Research Summary: What is a DAO? Conceptual Foundations


Firstly, there are the existing legal structures (inside triangle) which we can write bylaws with smart contract operative artifacts (eg voting) to be skeumorphic equivalents of unincorp non-profit assocs, discretionary mutual funds, or protected cell company (multi-stage treasury).
2. A-legality (xref COALA model DAO law) is everything at the circle perimeter (which expands with DLTs innovations) which is not yet accepted/recognised in a court of law, hence the various lawsuits which attempt to paint DevOps as business partnership and thus liable for DeFi hacks
3. if you only define a DAO as comparing with existing legal structures/entities you limit your imagination. For example by decoupling governance and economic tokens you can have non-linear participation, eg governance weight tied to say objective social metric (cf chess ranking) so active players have more say than mere sponsors.

Legal personality or judicial identity for a DAO solves 3 issues

  • owner of record for collective works/contributions (eg IP such as trustmarks cf Chartered Accountant)
  • sue and be sued, participating in existing dead-tree contracts enforcable in courts
  • useful set of defaults in the tethered jurisdiction … caselaw is quite useful when arguing about how to dissolve a DAO (cf ConstitutionDAO)

Reasons for not getting legal personhood …

  • you are subject to overarching nation-state legislation … see US sanctions leading to GitCoin dropping a Persian language proposal
  • you accede to external authority (not self-sovereign) … cf why Bitcoin crypto-anarchists have refused to be recognised under a single jurisdiction as they believe they are competing with fiat
  • working in the grey zone, compliance is unnecessary overhead or the value of anonymity is a key-component of the DAO (see assasination prediction market).

So entering the triangle from the circle means you are trading off creative expression (if using the communications analogy) for certainty.

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transactional spaces is just one view. I define DAOs as social interest vectors expressed as a mix of cultural lore (memes), common-law (eg governance) and commercial laws (tokenomics). Each can be seen independently so your transactional space works for excludable, divisible rival goods and the price discovery of member preferences (eg prioritisation of research). But a meme either resonates with the purpose or not so netiquette becomes invisible social glue to minimise interaction friction (read Lessig books on Code 2.0).

DAO - 关注.pdf (688.2 KB)

Briefly, there are 3 major approaches

  1. Constitution - embed the mission into the founding document and bylaws
  2. Certification - eg B-corp or registration as community interest company (CIC)
  3. Culture - align the rituals, social ego-stroking and communications around your purpose (cf Salvation army)
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This is related to the Coffee House discussion we had with Daniel on Thursday.

Specifically, the part of the discussion around the dangers of egos in DAOs.

It is also related to the concept of public goods. There’s a lot to unpack, but I’ll be brief here. Please don’t take absolute language as absolute belief =)

There is no such thing of a public good. Anyone who provides what is called a public good expects something in return. That thing can be external – fame, recognition, respect, social capital, etc. – or internal – warm fuzzies for the good thing they did.

Ignoring this perspective gives an opening for egos to become unmanageable.

Recognizing the possibility of the accuracy of this perspective opens possibilities to limit the control of the ego. This is why blockchain consensus models rooted in open-source code produce such functional DAOs or DAO-like organisms.

Successful DAOs will be skeptical at a cultural level. They will question every “public good” provided by their participants or any outside actor. They will demand verification. If someone rejects the possibility that they get anything from their actions, their elevation through the DAO will be restricted.

Happy Friday!

I think you are conflating the “public good/service” which is defined as something being non-excludable and non-rival (classic example being lighthouse) and thus difficult to finance historically, with motivations to contribute to such public goods.

Now there may be many reasons for individuals providing such public goods but do you see egos being a factor in priests selling their worldly material items to go play missionary in the black hole of beyond? If you study anthropology [cite RAND study] you’d discover we are transitioning from
a) Tribes (social ettiquette)
b) Institutional hierarchies (nation states)
c) Markets (complex economic chains) … to now
d) Emergent self-organising networks

I jokely refer to these as a) cultural lore, b) common law, and c) commercial lures. But now with blockchain we have codeslaw, the ability to codify and execute instruments or mechanisms of any of the above 3 into software. To achieve ego-less code, we need to surmount some of the messy honor/face/dignity aspects of tribes to realm of abstract thinking (eg avoiding friction in property rights).

note sure where the basis for this comes from. Define success (not just survivorship) and I can probably name several counter-examples (starting with Mother Theresa in generic good smaritan)

The conflation is there. Much of the arguments for public goods that I see in the crypto space are rooted in altruism. There is no altruism and there is no good Samaritan, even Mother Theresa.

do you see egos being a factor in priests selling their worldly material items to go play missionary in the black hole of beyond?

