Partnered With:

Teach you how to quickly build a DAO on Aragon

Read this article in 16 Minutes

This guide gives you a better understanding of what a DAO is and how to create your own.

Original title: "How to quickly build a DAO? Use Aragon!"

Original source: Lao Yapi

For decades, the principal-agent problem has been one of the biggest problems with traditional organizational structures. This problem occurs when an individual or entity violates ethical principles and makes decisions in its own interests, and these decisions affect other stakeholders. For example, when an individual has a large number of shares in the board of directors, he will have more decision-making power than other members.

From the first day of the birth of blockchain, contributors in the industry have been delivering concepts for a basic problem: "How can decentralized individuals achieve self-organization (without third-party intervention) to form a unified goal (in the interests of all) and collaborate for it."

DAO is to gradually encode the organization's iterative management and operating rules (consensus) on the blockchain in the form of smart contracts, so that without third-party intervention, through intelligent management means and token economic incentives, the organization can achieve self-operation, self-governance, and self-evolution according to pre-set rules, thereby achieving the organization's maximum efficiency and value flow. (code is law)

Blockchain provides us with the power of decentralization. Decentralization means transferring power to community users/members instead of having a single centralized institution manage everything; it makes various use cases in finance, governance, voting, fundraising, etc. possible. Today, we will learn about such a wonderful decentralized application through DAO. By the end of this guide, you should have a better understanding of what DAO is and how to create your own DAO.

Let's look at some of the differences between traditional corporate organizations and DAOs.

Traditional Organization

1. The hierarchical pyramid organizational structure lacks flexibility and reduces the organization's ability to adapt to the external environment

2. Individuals or entities can make changes to the organization based on their unique authority, even if it goes against the interests of the majority.

3. The decision-making voting power is concentrated in the hands of a few people, and the decision-making process is a long organizational chain and complicated procedures

4. The benefits generated by the company are usually private and centralized, and cannot motivate the majority.

DAO

1. The operating rules, responsibilities and rights of participants, and reward and punishment mechanisms in DAO are all open and transparent

2. The approval vote on any matter of the community is initiated by members independently, without the intervention of any central agency.

3. Token as a better means of incentive, stimulate the effectiveness of the organization to achieve value circulation

4. No hierarchy, completely democratized/decentralized

Members/Participation

Now that we have a basic understanding of DAO, let's see how members can participate in the governance of DAO. Different membership models usually determine the voting method and its results in DAO. There are currently two common membership models: token-based and share-based membership.

- Token-based membership.

These types of memberships are used to manage a wide range of decentralized protocols. The liquidity of tokens is distributed by decentralized exchanges, and members holding these tokens have voting and governance rights.

- Stock-based membership.

These types of members can participate in the management of community-initiated projects, such as charity, fundraising, investment, etc. This is a more closed type of permissioned DAO, where members are allowed voting and governance rights based on their shares, which are usually converted from tokens or proof of work (POW).

What is Aragon?

Aragon is the largest platform for creating DAOs to date, with 1,800 DAOs currently managed together through its application and service components. Aragon aims to expand the use of DAOs as a free and open source technology that allows the creation and management of decentralized organizations in different forms, including companies, cooperatives, non-profit organizations or open source projects. Aragon makes it easy for organizations from clubs to companies to create DAOs.

Aragon’s Products

The full range of Aragon products includes: Aragon Client, a tool for creating and participating in DAOs; Aragon Network, a broader DAO comprised of a network of DAOs; Aragon Association, a nonprofit that distributes proceeds from Aragon token sales; and Aragon Court, a Web3 arbitration hub that uses cryptoeconomic incentives for autonomous guardians to adjudicate subjective disputes.

Aragon provides a static template to make your own DAO, but it also allows you to create a custom one. Customization is achieved through “applications” (sets of smart contracts) that can be installed or removed from a DAO by vote. The purpose of an application varies widely and can include: a financial application to allocate DAO funds, a proxy application that interacts with other Ethereum smart contracts, a token application that manages members, or a voting application that acts as a decision-making system. In addition, Aragon provides a template for users to create and deploy smart contracts, applications, and organizations.

