The DAO’s Roadmap Planning When should a crypto project launch a DAO?

When to create a DAO, now or later, is a question worth pondering.

Towards the DAO of the future

To be honest, DAOs will be the organization of the future. The elements that make up a DAO (Decentralized Autonomous Organization) have been around for a long time, and it’s time to combine them to make something greater.

The COVID-19 pandemic has prompted us to discover many things that the tech world is already familiar with, such as how distributed teams can still collaborate efficiently. Compound, Gitcoin, and a few others have shown us that it is possible to integrate teams and communities and let them make decisions.

So, does this mean that every startup should create a DAO?

not completely.

First, not all businesses are suitable for DAOs (like a sock store on Shopify). Even if it fits, there is still quite a bit of work to be done before the first on-chain voting takes place within the DAO.

DAOs are communities. A shared vision is formed within the community and a mission is developed on how to achieve this vision. For example, the We Run Uptown community established by Hector Espinal revolves around a common mission: “To inspire New York runners to become better themselves and to enjoy the fun of running by building a community network.”

But it wasn’t the way he got his Washington Heights (northern Manhattan) neighbors to run with him, instead he just posted on Facebook: “Wait for me at 168th and Broadway, we’ll be together Go for a run on the bridge.”

Those who join Hector know exactly what they’re going to do (running) and with whom (neighborhood). But as for why they do it, everyone has their own reasons, but they all share a common vision: to be healthier.

The same is true for DAOs. It’s hard to start a project until you really understand what the project is, how, and why, and whether it’s going to get people’s attention.

In addition to a sense of community, DAOs also need governance and incentives. Although the community will build these mechanisms later, the framework needs to be built first. Because the governance and incentive structure will carry your blueprint vision, outline the general direction of the DAO, and ultimately be the main reason for people to join.

So, when should you start building a DAO? Jesse Walden of a16z has some answers on this:

– Progressive decentralization

Walden believes that crypto startups should gradually decentralize: “Building a successful product from the start comes at a high price: product leadership, rapid iteration, step-by-step market orientation, although these lead to community ownership and governance The road to compliance has become complicated, and that’s what guarantees its long-term health.”

Building a community around an untested idea often leads people to overlook the most critical task: testing the idea. To avoid such mistakes, Walden recommends the following three steps:

  • Explore product-market fit
  • Build an active community
  • Transition to community ownership

Explore product-market fit

Things move fast, and directions change fast. You need to work in sprint mode: define the problem, draft the solution, and test it. The core team can continuously adjust and repeat the above steps until the product meets the market demand.

Focus and rapid iteration are critical. To optimize for speed, you need to keep features small and flexible. Walden suggested that decentralization should not be considered at this stage.

Community Involvement

When you find your target market, you’ll find that you’re solving a real problem for a large group of people. Even if your product is still in the drafting stage, it will continue to receive requests from users. Some users even ask for functionality. So now, it’s time to start building a community.

If building a DAO is not in your plan, building a community might be a good idea, for two main reasons:

  1. Gain customer insights to help make product adjustments;
  2. Increase customer stickiness. Because it’s very easy for consumers to give up on a product they didn’t meet through the community.

In Web2, businesses build communities in order to derive value from them. For example, Coda, the documentation app I used when writing this article, has a vibrant online workspace where people can share templates, develop workflows, and exchange experiences. While community members can benefit from these interactions, the greatest value goes to Coda. It mines forums for use cases, feedback, and ideas. In return, users pay for the products they help develop.

This looks like exploitation, but it is. Even though community membership is voluntary, things might not have to go that way.

If Coda decides to go the DAO route, it can:

  1. Get community members to suggest product development.
  2. Build governance and incentive structures at the community level.
  3. Backtrack value by rewarding members for contributions (e.g. template creation, workflow development), etc.
  4. Introduce a token mechanism to realize value exchange among community members.

community ownership

All the efforts of the first two phases will converge into one step. The founding team returns full control to the community. From now on, token holders will make all decisions about the future of the organization.

Governance and incentives are the biggest challenges in making the leap from a supportive but hands-off community to an operational DAO. No matter how much work you have done in the previous stages, it is ultimately up to the community to improve the governance structure and develop the processes and procedures to enable the DAO to handle all aspects of the business.

In addition to day-to-day operations, there are some challenges in terms of existing shareholders, employees, taxation and company registration. Most states and countries do not recognize DAOs as legal entities. Do you want to register it as an LLC or choose to register it as a DAO in the state of Wyoming? Based on the choices you have made, what will happen next with respect to wage deductions and compliance with labor laws?

I don’t currently have all the answers to the above questions. And frankly, I don’t think anyone knows. As we’ll see in the examples below, designing a reasonable architecture can take years, and often more than three years.

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