Practitioner's self-report: How to create a DAO (with list of advantages and disadvantages of tools)

特邀专栏作者

2022-06-11 10:00

This article is about 8411 words, reading the full article takes about 13 minutes

The issue of DAO cold start has always been a concern of everyone. We often see various articles introducing the mechanism, culture, tools, etc. of DAO, but the nuances of how to cold start and start and run DAO are still relatively missing. Therefore, t

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Original Author: paradise

introduction

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How did it all start?

I started trading cryptocurrencies in 2017 - watched my portfolio plummet, then come back from the dead. After letting it go and forgetting about it for a year or two, my interest really started to peak again during the pandemic. By mid-2020 I was back in trading and trying to digest new information, but stayed away from nfts for a few reasons.

That changed quickly.

By September 2021, I've built a reputation as a web3 nerd among friends and family (whether that's good or bad). I even convinced our fantasy football league to put our money in cryptocurrency.

I bought my first NFT last December and joined a couple of my favorite communities that are still active today (Floor & Shiny).

As of February 2022, I feel like I've been in the field for a year and still have a lot to learn.

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"Always anxious" was the only word to describe our state last year

Fast forward to March 2022 and we can safely say that our fantasy football pot is doing great. The market is on the rise, and I'm happy to advise my curious and wonderful friends who work primarily in the Web2 world on cryptocurrencies and NFTs.

But what exactly am I trying to create?

I'm thinking hard and trying to create my own NFT community. However, as some of you know, expectations are high and project delivery is insufficient, especially as people in the industry are becoming more and more wobbly. WGMInterface's farewell letter hit me hard, I didn't want the experience of creating a project to go from having fun to being full of anxiety.

Are there opportunities that are impactful, low-risk, and can create a good learning environment?

I do have some friends throw olive branches to me involving the field of encryption, NFT and web3. They are already very successful in their careers and in their lives. What if we formed a group among us to learn together, invest together, and eventually create something together? What if we started by creating a DAO?

It's not a novel idea, but the key is something I've built for myself - keep it small and expand our circle only when necessary (a minimal viable community).

I'm already working on NFTs.

I've explained NFTs to friends and family.

I've been following my friends and their businesses in the web2 space and trying to understand if there are any web3 applications worth developing.

Creating a DAO seems like the most optimal way to get friends more involved with Web3, learn the ins and outs of managing a product in Web3, make money along the way, and look forward to building great things with 14 other friends with super brains.

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How does DAO work? What are the rules of operation?

Every project/DAO needs to know what they want to achieve before they can be created. For us, we want to be a Web3 learning and investing community, ready to act on our knowledge and seize opportunities when the time comes.

deposit

Everyone has about a month to make a deposit

Min = 1 ETH, Max = 10 ETH (to ensure no one mass-controls the DAO immediately)

1 ETH = 10,000 DUCK tokens

governance

DAO-based token ownership, 1 token = 1 vote

Proposal approved by a majority of votes (<50% & =50% are votes not passed)

Proposals/Polls last 24 hours

Proposals can be implemented if votes >50% (within 24 hours to ensure we can act quickly if needed)

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Meeting

We choose to meet weekly. The purpose is to have a medium through which we can discuss what is happening in the NFT space, bring concerns to the table, talk about current and future investments, and relay any important information to each other.

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random tidbits

Many newcomers are hesitant to deposit large amounts of ETH. This is to be expected, so I allow deposits after 7 days of the first investment - and usually, depositing after raising a round of funding is a big no-no, but isn't it worth some experimentation in order to win?

Despite the dilution this created, I initially chose the tradeoff because it helped us grow further. Our first investment is Moonbird mint of 2.5 ETH (the current floor price is about 25 ETH). You can imagine how exciting this is for us and how enticing it makes DAOs 🙃.

I have collected a lot of screenshots of frequently asked questions, I hope everyone can get started quickly

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how do we do it

Since many people come from the world of Web2 and know next to nothing about the world of Web3, we realized it needed to start with as little friction as possible. As much as I would like everything to be on-chain and fully decentralized, I realize that this may be a high barrier to entry for beginners, so gradual decentralization is the most sensible course of action.

