Blockchain and Decentralised Autonomous Organisations (DAOs): The Evolution of Companies?

Abstract

Blockchain’s potential uses are wider than simply cryptocurrencies. Blockchain can and is being used to create Decentralised Autonomous Organisations (DAOs). DAOs represent a radical rethink of how organisations, such as companies, can be structured and run, including changes in ownership, governance, decision-making and profit distribution. DAOs not only lower transaction costs dramatically — and transaction costs are the very reason for a firm’s existence — through their use of smart contracts they can prevent laws and other rules being broken. This article shows that business structures have evolved over the centuries and DAOs are simply another evolution. DAOs require a rethink of the law, including the granting of legal personality to DAOs as well as granting limited liability to DAO token holders.

Keywords: blockchain, Distributed Ledger Technology, DLT, DAO, distributed autonomous organisations, smart contracts, company, corporation, governance, separate legal personality, limited liability

JEL Classification: K22, L22