THE FUTURE OF CORPORATIONS IS DECENTRALIZED DAO F

Words by Dr Irina Heaver

rom the beginning of time, humans have been figuring out how to pull resources and capital together to achieve a positive social or financial outcome.

The industrial innovations starting from the railroads and shipping companies caused legal innovation that brought us the concepts of partnerships, joint-stock companies, limited liability companies, preferred shares and so on.

All of the above was done with the view to efficiently pull capital together, as well as to protect the participants from adverse legal consequences.

The ICO mania of 2017, despite coming with a lot of backlash, has shown us that the future of funding is decentralized. The rise of DeFi, albeit that we are still early, has shown us that the future of finance is decentralized. The pandemic of 2020 has shown us that the future of work is remote and decentralized.

So, why are we still thinking of companies as a legal establishment on paper, sanctioned by a government, that has a seal and a board of a few people in charge of a centralized collection of individuals that come to an office from 9 to 5?

I think we all would agree that this concept of a company is morally outdated, especially considering the rise of open source projects that are being launched on decentralized protocols, and other innovation such as smart cities and selfdriving cars.

A Dubai-based company doing business with a Swiss-based foundation brings all sorts of transborder issues into play - which hordes of lawyers and accountants will happily charge you for. Internet native companies, such as internet native money – Bitcoin - have the potential to enable groups of people to operate more efficiently by relying on smart contracts to govern certain processes. Through the use of smart contracts, the company can automate certain aspects related to the way they operate, reducing operational costs and improving internal controls while simultaneously increasing the overall transparency.

The search for a legal structure for decentralized autonomous self-governed organisations - that transcend jurisdictional borders, that has a legal personality and can contract in its name as well as manage and deploy capital started in 2016 and proceeded with various degrees of success.

The all too well known DAO that launched on Ethereum resulted in the Ethereum fork. Several initiatives attempted to put a ‘legal wrapper’ over DOAs allowing for the limitation of liability for the participants.

In my mind, this is like trying to improve on the horse and carriage when planning to invent the car.

Perhaps we can start with a clean page and work on structuring an internet native company?