Here are our basic requirements:

Start with a single point of contact (one app) whenever possible
Need to choose the right mobile device
Differentiate and not compete with other communities
The cost of upgrading/switching applications is lower
legal compliance

With the above in mind, we set out to explore tools for DAOs and ways to build DAOs so that it scales well.

communicate

communicate
money management
DAO governance
document
money management
Contributor Compensation Payment and Reimbursement
Accounting and Taxation

communicate

We first ruled out iMessage and WhatsApp. The former is too limited and doesn't bode well for us Android users. The latter doesn't have great bot integration.

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Advantages of Discord

The Web3 community uses Discord extensively, and the behavior habits of Web3 friends who join Spicy Duck will not change.
Integrations are plentiful. Most communities are built here, so we should be able to run a community with many bots out of the box.
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Disadvantages of Discord

Among many other chat servers vying for the user's attention.
At only 15 members, Discord feels like overkill - do we really have enough small talk topics to get the full power of Discord?
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Advantages of Telegram

There is no competition for user attention. You know it's a message from Spicy Duck and you just open Telegram for a DAO chat.
Vote locally. There will be more on this in DAO governance, but a lightweight DAO voting method is important.
Group chats with 15 members make the atmosphere feel more alive. It's the right vibe, not overkill.
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Disadvantages of Telegram

Telegram has less Web3 integration/bot features than Discord.
In the future, scaling beyond 15 members may become difficult. Channel segmentation is not a native feature of Telegram.
If we were to build more things for Telegram, it might be annoying/hassle when switching costs to scale.

At the end of the day, we really value low friction + a tighter community feel. Discord feels a bit overkill (redundant) for 15 people, although not having that many integrations and extensions could be an issue in the future. We all know what it's like trying to use Discord for the first time, and it's hard to describe.

Telegram gives us 80%-90% of the functionality, and the better small community/group chat feel we wanted. For members already active in Web3 and becoming more active, it is important that we are not competing for attention among hundreds of other communities. When we open Telegram, we know what the information is for and the attention is high.

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Enabler for DAO

The field is still in its infancy and underdeveloped, so the rules are constantly changing. The need to digest information quickly is critical. While we care a lot about the DAO platform, it's all relatively even. We explored things like Upstream Collective, Colony, and Syndicate. For simplicity and clarity, we spend most of our time discussing these three issues.

While Upstream and Colony are indeed more powerful and offer a larger feature set - we ended up releasing our DAO with Syndicate for three main reasons:

Customer Service/Response
protection of general law
Non-accredited investors can legally participate

In this ever-changing space, where things are often broken and markets can be volatile - we want to rely on a service that is responsive. Frankly, Syndicate goes way beyond that. Their Discord is well managed, with multiple team members always there to answer questions, focus on issues, and iron out bugs in a timely manner. This is a huge advantage.

In addition, Syndicate also helps ordinary people to legally set up DAOs. The idea of counting on other services to put people on full legal counsel is daunting. We need more services like Syndicate that can take into account the legal implications for the average person and be able to last until mass adoption. The idea that everyone can shell out tons of cash to create a legal structure for a DAO is silly.

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Creation of joint management dashboards and legal documents

Once everyone is part of the legal entity, the best part is that Syndicate is structured as an "investment club" per SEC guidelines. This is an important distinction if you're thinking long-term and want to be able to legally continue to operate after more regulation is introduced.

As an investment club, there are four big things to remember:

You cannot invest in securities (as a non-accredited investor), which means only cryptocurrencies and NFTs (with a few exceptions).
Your membership limit is 99 members.
Every member must participate in decision-making in some capacity.
You cannot publicly provide registration information into your club (only a private link to join).

This is good. It gives us the guardrails we need to abide by, and it also gives our non-accredited investors an avenue to be able to participate legally. For mass adoption of DAOs, either regulations need to change, or services need to be built around clear legal guardrails. Also, similar to our DAO, most of the world is made up of non-accredited investors. Syndicate handles this well.

DAO governance

This is an area of DAOs that can quickly become more complex. We evaluated a few on-chain options, but ultimately narrowed down to two off-chain tools - Snapshot and Telegram Polls.

Although I want governance and voting to be on-chain, I want to optimize participation - make it as easy as possible. Many of the voting options suck on mobile, and there is no way to connect to a mobile wallet without going through a lot of complicated steps or multiple clicks. I realize that most members of our DAO will be mobile-first because they are very busy. I want them to discuss quickly and vote easily.

