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How to build a DAO in 5 minutes with Colony

Jack DuRose

8 months ago ·

5 min read

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NewToken_colony.gif DAOs hold within them a promise of Arcadia in the future of work: to enable a group of people to collaborate on a shared project without needing to trust or even know one another. This is a new paradigm for coordination without centralisation; not a firm, but a fluid.

Corporate hierarchies allow us to overcome problems like division of labor, coordination, and quality control. They also provide an alternative to the market-price mechanism for labor. Companies increase in size once they reach a threshold where it’s more cost-effective to employ someone to be available all the time rather than paying an external supplier to do what’s required when factoring in the “transaction cost” of finding and managing those suppliers.


However, DAOs as they stand today do not do that. Tokenholder voting is not the future of organisations. It is suitable only for infrequent, large-scale stakeholder decision making, not the fast-paced environment of day to day organisational operation. Both because it's costly to vote on-chain and because it's time consuming to keep up with the day-to-day of an organization.

It is not something a tech company could use to run and grow their startup. It’s not appropriate for a non-profit that needs to manage day-to-day activities. It is decentralization theatre. The overwhelming majority of the real work and decision making take place behind closed doors, and who has the control behind those closed doors is opaque.

Enter Colony

That’s where Colony comes in. Colony was one of the first projects to start building on Ethereum back in 2014, and to see the full potential of blockchain smart contracts as the basis for new kinds of on-chain organizations that are open, participatory, and most importantly of all, agile.

Over 2022 Colony’s roadmap will roll out, delivering with it a suite of tools that give DAOs flexible ways to take decisions, and manage trust and risk within your DAO. The reality is that different types of decisions require different tools based not only on the type of question being asked, but also how consequential the decision is. The flexibility of this approach to consent in DAOs will allow far more of a DAOs activity to come on-chain. With it will come greater agility, more transparency, and real accountability, and DAOs will finally start to live up to their promise.

One of the key building blocks of Colony’s more agile and responsive approach to DAO tooling, is Reputation. It is an inescapable reality that some people are better at some things than other people, and some people do more work than others. Reputation allows for the emergence of a natural and fluidly evolving hierarchy.

Screenshot 2021-12-15 at 02.02.05.png

Instead of being monitored and evaluated by someone higher up a hierarchical food chain, an individual’s merit within a colony is calculated through a systematic peer review of completed work and represented numerically on the blockchain. This number, by virtue of being rooted in trustless consensus, entitles the individual to direct shared resources of the firm within the remit of their expertise.

Another is Colony’s first governance mechanism: Lazy Consensus. Lazy Consensus transforms the fundamental bias of a DAO from inaction (this thing will not happen unless we agree it will happen) to action (this thing will happen unless someone disagrees enough to bring it to a vote) allowing DAO’s to move rapidly on decisions that are uncontentious.

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Overview of Colony features

Token Creation

Creating your DAO token if you don’t have one in a simple button click. Give your token a snappy name and a memorable ticker symbol, and with the touch of a button you're done.


You can think of domains as projects, departments, teams, circles, or whatever makes sense for your organization. Each domain can have its own separate budget controlled by the contributors to that domain.


Award influence in proportion to merit. Every time a contributor gets paid in your colony’s native token, they earn Reputation in the Domain they earned the payment from. That Reputation gives them power to stake on Motions, and vote in disputes in the Domains in which they have reputation.


Voting on every damn thing is no way to run an organisation. No, not even a decentralised one. You see, voting implies that there is disagreement, and very often there isn’t, so voting is a waste of everyone’s time. In Colony, voting is only necessary if there actually is disagreement about something.

Coin Machine

The fastest, easiest, simplest way to sell your token to your community. 100% of funds raised go straight into your colony to be governed by your community and you can even whitelist participants based on arbitrary criteria such as completed KYC.

Extension Manager

You can think of this as an app store for DAO’s. Extension manager allows you to select, install, configure, and upgrade your colony's chosen features. Features like Coin Machine are extensions and there will be a growing ecosystem of extensions soon.

Build a DAO in 5 minutes

Before we get started, there are three prerequisites and you may need to set up first.

  • Install Metamask (Colony currently only supports Metamask)
  • Go to https://xdai.colony.io/connect. The dapp will prompt you to add xDai chain to your Metamask.
  • Get some XDAI to pay for transaction costs on the xDAI network ($0.1 will be enough to create and operate a DAO on colony). The easiest is to reach out on our Discord and someone will give you some. (Don’t worry, Colony is going gasless very soon, so this annoying bit of friction will no longer be necessary.)

With Metamask connected to the xDai network in place and a tiny bit of XDAI on your wallet, you are good to go.

  1. Claim a username and, if you like, complete your profile.

  2. Continue at ​​https://xdai.colony.io/landing and initiate the creation process by choosing a name and unique URL for your DAO. create_colony_gif1.gif

  3. Choose whether you want to create a new token for your DAO or import an existing ERC20 token that has been bridged to the xDai network.

  4. Almost there! Conclude the creation process by confirming your settings and signing the following eight transactions in your Metamask.

Congratulations, you have successfully created a DAO on Colony. 🎉

Next, you may want to send funds to your DAO or get started with allocating funds to teams you have created and paying contributors. Payments made in your DAO’s native token will automatically earn the recipient reputation points. To make use of Colony’s lazy consensus feature, make sure to install the extension “Motions and Disputes”.

Invite your collaborators and make yourselves comfortable in your new DAO. For more information, find our docs here and do not hesitate to reach out on our Discord should you have any questions.

Jack DuRose

8 months ago ·

5 min read

May 2020

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We are a multi-faceted team of crypto enthusiasts based in Berlin.

© 2021 cryptotesters UG