July 7, 2023

Key Considerations for Structuring a Decentralized Autonomous Organization (DAO)

Decentralized Autonomous Organizations, or DAOs, have become a popular way of managing projects and communities. Simply put, a DAO is a digital organization that operates based on smart contracts. Decisions are made by members of the organization according to the model’s structure.

While the concept of a DAO is straightforward and may seem like the ideal type of organization for a crypto project, managing it is not easy.

In this article, we will discuss the key stages that the project team should take into account when choosing the DAO organizational structure.

The first stage is to define the goals and management structure of the DAO

The first thing to consider when creating a DAO is its goals and objectives. A DAO can be created for various reasons such as fundraising, investments, asset management, and more. The project team develops a structure, management mechanisms, and decision-making processes depending on the organization’s tasks.

The management structure in a DAO can be democratic, meritocratic, or a combination of both. A democratic management structure means that each participant has an equal vote in decision-making. For example, if 100 people participate in a DAO, each has one vote for any decision.

In a meritocratic management structure, participants with a larger number of tokens have more weight in decision-making. If 100 people are participating in a DAO and one participant owns 50% of the tokens, their vote will carry more weight than any other participant’s vote.

A combination of democratic and meritocratic structures is also possible. For example, a rule could be established where each participant has one vote, but participants with more tokens are granted an additional vote…

Read the continuation of this article in our article on Hackernoon…