• DAOs have recently begun to purchase real-world assets including art, a golf course, a copy of the U.S. Constitution, a National Basketball Association team and real estate.
• The coordination and regulatory costs associated with these purchases have caused significant issues for DAOs.
• Scott Fitsimones, the founder of CityDAO and author of „The DAO Handbook,“ considers solutions to the coordination and regulatory problems plaguing decentralized autonomous organizations.
The past few years have seen a dramatic shift in how we think about organization and governance. Decentralized Autonomous Organizations (DAOs) have emerged as a powerful tool for crowdfunding and governing digital assets, and recently, some of these DAOs have started to acquire real-world assets such as art, a golf course, a copy of the U.S. Constitution, a National Basketball Association team and real estate.
Unfortunately, these purchases have highlighted a major issue for DAOs: coordination and regulatory costs. These costs can range from the mundane (filing paperwork for the purchase) to the complex (working through the legal system to resolve disputes between members).
To better understand the coordination and regulatory problems plaguing DAOs, it’s important to consider the history of DAOs and the current environment in which they operate.
The concept of the DAO has been around for more than a decade, but the technology to support them has only recently become available. Ethereum, the most popular platform for launching DAOs, was released in 2015, and since then, a wide variety of DAOs have been launched. DAOs have been used to manage financial protocols, steward digital assets, and even purchase real-world assets.
But while the technology has advanced to support the creation of DAOs, the legal and regulatory environment has not kept up. As DAOs begin to acquire real-world assets, they must navigate a myriad of laws and regulations that were not designed with decentralized organizations in mind. For example, DAOs must consider how to resolve disputes between members in the absence of a centralized authority, how to ensure their assets remain secure, and how to register their assets with the appropriate government agencies.
These coordination and regulatory costs can be quite significant, and are a major barrier to the growth of DAOs. To help address these issues, Scott Fitsimones, the co-founder of CityDAO and author of “The DAO Handbook,” has put forth a number of potential solutions.
First, Fitsimones suggests creating a set of standardized legal documents specifically designed to address the needs of DAOs. These documents would include things like articles of incorporation, operating agreements, and dispute resolution mechanisms. By having a set of pre-defined documents, DAOs could quickly and easily address the legal and regulatory needs of their organization.
Second, Fitsimones proposes establishing a set of DAO-friendly laws in the jurisdictions where DAOs operate. Several states have already begun to implement such laws, but more action is needed to ensure that DAOs have the legal freedom to operate in the real world.
Finally, Fitsimones recommends creating a set of tools and services specifically designed to facilitate the coordination and governance of DAOs. These tools would include things like voting platforms, dispute resolution mechanisms, and financial management services. By providing these tools, DAOs could reduce the coordination and regulatory costs associated with their operations.
Overall, the emergence of DAOs has brought about a number of exciting possibilities for how we can organize and govern ourselves. But in order for DAOs to reach their full potential, they need to address the coordination and regulatory costs associated with their operations. By adopting the solutions proposed by Scott Fitsimones, DAOs could move closer to realizing their vision of a more decentralized world.