Different types of DAOs: How to create your own DAO

DAOs can take on various forms and structures, but at its core, it is an internet-based community that operates using a shared bank account. As explained by Cooper Turley, an investor and builder of numerous successful DAOs, it begins with a group of individuals who come together in a chat group and pool their resources using an Ethereum wallet. With this collective capital, the group decides on how to fund their DAO's mission, jointly determining the direction and goals of their community. By operating in this decentralized manner, DAOs offer a unique opportunity for individuals to collaborate and make decisions in a transparent and democratic way, enabling new forms of innovation and collaboration on a global scale.

They are commonly categorized into two main groups: those that collaborate on managing open-source, blockchain-based projects, and those that make investments. Some DAOs operate similarly to traditional limited liability companies (LLCs), while others may resemble venture capital (VC) or investment firms, such as PleasrDAO. In either case, the decentralized and community-driven nature of DAOs provides a unique approach to decision-making and governance that enables a more inclusive and democratic approach to managing projects and investments.

The structure and rules of each DAO are determined by the group that forms it and their specific goals. As a result, each DAO may have its own unique type, governance model, and set of rules.

For those who remember the infamous hack of the first DAO in 2016, where millions of dollars were stolen, the term DAO may carry negative associations. However, since that time, DAOs have made significant progress and advancements, even though there are still risks to be aware of.

Want to learn more about DAOs and how they work?

Read more: Decentralized Autonomous Organizations (DAOs) Explained.

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Types of DAOs

It's crucial to recognize that the term DAO is broad and encompasses a wide range of groups and businesses. While two DAOs may be vastly different from one another, they can still both be considered DAOs. In fact, the term DAO is often used to describe any decentralized organization that operates through a blockchain or other distributed ledger technology.

Here are a few examples of well-known DAOs:

• The Friends with Benefits DAO is an exclusive social club which you pay to enter.
• The HerStory DAO collects and funds projects by Black women and non-binary artists.
• The MetaCartel Venture DAO is a for-profit business that invests in early stage decentralized applications.
• The Komorebi Collective DAO funds women and non-binary crypto founders.
• The PleasrDAO collects various NFTs and invests in other assets.
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How DAOs operate

To grasp the concept of DAOs fully, it is essential to have an understanding of the underlying technology that powers them. Blockchain technology and smart contracts are at the heart of most DAOs. Smart contracts are pieces of code that are stored on a blockchain, and they allow for the automation of specific tasks and the enforcement of predetermined rules and regulations.

Blockchains are digital, decentralized ledgers that are widely known for publicly recording transactions of cryptocurrencies such as Bitcoin and other digital assets like NFTs. However, blockchains have many other uses beyond these transactions. In the context of DAOs, blockchains serve as the backbone, allowing for the storage of rules and structure on-chain.

Traditional organizations often operate under a hierarchical structure, where a formal board of directors, executives, or upper management are responsible for decision-making and setting the organizational structure. However, DAOs operate differently in that they are decentralized and not governed by a single individual or entity. The rules and governance of each DAO are established through smart contracts on the blockchain and can only be altered through a democratic voting process involving all members of the DAO.

In contrast to traditional organizations where a select few hold a majority of the decision-making power, DAOs operate on a democratic voting system where each member has an equal say. This allows for a more inclusive decision-making process and empowers each member to contribute to the DAO's objectives. A prime example of this democratic process in action is the PleasrDAO's decision to purchase the Wu-Tang Clan album collectively. The members of the DAO voted together on the decision and, following the purchase, created an NFT deed of ownership for the album. As a result, all members of the PleasrDAO co-own the NFT deed and share in the ownership of the album. This collective ownership model is one of the unique and exciting features of DAOs.

In larger DAOs, teams may be formed to address different aspects of the organization. These teams are led by individuals who have been elected by the DAO's members. This approach helps to streamline decision-making processes by allowing teams to handle day-to-day operations and make decisions within their respective domains.

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DAO structure

DAOs can have vastly different structures, but typically, when joining a DAO, members agree to the existing code. It is not easy to change this code, and any changes require a vote between members. This approach ensures that all members of the DAO have a say in the governance and operations of the organization. As Aaron Wright, co-founder and CEO of OpenLaw, points out, DAOs are "very participatory." Wright, who has helped launch several DAOs including FlamingoDAO, emphasizes that DAOs rely on the active participation of their members. This democratic process ensures that the interests of all members are represented and that the DAO operates in a transparent and inclusive manner.

