Have you heard of the business model called “DAO,” which stands for “Decentralized Autonomous Organization”? The world is driven by 5G speed because of the information and tech revolution. The emergence of a decentralized system has revolutionized traditional organizations and business structures.
So, as a new entrepreneur or business owner, it is an excellent opportunity for you to do business through this innovative business model. DAO’s business model allows a group of people with similar interests to run their organization through decentralized governance rather than any hierarchal authority body.
If you are interested in this new way of running a business, this article will tell you how to start a DAO in the United States. Let’s explore how to register a DAO.
What Is a DAO?
A Decentralization Autonomous Organization is a new form of legal entity that has no central governing authority. Instead of any hierarchal authority body, it operates with the power of blockchain technology and a decentralized network. DAO members can govern and manage business operations collectively.
In a DAO model, all kinds of activities are predefined and executed through smart contracts on a blockchain platform, such as the decision-making process, rules, and actions. Smart contracts refer to the business’s operations, including voting rights, fund collections, and governance rules.
Basically, DAOs aim to reduce the need for central authority by distributing decision-making power while operating a business or organization.
Simply put, you can say that a DAO (decentralized autonomous organization) is a structure for a business entity in which token holders or members have a direct say in how the entity is run and what decisions are made. A DAO model operates via a coding program that manages all activities. There, you can complete financial transactions, business documents or records, tasks, etc., for your business.
What Is the Purpose of DAO?
In 2016, a group of developers came up with the idea for the DAO business model. They were motivated by the decentralization of cryptocurrency. In fact, the main purpose of the DAO model is that it can run without any centralized authority. It represents the ideas of decentralization, transparency, and access to independent decision-making policy so that any business or organization can work well.
That means DAOs intend to improve the traditional management structure for the company’s benefit and transparency. Instead of depending on an individual higher authority, a DAO dedicatedly tries to make an opportunity for every member so they can raise their voice, vote, and approve major activities.
If you think that, is it like a democratic policy? Yeah, it is true. DAOs aim to share decision-making power among the members or token holders so that they can directly participate in the operational activities of the business or organization. In this case, You do not have to depend on a higher authority when you run a business through this method.
Difference Between DAO VS Traditional Business Organization
You know, DAOs and traditional businesses have quite significant differences. Differences are given below:
| Aspect | Traditional Business | DAO |
|---|---|---|
| Business Structure | Depends on the Hierarchical structure | Depends on the Decentralized structure |
| Decision Making | Higher authority or executive teams make top-bottom decisions | Collectively decisions made by token holders |
| Ownership | Individual, shareholder, or stakeholder | Token holders |
| Transparency | Depends on business reputation and compliance | Fully transparent through blockchain |
| Centralization vs Decentralization | Centralized | Decentralized |
| Profit Distribution | Shareholder, stakeholder | Token holders, community members |
Benefits of a DAO
Before knowing the step-by-step guidelines for how to register a DAO, you must know about the benefits of a DAO. It will increase your attraction to this new model of business structure. Even though the DAO model is still in its early stages, it has not yet reached the mainstream. However, the benefits of a DAO model business have been proven by various actors. Especially the operating system of a DAO without any hierarchal authority and the democratic policy for the decision-making process.
- Decentralization: One of the best advantages of a DAO model is that it does not need any central authority to operate a business. It gives all the participants the power to make decisions and run the business. It promotes transparency and inclusivity and reduces the risk of corruption or manipulation
- Automation: Automation refers to the whole ecosystem of a DAO operating through code and algorithms. Due to the programming system, there is less opportunity for human error and manipulation. All the members need to ensure that the code works properly. When there is any error or needs any update, then all the participants can make a collective decision.
- Open Participation: As you know, the DAO’s method allows open membership. It means that anyone can join an organization’s or business’s activities as long as they follow the rules and protocols that have already been set up. Basically, this business model lets people directly take part in all kinds of business activities and play an important role in making decisions. It is also regarded as a major benefit of this structure.
- Transparency: Another important benefit of the DAO method is transparency. It operates through blockchain technology, which provides transparent and auditable documents of all transactions and activities. This transparency increases trust and accountability among all the members of the business. Members can easily verify all kinds of activities based on blockchain technology.
