How to start a DAO on Solana: A Proposed Framework

If you’re starting an organization in web3, chances are you have a lot of questions: How can a startup work directly with investors on a global level? Are there ways not to sacrifice transparency? That’s where DAOs come into play.

By setting up a DAO you can create an organization where communities have collective ownership of a particular blockchain project. Each person focuses on what they do best and trusts that everyone else is doing the same. There are many types of DAOs and the beauty of them is that they can be pretty much anything —structurally— and it’s not just about revenue. The possibilities are endless.

Let’s explore what a DAO is, and how you can set one up.

What’s a DAO?

A DAO is a Decentralized Autonomous Organization; A community that is organized and operated on a certain blockchain. “Decentralized” means there’s no controlling authority, “Autonomous” points to self-governance, and “Organization” means a community with a certain purpose. DAOs follow their own laws, terms, and methods of operation.

Formalities aside, a DAO starts with people. The community is the largest asset of any DAO as the members are expected to generate ideas that push the organization further. DAOs are accessible to anyone, anywhere whose ideas align with the project, meaning people are able to join communities fairly easily.

DAO Setup Step-By-Step

Step 1: Mission statement, and Goals

After you’ve chosen a name for your DAO and figured out the purpose of what you’re building, you’ll need to draft a mission statement —the formal aims and values of an organization— for your DAO. Drafting a mission statement will help you figure out what your goals are as well, effectively killing two birds with one stone. Your mission statement and goals will essentially act as your Web3 business plan. Also, having your DAOs information in one place will help save time when it’s time to share your ideas with the community and others.

Here’s a quick list of questions you may ask yourself while crafting the DAOs mission statement and goals:

  • What problems are we solving?
  • What are the benefits for the users, and the community?
  • Who will have access, and how will they be granted access?
  • What’s the urgency for it?
  • Has it ever been implemented before?
  • Crisis control: What will we do when something unprecedented happens in the market and affects members or the DAO?

Step 2: Ownership and Governance

Ownership/membership in a DAO is usually tokenized. To become a member of your DAO, people would need to buy the token on a decentralized exchange, which gives them voting and decision-making rights. Alternatively, a DAO can transfer ownership to its members in the form of “rewards” or through “airdrops”— tokens distributed to ‘whitelisted’ wallets.

As a founder, you must decide what your project’s tokenomics — the economy and distribution of tokens— will look like. Picking how your token is allocated and who holds it is an important task, as the holders will make up the organization. You want token holders to be people that:

  1. Care about the mission
  2. Are active contributors

Once tokens have been distributed, and members are recognized it’s time to begin working. In a DAO, decisions are made as a group. Here’s what a typical flow looks like:

  • Members submit ideas and create proposals
  • Members discuss important matters through chat and/or video calls
  • Members reach a consensus by voting on the proposal
  • The proposals are executed via smart contracts

Alternatively, DAOs can practice something called delegated governance where the community gives certain rights and powers to a subDAO or working group that helps the organization move forward quickly.

Step 3: Community management & communication— building a strong team

Essentially, you want to build a large community where the shots are being called by the members. You’ll need members dedicated to community management and moderating and progressing the discussions of the DAO.

There are plenty of channels and community tools you can use including Discord and Telegram. Or both; managing several platforms where members and non-members can communicate together works for a lot of DAOs. For private discords, Guild can help you maintain token-gated access to discord communities, ensuring only DAO members are allowed into group chats.

Another useful tool for DAOs is Realms, the platform allowing DAOs to token-gate voting proposals for DAOs on Solana.

Step 4: Treasury management

Since your DAO needs capital to achieve its goals, you’ll need to organize a treasury. Treasury management is a crucial aspect of your DAO since every member can see how the funds are diversified. The more capital you have in your treasury, the more runway the organization has, so you need to keep these funds safe. Standard practice is to create a multi-signature wallet and assign a trusted group of DAO members as multi-signature members. This way you can keep the funds safe and maintain decentralization for your organization.

DAO Tools

There are various protocols and robust tools that make DAOs’ lives easier on Solana, ranging from the collective management of treasuries to the automation of bulk fund transfers. For a complete listing of DAO tooling in the Solana ecosystem, read our guide covering DAO tooling.

Bottom Line: Be Heard, Be Early, Make A Difference

While DAOs are still in their early stages, they are, unDAObtedly, the future. DAOs simplify setting up a transparent business that manages massive amounts of assets. And perhaps what’s even more important, is DAOs present a myriad of opportunities to build something meaningful.

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