Decentralised Autonomous Organisations: The Future of Corporate Governance or an Illusion?

17 Pages Posted: 3 Jul 2022

See all articles by Brian Sanya Mondoh

Brian Sanya Mondoh

BlockchainLex.io

Sara M. Johnson

RBC Family Office

Matthew Green

Independent

Aris Georgopoulos

University of Nottingham; University of Nottingham - School of Law

Date Written: June 23, 2022

Abstract

“What things will be like, when, if ever, they have attained righteousness” A Decentralised Autonomous Organisation (‘DAO’) is a term used to describe a ‘virtual’ organisation embodied in computer code and executed on a distributed ledger or blockchain. DAOs implement smart contract code (discussed below) to automate organisational governance and corporate decision-making tackling issues and operational systems inherent in traditional corporations. Firstly, DAOs can be used by participants working together collaboratively outside of a traditional corporate form. Secondly, DAOs can also be used by a registered corporate entity to automate formal governance rules contained in corporate bylaws or imposed by law (Jentzsch, 2016). Likened to a ‘digital co-operative’, a DAO’s participant maintains direct real-time control of contributed funds and the DAO’s governance rules are formalised, automated and enforced using smart contract code. A smart contract, i.e. a self-executing code on a blockchain, executes business logic when predetermined conditions are met i.e “if “x” occurs, then execute step “y” (Szabo, 1994). Smart contracts are designed to execute and monitor contractual conditions (such as payment terms and enforcement of legal agreements amongst other things). Arguably, smart contracts could lower various transactional costs and losses, minimise malicious and accidental occurrences, and also diminish the need for trusted intermediaries and centralised institutions such as central banks and reserves (Szabo, 1994). Around the world, the legal status of DAOs remains the subject of active and vigorous debate and discussion. Some commentators suggest that DAOs are autonomous code and can operate independently of legal systems; others suggest that they must be owned or operated by humans or human created entities. Ultimately, how a DAO functions and its legal status will depend on many factors, including how the DAO’s code is programmed and by whom, where, and for what purposes it is used (Jentzsch, 2016).

Keywords: blockchain, smart contracts, DAO, algorithms, corporations, governance, stakeholders, regulations,,etherium, crypto, LAO, LLP, complex systems, corporate decision-making, decentralised, autonomous, organisations, voting rights, hacking, cyber attacks, shareholders,

Suggested Citation

Mondoh, Brian Sanya and Johnson, Sara M. and Green, Matthew and Georgopoulos, Aris (Aristeidis) and Georgopoulos, Aris (Aristeidis), Decentralised Autonomous Organisations: The Future of Corporate Governance or an Illusion? (June 23, 2022). Available at SSRN: https://ssrn.com/abstract=4144753 or http://dx.doi.org/10.2139/ssrn.4144753

Brian Sanya Mondoh (Contact Author)

BlockchainLex.io ( email )

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Sara M. Johnson

RBC Family Office ( email )

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Matthew Green

Independent ( email )

Aris (Aristeidis) Georgopoulos

University of Nottingham - School of Law ( email )

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United Kingdom
+44 (0) 115 8466307 (Phone)
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University of Nottingham ( email )

University Park
Nottingham, Nottinghamshire NG7 2RD
United Kingdom
+44 (0) 115 8466307 (Phone)
+44 (0) 115 9515696 (Fax)

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