How to Organize a DAO
Before starting a DAO business, you should know that this type of business model involves a lot of complicated technology, but do not worry! There are a lot of tools available now that can make this process easier. Here is the process for registering a DAO and growing your business.
1. Fix Your Goal
First of all, you should think about why you want to start a DAO. That means setting goals can help you define the purpose and mission of the DAO. It could be for a for-profit or non-profit organization, a business, a company, or a community project.
You might use this method for a profit or non-profit organization, a business or company, or a community project. You need to think about your objectivity, figure out problems, and build your community around people with the same interests.
When you set a goal, you have to come up with key results that show how far you have come toward it. If you have a goal and mission, it can motivate your community members or participants to understand the facts. And, you know, setting goals can be used as a guideline for making decisions in the DAO.
2. Create a Community
When you have determined your goals, the next step is establishing a community. It means creating a network of individuals with the same interests, values, and goals. If you want to start a DAO in the USA, you can expose your idea through various social media and online communities. For example, Facebook, Twitter, Instagram, and so on.
Through these social media sites, it is easy to reach a lot of people who are interested in the same thing. You can do marketing for your DAO business through Facebook pages or tweets on Twitter so that people get engaged in your community and have a chance to work together.
To achieve people’s trustworthiness, you can ensure that the DAO business model follows the laws and rules of the United States. Besides this, you can also collect funds while growing your memberships.
3. Encode the Rules
Encoding the rules refers to the process of creating and implementing a set of smart contracts or protocols to keep the DAO running and making decisions. Essentially, these rules are defined through computer code and are used to automate various functions and ensure transparency.
During this step, to make smart contracts, you may hire a group of developers who can assist you in creating smart contracts on blockchain technology. A smart contract will define and enforce the rules of the DAO. These smart contracts are written in programming languages specifically used for the blockchain platform.
Then, you must specify the decision-making procedure and establish the rules for the DAO, including voting mechanisms and the process for submitting and approving proposals. Your voting systems are based on token holders, reputation, or other factors.
4. Launch and Deployment
It refers to the process of creating DAO operations and functional activities on a blockchain network. A blockchain network can be used to run all kinds of activities. At that point, you can use Ethereum, Binance Smart Chain, or another blockchain network to set up the DAO.
Consider that with this step, your DAO method is ready to run the smart contracts and protocols that represent the rules, administration, and operations. Your business goals will determine how you want to grow your DAO. At this point, your DAO works as its own entity. There is no ownership or central authority. It only relies on the community.
Basically, deploying the DAO makes sure that the encoded rules and functions are actively operating and accessible to the participants. It will allow your participants to engage with the DAO based on predefined governance and principles.
5. Token Allocation and Distribution
Token distribution is another important step for operating a DAO business in the United States. Token distribution refers to allocating and distributing the business’s native tokens to various participants. Basically, it involves determining who receives the token, how many tokens they receive, and under what conditions the token will be distributed among participants in the DAO ecosystems.
This distribution may be based on various factors, including financial contribution, work combination, or a combination of both. Usually, a portion of the token is given to the DAO’s founder and team members who have collaborated to build the project. If you want to receive external funding for your DAO ecosystem, then you can sell your token to investors who provide financial backing. To align incentives, promote transparency,l and foster long-term sustainability, it is important to design the token distribution process carefully.
FAQs
Q1: How much does it cost to start a DAO?
Answer: If you think that this method of business structure is more expensive than the traditional one. It may be true, but it depends on the blockchain technology you are using and the type of project you are planning.
Q2: How difficult is it to create a DAO?
Answer: Basically, starting a DAO can be hard and complicated because this type of business model involves a lot of technical, legal, and management issues. However, the difficulty level can vary based on the DAO’s particular objectives and level of complexity.
Bottom up
Finally, the DAO model is a new innovation for the business industry. Through this model, you can operate a business or organization without any central authority. All kinds of business activities work through blockchain technology, such as decision-making, voting, major activities approval, token selling, etc. This article may help you figure out how to start a DAO. DAOs intend to improve the traditional management structure for the company’s benefit and transparency.