To become a member of a DAO and gain voting power, individuals usually purchase governance tokens. These tokens are a form of cryptocurrency that is specific to the DAO and tied to its project or mission. In some DAOs, governance tokens can only be obtained during structured funding rounds, and demand for these tokens can exceed the amount available, leading to competition for ownership.

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DAOs operate differently from traditional organizations, as decision-making is not subject to a rigid quorum or a fixed number of people required to vote. Instead, DAOs operate through rough consensus, much like the way the internet operates. Aaron Wright, co-founder and CEO of OpenLaw, compares the process to a community that comes together to support a project. The more support a project has, the easier it is to make decisions and move forward. This decentralized approach empowers members of a DAO and allows for a more democratic and participatory process.

Being part of a DAO comes with a sense of ownership and participation. Depending on the DAO, the more you contribute, the more weight your vote holds. Whether through governance tokens or other forms of investment, like ether, the power to shape the future of the organization is in the hands of the members. It's important to note that every DAO has its own system, so it's essential to do your research before getting involved.

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How to create your own DAO in 6 steps

We've seen the different types of DAOs, we've learnt about its strutcture but...how to create a DAO?

1. Define the Purpose: The first step in creating a DAO is to define its purpose. What problem is the DAO trying to solve, and what specific outcomes is it aiming to achieve? This is important because it will help guide the governance structure, decision-making process, and membership criteria.
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2. Choose a Blockchain: DAOs are built on blockchain technology, so you'll need to choose a blockchain that can support your DAO's specific needs. Ethereum is currently the most popular blockchain for DAOs, but other options like Polkadot and Cardano are also worth considering.
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3. Design the Governance Structure: The governance structure of your DAO will determine how decisions are made, who has voting power, and how disputes are resolved. There are a variety of governance models to choose from, including token-based voting, reputation-based voting, and liquid democracy.
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4. Develop Smart Contracts: Smart contracts are the building blocks of a DAO, as they define the rules and processes that govern the organization. You'll need to develop and deploy smart contracts that reflect the governance structure you've designed.
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5. Launch the DAO: Once you've developed the smart contracts and established the governance structure, it's time to launch your DAO. This involves deploying the smart contracts on the blockchain and inviting members to join.
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6. Manage the Community: Building and managing a strong community is essential to the success of your DAO. This involves communicating with members, engaging them in decision-making, and fostering a sense of ownership and participation in the organization.

Creating a DAO can be a complex and challenging process, but with the right planning and execution, it can lead to powerful new models of collaboration, governance, and value creation.

DAO means Community

Do not forget this though. At their core, decentralized autonomous organizations (DAOs) are built on the principles of community, collaboration, and decentralized decision-making.
Unlike traditional organizations, DAOs are owned and governed by their members, who collectively determine the direction and strategy of the organization. This means that building and managing a strong community is absolutely critical to the success of a DAO.
A thriving community can drive engagement, innovation, and growth, while a disengaged or fragmented community can hinder progress and even threaten the viability of the organization. To build a strong and engaged community, DAOs need the right tools, processes, and strategies, including NFT membership platforms like UCollect that offer exclusive benefits and access to members. With the right approach to community building and management, DAOs can unlock the full potential of decentralized decision-making and create powerful new models for collaboration and value creation.

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UCollect supports DAOs!

UCollect is an NFT membership platform that can help DAOs build and manage strong communities through exclusive membership benefits and access.
With UCollect, DAOs can create unique membership tiers that offer different levels of access, rewards, and privileges to members. These benefits can include access to exclusive content, participation in decision-making, voting power, and even financial rewards through revenue-sharing models. By leveraging the power of NFTs, UCollect can provide a secure and transparent way to manage membership and rewards, while also fostering a sense of community and ownership among members. With the beta launch just around the corner, now is the perfect time to sign up and join our program! Be the first to experience the power of UCollect and help us shape the future of community management for DAOs.

Don't miss out on this exciting opportunity, subscribe to our beta program today!