How to Manage Charitable Funds Using DAOs on the Blockchain (With Algorand Examples)

Blockchain DAOs are transforming charitable funds by introducing transparency, decentralization, and community governance to the donation process. Instead of relying on traditional centralized entities to manage funds, DAOs use smart contracts to automate the allocation and distribution of donations.

This ensures that funds are used efficiently and transparently, with the community having a say in how the funds are allocated. The UkraineDAO is a notable example, where donors can vote on funding proposals and track how their donations are being used in real-time. Overall, blockchain DAOs are revolutionizing charitable giving by making it more transparent, efficient, and community-driven.

How Blockchain DAOs Manage Charitable Donations

The process of how blockchain DAOs for charity transform the management of charitable funds typically involves several key steps:

  1. Creation of the DAO: A group of individuals or organizations creates a DAO on a blockchain platform. They define the mission, goals, and governance structure of the DAO, including how funds will be managed and distributed.
  2. Tokenization of Funds: Charitable funds are tokenized, meaning they are converted into digital tokens on the blockchain. Each token represents a share or portion of the total funds.
  3. Community Participation: Anyone can participate in the DAO by acquiring tokens. This gives them a stake in the organization and the ability to participate in governance decisions, such as approving funding proposals.
  4. Proposal Submission: Individuals or organizations can submit proposals for funding, outlining how they plan to use the funds for charitable purposes.
  5. Voting: Token holders vote on funding proposals. The voting process is typically transparent and conducted on-chain, meaning that the results are publicly accessible and tamper-proof.
  6. Funding Allocation: Approved proposals receive funding in the form of tokens. The DAO’s smart contract automatically executes the transfer of tokens to the recipient’s address.
  7. Transparency and Accountability: Since all transactions and decisions are recorded on the blockchain, there is a high level of transparency and accountability. Donors can track how their donations are being used in real-time.
  8. Impact Reporting: Recipients of funding are required to provide regular reports on the impact of their projects. This helps ensure that funds are being used effectively and that the DAO’s goals are being met.

Each step requires careful planning and execution to ensure the success of the program. It’s also important to comply with all relevant regulations and laws for managing blockchain charitable donations.

Algorand Blockchain for DAO-based Charitable Fund Development

Developing on the Algorand blockchain involves using tools like AlgoSDK to interact with the blockchain. Developers can create smart contracts, handle transactions, and manage assets programmatically, enabling a wide range of decentralized applications for charitable funds.

To begin development, we need to install the algosdk library and import algosdk, a crucial step in initializing our Algorand blockchain project:

const algosdk = require("algosdk"); // Import AlgoSdk Library

We need to create an Algo Client using server, port, and token:

const token = "YOUR TOKEN HERE";
const server = "https://testnet-api.algonode.cloud/";
const port = "PORT HERE";

// Algo Client creation
let algodClient = new algosdk.Algodv2(token, server, port);

Create a Smart Contract for Charity on Algorand

To create a smart contract, first, we need a creator account. Use the generate Account () method provided by AlgoSDK:

let creator = algosdk.generateAccount();

What are Smart Contracts?

Smart contracts in Algorand are self-executing contracts with terms written in code, deployed on the Algorand blockchain. They automatically execute when conditions are met, enabling decentralized applications, asset management, and voting mechanisms for transparent charitable giving.

Smart Contract Storage

Smart contracts have 3 different types of storage:

  • Global Storage: Data stored globally for the contract (up to 64 key/value pairs).
  • Local Storage: Specific to each account opted into the smart contract.
  • Box Storage: Used for maintaining a large amount of state.

Create a Smart Contract

Create a JavaScript function for deploying a smart contract on Algorand.

async function createDAO(){
    // Smart Contract creation method
}

we first need to write the logic in Teal (Transaction Execution Approval Language) and then compile this Teal logic into a binary format that can be executed by the Algorand Virtual Machine (AVM). This compiled Teal code is what defines the behavior of the smart contract on the Algorand blockchain.

Prepare a Teal Logic

Teal (Transaction Execution Approval Language) is Algorand’s efficient, secure, and deterministic smart contract language. It enables complex logic for various functionalities like multi-signature transactions. Teal is stack-based, compiled to a binary format, and executed by the Algorand Virtual Machine (AVM), ensuring consistent behavior across the network.

