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The Five-Point Palm Exploding DAO Technique
0x8DB8
January 28th, 2022

Or Creating The Minimum Viable DAO (MVD)

*Disclaimer: This is an entirely theoretical/suggestive piece, and by no means is meant to be prescriptive in nature. While it has been informed by many people who have created DAOs, and gone through the trials and tribulations of doing so, please use your judgement and common sense as you move forward. :)

Quick primer — what’s a DAO?

DAO stands for decentralized autonomous organization and at its crux:

  • Is a community or group of people banded together for a singular purpose
  • Usually within a flat organizational structure (meaning no one person calls the shots/lacking hierarchy)
  • Often with a group “bank” account called the DAO treasury
  • Decisions within the DAO are made via governance in the form of DAO voting — a formal flow of putting proposals forth that outline certain group actions or decisions voted on by the members of the DAO

Quick five — you know what a DAO is. What are the five points to consider?

The Five-Point Test for a Minimum Viable DAO (MVD)
The Five-Point Test for a Minimum Viable DAO (MVD)

Doesn’t make sense yet? Don’t worry, it will. Soon™.

Now, why have people been so excited to create DAOs of late? Are they novel?

DAOs are not a new concept by any means. The first formal DAO, called “The DAO” was formed in April 2016, and though it did not stand the test of time, it spawned the creation of a generation of new DAOs. But even before that initial “official” DAO — they’ve been around forever. DAOs have existed in the form of group chats with a Venmo ledger among friends, the shared piggy bank for that hobbyists’ group at the community center, or as basically every local girl scout’s chapter in existence.

Okay, I get that…but why NOW?

In the last 6-12 months, DAOs have experienced a new wave of rebirth. Major DAOs have made headlines such as PleasrDAO, ConstitutionDAO, and PartyDAO, with grand visions of collecting rare art, buying the Constitution, and collaborating with various organizations and efforts to raise funding in new ways.

The promise of making your dreams a reality, alongside your friends, in a seemingly short period of time with assumedly great ease is appealing. No doubt.

Different tools, platforms and collectives have preached the simplicity of creating a DAO — “Here just do x, y, and z with our tools and you’re good to go!” or “Just band together with your homies and you’ve got a DAO; you can accomplish the world and people will give you money!”.

Sorry fam, it’s not that simple. Now enters…

The “Five-Point Palm Exploding DAO Technique” for MVDs

I created this five-point technique as a method for anyone to validate their concept for a MVD, or Minimum Viable DAO.

If you watched Kill Bill, you may recognize where I borrowed the five-point title from. ;)

And if you didn’t, but you’re curious, check this out (you’re welcome) —

The Minimum Viable DAO (MVD)

Now, what exactly do you need to create a MVD?

There are five broadly applicable concepts to consider.

  1. North Star — What is the one-liner purpose for this DAO?
  2. Centralized vs. Decentralized — Can your DAO truly function in a decentralized manner to achieve your North Star goal?
  3. Logistics — Have you identified the logistics that need to be handled to accomplish your North Star goal? Are they feasible?
  4. Narrative — What are you pitching your community and what is the narrative that will bring DAO members together? Why is the DAO doing what it’s doing?
  5. Lifespan — Is this looking to be a DAO that exists for two months, a year, or forever?

If you’re able to validate each of these five points, you should theoretically have what it takes to create a MVD for your grand vision.

In the coming sections, we’ll break each of these down a little further into:

  • Why is this point even important to consider?
    • Speaks for itself.
  • What this looks like in action: ConstitutionDAO
    • An example from the context of building ConstitutionDAO. I was a core member, and share from my experience. Our core team had to do a LOT of thoughtful deliberating, as should you!
  • How do you figure this out?
    • Recommendations for how to validate a given point, if you’re not sure how.

Point One: North Star — What is the one-liner purpose for this DAO?

Why This Is Important

You need to be able to boil down the purpose of what your DAO is meant to accomplish, or if not accomplish, exist for. Don’t make it too broad that anything goes, or too specific that you’ll feel like your hands are tied in the future.

The point of having this DAO North Star is to be able to use it to guide your decisions both when you initially prop up the governance, structure, and flow of your DAO, but also later when you may be faced with unexpected choices to make. You need something to help guide you — that’s when you turn to this.