Yes.

The discussion during the chat had to do with limiting the damage ego can do to DAOs. Part of a DAO is culture. If the DAO has a culture of skepticism of people that are building/providing public goods, the DAO might have less of a chance of an ego taking over. Expect providers, priests, for example, to say how they are profiting from their actions: peace of mind, warm fuzzies, their god’s favor, influence in their church, etc. Then be okay with people making that profit.

A successful DAO is one that accomplishes its defined mission.

For example, Satoshi started the most successful DAO because the consensus and open source nature of the tech, but mostly because they were anonymous and stepped away.

Thank you for this interesting summary @danielo

The concept of a decentralized autonomous organization or DAO clearly establishes a new precedent for managing modern organizations. With the value of collaboration and transparency among team members, DAOs can foster new avenues of productivity.

I am interested in knowing what are the distinct models for membership in DAOs?

@danielo
Is bureaucracy antithetical to DAOs?

Does increasing internal regulatory layers preclude opportunities for automation? Or create new opportunities for it?

For non-profits, you are mainly dealing with volunteers so you have to make the contribution process as painless as possible (we deal enough of the chicken-shit at work where at least compensated). So we try to automate the boring/trustless parts and amp up the fun/social components (though consensus forming can be slow).

Does increasing internal regulatory layers preclude opportunities for automation? Or create new opportunities for it?

Depends (as RaidGuild puts it) … on whether you

  • if you want to go fast, go alone
  • if you want to go FAR, come along (group)

So coding for cooperative activities require additional smart contracts which does slow things down but doesn’t have single point failure.

Please, is DAO an organisation, or a concept that promote governance

The Coffee House Chat with author @danielo discussing this paper and summary.

I’m sure that anyone who writes a brief summary of the discussion and posts it here will get a lot of love.

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  1. By definition, every DAO is an (subset) of organisation, but not every organisation is a DAO. The legal form of a DAO can vary, from a unincorporated non-profit assoc to a collective fund of funds. see

  2. Decentralisation - well the SEC still hasn’t given a clear rule on this but we can assume a decision model that devolves to individual/group rather than traditional hierarchy

  3. the autonomous part is debatable, there are examples of cybernetic organisations (cybORGs) which clearly are not DAOs (the CFTC consent order against Ooki) but a concept that promotes governance is too narrow. Typical governance concepts are enumerated here but member participation is a necessary but not sufficient condition for a DAO. Heck a football riot involves everyone but an fracas is not organised.

Perhaps we can come up with D-corp, the DAO equiv of B-corp or standard C-corp. What are the tests that would be supporting evidence of a DAO considering the spectrum of for/non-profit above can all fit into the definition?

---- An in response to @Sword.of.Owmens below, I respectfully ask him to give us some insight as to new institutions that may evolve within the Internet of Value :point_down:

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I concur as always @drllau is correct and add to it, and I am not an expert but I am entrepreneur and this is part of any decent Business Degree Curriculum; the aforementioned descriptions are an acceptable baseline for the Crypto Stock Market Sectors and Industries to establish formal definitions of the sectors and industries it has created. Since it’s creation from the Finance Sector, it has rejected the same institution it needs to be recognized by, the American Stock Market. Furthermore one of the biggest endeavor the “Crypto Stock Market” has to endure, it would be to draft definitions for the already branching crypto businesses and sub tiers. The Crypto Stock Market legitimization and recognition as the second American Stock Market is possible.

