The Evolution of Web 3 and Decentralized Governance

Abstract

In this chapter, the authors give a theoretical overview of the landscape of decentralized autonomous organizations (DAOs) as the native organizational structure of Web 3. The authors place this new formation in the existing theoretical framework of transaction cost economics and new institutional economics analyzing their governance from economic and legal perspectives. They argue that DAOs are so-called hybrid organizations, which embrace features from the free market and from hierarchical organizations. DAOs show characteristics of hybrids such as pooling resources, coordinating operations by contracts and facing competition in their coordination. However, their changing nature imposes challenges in their identification.