How to choose the right blockchain for your DAO

In this guide, we'll explore a few blockchains and describe their key differences, so you can choose the best chain for your DAO.

What is a blockchain?

A blockchain is a distributed ledger that anyone in the world can write on, but no one can alter the previous records of. Think of it like an immutable spreadsheet. You’ll use a blockchain to record votes, execute decisions, make transactions, and even build applications.

Blockchains are secure and universally-verifiable, meaning anyone can read what they say. However, once something is implemented, it cannot be reverted. This makes blockchains great for storing the results of a vote or sending monetary transactions, but not great for personal information or executing actions that might need to be reverted.

Why does my DAO need to be on a blockchain?

DAOs are blockchain-enabled communities, meaning they use the blockchain to power their actions. DAOs vote “on-chain,” meaning they sign and record votes on the blockchain. They also use cryptocurrencies for payments, voting, ownership distribution, and more. Cryptocurrencies exist on the blockchain and require on-chain actions, such as signing transactions, to be moved.

Comparing the options

Here are three popular blockchain options for your DAO:

Ethereum blockchain

Ethereum is an L1 (layer 1) open-source, distributed computing network that enables the creation of decentralized applications (dApps). These applications have:

  • High security.
  • More reliability in transactions (fewer unexpected errors than other chains).
  • Slower and more expensive transactions than other chains (because it's so popular, there's a high volume of transactions).

This chain is best for large, established DAOs with large treasuries that want to prioritize security, but are okay with paying a high fee for transactions.

Polygon blockchain

Polygon is a blockchain scalability platform that runs in parallel to the Ethereum Blockchain as an L2 (layer 2). Compared to the Ethereum Mainnet, Polygon has:

  • Lower fees to make a transaction.
  • Faster transactions.
  • Lower security than Ethereum.

This chain is best for small DAOs that don’t want to pay a high fee for each transaction, but are okay with the security trade-offs and the slightly more limited capabilities of Polygon. Please keep in mind that if you use the Polygon network for deploying your DAO, all your assets (minted token, treasury vault, etc.) must also be stored on the Polygon network.

Arbitrum blockchain

The Arbitrum network is a new L2 blockchain similar to Polygon. It is designed to improve the capabilities of the Ethereum blockchain by boosting its speed and scalability. Arbitrum has:

  • Low fee costs.
  • Faster transactions.
  • Lower security than Ethereum, but higher than Polygon.

This chain is best for small DAOs that are comfortable using a newer chain that hasn’t been as battle-tested as Ethereum.

Using Optimistic Rollups, Arbitrum records batches of submitted transactions on the Ethereum mainchain and executes them on a cheap side-chain, while leveraging Ethereum to ensure correct results. Please keep in mind that if you use the Arbitrum network for deploying your DAO, all your assets (minted token, treasury vault, etc) must be stored on the Arbitrum network.

Arbitrum doesn't have its own native utility token and uses the ETH token for paying transaction fees.

ARAGON EXPERTS
For these advanced topics, you may want to consult experts with hands-on experience in your context

Mainnet or Testnet?

Blockchains can be divided into two categories:

  • Mainnets
  • Testnets

A Mainnet blockchain is a live blockchain that you can use to send and receive cryptocurrency transactions or any other kind of digital data (for example, run a DAO or a decentralized application). Each executed transaction on Mainnet involves gas fees.

In contrast, a testnet is a network with the same functionalities as a mainnet, but used for testing purposes. On this blockchain, the transactions fees are paid with fake coins that are claimable for free. Think of a testnet as a safe sandbox for trying new things.

Each mainnet chain comes with various testnets, so it’s best practice to use the corresponding testnet with the mainnet you plan to deploy on. For example, you could test your DAO on the Rinkeby network, then deploy the main DAO on Ethereum.

It is strongly recommended to run a new DAO’s governance processes on a testnet and check things such as governance thresholds and treasury management before deploying to a mainnet, where you’ll need to pay gas fees and transactions cannot be reverted.

What is off-chain voting?

Off-chain voting is when a DAO records votes on a platform that isn't deployed to the blockchain. No gas fees are necessary, since the platform doesn't interact with the blockchain. It also means actions of the vote cannot be executed automatically, because the off-chain platform is not built on smart contracts.

Snapshot is an example of an off-chain voting platform. In Snapshot, users sign votes with their wallets, and those signed transactions are stored within the software.

In an off-chain vote, the results need to be executed by a multisig after the vote has concluded. Or, someone can gather the vote results and execute them in a smart contract. This removes the “trustless” aspect of voting, but can be a good safeguard in case a malicious proposal is passed and also a good way to save gas.

Which chain is best for my DAO?

While there are trade-offs between blockchains, a DAO Expert can help you narrow down your needs. DAO Experts are verified service providers in the crypto space who can help you build and deploy your DAO.

Most DAOs choose to deploy on Ethereum because of the availability of assets and higher security. Ethereum also has easier access to on and off ramps. On many rollup chains, you need to pass through Ethereum first, which adds more steps and higher fees. Some DAOs may use a combination of both on and off-chain voting to save money on gas fees and maximize speed.

A combination of on-chain actions, such as deploying a token on Ethereum, and off-chain voting, such as Snapshot, is a popular way to run a DAO.

This guide was last updated in August 2022. Since the DAO space is continuously evolving, we're regularly updating the guides and adding new ones.
Do you want to be notified when new guides are published?
Do you still have questions? Let us know which topics we should add to this guide.
What would you include in these guides? Let us know!
Want to keep up to date with new resources and tools from Aragon?
ANIMATION COMMUNITY LINKS ARAGON

A global distributed community

We support the advancement of DAOs and decentralized governance solutions in all geographies and industries.
Be part of this revolution.

Aragon Project
EARLY BIRD ACCESS
Join the Fight
ARAGON AMBASSADOR PROGRAM
Apply Now