In-depth Analysis of DAO Organizations: Advantages and Challenges of a New Organizational Form

Decentralized Autonomous Organization ( DAO ) as an emerging organizational form is igniting a wave of innovation in the Web3 world. It not only reshapes our understanding of traditional organizations but has also incubated star projects such as Compound and MakerDAO. From project initiators to investors and ordinary players, there is keen attention on DAOs. However, the definition and essence of DAOs still have many controversies. This article will delve into key issues such as the core characteristics, advantages and limitations, creation process, and legal regulation of DAOs from a professional perspective.

1. The Essential Characteristics of DAO Organizations

The core of DAO lies in the two main characteristics of "decentralization" and "autonomy":

1. Decentralized Organization Structure

Unlike the centralized management of traditional companies, a DAO does not have a board of directors or other decision-making bodies; instead, all members share management decision-making power. A DAO operates automatically through smart contracts, eliminating the interference of centralized institutions. This structure effectively avoids the principal-agent problem of traditional companies, aligning the interests of decision-makers with the overall interests of the organization.

2. Member self-governance model

DAOs usually achieve autonomy through voting. Members holding governance tokens can propose initiatives and participate in voting, with the final decision on whether to implement the proposal determined by the voting results. This model breaks traditional hierarchical structures, promotes equal communication among members, and increases participation. At the same time, the automatic execution of smart contracts also addresses the issue of decision implementation.

2. The Basic Process of Creating a DAO

Creating a DAO generally includes the following steps:

1. Establish the organization's purpose and operating rules
2. Write the rules into the smart contract
3. Conduct strict testing and auditing of the contract
4. Raise funds through token sales and other means.
5. Deploy the contract on-chain to officially establish the DAO.

It is important to note that this is the creation of a DAO on the chain and does not equate to registering a formal entity within a legal framework.

3. The Current Legal Regulation Status of DAO

Currently, a few regions have established regulations regarding DAO:

1. UAE

The "DAO Association Regulations" released by the UAE RKA DAO provides a clear legal framework for DAOs, granting them independent legal person status. The regulations detail the technical requirements, internal governance, and external supervision for DAOs.

2. United States

Wyoming has passed the "DAO Organization Supplement Act," allowing DAOs to be registered as limited liability companies. Tennessee has also amended its code to allow LLCs to register as "decentralized organizations."

4. The Feasibility of DAO as the Issuer of Tokens for RWA Projects

If the DAO is registered as a legal entity in the local area and meets financial compliance requirements, it can, in principle, act as the issuer of tokens. However, a DAO that exists solely on the blockchain cannot issue tokens directly; it needs to undergo legal structuring, such as establishing a corresponding company or foundation entity.

V. Conclusion

DAO, as a new form of organization, has unique advantages, but still faces challenges in terms of legal compliance. The relevant regulatory framework needs further improvement, and project teams should pay more attention to compliance requirements in the real world. With the gradual clarification of the regulatory framework, DAO is expected to play a larger role in the future.