How to Start a DAO – Step by Step Procedure to Building a Decentralized Empire

How To Start A DAO

If you are a startup looking for a regulated business model, how to start a DAO might be your quest. The reasons behind this are automated processes, transparency, and security offered by Decentralized Autonomous Organizations. Starting a DAO simplifies the workforce while offering a greater return on investment. The various stats about Decentralized Autonomous Organization development also confirm the same. According to DeepDAO statistics, 2023 reached the milestone of 12,000 active Decentralized Autonomous Organizations. The increasing demand and earning possibility may trigger you to know how to start a DAO. 

However, starting a DAO is a new business model in the crypto space. So before beginning initiatives, getting your queries answered is important. This complete guide can clear your doubts about creating a Decentralized Autonomous Organization. Also, the step by step procedure helps you wipe out the challenges in creating DAO. So when you finish this blog, you will have comprehensive knowledge on how to create a DAO. And where to get a perfect solution for your startup trials on DAO creation. 

Without further delay, let us have a deep dive on…

How To Start A DAO in 8 Simple Steps?

Following are the 8 steps to start and build a DAO in 2024

STEP 1 – Comes with a Vision and Goals

Before starting a Decentralized Autonomous Organization, you should be clear on your vision and goals. The compact whitepaper should elaborate on the goals and how your DAO will operate. Just like the business strategies, your objectives should be more appealing to the users. Further, the goals should be more realistic and achievable for both you and your users. Because every decentralized autonomous organization has an intention. To lead a role, you should know how to start a DAO with a unique purpose.     

Considerations

Being specific and aware of DAO management tools might be more beneficial for startup businesses. The advantage of starting a DAO is the space to define the required goals. This may initiate an in-depth analysis that fills the flaws and improves project objectives. The next one on the line is…

STEP 2 – Determine the Type of DAO

Define the right one from different types of DAOs. Choose the type of Decentralized Autonomous Organization. But which is the ideal type to start a DAO that matches your startup goals?. To help you with this, here are the most popular types for your consideration.

Protocol DAO

Protocol DAO is the type of DAO specifically designed to serve particular decentralized protocols. This type facilitates operations like governance, and protocol improvements via a governance system. The governance token holder has the right to vote against the said operations. For instance, you can start a DAO similar to Uniswap’s protocol structure. The UNI token holder has the right to participate in Uniswap’s improvement. The people having DAO tokens will handle its community treasury, proposal verification, and more. 

Investment DAO

The Investment DAO supports startups’ funding and investment requirements. That means it is specifically meant to help community members with capital raising or investment. This decentralized autonomous organization has set guidelines controlled by dedicated smart contracts. The community participant has the right to decide the investment proposals. Usually, the investment would be based on different assets like cryptocurrencies, NFTs, virtual real estate, and more. The specific DAO will conduct token sales or list their native tokens for fund gathering. 

Grant DAO

Grant DAO entrepreneurs to raise capital for new initiatives, also the functional role of participants is similar to that of investment DAOs like voting. The eligible enterprise can apply for funding support. The proposal will be processed based on the voting decision by community participants. The funds are usually approved from the reserved funds of the DAO community. So if your intention is to help new businesses, then start a DAO.

Social DAO

Social DAO combines the contributions of different types of people to create equal opportunities and knowledge for everyone and allows every participant to learn new strategies and tactics in the field. The participants will get rewards if their contributions are viable for community development. Yet, the participants will be the token holders and are invited by the DAO community. For instance, you can consider Developer DAO, one of the leading social decentralized autonomous organizations. For instance, you can start a DAO similar to Developer DAO, one of the leading social decentralized autonomous organizations. 

Collector DAOs

Collector DAO helps artists demonstrate their art and retain ownership of the art. This organization has participants like digital creators, NFT collectors, and DeFi project owners. Here, the art will be in the form of a Non-Fungible Token (NFT). Thus participating in the DAO enables the artist to get access for investment. Flamingo DAO and Pleasr DAO are some popular examples of collector DAO.

These are the top 5 types you can consider to start a DAO. Now let us glance through the next step. 

STEP 3 – Create a Community

Community is the basic thing that defines growth of your DAO, so create a stong community by the lot of options in modern-day technical innovations. You can connect with social media, conduct promotional campaigns, referral programs, and more. However, be aware of the size, member count, and specialty while you start a DAO. Also, you should define whether it is a public or private DAO. So that, you can define the community’s role, and governance rules to yield better efficiency. 

Implications

Again, the success of the DAO relies on the community’s active participation. Hence make sure there is a free flow of communication irrespective of hierarchy restrictions. You can use active forums, discussion councils, and social media platforms to enhance user engagement.    

STEP 4 – Decide Funding Plans and Strategies

You should define how to start a DAO with greater user participation and revenue-making possibilities. Generally, the primary source of income for a DAO will be from the tokens. So first, structure the DAO treasury and prepare token economics. The person who is interested in your organization’s goals will buy native tokens. The funds gathered will be held in the treasury for funding and investment purposes. You can measure the token and treasury performance by integrating DAO tools.

Token Parameters

Speaking of token parameters, the token should follow specific governance rules. The mode of token usage and enclosed rights should be clear and brief. Generally, DAOs prefer fungible tokens (ERC20) for governance and NFTs for ensuring ownership. So be aware of how to start a DAO and choose the right token accordingly. Overall, these efforts can lead your decentralized autonomous organization into progressive growth.

Also Read: How to create a Crypto token 

STEP 5 – Define the Governance Model

Each DAO holds a simple but effective governance protocol to improvise its core idea. You should regularize them to meet the DAO goals. Every proposal and change should be validated through a voting system. So disclose how the governance system works and what rights will the participant have. The governance model should also highlight how to start a decentralized autonomous organization with rewards, and incentives. So that your startup business will grow exponentially. 

