Category Archives: DAO

Future Forum Dubai: How Do We Define Wealth In The Future?

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Happy to have been a part of this session “How Do We Define Wealth In The Future?” to uncover the potential shift away from traditional monetary forms of value and the role emerging technologies will play in creating alternative forms of wealth.

The Future Forum is an annual event hosted by the Dubai Future Foundation convening over 400 of the world’s top futurists to Dubai to anticipate challenges, imagine opportunities, share foresight, and shape the future. The first edition of the Dubai Future Forum will be taking place in October 2022 at the Museum of the Future in Dubai, United Arab Emirates.It took place over two days at the iconic Museum of the Future, the Forum provided an international platform for futurists and thought leaders, from diverse sectors, to build a long-lasting community by engaging on tomorrow’s most pressing issues; cementing Dubai’s position as a rising global hub for futures leadership and action.

This year’s Forum will hosted 30 sessions with a focus on four key themes: the Future of our World; Mitigating Existential Risk through Foresight; Value and Humanity; and Hedging our Bets through Foresight.

The Dubai Future Foundation seeks to reimagine and inspire Dubai’s future in collaboration with public and private sector partners to create initiatives, programs, and thought leadership to inform and implement on a local and global stage. The most visible manifestation of this determination is the recently opened Museum of the Future.

Duncan Cass-Beggs, Counsellor for Strategic Foresight, OECD,

Dr. Susann Roth, Chief of Knowledge Management, Asian Development Bank,

Joseph Raczynski, Technologist and Futurist,

#TheFutureWeMake #MuseumOfTheFuture

Dubai Future Forum Inspires

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It was a pleasure and honor to have been a part of the inaugural Dubai Future Forum. It is an annual event hosted by the Dubai Future Foundation convening over 400 of the world’s top futurists to Dubai to anticipate challenges, imagine opportunities, share foresight, and shape the future. The first edition of the Dubai Future Forum will be taking place in October 2022 at the Museum of the Future in Dubai, United Arab Emirates.

It took place over two days at the iconic Museum of the Future, the Forum provided an international platform for futurists and thought leaders, from diverse sectors, to build a long-lasting community by engaging on tomorrow’s most pressing issues; cementing Dubai’s position as a rising global hub for futures leadership and action.

This year’s Forum will hosted 30 sessions with a focus on four key themes: the Future of our World; Mitigating Existential Risk through Foresight; Value and Humanity; and Hedging our Bets through Foresight.

The Dubai Future Foundation seeks to reimagine and inspire Dubai’s future in collaboration with public and private sector partners to create initiatives, programs, and thought leadership to inform and implement on a local and global stage. The most visible manifestation of this determination is the recently opened Museum of the Future.

Tech Snippets Today – GLEAC – Sallyann Della Casa – Chief Identity Hacker, with Joseph Raczynski

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It was an honor and a privilege to speak with Sallyann Della Casa.  She is Chief Identity Hacker at GLEAC.  We dive headlong into NFTs and their increasing relevance going forward.  Some background about my esteemed guest.  She is one of the 4% of women globally who has a patent pending method and algorithm (for measuring soft skills) as a sole inventor. Sallyann holds degrees and certifications in Law, Organizational Behavior and Urban Planning. She speaks five languages and is a published author. Her education spans the globe from Harvard University to Franklin College to University of Toronto.

Sallyann spends her days obsessing about GLEAC, her technology company, which measures and develops soft skills gaps for any job (current and future) in 10 minutes a day. GLEAC’s clients and partners include Prada, Accenture, Korn Ferry, Monster etc. GLEAC has been featured in the Dubai Cares, The Future is Human pavilion at Expo 2020.

ILTACON 2022: WHAT LEGAL PROFESSIONALS NEED TO KNOW ABOUT BLOCKCHAINS

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Originally published in the Legal Current

By Carrie Booker

A highlight of Day One of ILTACON included the session Blockchain – Are You Prepared for DeFi, NFTs, and DAOs? with Joe Raczynski, manager, Technical Innovation Services. The session provided a blockchain overview and explored cryptocurrencies, smart contracts, decentralized finance, and non-fungible tokens (NFTs).

