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Can DAO become the "Dutch East India Company" in the new era?

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Can DAO break the four-century old business model?

原文标题：《重温 1602 年：DAO 是新的企业范式吗？》

Original article by Andrew Singer

Block unicorn

"Entrusting your vote to competent experts in the industry will give owners a stronger and clearer voice in the management of these companies."

In 1602, the Dutch East India Company was founded in what many believe was the world's first initial public offering -- allowing complete strangers to buy ownership of shares. Four centuries later, the shareholding model -- and especially its incarnation as the modern commercial "company" -- set the pace for much of the economic world.

But the decentralized, autonomous DAO could soon undermine the joint-stock or capitalised business model, just as the Dutch East India replaced the limited partnership of the time.

Or some might say: "The DAO is the new LLC," DAO investor Cooper Turley says of these leaderless Internet native entities, where key decisions are often made by consensus. "In five years, companies will no longer own equity. They will own tokens, and they will be represented as DAOs," while noted investor Mark Cuban added, "The future of the company could be very different as DAOs take over the traditional business." Others see DAO as challenging venture capital firms in the race to fund Web3 projects.

"I think DAOs are already replacing traditional companies," Sam Miorelli, a lawyer active with many DAOs, including Curve Finance, told the magazine. "The promise of the DAO is the opportunity to return to the historical norm of project first, where smart people with good ideas can get funding and build communities around projects without first finding a legal budget." These decentralized autonomous organizations have some unique characteristics. According to law professor Aaron Wright:

"DAO is not managed by a board of directors or managers, but is intended to be managed through democratic or highly participatory processes or algorithms."

In fact, they've been described as operating "similar to an online chat room with a bank account," because "almost anyone anywhere can access the Internet and can join the DAO, participate in its governance and share in its profits," Florence Guillaume, a professor at the University of Neuchatel School of Law, tells the magazine.

2016 DAO

Back in 2016, when one of The first decentralized autonomous organizations -- unhelpfully named "The DAO" & NBSP; When it launched on the Ethereum blockchain network, things didn't look so rosy. A few months after its inception, "The DAO" was hacked and lost $60 million, leading to a bitter split in The still-nascent Ethereum community that eventually led to a "hard fork" to recover stolen funds. For some time, "The DAO" cast a shadow over decentralized autonomous organizations.

Today, these transparent community organizations still face serious regulatory and legal challenges. Do they have to pay taxes? Can they open bank accounts or sign legal agreements? Can they bring lawsuits against other DAOs?

Attorneys Louis Lehot and Patrick D. Daugherty write: & NBSP; "There is no model DAO Act, just like there is a Model Business Company Act." They were "legally unprecedented". Key decisions, such as deciding how to spend money, are often voted on by thousands of members/owners. Needless to say, decision-making can be cumbersome.

A few things about DAOs: They are typically cooperatives hosted on blockchains like Ethereum (but not Bitcoin) that can process blocks of software code called smart contracts that are executed automatically when certain conditions are met. For example, if an airline's flight is delayed by four hours (i.e., condition), a smart contract code triggers payment via mobile phone to a passenger who has purchased an in-flight insurance policy.

大多数 DAO 通过出售 Token 筹集资金，这赋予了投资者/所有者投票权。如果 DAO 投票支付股息或通过 Token 价格升值， Token 所有者就会赚钱，类似于投资者在可口可乐等上市股份公司中赚取利润的方式。

A better business model?

"Daos have a future," Erik Vermeulen, professor of business and finance law at Tilburg University, told the magazine, given their transparency, security, and open source governance protocols, which means constantly exploring and testing vulnerabilities. Moreover, they do not encourage "rent-seeking", the manipulation of public policy or the economy to increase profits. This is akin to companies lobbying governments for subsidies. Vermeulen added that because of their distributed nature, they are aimed at preventing natural and political monopolies.

但是，它们真的优于传统的组织业务模式吗？并非所有人都同意。「当前的 Token 系统并不一定能防止垄断，因为有些人可能拥有大量的 DAO Token ，因此可能控制投票结果，」沃顿商学院史蒂文斯金融创新中心董事总经理 Sarah Hammer 告诉杂志，添加：

"All DAOs are different, and some are structured to promote inclusion, while others limit their membership in response to something called token gating. Token gating requires DAO members to verify that they hold DAO's NFT token in their encrypted wallet before accessing DAO's Discord server or website."