Unfortunately, we feel that Snapshot is too heavy for the desktop. For this reason, we have chosen Telegram Polls. This is a native feature of our instant messaging app and provides us with a quick and transparent way to submit proposals for voting

But, the truth is - Telegram Polls are the most non-Web3 thing you can do...

document

We needed a single place where all documents for research, proposals, data, meeting minutes and links could be accessed and stored.

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Vaults, vaults and hot wallets

Here's another simple decision we made. We need a multi-signature wallet for trust and security of our assets/vault, and a hot wallet to be able to mint, buy and sell assets as needed. This has been implemented many times in other DAOs and the common solution works well for us.

Therefore, we have implemented the following measures:

Gnosis Safe for our vault/vault
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Contributor Compensation Payment and Reimbursement

We have found that three effective ways to implement contributor compensation and reimbursement are:

Utopia Labs
Parcel
Coinshift

We like all three for different reasons. In a sense, all three methods allow for funds/expense management, and the basic functions of all three methods are relatively similar. The difference lies in their customer service/responsiveness and their product direction.

We want it to bill in multiple wallets, handle payments for contributors, and have decent customer service, because dealing with finances can get messy, and when things get messy, it's great for us to have a person to contact directly important.

While we like the user experience of Parcel and Coinshift, they don't support billing for multiple wallets. This is a pain for us - I don't want to have to manually monitor and add these transactions.

What started as a tweet ended up arranging a demo with Pryce.

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Bookkeeping, Accounting and Taxation

While there are plenty of personal accounting and bookkeeping tools for Web3 right now, there aren't any really enterprise/DAO-friendly tools yet. Most are in early development and cost more than what they can offer.

Having said that, we don't really have a super complex system yet, nor do we have many transactions, so we opted to use Koinly (annotating transactions where necessary) while waiting for Utopia Lab's bookkeeping solution to launch in June.

We evaluated Coinbooks and liked what they did, but ultimately, we wanted to put all of our spending, payments, and billing on one service to reduce hassle. The cost of Coinbooks (at this time) also doesn't make sense to us. The short-term pain of using Koinly and later migrating to Utopia Labs seems like a good tradeoff.

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Where are we today?

We've made some investments and started to form an thesis around what we think makes sense for our future.

Some notable investments include:

Moonbirds
Moonbirds Oddities
Chromie Squiggles
Floor NFTs
Tokenproof

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What else did we encounter?

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01 Exit Mechanism

The problem that needs to be solved: How can we allow the ownership to have strong liquidity without violating the correct exit under the securities regulations for non-accredited investors?

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02 Increase treasury funds of DAO

Problem to be solved: How do we increase the DAO's funding without diluting existing shareholders?

We have 15 members with a starting value of 42.2 ETH. That's great, but it's trivial compared to a large DAO. We'd love to be there, but we don't necessarily think inviting more people to participate is the best way to do it.

Some ideas that might come to mind:

Create Art/Generate Mint, we share the profits with the artist (or ourselves)
Advising in our area of expertise (similar to CPG)
Building our tools to monetize the DAO
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increase/motivate participation

The question at hand is: how do we increase and incentivize participation?

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Learning together as a DAO

The question at hand is: how do we enable everyone to actually have access to the same tools and learn together?

We set out to create this DAO for the purpose of learning together. It allows us to invest in assets, reach out to diverse communities, and apply those learnings to future investments and the things we build. In theory, this makes a lot of sense. In practice, we encountered some problems.

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diluting early believers

The question at hand is: how do we ensure we don't dilute early believers/investors? Or are we diluting them?

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Business Wallet and Spend Management

The question at hand is: how can we enable everyone to make purchases on behalf of the DAO, and properly operate our accounting system and pay taxes?

Now, the wallet architecture of Web3 is not friendly to the real world. We must each have separate hot wallets or make sure we mark business transactions on our personal wallets separately. Otherwise, we run into accounting and tax issues.

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haters gonna hate

As you read this article, there is a section to address some common grievances and questions that may crop up in you. Our purpose is to learn about Web3, NFTs, cryptocurrencies and DAOs. For a new group of people, implementing everything at once is overkill and not the right solution. Our intention is to gradually decentralize, and over time we'll get more and more comfortable and move things on-chain.

There are many DAO tools that have not been considered yet. This list is not exhaustive.

I know. I wish I had time to go through everything, but sometimes it's better to build and tweak than spend a lot of time digesting the nuances. We will gradually decentralize, and time and effort will tell if this is the right decision.