Legal Current had the opportunity to talk with Raczynski after his session, and below is a recap of the conversation.

Legal Current: Why is it important for legal professionals to understand how blockchains work?

Raczynski: If you plan to practice as a legal professional beyond the next three plus years, blockchain is critical to understand. Blockchains are a fundamental shift in the way we think about control and proof.  They can help people track provenance, view records, and execute contracts. It is a fundamental shift in the way we will transact with code acting as the unbiased middle between two entities. It has the potential to be very powerful. If you are on the transactional side, there is little question in time, you will interact with blockchains for almost any legal document. It will certainly help in the automation components of workflow going forward. As you can imagine, litigation will certainly ensue as questions around the above become central to disputes. 

LC: Can you share a short history of blockchain and key ways to participate in it?

Raczynski: Blockchain was initially considered a ridiculous notion – the idea of a digitized ledger beholden to no single owner. However, the evolution of blockchain from joke to genuine is stark. For example, the top 50 banks in the world have unified in the realization this technology could disrupt the financial industry.

For those newer to blockchain technology, here’s a brief history: In its simplest form, the term “blockchain” refers to a peer-to-peer network of computers running a common software protocol that includes a database replicated on each computer connected to the network, where each user interaction (other than a query) is recorded as a new entry. Each computer is called a “node,” while the database is often referred to as a “distributed ledger.” In its most simplistic sense, blockchain is a distributed database based on code.

People will participate with the exchanging of digital tokens, cryptocurrency, NFTs, DAOs, ticketing, identity, and almost anything else that require some verification between two parties.

LC: Explain what decentralized autonomous organizations are and how smart contracts are used to enforce the rules governing them.

Raczynski: A DAO (decentralized autonomous organization) is a revolutionary change in the manner that people and businesses can organize. Leveraging blockchain technology, it is a decentralized model of control and governance. The essence of a DAO is transparency, clarity of rule, and process-driven decisions – primarily utilizing smart contracts on distributed ledgers. Once a DAO has been established, via a blockchain, participants take ownership of its token, which allow them to participate in the system.  Token holders can propose changes, and vote on those changes, with the subsequent actions being taken “leaderlessly.” There are no CEOs, CFOs, CTOs, only code and community.

Central to any discussion of blockchain and its legal impact is understanding “smart contracts,” a term that has been around for decades but in this landscape has a specific meaning. A smart contract is a few lines of computer code that creates an “if/then” statement, e.g., “if Amazon® stock is at $2,000 on January 1, 2019, then sell it.” What is special about smart contracts on the blockchain is that once an agreement has been reached by two parties, it is programmed onto the platform and becomes self-executing and immutable – without any human intervention. 

LC: What impact are blockchain technologies making on the FinTech and LegalTech spaces?

Raczynski: The next building block for this vision is transforming the financial industry. Decentralized finance (DeFi) is reimagining what the industry could look like without intermediaries. By its nature, blockchain removes third parties because the code and underlying math does the verification. Currently, DeFi has hundreds of billions of dollars locked into various blockchains, using smart contracts and cryptocurrency.

For example, in DeFi, if I wanted to earn 20% interest on my cryptocurrency (my money), I could sign a smart contract within my digital wallet telling the blockchain to hold in custody the money for an agreed period, netting me 20%. Nearly every imaginable financial instrument is being ported over into DeFi.

What is pivotal  is that you can establish complex financial ecosystems that run based on rules, thus eliminating the need for traditional third parties, like banks and brokerage houses. These rules can dictate action, lock-in value, automate transactions, and create immense efficiencies in the marketplace at a fraction of the cost of our current systems.

LC: How are NFTs and the metaverse evolving, and how is the regulation landscape keeping up?