What This Looks Like In Action

For ConstitutionDAO, our North Star was to place a bid on the copy of the US Constitution that was being put up for auction a week after the initial birth of our DAO. That’s it. Simple.

Now when we began to entertain how we would accomplish that, it was clear we would need to raise a lot of money in order to place that bid. When we didn’t win the auction, our promise to those who had put in money for the cause, was to issue refunds. We had a lot of paths before us, many eyes on us, and pressure from various different angles.

Ultimately though, we were able to look to our North Star purpose and acknowledge that since we no longer were trying to place a bid to win the auction for the copy of the Constitution, we no longer had a purpose to exist as a DAO. If we wanted to come together and create a new treasury to accomplish a different goal or for another purpose, we could do so, but in the context of a new DAO, not ConstitutionDAO.

How Do I Figure This Out?

Sit down by yourself or your other core team members and strip away all of the noise. Ask yourself these questions:

  • What is the high signal message or purpose you’re trying to communicate?
  • WHY are you trying to creating a DAO?
  • WHAT is it meant for?

Adjust to make sure it’s not too broad or narrow. That’s your North Star.

Point Two: Centralized vs. Decentralized — Can your DAO truly function in a decentralized manner to achieve your North Star goal?

Why This Is Important

At a high level, it’s important, and obvious, that a DAO needs to be decentralized. Now what exactly that means and how rigid that definition is, may vary based on who you ask. What I can tell you is, that you need to ensure that it’s NOT centralized — you need to ensure that in order to accomplish your North Star goal, you do not NEED to have a centralized hierarchical structure.

What exactly does that mean?

Well, DAOs are intended to have a flat structure, or as close to a flat structure as possible. This means that there isn’t any one person or specific group of people that over the long run routinely get to make all of the important decisions. The decisions of the DAO are intended to be made as a collective.

So when I ask you, can your DAO accomplish or fulfill its North Star vision in a non-centralized way, what I’m really asking is — do you see someone or a specific group of people making the choices? Will governance by all DAO members truly play the defining role in all of the DAO’s actions and choices?

If this is a no, then you don’t have a DAO. And that’s okay! That just means it’s time to explore other models of organization. For example, if a brand decided to go and create a DAO, and their North Star was to create an NFT collection for said brand…it’s not improbable that the owners/creators of that brand may want to make all of the decisions when it came to the creation of that NFT collection. In that scenario, a DAO structure may not be the right fit.

What This Looks Like In Action

For ConstitutionDAO, things came together incredibly quickly. We were up and running in the matter of hours, not days, and began executing via a core group of team members. Very quickly, our community grew at a scale we couldn’t have possibly imagined — tens of thousands populated our Discord server and thousands had contributed to the treasury for the purpose of placing a bid on the Constitution.

We had neither the bandwidth nor structure in place to use governance to guide every decision we made initially. Oftentimes, during the early stages of DAO conception, choices are made by a smaller core group of people — it’s not quite so decentralized. It’s true. However, we had a committee working on and had every intention of establishing a governance structure for the future of our DAO, should we win our bid at the auction.

We had long term plans to establish governance and ensure that every choice thereafter was made by DAO members as a whole rather than by our core group. It was one of the most important reasons why we chose as a core team to not hold any of the $PEOPLE tokens for ourselves — we wanted to ensure that if that was an action for the DAO to take, it was a choice that was made by the DAO at large and not by those on the core team at the beginning of ConstitutionDAO.

How Do I Figure This Out?

Look back to your North Star (Ha! See how we’re using it already to guide considerations?). Really drill down on how you see decisions being made in the future to fulfill the purpose or goal of the DAO. If you really think about it, you should instinctively know whether a decentralized or more centralized structure is most likely needed to accomplish that North Star vision.

If it happens to be that decentralized is not the way to go, no biggie. That just means you may not have a DAO on your hands. It doesn’t mean you can’t accomplish what you want to; it just means that you may need to consider other organizational structures — maybe it’s a corporation, maybe it’s a club, maybe it’s a community that takes the shape of a neighborhood Facebook group (but, goodness, I hope not).

Point Three: Logistics — Have you identified the logistics that need to be handled to accomplish your North Star goal? Are they feasible?

