What Is a DAO?

DAOs are code on the blockchain that represent organizations of people to get together for different objectives. In the future DAOs may be recognized legally as legal persons of many types.

The term "DAO" is an acronym for "Decentralized Autonomous Organization".

The term "autonomous" is used to describe a DAO because it is an immutable smart contract on a blockchain and it is practically impossible to stop or tamper with it by any traditional organization, corporation, or government.

The term "decentralized" is also used to describe a DAO because when the smart contract is sent to the blockchain it becomes replicated globally in all the participating machines of the network.


Like traditional organizations, DAOs usually have the following structure:

Participants: Participants may be persons who become DAO token owners by purchasing them in the market or acquiring them at issuance. DAOs may have boards, management, and people with different functions with different permissions to sign certain types of transactions with their wallets.

Purchase and sale of participations: Token ownership of DAOs may be bought and sold in the market.

Transfers: DAO tokens may be transferred from address to address just like ERC-20 tokens or other crypto assets.

Rules: DAOs usually have rules similar to traditional organizations for their decision making, distribution of funds, and future changes in their rules.

Treasury: The main objective of DAOs is usually to have a treasury with funds in crypto assets that are used for different objectives.

What Objectives a DAO May Have and Legal Personhood?

DAOs may be recognized as legal persons such as investment companies, corporations, charities or foundations, trusts and pension plans.

The objectives that DAOs may have include the following:

Investment: A DAO may have the structure of an investment company where token holders vote on projects and other crypto assets to invest in or they may hire professional investment managers.

Business: DAOs may be recognized as legal persons in the future such as corporations, LLCs, partnerships, etc. As such, they will have very similar structures and rules as their traditional counterparts.

Charity: A DAO may be organized just for the purpose of a charity to give money to beneficiaries and may even be recognized legally in the future for tax breaks and deductions.

Trusts: A DAO may have rules very similar or identical to legal trusts and may have the same purpose and its token holders the same fiduciary duties.

Pensions: A DAO may be a pension plan or retirement plan for employees or individuals that belong to different kinds of organizations.