Raczynski: The next stage of blockchain, cryptocurrency and DeFi are non-fungible tokens (NFTs). They represent anything physical or digital registered to the blockchain. NFTs give an asset a unique code – or hash or name – that can be checked and is verifiable on that digital ledger. We will use this to prove ownership of assets, such as the deed to your house. Recently, NFTs have taken the art and music world by storm. Billions of dollars of digital art have been purchased in the last year. As we move into the metaverse, an eventual virtual place for business and entertainment, those assets will have even more value in virtual homes or in a digital Times Square. It is surreal to contemplate, but this will happen in the next handful of years, all enabled by blockchain.

Currently, the only regulation that exists starts with cryptocurrency and the DeFi space. NFTs are so new, there is very little guidance. As for the metaverse, it is going to be amazing to see how regulators will address it.

Forum: The LawFirmDAO offers bold predictions of future firm partnerships

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Originally published in Forum Magazine

By Joseph Raczynski

Could decentralized autonomous organizations (DAOs) revolutionize how law firm partnerships are going to be structured in the near future?

Imagine a fully decentralized law firm. What might that look like? What if every attorney who opted in became a partner from Day 1, equitably sharing the benefits and firm profits? Gone is the elongated timeline to reach ownership, prestige and profit potential. Further, what if I said this could be built now with computer code that provided full transparency into rules, roles, profit sharing, voting, governance, and that even creates a sense of clarity and community – all out of the box?

Welcome to LawFirmDAO, a hypothetical but now feasible entity created within a decentralized autonomous organization (DAO).

Mind you, I know of no one who has written or talked about this, but this LawFirmDAO concept is something that could be the future of law firm structure. The reason? The lack of transparency within some law firms on occasion has been their undoing. Howrey and LeClairRyan both were victims of a few partners making decisions sometimes in a vacuum, without a wider participation of the firm’s attorneys; this ended up costing the firms dearly.

For some perspective, let’s unpack the essence of what a DAO means. DAOs are essentially entities built on code, leveraging smart contracts and tokens that permit token holders (attorneys) to vote on decisions the organization (the law firm) is considering. Fundamentally, a DAO is a blockchain structure – think of it as a safe database – that anyone can leverage to self-govern through participation. The entity is authored by rules that are baked into the code, permitting voting through digital tokens, sort of like cryptocurrency – all while leveraging smart contracts.

So, what does this mean? A DAO is a newer governance structure that humans (for now) are creating, which has a stated purpose and a plan to execute decisions via code. Let’s explore how this would work for LawFirmDAO.

Decision-making and profit-taking in LawFirmDAO

As a component of Web3, the next generation of asset tokenization, DAOs create a structure of governance. (Currently, most of the successful DAOs are built on the Ethereum blockchain.) Participants are essential to this structure, and they are directly linked to that organization in a verifiable and provable way.

This is accomplished via a digital wallet, linked to a blockchain that contains your assets, money, non-fungible tokens (NFTs), deeds and your DAO tokens – the latter proving you are a part of that organization. Think of it as your digital identity card to partake in the governance of the DAO. Each attorney would have a wallet with the LawFirmDAO tokens inside permitting them to connect to the DAO, create proposals and vote. The intent is to move away from a top-down model, and inherently a DAO structure enables this.

A well-written DAO drives community, fostering the creation of guilds within it to create new opportunities; the DAO then rewards people based on their individual participation.

In this vision of LawFirmDAO, a founder, for the purpose of creation, sets forth a plan to create the firm with all the typical rules of governance, but in full transparency and outlined in code, which is stored on a blockchain. After its creation, the founder withdraws as the leader to be an equal partner with all other participants, i.e., attorneys. The DAO is created, and tokens (shares) are issued. Prospective attorneys coming on board interact with the code via a friendly app or website, connecting in a digital wallet.

Compensation and work matters could be doled out simply as well. For example, attorneys could choose Option A and be rewarded for every client they bring in at 80% of those fees; or Option B and they are rewarded 10% of client fees because they did not bring in the client but worked the matter. In this way, attorneys could shift from one type of work matter to another by choice, simply by reassigning themselves and the code verifying it’s acceptable. Virtually every nuance of a firm governance structure could be pushed into this paradigm via code, verifiable via the blockchain.

