DAOs (Decentralised Autonomous Organisations) v DINOs (DAO in Name Only or Decentralised in Name Only)

Abstract

There is considerable interest in Decentralised Autonomous Organisations (DAOs) as a new organisational form. DAOs promise to decentralise decision-making and ownership: no longer does a single person or small group make the organisation’s decisions or own it. Another feature of DAOs is the reduction of wrongdoing—if not elimination: DAOs can only perform actions that their code (smart contracts) allows. In contrast, in a company and other traditional organisations, employees and others cannot be prevented from breaking laws, policies, or both. Yet, operating a DAO is difficult for a range of reasons.

Most organisations using the term DAO are not DAOs; instead, they are DINOs (DAO in name only or decentralised in name only). Distinguishing DAOs from DINOs is complex and increasingly important as jurisdictions move to create legal structures to accommodate DAOs. The difficulty distinguishing the two is that many DAOs, despite their name, have elements of centralisation. The factors indicating a DINO include the DAO’s founders (or a small group): formulating proposals for the members to vote upon, controlling sufficient tokens to influence the outcome of votes, or retaining the right of veto. However, a clear distinction is if the entity has intellectual property rights and attempts to enforce those rights following a fork.

Keywords: Decentralised Autonomous Organisation, cryptoeconomics, DAO, blockchain, distributed ledger technology, DLT, DINO, DAO in Name Only, Decentralised in Name Only

JEL Classification: K22, L22