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If I may I would like to further expand my response from earlier:
a) tokens are not debt (legal tender) equity (when no residual assets), nor beneficial interest (voting can be non-linear). So what exactly is being exchanged?
b) the traditional institutions were oriented around custodial accounts and fiduciary duties. With smart contracts, its composible so every DAO treasury can potentially be a quasi-bank + betting market (mint + reserve + auction combo) … you don’t need traditional forms for a new Internet of Value
c) what will be the new institutions that arise? FATF is already deciding global minimum for financial privacy (or lack thereof), will Basel Committee become the stablecoin bestie (if it understands algo-coins) or an existential threat (by siding with TradFi)?

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Governance can be define as the integration of norms and culture, the laws and the code the people and the institution that facilitates coordination and together determines an organisation. The meaning of governance vary depending on the organisation and how it is used.
In blockchain, governance is said to be the process by which individuals and groups with developing relationship bargain and adapt to changes within an instituional environment, just like the smart contract research forum. To blockchain dao is a set of rules and regulation that governce it.
Once a DAO has been deployed to a blockchain it rules can no longer be changed, predicting the need for change in the future, DAO authors must incoporate the rules-for-changing, in the original deployment. This means once the rules for changing has been incoporated, it is possible to change the operation system to a new one alongside the changing world.
It is worth noting that the blockchain governance is polycentric, and does not have one center of power. It bulids on polycentric governance and actors which imfluences, and interact with eachother with a common goal.
Dao makes it possible for access everywhere and to anyone, this shows that regardless of wherever or whosoever who wish to make use of it, it is open and this makes it possible to get different opinions from people concerning any project in blockchain.

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Gareth Morgan (1980), in his book, “Images of Organization,” looks at an organization through eight metaphors: a machine, an organism, a brain, a culture, a political system, a psychic prison, a changing flux, or as an instrument of domination.

One of the reasons for the DAO’s many contradictory and diverse definitions may stem from the metaphors used to define what an organization is.

According to biblical literature, a united human race speaking a single language and migrating eastward had the vision to build a tower that could reach heaven. Up until their communication was cut off, they were able to converse easily and made significant progress.

The Tower of Babel may be viewed as the earliest DAO in a previous guise, given that the following ethos was met to qualify as a DAO

DAOs originated in a society that valued the idea of autonomy. The older term DAC (decentralized autonomous corporation) was also used to envision a natural system that is viewed as self-governing within a humanist framework while also including conventional for-profit forms. This concept of DACs was motivated by rivers’ awarded legal rights, which is related to the eleventh-century “deodand” legal entity, a physical thing that has been conferred personhood in order to be litigated against. The initial occurrence of this word, which evolved from DAC into the DAO, was advertised as an unstoppable financial body but was hacked a month after its introduction. DAOs in later iterations might be seen as software tools that support cooperation by providing money and decision-making processes. Because they are peer-to-peer institutions, DAOs have the ability to dramatically lower the costs and barriers associated with creating an organization. Now, a DAO can be described as a group of people connected by a common vision—a vision so big that it motivates people to work together autonomously to accomplish the vision. They are a virtual organizational form where the source code defines the bylaws. For people to work together, there must be strong and consistent communication styles among members of the DAO, and the operations are decided by the token holders of the DAO. These guidelines are suggested to help set up a DAO.

  • The idea or goal of the DAO needs to be thought of and should be appealing enough to get people to join the DAO.
  • A platform will be selected to allow for effective communication among members. Various platforms exist, but the most common platform for communication is the Discord App. Discord is a free communications app that lets you share voice, video, and text chat with friends, game communities, and developers. It has hundreds of millions of users, making it one of the most popular ways to connect with people online
  • A smart contract will be developed to guarantee that the DAO’s operations are automated. Automation of the smart contracts that control the DAO’s activities is crucial. To make sure key elements are not overlooked, it is crucial that the smart contract undergo comprehensive testing. This is so that members of the DAO can only alter the rules established by the smart contract through the DAO’s governance system once they have been created.
  • Tokens are sold to raise money that becomes part of the treasury when the smart contract has been implemented. Only token holders have the ability to vote on DAO decisions.
  • The DAO is launched on the blockchain after everything is set up. The DAO’s blockchain deployment enables transparent, automated, and immutable smart contract execution. The future of the DAO is then decided by its members using weighted votes.