We need to create an approval program and also a clear program. Include these steps into the function called createDAO.

const approvalProgramSource = `#pragma version 2
    txn ApplicationID
    int 0
    ==
    bnz main_l6
    txn OnCompletion
    int NoOp
    ==
    bnz main_l3
    err
    main_l3:
    txn Sender
    byte "creator"
    app_global_get
    ==
    bnz main_l5
    int 0
    return
    main_l5:
    byte "vote_counter"
    byte "vote_counter"
    app_global_get
    int 1
    +
    app_global_put
    int 1
    return
    main_l6:
    byte "creator"
    txn Sender
    app_global_put
    int 1
    return`;



const clearProgramSource = `#pragma version 2
    int 1`;

Compile Teal source

After creating the Teal logic for the smart contract and the JavaScript method to deploy it, the next step is to compile both Teal sources. This involves using the Algo SDK’s compileTeal function to convert the Teal code into a binary format that can be executed on the Algorand blockchain. This compiled Teal code is then used in the JavaScript method to deploy the smart contract.

//compile teal codes
const approvalCompileResp = await algodClient
    .compile(Buffer.from(approvalProgramSource)).do();

const compiledApprovalProgram = new Uint8Array(
    Buffer.from(approvalCompileResp.result, 'base64')
);

const clearCompileResp = await algodClient
    .compile(Buffer.from(clearProgramSource)).do();

const compiledClearProgram = new Uint8Array(
    Buffer.from(clearCompileResp.result, 'base64')
);

Define Global and Local storage

// define uint64s and byte slices stored in global/local storage
const numGlobalByteSlices = 1;
const numGlobalInts = 1;
const numLocalByteSlices = 1;
const numLocalInts = 1;

Deploy the Smart contract onto the Blockchain

const suggestedParams = await algodClient.getTransactionParams().do();

// Create Smart contract
const appCreateTxn = algosdk.makeApplicationCreateTxnFromObject({
    from: creatorAcc.addr,
    approvalProgram: compiledApprovalProgram,
    clearProgram: compiledClearProgram,
    numGlobalByteSlices,
    numGlobalInts,
    numLocalByteSlices,
    numLocalInts,
    suggestedParams,
    onComplete: algosdk.OnApplicationComplete.NoOpOC,
});

Sign in transaction and get the AppId of the smart contract

// Sign and send
await algodClient
    .sendRawTransaction(appCreateTxn.signTxn(creatorAcc.sk))
    .do();
const result = await algosdk.waitForConfirmation(
    algodClient,
    appCreateTxn.txID().toString(),
    3
);

// Grab app id from confirmed transaction result
const appId = result['application-index'];
console.log(`Created app with index: ${appId}`);

How to Interact with Charity Smart Contracts on Algorand

Before a user can interact with a smart contract, they need to opt in their account: 

async function optIn(){
    const suggestedParams = await algodClient.getTransactionParams().do();

    // Opt in with user account
    const appOptInTxn = algosdk.makeApplicationOptInTxnFromObject({
        from: userAcc.addr,
        appIndex: 640569588,
        suggestedParams,
    });

    // Sign in transaction
    await algodClient.sendRawTransaction(appOptInTxn.signTxn(userTwoAcc.sk)).do();
    await algosdk.waitForConfirmation(algodClient, appOptInTxn.txID().toString(), 3);
}

After the user account can interact with the smart contract.

async function callNoOp(){
    const suggestedParams = await algodClient.getTransactionParams().do();

    const appNoOpTxn = algosdk.makeApplicationNoOpTxnFromObject({
        from: userAcc.addr,
        appIndex: 640569588,
        suggestedParams,
    });

    await algodClient.sendRawTransaction(appNoOpTxn.signTxn(userTwoAcc.sk)).do();
    await algosdk.waitForConfirmation(algodClient, appNoOpTxn.txID().toString(), 3);
}

Conclusion

Leveraging Decentralized Autonomous Organizations (DAOs) for managing charitable funds offers a transparent and secure approach to resource allocation. By utilizing blockchain technology, DAOs ensure that every decision is recorded immutably on the blockchain, fostering accountability and trust. Additionally, DAOs enable stakeholders to participate in decision-making, ensuring that resources are allocated based on community consensus. This innovative approach not only enhances transparency but also streamlines the process, making charitable fund management more efficient and inclusive.

You can learn more about Algorand Development using the following link: https://developer.algorand.org/docs

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