What is a DAO? How DAOs work and how to create your own

A DAO, or Decentralised Autonomous Organisation, is a group of people who come together with a shared objective–thus, forming an organisation. Unlike ordinary organisations, however, DAOs have no hierarchy and are formed by a “flat” structure. We’re determined to answer your question, “what is a DAO?”, in a simplified way.

Who owns a DAO?

Due to its “flat” structure, a DAO is governed by all its members and everyone has an equal say in what occurs within the DAO. DAOs are owned by their community or token holders. To make a decision as a DAO, proposals first need to be submitted. By using their tokens, all members can participate in a vote. 

How DAOs work

Though the language is complicated, how DAOs work is quite simple.

The rules and votes of a DAO are executed by smart contract technology. Smart contracts are programs stored on a blockchain that automatically initiate the terms of certain agreements and implement DAO governance.

Examples of DAOs


The DAO appeared in 2016 and was the first DAO to emerge. Their objective was to act as a venture capital fund in the decentralised technology space. The idea of the platform was to allow anyone with a project to submit a proposal and have the community vote on whether they would receive funding from the DAO. Anyone with the DAO tokens was eligible to vote.

To bring the idea to life, the DAO held a fundraiser during May 2016. With over 11,000 members, the DAO was able to raise $150 million making it the largest crowdfunding in history at the time.

Unfortunately, after the fundraising, the DAO became the victim of a cyber attack. The DAO has since become inactive.

DAOs and NFTs

DAOs can be formed by a community who wishes to collectively own an NFT or support artists who create NFT-backed artwork. This was first seen when pleasrDAO was formed. Their objective was to join funds collectively in order to be able to afford the $525 million NFT-backed artwork by digital artist pplpleasr

The DAO succeeded in buying the art piece and later evolved its mission to collect digital art that represents and funds important ideas, movements and causes that have been memorialised on-chain as NFTs.

The relationship between DAOs and NFTs has developed since the emergence of pleasrDAO. DAOs and NFTs can help build each other. Like DAOs, NFTs are also programmed with smart contracts. So, if you created an NFT project to help fund a DAO you could program the smart contract to automatically send the proceeds to the DAO. 

What is a DAO in the Metaverse?

A shared belief of builders in the metaverse is that users should own and control the content they create. Users as owners is a fundamental element of Web3 which is also enabled through DAOs in the metaverse. 

Through DAO governance, community-owned metaverses will be able to ensure that their virtual realities are sustainable and beneficial to all the community members.

Organising and monitoring metaverses will be made easier when handled by the metaverse DAO.

Which DAO is the best?

There are several categories of DAOs, all addressing the different needs of their missions. How DAOs work may also change for different missions. Determining which DAO is best depends on your own personal vision. There are many DAOs which allow for newbies to get involved by sharing their skills. By participating in numerous DAOs, you will be able to discover which DAO best suits you. 

How does a DAO make money?

There are numerous ways for a DAO to make money. The most common way that DAOs make money is by launching a cryptocurrency token. The token can be bought on crypto platforms such as Uniswap or Pancakeswap. Buying a DAO token is like buying shares in a company–so, once a user buys a DAO’s token they are a part of the DAO. The proceeds from the token sales will go to the DAOs treasury which the DAO can collectively decide how to use.

Another common way DAOs make money is by creating and selling an NFT project. Like water and music, a DAO can make a membership NFT which gives the owner access to a private community chatroom, events and even research papers about the web3 ecosystem.

How do I create my own DAO?

Starting a DAO is quite simple. However, there are challenging aspects to it–such as keeping the DAOs funds safe from hackers.

With the development of code-free dApp builder tools, creating a DAO has never been easier. Instead of having to hire a developer to write your DAOs smart contract from scratch, you can easily create a DAO using a platform like Aragon.

Before you create a DAO, you need to think about the following:

  1. DAO structure – What is your DAO’s vision over the short-term and long-term? How will the DAO make decisions? What are the benefits of having a DAO for your community?
  2. Type of DAO – Depending on your DAO’s purpose, it could either be a venture DAO, social DAO, collector DAO or protocol DAO.
  3. DAO token – This is necessary for your community members to be able to participate in proposal voting and other gated activities.
  4. Community – Who are the members of your DAO? How will you let them know what you’re creating?
  5. DAO treasury – This is important for the management of your DAO’s funds.

A well-designed DAO takes time to analyse and implement these 5 elements.

How do I invest in a DAO?

To invest, or get a share in a DAO, you can buy its tokens on a crypto exchange platform. 

Why do we need DAOs?

DAOs are an efficient way to build the projects needed by your community without having to search far and wide for funding. Because DAOs are not dependent on outsider stakeholders, they are able to stay true to their mission without having the pressure to alter the DAO.

DAOs also make it easier for people to collaborate and build together beyond borders. By using blockchain technology, it is easier to manage and transfer funds as opposed to a traditional organisation.

DAOs are a promising way for projects in web3 to maintain their authenticity whilst giving community members the power to have input in what does and does not happen in the community.