Decentralized Autonomous Organizations – DAOs: The Convergence of Technology, Law, Governance, and Behavioral Economics

Abstract

Decentralized Autonomous Organizations – DAOs constitute a new form of collective organization in the digital era. They usually relate to the use of blockchain technology, that ensures decentralization. DAOs rely on smart contracts to define their functioning rules and their operation. In general, DAOs are not related to traditional corporate forms and are not necessarily registered or recognized by law as corporates or associations. In any case, DAOs enable a new kind of governance, a governance based on technology and based on the use of smart contracts deployed on a blockchain network. In this sense, they could represent a revolution on collective governance. A revolution that could shape governance in the digital era. For this reason, DAOs could be the governance tool of Web3. The use of tokens as means of participation and voting by the members of a DAO provide a new technology tool that can combine law, governance, game theory, and behavioral economics. DAOs themselves could be viewed as technology tools that could transform governance in general and even democratic participation. The paper examines these issues and try to critically evaluate the potential and possible caveats of using DAOs as a governance tool. It demonstrates that the idea of decentralized governance in DAOs is similar to decentralization of governance of open-source software. The paper also highlights that the notion of modularity present in the open-source scene is also present in the blockchain technology realm and could be transposed to governance in DAOs. This modularity also contributes to the disruptive nature of governance in and by DAOs. As demonstrated in the paper, DAOs are true catalysts of law, governance and technology and represent the future of governance systems. The article refers that DAOs enable the coexistence of multiple democratic governance stacks. In any case, also mentions that some problems could arise from these multiple governance instances, as the fragmentation of the collectivity, the difficulties associated with the choice of the governance modules, the risk to the democratic principles in creating partial democratic instances, and the risks associated with a technocracy. At the end, considering all the benefits and risks related to the use of these new digital collective governance tools, the article concludes that DAOs can be considered the future of governance systems.