A DAO, or decentralized autonomous organization, is theoretically a new form of organizational structure. Examples include one of the largest projects, "Uniswap," a decentralized exchange based on the Ethereum network, and one of the more interesting ideas, "ConstitutionDAO," which raised funds to purchase a copy of the United States Constitution. A model DAO lacks the decision-making bodies typical of any other type of enterprise. Managing the company's affairs, typically reserved for one or a few individuals, such as a Board Member, is entrusted entirely to the organization's members. Instead of committees, management, or directors, a decentralized autonomous organization relies on user votes. Users operate within the organization based on a set of rules, enforced by a computer program that, when a number of conditions are met, automatically performs an action or presents a result, consistent with the standards described within it (smart contract). To become a member of a DAO, one must purchase the associated cryptocurrency, and holding it typically grants voting rights, the power of which is proportional to the number of tokens held. Voting is fully transparent, with votes cast on the blockchain recorded and publicly visible. According to the purist vision of a decentralized, autonomous organization, all decisions related to the venture, whether concerning current operations or the vision for its development, should be submitted to a vote by token holders.

The idea behind a DAO is to replicate legally recognized structures, resembling, for example, a joint-stock company. All rules and relationships are described based on open source code, the use of which is enforced by a smart contract on the organization's token holders. Typically, the DAO's basic operating model is proposed by the project's founders, and then community members modify, improve, or redefine the "statute" describing the entity's operations. One of the key elements of a DAO is the complete lack of hierarchy, beyond that naturally resulting from involvement in a given project (usually, a larger number of tokens held means greater voting rights, and therefore greater influence on the project's fate). Because a decentralized, autonomous organization relies entirely on the involvement of its members in managing the project's affairs, DAOs often utilize their internal capital in the form of tokens to maintain users' enthusiasm for running the project.

Voting on a specific decision, for example, regarding the release of an additional number of tokens into circulation, is conducted using tokens, and the entire process is recorded on the blockchain. Theoretically, there's nothing stopping someone from using their tokens to deliberately compromise the project by making a consciously poor decision. In practice, DAOs rely on funds raised through the sale of tokens, which are then used to express their opinion during voting. This means that each person who gained voting rights had to commit capital to the project. The greater the level of involvement, the greater the voting rights, but the greater the loss if the project were to fail.

A DAO can be a great idea for organizing many people interested in the same topic, or, for example, conducting specific research, into a single structure. Among the advantages of this type of organization is decentralization, thanks to which the success of the project is not based on a single person, such as the CEO, but on the broader opinion of all users. Distributing decision-making across all token holders can also significantly improve their involvement in the project. Individuals don't necessarily need to have a strong voice, but thoughtfully designed mechanisms encouraging voting, burning tokens, or using tokens in any other way should be sufficient incentive for active participation in the DAO's affairs. It's also worth noting the global nature of this type of initiative. Using blockchain technology allows us to bring together people from around the world who share a vision or perhaps dream of achieving something, but until now, due to a lack of resources or opportunities, it has been beyond their reach.

A decentralized, autonomous organization seems ideal for certain crowdfunding projects, such as research, investment, or cultural ones. However, it's important to remember that theoretically, no legal system explicitly addresses DAOs as a separate category or type of legal entity. Building the appropriate foundations, both technically and legally, to ensure all DAO-related functionalities for its members and to achieve operational capacity within this model, is an absolute priority. It's important to note that we're dealing with a completely new form of association for investors and enthusiasts in a given field. Further development of the DAO's nature and the foundations for its creation is inevitable; the precise legal status of this type of organization has not yet been determined in any jurisdiction. The upcoming MiCA regulation , intended to regulate and unify the rules of the cryptocurrency market within European Union member states, also does not refer to decentralized, autonomous organizations. Of course, the above does not mean that it is best to remove DAO-based elements from our planned project, but additional attention should certainly be paid to the legal regulation of the basic aspects of the functioning of the planned organization.

This alert is for informational purposes only and does not constitute legal advice.

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