a whole. Small, autonomous groups called “guilds” often form within each DAO and deal with specific tasks and issues.
“To put it simply, the DAO is a team. This is a commune where no one is in charge, but everyone votes on what the organization will do,” Joan Westenberg, director of marketing for MODA DAO , told Lifehacker. “This is a self-made group of people that is really no different from a cooperative, but the voting takes place on the blockchain.”
As for what you can use DAO for, Westenberg says there are quite a few options: “You can make a DAO out of anything. If you want to start a bookstore, you can make it a DAO and ask members to vote on how the bookstore will be run with transparency you don’t get with other traditional methods. A DAO can be anything as long as it is a decentralized organization that empowers its members to make decisions.”
A good example is the Big Green DAO , which was launched late last year by Kimbal Musk, Elon Musk’s brother and Tesla board member. He is affiliated with Big Green, an existing food justice charity that raised over $9 million in 2019. There’s a lot of money out there, and DAO members decide together how to use it.
“Anyone can set up a DAO and start working with other people,” added Shipyard Software CEO Mark Lurie, who recently registered Admiral DAO in the Marshall Islands. “What makes it a DAO is that the charter is included on the blockchain. This is the difference between a DAO and an ordinary company. You can get together with a bunch of friends and vote on how you spend your money. You don’t have to be a company.”
How to join DAO?
Most DAOs have Discord channels and this is a great place to start and keep an eye on a group to see if its interests and mission align with yours.
“You can join one DAO and ask questions,” says Lurie. “Some of them require you to pay with crypto to enter, but most of them are free and the community is open to answering questions.”
Let’s get back to the Big Green DAO. When you donate to an organization, you will receive an email inviting you to join the Discord group. Browse the list of other DAOs on DAOList orDeepDAO to find one that matches your personal passions. They may have charters or other documents that you may want to read before joining Discord or otherwise interacting.
How to create your own DAO?
A DAO can be created by anyone with technical expertise, and they are typically centered around a common cause, goal, or set of interests (such as when the DAO Constitution made a bid to buy the US constitution). Having a member with an engineering background who understands blockchain can help you get a DAO up and running, especially when you are building a native cryptocurrency that grants “control” rights to the holders.
“DAOs are governed through community governance, where new policies and other actions can be proposed and voted on by all participants,” said Beyond Protocol CEO Jonathan Manzi. “The right to vote is often tied to the DAO’s own governance token – the more tokens held, the more voting power you have. These tokens are usually traded on the open market, and their value is determined by the forces of supply and demand.”
If any of these words confuse you, you are not alone, but times are changing fast and knowledge is power, so it’s time to learn. We have a glossary of cryptocurrencies here and an explanation of how to create your own cryptocurrency here .
Is it worth creating a DAO?
Just because you can form a DAO doesn’t mean you should. Each state has different rules, and it’s important to research the different states to make sure the laws are clear.
“Yes, anyone can create one, but I always advise people to read the rules and regulations in your territory because they will be different,” Westenberg said. “I think Wyoming is the first place in the world to have clear and precise guidelines for building a DAO. At the moment, anyone can create it. I would say try to act in good faith if you are in a position where regulation takes root. Be careful with the laws depending on where you live.”