Types of DAO Governance Model

Based on the type you have chosen to start a DAO, the governance system will vary. The most popular governance models for your consideration are,

  • ConstitutionDAO
  • ENS (Ethereum Name Service) DAO
  • Friends with Benefits DAO
  • JuiceboxDAO

Utilizing a perfect governance model could enable you to build a DAO successfully and securely. So choose the governance model considering the decision-making procedure, size, future upgrades, and dispute handling. 

STEP 6 – Create a DAO

Now, you may clearly understand the technical essentials of DAO development. So your next thought would be how to start a DAO with efficient codings. To begin, choose the blockchain, token standard, and smart contract functionalities that meet the mission. Being a startup, this might be difficult as it needs in-depth technical and development knowledge. So partner up with a professional DAO development company to overcome such challenges.

Getting direction from professionals could give you comprehensive support throughout the entire process. As a result, you can start a DAO with a robust, and secure platform meeting your objectives.

STEP 7 – Testing a DAO

Security auditing and performance analysis are the prime considerations while starting a DAO. You should make sure the DAO has proper functional characteristics and produces better performance. In this sense, complete testing based on the defined metrics is necessary. Once you have done this, the decentralized autonomous organization is ready for deployment. 

STEP 8 – Deploying and Monitoring

This is the final stage of bringing the decentralized autonomous organization into usage. Once the testing phase is over, you can build a DAO with careful supervision. Since it is a new business model, monitoring their performance becomes necessary. So be familiar with the required DAO tools to recognize and rectify the real-time issues.     

So far you have learned how to start a DAO with a step-by-step procedure. Each step requires careful consideration and technical proficiency. So that, you can clear the legal and regulatory norms while creating a DAO. Yet, how to create a DAO without facing such challenges might be your query. Before checking that, let us figure out the… 

Start A DAO

Challenges Associated with Starting a DAO

The following section will give a clear picture of the challenges in creating a DAO. This may help you learn how to start a DAO with perfect solutions. Here we go with them one by one.

Deciding Governance Model

First of all, starting a DAO with a decentralized decision-making process is a challenging task. The major concern here is the governance power. The person having more platform tokens will have more loyalty and power. This will reflect in the decision-making process and lead to centralized operation. This will severely affect the credibility of the Decentralized Autonomous Organization. So choose the governance model that is balanced between decision-making and DAO goals.  

Security Risks

Smart contracts are self-executing programs that automate the DAO operations well. Yet, they are vulnerable to security risks if it is not protected properly. A small bug in the decentralized framework may lead to attacks and data theft. So starting a DAO with robust security measures and frequent auditing is the ultimate solution here

Regulatory Complications

As you know, some countries are still framing guidelines to regularize crypto usage. Accordingly, many global nations do not have legal regulations for decentralized autonomous organizations. So before the query’ How to start a DAO’ arises, check your regional regulatory complications.

Operational Cost

A decentralized Autonomous Organization is fully functional with a community of people. As they offer funding and investment support to startup participants, operational costs become higher. To reduce the operational cost, you may prefer blockchain which has lower gas fees. So start a DAO with a blockchain that offers high throughput at lower operational cost.

Business Exposure

The concept of a decentralized autonomous organization is still in its growing stage. So to take your business to high reach, incredible marketing and promotions are essential. You can offer better rewards, incentives, and fair policies to attract user contribution. Running promotional campaigns can boost your DAO exposure as well.  

Scalability

As discussed earlier, a decentralized autonomous organization is a group of people or a community. As the members and services grow, the DAO network will have more transactions. And it should be capable of managing large-scale operations. So choose the blockchain that is highly scalable to meet your scalability expectations. 

These are the challenges startups will face when creating a DAO. But how to start a DAO excluding these challenges? You may seek guidance from a professional DAO development service provider. Their well-framed infrastructure and technical edges may help you to build a DAO cost-effectively. 

Speaking of the cost, you might be eager to know how to create a DAO cost-effectively. Here we have a glance at…

Cost to Start a DAO 

The average cost to start a DAO will approximately range between $15,000 to $30,000. However, this is not a fixed-term and accurate price range. The cost may vary according to your business requirements. Let us have a brief overview of this.

Speaking of the cost, certain factors have a greater influence on the DAO development cost. They are,

  1. Type of DAO
  2. Governance Model Selection
  3. Complexity of Functionality
  4. Blockchain Selection
  5. Security and Smart Contract Auditing
  6. UI/UX interface design
  7. Tokenomics Structure
  8. Clearing regulatory approval
  9. Hiring developers
  10. Marketing and promotions

Apart from these factors, getting an LLC (Limited Liability Company) certificate is essential to build a DAO. For that, you need a DAO platform built on the best blockchain and is supported by the community. Furthermore, real-time assistance and future upgrades also increase the development cost. So prepare your budget, time frame, and financial backup while starting a DAO. The cost breakdown discussed here may clear your query ‘how to start a DAO’.

Why Choose Coinsclone?

If you are looking for a comprehensive solution to create a DAO, Coinsclone must be an ideal place. With over 7+ years of industry presence in deFi development, we excel in creating decentralized autonomous organizations. We have skilled and experienced developers to analyze your DAO goals and guide you in choosing the appropriate tech stacks. Also, our expertise and experience help you create a DAO technically robust and cost-effective. With our client-friendly development process, you can feel relaxed while attaining your enterprise goals cost-effectively. So shake your hands with us! Let us together give life to your decentralized autonomous organization project.