Using DAOs in practice

DAOs are useful for making significant decisions in organisations including those that require documented voting or involve managing funds.

To help understand how a DAO can be used in an organisation let's consider various steps that would be involved in the context of using a DAO for a housing co-op.

Create the DAO

The first step is to create a DAO (decentralized autonomous organization) on a blockchain platform. This is the heart of the system and is technically composed of a bunch of programs initiated on a public network.

There are various options for what platform to do this with, each with different functionality, usability etc. much like choosing between Discord or Slack. Neverthless it's quite easy to get started with some of the popular platforms like DAOHaus or Colony.

When creating the DAO, you need to decide on parameters affecting the running of the DAO such as vote quorum and how long people have to vote. You should be able to change these later.

You will also probably create a forum to manage discussions, decide what to vote on, link to votes on the DAO platform itself, etc. It is very common for DAOs to use Discord for that.

Invite members

Next, invite members to join the DAO. These will mainly be people living in the co-op’s housing, though you might also have roles for investors, mediators or others.

Each member will need to have a digital wallet (e.g. Metamask) that is compatible with the blockchain platform being used – this is where they keep their DAO tokens and what they use to vote.

Here's a guide to doing that

Define project goals

Once the DAO is set up and members are onboarded, define the project goals and objectives. This could include the project timeline, what deliverables will be achieved via the DAO “e.g. finding a house and buying it”, and the budget which would be added to the DAO as tokens.

You may also agree on what kind of decisions the DAO should take and, separately, what can just be decided as simple votes in your forum software e.g. Discord.

Establish decision-making processes

This could include procedures to enact votes e.g. the Sponsor Threshold on DAOHaus is a setting defining how many tokens a member needs to make a proposal.

And how to handle disagreements among members, for example, about votes that passed but some people were unhappy about. A lot of this would be similar to processes you’d have for a non-DAO organisation.

Make decisions

When important decisions need to be made, such as purchases for the co-op, changes to the project scope or budget, the DAO members can discuss it in Discord then define a proposal to vote on. Actual votes using a digital wallet can be made for free using a tool like Snapshot or a vote on the DAO platform itself like DAOHaus (which can cost fees).

Once a vote has been taken, subsequent action can be implemented through the appropriate channels. Some of these may be outside of the DAO such as the organisational bank account. Some may be functions built into the DAO e.g. voting on a proposal to transfer funds to a contractor with the “Token Transfer” function.

Note: fund recipients need to have a wallet too and if you're working with someone who cannot do that, you may need to decide on an intermediary to process payments. This could be a trusted person or an organisation.

Manage funds

The DAO should have a clear process for managing project funds. This could include setting a budget, tracking expenses, and approving requests for funding from members.

Many of these are done directly by executing proposals that have been voted on i.e. as core DAO functionality. There may be other tasks though such as processes for getting external money into the DAO treasury, or making repeat payments for things that have already been voted on.

There are lots of tools to help with this sort of thing e.g. Boardroom

Monitor progress

Regularly monitor the progress of the project and track milestones. This will help identify any issues early on and allow for timely resolution. For example, do we need to reduce the voting period to speed up decision-making?

After a project phase is complete, evaluate success based on the initial goals and objectives. Use this information to improve future phases and refine the DAO's governance structure and decision-making processes.

That might mean things like creating sub-DAOs to manage different decisions separately, as with sociocracy.

Costs of using the DAO

Many transactions on a blockchain have costs – this is part of the mechanism that keeps blockchains trustworthy. We can use blockchains that have low costs, such as the Gnosis chain which is designed to enable this kind of project at lower cost than other chains.

Overview of steps involved in using a DAO

In short here are the actions and tools involved in using a DAO as a user:

» If you need help to understand if a DAO could work for your project, send an email.