What we talk about when we talk about DAOs: a mega🧵 of some thoughts
Ugh, another thread about DAOs? I get it: it’s easy to dismiss concepts that are difficult to pin down definitionally as tech-bro gobbledegook, but I believe DAOs are more than just an oft quoted buzzword.
Ugh, another thread about DAOs? I get it: it’s easy to dismiss concepts that are difficult to pin down definitionally as tech-bro gobbledegook, but I believe DAOs are more than just an oft quoted buzzword.
“This is just like last cycle when everyone added Blockchain to their name” To a degree, yes; but like blockchains, DAOs cannot be singularly defined, and that’s why so many different types of participants feel entitled to label their organizational entity a DAO.
DAOs defy singular definition bc: 1.each component of the acronym exists on a spectrum
2. the use cases/optimal structure for DAOs haven’t been fully fleshed out yet
3.we currently lack a principled framework to distinguish between what should and shouldn’t be called a DAO
2. the use cases/optimal structure for DAOs haven’t been fully fleshed out yet
3.we currently lack a principled framework to distinguish between what should and shouldn’t be called a DAO
Every DAO exists on a spectrum from fully decentralized ownership/governance (e.g., bitcoin) to more or less fully centralized ownership/governance (e.g., Constitution DAO); from fully autonomous decision making (e.g., Aave protocol) to human-guided decision making (e.g., FWB)
The questions to assess where on the spectrum a DAO lies:
-what can a single participant unilaterally do to effect changes to the DAO?
-is the core function of the DAO automated by code or does it involve degrees of human agency?
-how are treasury funds distributed?
-what can a single participant unilaterally do to effect changes to the DAO?
-is the core function of the DAO automated by code or does it involve degrees of human agency?
-how are treasury funds distributed?
Decentralized should ideally mean lone actors cannot unilaterally bind the DAO, utilize DAO funds, or expel members.
Autonomous should ideally mean the purpose of the DAO is entirely automated by code (and is thus out of the hands of humans)
Organization is trickier…
Autonomous should ideally mean the purpose of the DAO is entirely automated by code (and is thus out of the hands of humans)
Organization is trickier…
Organization is tricky because there are different schools of thought that prefer differing levels of freedom/chaos in how a DAO meets its goals. Are there committees? Is there a way to differentiate core from non-core members (for liability or compensation purposes)?
Making matters more complicated, some projects have an LLC attached to a DAO, like Uniswap Labs and the Uniswap DAO. Who is the real O in the DAO here? Where does the DAO’s value originate? What actions of the DAO is the LLC responsible for since it created the DAO?
On top of that, the O in DAO is tricky because there are a multitude of organizational structures, and some DAOs are still in an experimental phase regarding structure. The fluidity could also be due to the legal uncertainty around DAOs and whether they deserve a carveout.
By default, for-profit DAOs are general partnerships under the law, subjecting all participants to liability. DAOs can choose other forms of partnerships, LLCs, and, of course, the corporate form, which all offer a variety of liability/management structures.
Closing thoughts:
1. It’s fine for core participants to want control over the mission of a “DAO,” but it would be fairer to term these groups “DOs.”
2. Global and fully autonomous organizations likely deserve a new legal framework for registration/liability.
1. It’s fine for core participants to want control over the mission of a “DAO,” but it would be fairer to term these groups “DOs.”
2. Global and fully autonomous organizations likely deserve a new legal framework for registration/liability.
Closing thoughts (continued):
3. DAOs should be honest and upfront with potential members regarding what members are actually own, what rights they are entitled to, and what legal/financial risks they may be opening themselves up to.
3. DAOs should be honest and upfront with potential members regarding what members are actually own, what rights they are entitled to, and what legal/financial risks they may be opening themselves up to.
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