What is a DAO?

A Decentralized Autonomous Organization is a software program running on a blockchain offering users a built-in model for the collective management of its code. Regarded as a community-led entity with no central authority, it is represented by open computational rules protected on the digital ledger. Chances of forgery are minimalized via timestamping and disseminated as a distributed database.

Ultimately, a DAO is fully autonomous and transparent, governed entirely by its members who collectively make crucial decisions about the future. A group of developers, highly inspired by the decentralization of cryptocurrencies created DAO, to automate decisions and facilitate cryptocurrency transactions.

How do DAOs work?

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Rules are created through community voting via smart contracts

Rules are established by a core team of community members via smart contracts. It lays down the foundational framework by which the DAO is to operate. Amendments are prohibited unless they’re voted upon by the DAO’s core community members. Smart Contracts play an essential role in building a sustainable and autonomous DAO, as the decisions related to operational workflows, governance system, and incentive structure will take place through voting only.

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Users can fund DAOs growth by purchasing the DAOs native tokens

After the foundation of rules, funding DAO is certainly the next step. Issuing a token is the primary way of raising funds and filling the DAO treasury. Individuals or entities interested in the DAOs growth can purchase the DAOs native token (Cryptocurrencies tied directly to a project).

In return for their fiat/investment, token holders obtain certain voting rights, usually proportional to their holdings. Once funding is established, the DAO is ready for kick-off.

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Receive governance tokens to influence the token distribution and treasury management

Once sufficient funding is poised for a DAO to kick off, all of its decisions will be made by token holders through a consensus vote. As the DAOs stakeholders, community members will work towards the most favourable outcome for the entire network. Beyond voting rights, members can also obtain governance tokens in return, including roles in token distribution and treasury management.

Benefits of DAO in the Real-world

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Transparent, Decentralized and Automated

The Decentralized and Transparent nature of DAO provides complete ownership to its members to maintain the protocol. The profit margins also increase as the organizations only pay for existing on the blockchain. Thanks to Smart Contracts, DAOs are automated, and decisions take place automatically.

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Community-Focused

The decision making power is directly proportional to the number of tokens held by a member, but it doesn’t give them additional rights or privileges. Token holders have the right to effect changes that help in the development of the protocol, making it a rewarding and democratized space.

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Potential Earning Opportunity

Holding governance tokens in a DAO is equivalent to possessing equity in an early-stage startup – if it is successful, that equity is like gold. The token holders get a fixed percentage of the transaction volumes on the exchange. It helps to create a more stable token user base with a long-term investment mentality. Many retail investors and venture capitalists join a DAO solely to profit from its native token.

Future Potential of DAOs

The investment in DAO continues to grow at an incredible speed. Despite the potential for DAOs to revolutionize the industry and corporate structuring, they face security and legality issues. The technical competence, one needs to understand the computational infrastructure and consensus mechanism within the smart contract to feel good about investing in it.

Many investors and analysts believe that DAO will eventually become prominent, replacing traditionally structured business models. Wyoming became the first state to recognize DAOs as legal entities. DeepDAO says about 181 DAOs, with an ecosystem’s total asset under management (AUM) of $13.4 billion.



After you’ve incorporated DAO, the next step is to raise money from VCs. Let’s understand those steps further:
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Write a white Paper

Following the incorporation of your DAO, you must write a white paper. A white paper is a crucial document outlining your DAO, what it does, and how it functions. It should be easy to comprehend, crisp, and clear.

Because your white paper will probably be used to encourage potential traders to assist your DAO, it must be well-written and appealing.

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Creating a Pitch Deck

You’ll need to prepare a pitch deck in conjunction with white paper. A pitch deck is a small presentation summarising your DAO’s mission and goals.

Your pitch deck ought to be clear, visually intriguing and uncomplicated to observe. It should also include statistics about your group, your progress to date, and your long-term goals.

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Create a Website

The next stage in raising funds for your DAO is to create a site. Your website should be professional and informative. It should include your white paper with other essential data about your DAO.

It should also include a method for interested traders to contact you. It can be fulfiled through a contact form, an email address, or a social media account.

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Reach out to VCs

You can start reaching out to venture capitalists after establishing a white paper, pitch deck, and website. It is essential to be clear about your goals and what you’re searching for when approaching VCs.

Some venture capitalists may be hesitant to invest in your DAO if they trust the objective. Others may be concerned with the financial return that investing in your DAO would provide.

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Shut the Deal

After you’ve found a VC interested in investing in your DAO, you will need to negotiate the terms of the investment. It includes the amount of money the VC will invest with any equity stake they may receive in exchange.

When negotiating with VCs, keep in mind that your situation is appropriate. Despite all this, they’re the ones who are reluctant to put money in your DAO. As a result, it is best to aim for phrases advantageous to you and your company. It includes obtaining a high fairness stake and a huge DAO valuation.