Why This Is Important

Logistics in every DAO are going to look very different. It’s important to examine what you need to accomplish on the operational and logistical side of things because if you don’t, things have the potential to get out of hand very quickly. You need to consider, atleast in a broad sense, what operational things need to be handled or overseen to make the North Star vision a reality. Simply from a common sense and feasibility point of view.

What This Looks Like In Action

In the context of ConstitutionDAO, we needed to think about:

(1) Logistical/operational considerations most DAOs make (outlined in the section “How Do I Figure It Out?” below)

(2) Logistical/operational considerations for OUR specific goal

Since we aimed to place a bid at the Sotheby’s auction for the Constitution, that involved figuring out how to even place a bid. Some (and by no means all) other things we spent time figuring out early include:

  • Partnerships with museums for if we won the auction, and where the Constitution may go next
  • Partnerships with JuiceBox (we also explored Mirror as another platform) to set up our crowdfund for receiving contributions in the form of ETH
  • Operational considerations around our crowdfund strategy — receiving contributions from whales, people in our network and blasting our purpose far and wide to get others on board
  • How to work with Sotheby’s and what legal/financial/operational considerations needed to be made
  • Management of our Discord, Twitter, Instagram
  • Website development and updates

We had to think about who was going to do what and the appropriate timeline.

How Do I Figure This Out?

There are operations/logistics common among many DAOs. Some, not all, are:

  • If you plan to have a DAO treasury — how will you handle that? Whether it’s a Gnosis Safe or something else, figure out what you need to set this up sooner rather than later
  • Many use Discord as a place for their community (setting up permissions, channels, etc. is not something to take lightly)
  • Do you need legal protections and if so, does it make sense to consider setting up an LLC for the DAO? Who will be on the paperwork (also remember, paperwork takes many hours)?
  • Bandwidth — how much manpower and on what timeline do you need to execute certain tasks? Having an understanding of this and how much time who is going to be able to put in, especially at the beginning can be helpful

Beyond that there are some things that will be specific to your DAO that you should consider. These will not be something I can simply outline but you and your core team should sit down and consider the FLOW of how things may play out and the different branches of each step, to move your DAO in the direction of its vision. Naturally, logistical and operational considerations will arise. Note them down and don’t ignore them. Assess their feasibility. Be decisive.

Point Four: Narrative — What are you pitching your community and what is the narrative that will bring DAO members together? Why is the DAO doing what it’s doing?

Why This Is Important

It’s important to have a narrative. This helps you, the core team, but also your larger community of DAO members, and potentially even the external world (it depends from DAO to DAO how much the external community is a factor). It bands all of you together, keeps you aligned, and makes sure the message you are conveying internally and externally is the same.

Yes, this is similar to the North Star for your DAO, but it’s also an expansion of it. Remember, the North Star is a one-liner purpose; your narrative is your story and can extend to how you plan to execute.

It can also help inform your marketing and growth strategy at large. The DAO narrative can guide messaging or how the DAO vibes with campaigns, initiatives, partnerships or even events. It adds a little bit of color and personality to the skeleton of the North Star vision initially established.

What This Looks Like In Action

For ConstitutionDAO, our narrative was simple — let’s all buy the Constitution together. We wanted to establish this feeling of camaraderie, playfulness, ridiculous ambition (I’ll let you be the judge of how successful we were), and infectious energy.

We wanted you to want to buy the Constitution with your friends and have fun being a part of that mission. Many on the core team shared an interest in meme-culture, growth and simply working on a project together with our friends and because we wanted to — because we cared. That was part of our genesis narrative as a team and that extended to our strategy to brand, grow and promote ConstitutionDAO’s vision. We did that through memes, our Discord community culture, the official statements we put out, and our actions as a whole.

*An additional note re: ConstitutionDAO — At the time we did announce and begin building the community, we didn’t begin simply writing smart contract code immediately. Instead, we looked to the greater ecosystem to find partners with audited, more secure solutions to help us with our fundraising efforts instead of “moving fast and breaking things”. Before we actually raised any money, we took our time to be responsible and ensure that a refund mechanism was not only a top priority, but also possible.

I included the above note because there have been instances in which DAOs have ambitiously and sometimes irresponsibly announced their vision and plan to the public, before doing sufficient diligence. This may have been tied to an inadequate assessment of logistical/operational considerations, a North Star that wasn’t well scoped or possibly a misaligned narrative. When you publicly share the story of your DAO, you bear a certain responsibility. Act like it.

