Definition, Creation and Regulation of DAO Organizations

In recent years, DAO has sparked an innovative wave in the Web3 field as a new organizational form, giving rise to projects like Compound and MakerDAO that change industry rules. However, the specific definition and connotation of DAO remain controversial. This article will analyze the essential characteristics, creation process, legal regulatory status, and practical application issues of DAO from a professional perspective.

1. The Essence of DAO Organizations

DAO refers to Decentralized Autonomous Organizations, which have two core characteristics:

1. Decentralized organizational structure

• The DAO does not have a centralized decision-making body like traditional companies; decisions are managed collectively by all members.
• Achieve automatic execution of operational rules through smart contracts, eliminating human intervention.
• Transparent and public rules, breaking away from the traditional "black box" decision-making model.
• Effectively avoid the moral hazard issues of agents in traditional companies.

2. Member autonomous governance model

• Achieve internal autonomy within the organization through token voting.
• Eliminate hierarchical barriers and promote equal communication
• The decision reflects the opinions of the majority of members, avoiding "one-person dictatorship."
• Smart contracts automatically execute resolutions, solving implementation difficulties.

These two major characteristics complement each other and are indispensable. The DAO has, to some extent, subverted the paradigm of "organization versus individual" in traditional companies, aligning more with humanistic ideals.

But DAO also has its limitations:

• Smart contract vulnerabilities may pose significant security risks
• The decision-making efficiency is relatively low.
• There are challenges in legal compliance in the real world.

2. The main process of creating a DAO

1. Establish the organization's purpose and operational rules
2. Write the rules as smart contracts
3. Conduct contract auditing and testing
4. Raise Initial Funds
5. Deploy the contract to the blockchain

It should be noted that this is just the creation of a DAO on the blockchain and does not equate to registering a DAO organization under real legal frameworks.

3. The Current Legal Regulation of DAO

1. UAE

RKA DAO releases the "DAO Association Regulations", providing a clear legal framework for DAOs:

• Grant DAO legal person status
• Specify technical requirements
• Clarify internal governance and external supervision

2. United States

Wyoming passed the "DAO Supplementary Act:"

• Allow DAO to register as a limited liability company
• The rights and obligations of a DAO may differ from those of a regular LLC.

Tennessee Code Revised, allowing LLCs to register as "decentralized organizations"

3. Others

Countries like the Marshall Islands and Malta also have relevant legislation, but their influence is limited.

4. Can DAO be the issuance entity for RWA projects?

• DAO registered as a legal entity: theoretically possible, but must meet local financial compliance requirements.
• DAO that exists only on the chain: cannot directly act as the issuer of tokens and requires legal packaging.

5. Summary

The DAO has matured on-chain, but to deepen its interaction with the real world, it still needs to improve the relevant legal framework. Project parties should pay more attention to the compliance requirements of the real world to avoid unnecessary legal risks.