The concept of a Decentralized Autonomous Organisation (DAO) was first introduced in an article by Vitalik Buterin on the Ethereum Blog. In this paper he describes DAOs as 'entities that live on the internet and exist autonomously, but also heavily rely on hiring indivduals to perform certain tasks that the automation itself cannot do'.

Simply put DAOs are a way for like minded individuals to collectively band together and solve common goals using the principles of distributed consensus governance. As a non-human entity that abides by a programmatic set of rules, DAOs make it easier to coordinate a group of individuals working on collective impact orgainzations.

Although DAOs require human intervention to perform certain tasks like objective-setting (we'll dive into this later), these decentralized autonomous organizational structures are awesome for several reasons including availability of multiple framework options and its build in return on investment.

Framework Options

The most awesome feature of DAOs is the permissionless nature of DAO creation on most frameworks. You can find and compare popular DAO frameworks and the differences between them to determine which works best for you.

Once you’ve explored how easy the DAO creation process is, your organization can either:

• Find and join an existing DAO which shares the same goal(s)
• Create your own DAO

Since they were first introduced, several DAOs have been created with multple unique missions that you can join instead of reinventing the wheel.

Return on Investment (ROI)

Once created, the DAO and any programatic rules set via the smart contract, is secured and protected by the Ethereum network. On top of this, the ROI for the DAO results in the secure coordinator of both capital and community. These benefits can include:

1. Expediting funding to value-added projects or individuals
2. Aligning incentives through skin in the game
3. Creating network effects around a shared value or mission through social signaling
4. Distributing capital allocations across all ecosystem participants
5. Inspiring motivation and participation due to close proximity with other participants
6. Propagating genuine friendships in a remote fashion

The more refined the focus with tangible steps to creating value-added experiments, the more likely it is that others are will support the mission.

Making A Successful DAO

While DAOs are commonly pitched as revolutionary, they actually work far better with a very narrow focus. To-date many DAOs have failed when created with too big a vision and far too little support. The point here is that to set up a successful DAO you need to set objectives.

To capitalize on the network effects created by shared values, having a mission that stands out is set to increase social signalling, participation and chance of success. A great way to determine the shared goal for your organization involves answering questions like:

• What issue are you trying to address?
• Who are the individuals keen to address this problem & why is it not done yet?
• What is your unique leverage or specialized knowledge that makes you suited to solve this problem?
• Who are the people who can solve this problem?
• What can you do to incentivize them to solve this problem with you?

With answers to these high-level questions, you can now write into your smart contract the rules that will automatic these solutions.

Work with your Framework

With your smart contract written, the next step requires you to identify the framework tools that will allow you to create a DAO in a few steps for a minimal rate fee. At this point, you can work with your framework step-by-step guide for the remaining DAO creation process. Most common steps involve:

• connecting the framework to the appropriate wallet by signing into it.
• setting the parameters for your DAO for example a voting application would include:
  • Voting Period: the amount of time members have to vote on a proposal. Here you would ensure the voting windoe is long enought for all participants to see and act on the proposals.
  • Grace Period: the amount of time members have to raqequit if they do not like the outcome of a vote.
  • Proposal Period: the amount of times in which new proposals may enter the queue. This is done to avoid spam and ensure all proposals are issued chronologically.

Some DAO frameworks come with their own front-end interface tat makes it easy to handle your DAO functions.

Conclusion

Although a DAO is not a requirement for an organization, it can empower a large array of various business models by eliminating inefficient bureacrasies and red-tape. As a result we've seen the creation of DAOs that govern distributed VC firms, decentralized hedge funds, decentralized governments and more.

We have also come across meme DAOs like ALexDAO (solely for people named Alex) and BasedDAO (solely for people who are based)—which shows that it’s not about who can pool the most money, it’s about who can pool the most humans.