How Do I Figure This Out?

What your narrative looks like and indirectly, what your marketing, branding, growth shape into, are specific to your DAO. It’s also possible you don’t need all that, and the focus will be on simply defining the vibes and personality of the DAO. To identify what that entails — look to your North Star vision and what you, your core team and DAO members as a whole, want that narrative to be.

The expected narrative can evolve and change over time, but it’s also important to simply HAVE one. You can’t make shit happen by being a blank piece of paper. Nobody wants that. Dig into what your DAO stands for, the vibe you want to put forth, and what your community is connected by. Look to your North Star for a gut check. Write your narrative.

Point Five: Lifespan — is this looking to be a DAO that exists for 2 months, a year, or forever?

Why This Is Important

This one is by far the simplest to consider, yet important nonetheless. You and the core team need to have SOME sense of the lifespan of your DAO. Not all DAOs are meant to last for eternity. Most aren’t. They shouldn’t. No — they REALLY shouldn’t. DAOs or any kind of organizational structure that lasts beyond the length of its productive life is a drain to the community, energy, time and resources better spent elsewhere.

This is more likely to happen if there’s zero consensus on what the goals or lifespan may look like — part of why you’re going through this mental exercise is to prevent that. Again, organizational structures evolve over time, and as such, the expected lifespan may as well. That’s fine. What you shouldn’t do is have no expectation set for the core team or the larger community of DAO members ever.

What This Looks Like In Action

For ConstitutionDAO, it was relatively straightforward. We knew the DAO had the purpose of placing a bid at the auction that was one week away from the inception of our DAO. Two things were possible at the time — either we won or we didn’t. If we did win, then we would have to establish governance, figure out what had to happen with the Constitution, etc. The DAO would likely have a purpose to exist for a long time, years. At the time, I don’t think we truly considered HOW long it could exist for or what our role within the DAO may actually look like beyond a week or two. Things happened so quickly.

However we didn’t win. While the DAO was pretty much laid to rest soon after the conclusion of the DAO, we had not seriously considered the time or bandwidth of even the core team. Not everyone who was heavily involved the week of the auction bid, was able to contribute as much thereafter. This impacted our overall bandwidth. I think if we had won and we intended for the DAO to exist for much much longer, each of us would have had to take much closer look at what our individual bandwidth was as well as what it was collectively. It could have had major negative downstream effects since we hadn’t adequately assessed either the lifespan of our DAO or involvement in it. It’s crucial to.

How Do I Figure This Out?

This is as straightforward as going through the mental exercise of the different scenarios of how your DAO can play out over time, which is aligned with your North Star, and what your role and that of your core team looks like. Consider bandwidth, best and worst scenarios, and that should help you come up with some relative range of an expected lifespan for your DAO.

Closing Considerations

The last few things I would encourage you to ask yourself —

  • How simple can you go?
    • You should start with a MINIMUM VIABLE DAO, remember? Start simple, validate your concept, and scale up.
  • Who may be a part of the core team?
    • What is their bandwidth realistically?
  • What might you governance structure look like?
    • How will voting work i.e. will you implement quadratic voting?
  • What are your metrics of success for your DAO?
    • i.e. maybe it’s not about scale, maybe it’s about engagement, maybe it’s purely how much money is raised for a given goal — this can vary, so you need to identify what’s specific for your DAO.
    • This will help later when you need to assess the success of your MVD and whether it’s a good idea to scale up, course correct, or shut down.

Quick Five Point Summary (ICYMI)

  1. North Star — What is the one liner purpose for this DAO?
  2. Centralized vs. Decentralized — Can your DAO truly function in a decentralized manner to achieve your North Star goal?
  3. Logistics — Have you identified the logistics that need to be handled to accomplish your North Star goal? Are they feasible?
  4. Narrative — What are you pitching your community and what is the narrative that will bring DAO members together? Why is the DAO doing what it’s doing?
  5. Lifespan — Is this looking to be a DAO that exists for 2 months, a year, or forever?

Congratulations! If you’ve made it this far, then you just may have what it takes to set up a MVD. Wishing you good luck and sending good vibes! ❤️

Feel free to hit up my DMs on Twitter at anisha.eth if you have thoughts, feedback or just want to jam on ideas!

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