Eric Lim, a senior lecturer at the University of New South Wales, told the magazine: "The defining attribute that sets daOs apart from past organizations is the use of blockchain as a source of trust," so that the inputs and outputs of decisions are immutable and auditable." This represents an advance on the traditional centralised organisation. Lim calls it a "zero-sum game."

Daos have attracted more attention in the mainstream media over the past year, which reveals their strengths and weaknesses. ConstitutionDAO, for example, launched on short notice in November, raising $47m in a matter of days to bid on a rare first print of the US Constitution auctioned by Sotheby's.

Described as a "financial flash mob," the DAO gathered more than 17,000 "donors" -- a symbolic achievement in the eyes of many, and one that, if successful, would put the historic document "in many hands" (in a museum, for example) rather than being owned by one person and may never be displayed again.

However, once bidding began, it became clear that the DAO's transparent decentralized structure could be leveraged. Everyone knows how much ConstitutionDAO raises and how much can/will be bid. "The problem with ConstitutionDAO is that the highest possible bid is completely transparent," Explained David Friedberg. "Sellers will only bid on the DAO to get their highest bid." Citadel's chief executive, Ken Griffin, took the rare document home.

Dissolution is also not smooth, as DAOs can be quickly set up for special events and then dissolved. "ConstitutionDAO's core team struggled to come up with a plan to return its investment, as contributors argued in online group chats," the New York Times reported. "The average investment is about $200, but now investors may have to pay that much to get their cryptocurrencies back."

Growing pains

然而，这种经历并没有让 DAO 的支持者灰心，他们断言，与任何创新一样，增长挑战是可以预料的。这些实体旨在在 Web3 时代蓬勃发展。此外，DAO 的决策过程可以通过实施数字时代的变体（如委托投票）来简化，因此忙于研究提案的细节或细则的所有者（即 Token 持有者）可以将他们的投票分配给受信任的人。第三者。

As Paul Brody, ernst & Young's global blockchain leader, explains, shareholders of large companies can now vote down management if it underperforms. In practice, this rarely happens, but proxy voting changes everything. "Delegating voting rights would be a revolution, not just for the DAO," Brody told the magazine, adding:

"With widespread investment in blockchain and traditional stock markets, it's possible to track everything from executive pay to carbon footprints. Entrusting your vote to competent experts in the industry will give owners a stronger and clearer say in the management of these companies."

"Voting schemes based on smart contracts could allow more people to participate in decision-making, at least compared to more cumbersome and expensive systems that collect and validate votes," Wright said. "The availability of smart contract voting protocols may enable some businesses to adopt their own tailored allocation of decision rights among stakeholders."

Daos can also change who is hired for a project and how they are paid. "There's no question that DAO is the future of work," Anne Connelly, a faculty member at Boston University's Questrom School of Business, tells the magazine. "In an increasingly global society, the benefits of being able to recruit internationally and pay across borders in cryptocurrencies will provide unprecedented competitive advantages." Connelly says these autonomous organizations offer participants more power than they might have in a traditional company. Workers "have more ownership over the results of their work, and workers in developing countries will be less likely to fall victim to geographical class divides."

Others, however, are more cautious. "We're not quite there yet," Vermeulen said, adding that the DAO still has technical and operational flaws and could be vulnerable to "Sybil attacks" and "51% attacks," while Guillaume added, "Daos may not replace traditional companies but provide new alternatives for existing businesses and social organizations. They will become the preferred organization for specific cases, but this will be greatly influenced by legislation and how DAOs are treated legally," further explains:

"If this type of organization has corporate status and provides limited liability to its members, entrepreneurs and others looking for a legal structure to start a new business may be more inclined to choose to create a DAO."