In this post, we will focus on the Voting application, since voting is the primary action of most DAOs. Moreover, the Aragon Voting application is one of the most used applications in Aragon DAOs.

The application defines two conditions that must be met for any vote to be approved.

1. The percentage of affirmative votes must be greater than or equal to the percentage of required support across all votes.

2. The minimum number of participants required states the minimum percentage of votes among all possible votes in the DAO.

Note that both parameters can be changed by voting.

Another decision-making system that is being pursued as an Aragon application is Conviction Voting (CV), which originates from the fusion of social sensors. CV aims to represent the combined preferences and expressions of individuals on a proposal, rather than just providing a punctual "voting" window. Thus, their individuals express preferences (votes) for certain proposals, and the longer they maintain their preference for a certain proposal, the longer their "belief" in that proposal. Individuals can change their preferences (votes) at any time. In a DAO, members represent their preferences by allocating their limited tokens to one or more proposals. The longer they stay there, the more "belief" in the proposal accumulates and the greater the chance of reaching the passing threshold. Note that this threshold is dynamic and depends on the DAO's treasury, and CV makes it possible to deploy it in a real environment through simulation testing.

There are other ways to change the decision-making process in Aragon and change not only the voting application, but also the way the organization works. For example, the Committee Template It facilitates the creation of different committees (sub-groups) within the DAO. The DAO community can delegate certain decisions or tasks to these subgroups, which can operate autonomously. The idea is to promote the scalability of the decision-making process.

Aragon Voices

Aragon Voices is a key component of Web 3.0 voting infrastructure, driving unstoppable decentralized governance with zero voting cost. Anyone with an Ethereum address can design and implement On-Chain Proposals for their ERC20 projects, where community member votes can be cast without consuming gas fees and recorded as metadata to Ethereum and IPFS, or using Signaling Proposals with a centralized backend, which is universally verifiable on Aragond's custom vote calculation blockchain Vochain. Only the On-Chain Proposal creator needs to pay the gas fee to deploy the information to the mainnet. For some communities without ERC20 tokens, the upcoming release of Aragon Govern will enable anyone to issue tokens and specify a governance structure in minutes, which can then be imported into Aragon Voice.

Why is secure anonymous voting important?

The logic of anonymous voting is very simple: if there is no way to monitor voters' actual voting choices, then bribes and threats to voters lose their effectiveness.

For example, imagine a group of Amazon warehouse workers who want to create a voting proposal on whether to form a formal union. This situation can be very intense, with huge external social pressure, and it is difficult to get the majority to participate in the vote and follow their own hearts, especially when the voting is not anonymous. However, the legal and practical obstacles to joining a union do not affect decentralized autonomous organizations, so workers can set up a DAO on Aragon Client (or Aragon Govern) and distribute tokens to every worker in the warehouse. They will then be able to create an anonymous vote to reduce pressure until every vote is cast to eliminate any "influence bias". The results will highly credibly reflect how the workers feel about the matter, both in themselves and their employers.

Fairness and Verifiability of the Voting Process

Fully transparent voting removes any doubts about the integrity of the vote, meaning that the vote is unbiased and run fairly. Universally verifiable means that from process creation to vote recalculation, every operation is transparent and can be audited by a third party. Voters themselves can also query the Vochain Explorer with their ballot receipt to check if their vote was counted correctly. It’s a virtuous cycle: a trusted neutral platform deployed on-chain convinces more members to recognize the voting results, which encourages participants to think that their votes matter, which makes everyone more actively involved in voting governance.

Recent Developments on the Aragon Platform

Already a powerful tool for managing DAOs, the Aragon Platform has undergone a series of updates to improve its functionality. Aragon is using Polygon as a full-stack scaling solution. After integrating with Polygon, the cost is slashed from over $500 on Ethereum to around $0.1 on Polygon. This slashes the cost of managing DAOs and voting. It improves transaction speed and user experience on Aragon.

This announcement marks a major step forward in the evolution of DAOs, as DAO creators will now have an option that will allow them to deploy fast and efficient DAOs directly on Polygon, enjoying scalability and near-zero fees on the Polygon POS chain.

With its easy-to-use templates and applications, Aragon makes the creation of DAOs accessible to everyday people and paves the way for new organizations to be built in the decentralized era.