How to start a DAO on Power Protocol
The ChildDAOs function is now live in the Power Protocol dApp. Anyone can now propose to create a DAO and inherit Power's unique security and accountability features while decentralizing DAO governance.
Accountability: Power Protocol makes governors accountable for achieving the goals proposed in creating the ChildDAO. If they do, they are rewarded; if they don’t, their $POWER can be taken from them.
Security: Better accountability leads to more security, as it gives investors in ChildDAOs security that the funds they put in will be used as proposed.
Decentralizing DAO governance: ChildDAOs gain access to the core PowerDAO community of stakeholders, people with an active desire to participate in DAO governance. Therefore, ChildDAOs gain a valuable resource for success - decentralized and productive voters.
This article will explain how to create a DAO on Power Protocol and catalyze the PowerDAO community to generate effective and accountable governance decisions.
1/ Getting started with initiation proposals
To get started, you have to develop a brief for your ChildDAO. This brief makes up your initiation proposal.
It should consider the 2 stakeholders you will need to attract to be successful:
- Governors - $PWR token holders to participate in the governance of your DAO
- Investors - $WAVES holders to invest in your DAO
Importantly it should also state explicitly the goal and KPIs to track the goal for the DAO. A goal should be concise, independently verifiable, and time-based.
For example, TurkiyeDAO seeks to raise $1million in the treasury by July 2023 to fund the building of a school in Turkiye.
You can find the template for making a ChildDAO initiation proposal here: https://app.power.tech/daos/3P5825BbZE2tMtdTWKzSdBttUQbGW7gfZw5
We won’t discuss the template in detail, as you can read it yourself. Instead, we will focus on how it works and why you must write a clear proposal to the community to be successful.
2/ Attracting Governors
Each initiation proposal must state the $PWR tokens they want staked. This is a measure of decentralization; the more $PWR requested to be staked, the more decentralized the DAO will be.
Everyone who stakes $PWR will become a part of the Governance Committee. Governors can propose and vote on ways to use the DAO treasury. They also become accountable for the delivery of the DAO goal.
Every use of the DAO treasury must be proposed to the community of governors and judged by them on whether or not it will help move the DAO toward its goal. It will be approved if they believe it does move the DAO towards its goal.
Once a treasury proposal is approved, governors have explicitly put their money where their mouth is; they have staked their power on the proposal working towards achieving the goal. If the proposal does not work towards the goal, governors and community members can propose slashing the stakes of those who voted for it.
As you can see, the stakes are high for PWR holders to get involved in your ChildDAO. Therefore you should consider and state the value proposition for doing so in your initiation proposal.
3/ Attracting Investors
Each initiation proposal must state the target funds they want to raise for the treasury to complete the DAOs goal. Power Protocol has a unique function for DAOs - to hold in escrow treasury funds until a specific milestone is reached. This is called the “Initiation Period.”
The initiation period is a safety mechanism for investors. If the DAO goal cannot be achieved without a specific level of treasury funding, investors shouldn’t have to waste their money hoping the goal is met. During the initiation period, all investor's funds are held in escrow until the goal is met. If the goal is not met, the funds will be returned in full to investors.
This mechanism gives investors confidence that their funds will not be lost or misused. It means DAOs can bootstrap liquidity with powerful and engaging proposals without fear of misappropriating or taking custody of investor funds.
4/ Stating the value proposition
Each initiation proposal is geared towards gaining action by attracting these 2 groups of people:
- Governors will stake their money and reputation on their ability to discern a good and productive proposal from a bad one that misuses treasury funds.
- Investors will stake their money on the proposal's content and whether or not they believe the goal is worthwhile and achievable.
DAO creators should therefore demonstrate clearly the value proposition for both parties. Why a governor should be part of your DAO and why someone should invest are paramount questions to answer in the initiation proposal.
Typically the reason will be profit is distributed to investors and governors. So the details of distribution should be made clear in the proposal.
A new era of decentralized governance
Power Protocol represents a leap forward in decentralized governance systems. By making governors accountable, it reduces the risk of collusion or corruption, as with single-token governance. The enhanced accountability secures investors' funds from misuse, as governors have skin in the game. The escrow functionality reduces the risk for investors to support the DAO goals, knowing that if the DAO is unsuccessful in raising capital, their funds will be repaid.