Cryptocurrencies: What are DAOs and how to launch your own?
Crowdfunding is a thing of the past. There's a new way to organize projects involving large funds and hundreds of strangers that agree to your own rules and decisions-all based on a blockchain.
Welcome to "DAOs" or decentralized autonomous organizations. At its core, DAOs allow people to form new digital communities that decide on how to pool resources at a global scale. DAOs come together in order to launch kickstarter initiatives with the help of cryptocurrencies, that fund the project, or even allow stakeholders to make important decisions.
Some think DAOs are similar to the recent popularity of memecoins - that now exist as a cultural trend despite having no real purpose. Meaning, people own meme coins or NFTs because they want to. In a similar way, this "want" drives people to find DAOs. For instance, a group of people wanted to buy a copy of the US constitution and in order to do so, they raised funds through a token called PEOPLE that funded their ConstitutionDAO project.
How to launch a DAO crypto project on your own?
As you can see, DAOs can be launched for anything. All you need is a mission to want something badly enough, and a developer friend to create a governance token that will fund your DAO goals. Creating DAOs doesn’t have to be complicated. You can also make your own DAO in the metaverse, like in Decentraland, for instance, which already has an established DAO of its own.
When you do actually make your DAO project, there are some things to keep in mind like establishing clear rules from the start. This will tackle issues like mob rule where few DAO members could hold a majority of the tokens and begin to sway decisions in their favor. In a way, even Bitcoin has all the properties of a fully functional DAO, with predetermined rules, autonomous functions and a consensus based protocol that runs the network. So this makes Bitcoin not just the first DAO, but also the most successful one yet.
To date, several DAOs have come and gone but one in particular became infamous for its hack. In June 2016, "The DAO" - an initiative to support a decentralized version of Airbnb got hacked due to vulnerabilities in its code. Before the hack, the DAO campaign had raised over $150 million worth of funds in Ether, out of which $50 million worth of Ether was stolen from the DAO. The hack had a significant impact on people’s trust in both Ethereum and DAOs in general, at the time
Fast forward to 2022, and DAOs are now enjoying their best year yet. Most projects have their own incentives. Take ConstitutionDAO for instance, which was unsuccessful in buying a copy of the US Constitution, but members still have their tokens, which could potentially be valuable in other markets. Tokens like PEOPLE may not be as popular as other more valuable DAO cryptocurrencies like AAVE, MAKER, COMPOUND, and others, but PEOPLE and SPICE, and other new DAOs are certainly trading today.