According to Miorelli, open source legal work and open source decentralized building blocks are two ways that DAOs can lead to a future of lower transaction costs for all. "This also applies to funding ongoing projects. The core innovation of DeFi projects -- many of which are managed by DAO -- is" the returns that can be achieved when transaction costs drop to near zero and when immutable contracts make enforcement of outdated and classification rules, such as approved investor regulations, impossible."

Governance challenges remain.

Daos need to overcome some key obstacles -- such as decentralized governance structures that sometimes don't handle conflicts or competition well. "It's definitely difficult, complex and unwieldy to coordinate and organize activities in decentralized communities," Lin said. At the same time, Guillaume added, "The DAO governance structure needs to get to a point where managing resources using smart contracts is easier and more adaptable than using traditional organizational structures."

However, DAOs cannot completely eliminate the human element and all the limitations that are implicit in it. "Daos can't solve human organizational problems, but neither can companies. No law or organizational structure can eliminate interpersonal conflict," Miorelli said, adding that any well-organized effort can try to manage these conflicts.

There are other reasons for hesitation before declaring the DAO the future of an organization's business model. There is a danger of convergence, for example, as the DAO evolves into a company that resembles traditional top-down management. That's the question on Brody's mind: "When did the DAO stop being a truly participatory ecosystem and start looking like just another style of shareholder-owned -- and now stakeholder -- company with a full-time management team and a very corporate -- like a hierarchy?"

DAO 将只是一个拥有 Token 而不是股票的公司吗？「或者，它是否意味着更多意味着用户和所有者的高度重叠、参与和参与？」布罗迪问。「我认为 DAO 是人们会考虑与合伙企业、独资企业和公司一起考虑的几种业务结构之一，」他继续说道，尽管他预计大多数区块链业务将由 DAO 和许多「协议驱动的技术业务」管理。

More regulation on the way?

此外，一些 DAO 似乎好得令人难以置信——比如 OlympusDAO，它曾一度为那些愿意抵押其 OHM Token 的人支付 2,681.5% 的 APY。有些人认为 DAO 只不过是一个庞氏骗局，有些人认为它可能是 DeFi 的未来。但是，围绕它的喧嚣表明，可能会对这些互联网本地实体进行更多监管。这会确保 DAO 的未来吗？

The answer is not clear. Hammer notes that while some US states, such as Wyoming, have enacted legislation regarding DAOs, "many other states have not done so. In addition, some DAOs may specifically address federal regulations and securities laws."

"I don't see DAO replacing the traditional corporate form anytime soon," Hammer told the magazine. For example, traditional corporations formed under the Delaware Corporations Act "contain structures that, while imperfect -- such as proxy voting -- have stood the test of time."

In addition, replacing traditional firms as dominant business organizations "will require a complete transformation of the federal financial regulatory framework, which is unlikely to happen in the near future," Hammer added.

Cross-border cooperation

Overall, there is a lot to be excited about in decentralized autonomous organizations. "The DAO was the first structure to enable large group collaboration digitally in a completely trusted and transparent way."

"Using blockchain, a large group of geographically dispersed people -- many of whom can remain anonymous -- can now collaborate while trusting that any decision made is the true will of the community," Connelly told the magazine.

It also involves. "A dispassionate blockchain technology that treats everyone equally in the community" and allows for "incentive structures that are different from what we're used to". It's about inclusive ownership and doing what's right for the community, "Eric Lim added. Still, DAO is unlikely to completely sidestep the governance challenges that challenge traditional business organizations, Miorelli warns:

"The entire university sector is committed to optimizing the organization, and I don't think the DAO has any less need for discipline than a traditional company. Whatever the legal structure or name, it's the people that matter."

Daos also require a consensus mindset, which may take some getting used to. Eric Lim has tried several DAOs, which he says is in stark contrast to the way universities operate. "In the DAO, I had to convince almost anyone to fund the project," he says. "And people are motivated to talk to me. There is a consensus that if projects that provide value to the community are funded, the community will grow."

So, does the DAO really represent an improvement over something that already exists?

"I'm an optimist, and I believe in the DAO's intrinsic value proposition," Lim said. "The criticisms of DAO -- they're clumsy and messy and unmanageable -- are the same criticisms of democratic philosophy. Both, in my view, are permanent works in progress."