The Legal Basics of DAOs
What are DAOs?
To the uninformed, Decentralized Autonomous Organizations (DAOs) likely come off as simply one of the latest marketing ploys in the crypto space, but to the informed, they fundamentally change how companies can be run and governed.
In the simplest terms, DAOs are organizations that operate under the same basic concepts of a traditional company, but where no traditional managerial hierarchy exists. In its place instead is a flat hierarchy where all members are given a right to vote on strategic decisions usually reserved for management.
Take for example, Amazon. Jeff Bezos, as CEO, has controlling authority over executive decisions, such as whether the company will accept cryptocurrencies as payment on its platform. Imagine if, instead, all Amazon Prime account owners had this decision-making power and voted on whether Amazon would accept cryptocurrencies. This represents a shift from central management to a collective decision-making process.
In more technical terms, a DAO is an organization governed by a series of smart contracts which enable the organization to function autonomously, without the need for a central intermediary or authority as members interact with each other and make decisions according to protocol specified in code and enforced on the blockchain, i.e., software-codified bylaws and articles of incorporation for an organization.