The following components are indicative of a DAO:

  • The DAO must be self-replicating and self-maintaining, with no single point of failure. The survival of the DAO should not be jeopardized by the loss of a central node.
  • The DAO should attempt to create a strong foundation without violating the law. While DAOs are not always included in legal frameworks, when appropriate, their fundamental characteristics can be mapped from customary associations and human laws.
  • A DAO should increase its synergy when additional members are added.
  • The DAO should be permissionless.
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DAO - Conceptional Foundations - a brief summary

TL;DR Five lenses of DAOS -

  1. DAOs are organizational collectives.
  2. DAOs as entities
  3. DAOs as process
  4. DAOs as communication
  5. DAOs as cultural systems

DAOs are collectives that exhibit organizationally, expressed and evolved through communication events and processes, and shaped by an Ethos that highlights:

  • Decentralization - power is decentralized and so no single individual as the authority.
  • Autonomous - self-sovereign, not answerable to an external coercive force.
  • A shared goal, vision and set of values
  • Decentralized voting mechanism - giving every member of the DAO an opportunity to shape the collective.

Why Decentralized Autonomous Organizations - DAOs?

Using the ethereum docs, DAOs are member-owned communities without centralized leadership. A safe way to collaborate with internet strangers. A safe place to commit funds to a specific cause.

Pre-history of DAOs

At the core of the events preceding DAOs, is social moments. “The urge to decentralize and autonomize has informed social movements since the 1970s.” - Nathan Scheinder

Here are some preceding narratives and ideas associated with DAOs:

  • Co-operatives and stakeholder capitalism - documented in 1769.
  • Gig-economy and plataformisation
  • Self-management and teal organizations
  • Digitalization and process automation

The evolution of the concept of DAOs

While one of the first reference to DAO can be attributed to computer scientist W. Dilger. The usage of DAO in recent time however, is hinged on strong human element - describing the interaction and coordination between people.

DAOs have evolved to encompass a multitude of entities, and as a result, have had a spectrum of definitions.

The Ethos of DAOs

DAOs are infused with specific ideals in their name. While a DAO may have its specific ideals, it is worth noting that these DAOs exist as a subset of the larger ideals expected of a DAO like Decentrlaized, Autonomous, permissionless, and trustless.

It is these ideals that shape how DAO members coordinate their actions, how goals are defined, and incentivisation.

DAO as entity and process

As an entity, each moving parts - members - need to work and function smoothly for the DAO to achieve its goals and mission.

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we often underestimate what the blockchain and technology have changed and continue to change everything. we wouldn’t be invested in having these conversations, ironically, what we should be discussing should be more obvious, what is really at stake, that we have yet to understand?

The DAO Conceptual Foundations have been around since the first tech boom in the '90s the same built-in immutable code systems make up rules, and incentives that determine behavior and create a new type of organization and is considered a 'global organization because in the sense it is not bounded by geography.
In fact, it’s the latest iteration of a startup, the new model that can be managed by a community of people who put their money on the line in order to create something new and innovative. The idea of DAOs is to make management more democratic and to give power back to the people.

Despite the boost in popularity, DAOs have to undergo many challenges on their journey. Even with the positive response from the crypto community, DAOs still need to streamline and upgrade their processes. User-friendly interfaces and tools are also required. Regulations set by regulatory agencies will be another hurdle that DAOs need to overcome as they flip over into mass adoption.

No one person is in charge and a single person does not control the value of the DAO. If tokens are used to vote on every decision made by the company. The company also has its own currency, which it can use to buy or sell things. In all of the tokenization available, there is no way to differentiate which tokens are debt and which are equity.

However, if there are residual assets to favor interest, this would not be the case. This article should instead be discussing the different types of tokens and how they are used in the current and future market Cryptocurrency has flooded the financial sector, and decentralized autonomous organizations (DAOs) are one of the most prominent players in the field. So what are DAOs and their possible role in the financial realm of 2022 and beyond?

Token exchanges as a form of currency have led to some confusion about their legal status. Some tokens, like Bitcoin, are not considered legal tender because they do not have any residual assets that favor the interest of the person holding the token, so then would we if Voting is not linear because the tokens being exchanged are not debt, legal tender, or equity when there are no residual assets to favor the beneficial interest, what is “this” query doesn’t seem to be talking about a specific subject