How to DAO: Answers for Beginners

All the questions your mom will ask...

Aragon

• Jul 23, 2021 • 4 min read

What is a DAO?

A DAO is an online community that jointly controls a cryptocurrency wallet to pursue common goals, such as running a business or charity.

What does 'DAO' stand for?

Decentralized Autonomous Organization. The term was coined by Ethereum founder Vitalik Buterin in his 2014 article.

What is Ethereum?

Ethereum is a cryptocurrency network that allows tokens to be exchanged between wallets, and 'smart contracts' to be written to control transactions. Transactions on Ethereum are paid in the native $ETH token and usually denominated in 'gwei', which is 0.000000001 $ETH.

What is a smart contract?

A smart contract is a piece of software that will execute a transaction or an event on a cryptocurrency network if prerequisites defined in the contract are satisfied. They are the building blocks of DAOs.

Ethereum was the first cryptocurrency network that enabled people to build DAOs. The majority of DAOs are on Ethereum but other networks such as Polkadot, Cosmos, EOS & Cardano all enable DAO formation.

Is a DAO software?

Yes, a DAO is a software application, written specifically to run on cryptocurrency networks.

Can a DAO run on networks other than Ethereum?

Yes, a DAO can be built on any cryptocurrency network with smart contract capabilities, such as Polkadot, Cosmos, EOS & Cardano.

How should I use the word 'DAO'?

Sometimes 'DAO' is used to refer to the actual software smart contracts that control the application and at other times to refer collectively to the members of the organization.

Do I need to be a developer to contribute to a DAO?

Not at all, every DAO has an extended ecosystem of marketing, design, education, and community management so everyone with transferrable skills can contribute and add value.

Can anyone join a DAO?

Yes, as long as you can purchase the DAO's token. Some DAOs are private and their tokens are not for sale, but the majority are permissionless, meaning that anyone who owns the DAO's token is automatically a member of the DAO that issued those tokens.

What is a token?

'Token' is another word for digital currency or cryptocurrency. They are fungible (interchangeable) assets that can be used as money or in exchange for specific services on the internet. Instead of running on banking infrastructure like USD or EUR, tokens live on internet infrastructure called Distributed Ledgers or Blockchains.

Do I need a token to join a DAO?

Yes, most DAOs issue their own native tokens so you will need to own some of those tokens to become a member.

How many tokens do I need to join a DAO?

Usually, a fraction of a token is enough to join, but there might be benefits to owning larger amounts. For example, token holdings sometimes determine the weight of your vote in decisions that the DAO makes.

How can I buy a DAO token?

The easiest way is to obtain some $ETH via LocalCryptos, Coinbase, or Binance, send it to a Web3 wallet such as Metamask, Frame, or Argent, then swap it for the DAO token in Uniswap. Note: It is good practice to copy the contract address of the token from Coinmarketcap and paste it into Uniswap rather than searching for the ticker symbol such as 'ETH'. This is because two different tokens may use the same ticker.

How many DAOs are there?

It is difficult to tell exactly, but there are ~2000 on the Aragon network and probably a similar number on other networks. Resources such as DeepDAO are being built to provide a better census of the space.

Can a DAO hold other currencies in addition to its native token?

Yes, any compatible currency may be directly controlled by a DAO. In the Ethereum ecosystem, this means any ERC-20 token but not Bitcoin or any fiat currency such as USD.

What can a DAO do?

Most kinds of offline organization have been recast as DAOs: businesses, charities, social networks, investment groups, unions, political groups, etc. For more examples, see 15 Ways the World is Being Transformed by DAOs.

What is voting used for in a DAO?

Most decisions that DAOs make, especially about the transfer of funds, are voted on by their members.

Can any company use a DAO?

Yes, any existing company could become 'crypto-native' and convert themselves into a DAO, receiving and paying funds in cryptocurrencies. Some states and countries even enable DAOs to be wrapped in traditional legal structures such as LLCs.

Why would someone start a DAO?

A DAO is the natural governance structure for any crypto-native project but now a variety of online communities are beginning to adopt DAOs to solve their governance problems.

What are the benefits of a DAO?

Inclusive - anyone across the world can join and participate.
Democratic - all decisions may be decided by the community.
Transparent - every transaction to and from a DAO is public.
Permissionless - DAOs are unregulated and cannot be sanctioned by governments.

What are the downsides of a DAO?

Can be complicated - A DAO is a new technology so its terminology and user experience can be confusing.
Sometimes expensive - Ethereum fees to set up and operate a DAO can be high (but cheaper solutions are being developed).

What makes a successful DAO?

A DAO is merely a set of tools for self-organization so a strong purpose and community are the most important ingredients for a successful DAO.

Which tools do I need to join a DAO?

A Web3 wallet holding some of the DAO's native token. For example, to join the Bankless DAO, you will need the $BANK token.

How much does it cost to set up a DAO?

Approximately 0.2 $ETH, which is roughly $350 at the current exchange rate and with an average gas fee of 30gwei (07/2021). You can track the average gas fees here.

How can I start a DAO?

There are many ways to set up a DAO, but this is the basic process:

Obtain some $ETH. Note: you will need at least 0.2 $ETH to set up an Aragon DAO.
Send your $ETH to your Web3 wallet.
Once the $ETH has arrived, navigate to https://client.aragon.org/, click on Connect Account and select your wallet provider in the options. Click through the approval process until your wallet is connected.
Click on 'Create an Organization' and follow the instructions to create your DAO.
Here is a great walkthrough by Sarah Amann:

How to build a DAO in 5 minutes

Aragon is building the future of decentralized governance for Web3 communities & organizations. Deploy a DAO, manage your community, resolve disputes and run enterprise-level votes, all within our open-source stack. See the latest at aragon.org, subscribe to our monthly newsletter, join the conversation on Discord, or follow us on Twitter.