Decentralised Autonomous Organisations and the Corporate Form

Abstract

It has been suggested that the development of decentralised autonomous organisations (DAOs) will lead to a paradigm shift in the way we perceive businesses. DAOs ostensibly eliminate agency costs due to the absence of a board of directors, automated governance mechanisms and transparency provided by the blockchain upon which the DAO is launched. This article undertakes a comparative analysis between DAOs and corporations and questions whether DAOs really do improve the corporate form. Using a corporate governance and legal realist lens, this article suggests that a number of the purported benefits of DAOs are overly simplified. Moreover, there are several practical and legal obstacles that technological advancements and improved engineering must overcome before DAOs become a viable, mainstream organisational structure. Balancing the inevitable improvement in technology against these significant obstacles, this article predicts an incremental integration of DAOs into society through a hybrid approach, involving interim legal solutions and varying degrees of automation and decentralisation.

Decentralized Autonomous Organizations (DAOs) as Innovative Means to Supplement Transition Governance

“…They run on public, so-called permissionless blockchains and follow behavioral rules that are encoded in open-source software protocols. These rules are enforced by smart contracts, 5 which eliminate the need for intermediaries and create a transparent and efficient system (Tse, 2020).…”

“…In addition, the DAO process uses governance tokens to both showcase the membership to the community and the qualification to submission of improvement proposals and decision-making (stimulation by participation). Greater transparency, trust, adaptability, and speed enable rapid experimentation and the potential to direct activities towards a multiplicity of goals (Tse, 2020). At the same time, the elimination of agency costs without a particular board of directors may drive efficiency through automation and boost accountability, predictability, and common understanding in the collaborative effort (Hsieh, 2018).…”

“…These are summarized in Table 7.4. (Tse, 2020) Legal and regulatory Jurisdictional uncertainty No registry with a fixed location as it operates in a decentralized manner. This raises questions about tax implications Legal status Associated with the location is the question about the legal form of society the DAO would represent.…”

Zlouporabe blockchain tehnologije i utjecaj na trgovačka društva

“…I proces donošenja odluka bio je deficitan, pa su neki autori iz toga izveli zaključak da znatan dio procesa odlučivanja nije izrijekom uređen i da korisnici nisu u potpunosti osnaženi. 38 To se opet kosi s idejom "participativne demokracije jednakih" koju zagovara BC. Neki autori tvrde da je i način glasovanja bio postavljen tako da se omogući provedba "tvrde vilice".…”

Topical issues of digitalization in corporate law

“…Literature [6][7][8][9][10][11][12] highlights the merits of DAO, such as transparency of operations and decisions (without "pressure" from the board of directors); reducing the costs of the management agency, avoiding corporate conflicts; and disadvantages, such as legal uncertainty; unclear legal status; technical problems and shortcomings of blockchain technology, etc. There are obvious significant differences between Russian digital JSCs and DAOs, which the authors have already noted in the Results section.…”