Profits for the equity partners would be calculated by fees and automatically generated with their direct success via smart contracts. Rewarding structures are innumerable. Proposals from anyone in the LawFirmDAO would be offered via an online voting mechanism, verifying the person by their token in the DAO, and allowing them to put something to a vote – such as the creation of a new practice area in the next week, opening an office in Lagos or voting to change the profit structure. In this way, a DAO offers full transparency, equity, innovation, incentives, all of which are auditable and viewable in code. No one group or individual is dictating the direction, rather it is a verifiable way to be inclusive and egalitarian in its authorship and action – again, all via code.

An additional advantage to a DAO is the incentivized benefits aligned to the structure created within it. A well-written DAO drives community, fostering the creation of guilds within it to create new opportunities; the DAO then rewards people based on their individual participation. While a guild harkens back to the age of people forming groups of like-minded and skilled individuals, attorneys can do the same inside their LawFirmDAO. As a flat organization, everyone can propose ideas for vote, and if selected, chosen for action.

Legal DAO generator

Separate from this new partnership model created with a DAO, we will likely see DAOs created by law firms for their clients, which would allow for a coupling of current legal tech tools and blockchain. Issuance of a DAO could be done through an application like a contract automation tool; and for any company that wanted to create a DAO, the law firm would populate all applicable parameters – the name of the company and the token, number of tokens available, etc. – and then the firm could create the DAO, and, if necessary, file the business license with the appropriate state. (At the moment, only Wyoming has created laws around DAOs.)

Once this DAO has been created, another connected piece would be the voting mechanism. In this world, DAO participants would leverage their Web3 wallet to connect into the proposal and voting site. Once on the site, members would be able to vote on current ideas or propose actionable matters themselves. Each of these actions is stored on a blockchain that is inherently provable and verifiable.

The LawFirmDAO could be the future direction of equitable, democratic, transparent law firms that all parties can buy into through a Web3 DAO token. The fostering of community and innovation that this structure will birth could be transformative.

Animated Series: What’s Up with the Metaverse

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Originally published on the ABA Center for Innovation, Innovation and You

by Joseph Raczynski with creative by Elise Harmening, Esq.

What’s Up with the Metaverse, was written by Joseph Raczynski of Thomson Reuters, a member of the Governing Council for the Center for Innovation, and created by Elise Harmening, Esq., Project Specialist Manager at the Center for Innovation.

DAO (Decentralized Autonomous Organizations) and Regulation

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Originally published on Cryptos on the Rise.

A DAO (Decentralized Autonomous Organization) is a revolutionary change in the manner that people and businesses can organize.  Leveraging blockchain technology, it is a decentralized model of control and governance.  The essence of a DAO is transparency, clarity of rule, and process driven decisions – primarily utilizing smart contracts on distributed ledgers.  Once a DAO has been established, via a blockchain, participants take ownership of its token, which allow them to participate in the system.  Token holders can propose changes, and can vote on those changes, with the subsequent actions being taken, “leaderlessly”.  There are no CEOs, CFOs, CTOs, only code and community.

Close to 5,000 DAOs have been formed to date, expecting to grow exponentially.  Many involve pooling digital money together to purchase assets, both physical and digital.  ConstitutionDAO was established seven days prior to the auctioning of one of the eleven remaining copies of the US Constitution. The intent, to purchase and house it at a protected public location.  Participants in the DAO contributed money in ETH (Ethereum token) to the cause, raising $45 million.  Separately, the AssangeDAO raise $53 million for the criminal defense of Julian Assange.  These are quick and powerful ways form decentralized autonomous organizations.

Central to a DAO is transparency.  Anyone can see which individual (wallet address) owns tokens.  Tokens allow for people to vote on proposals.  Anyone can create a proposal.  Simply stated, and in an ideal setting, it is egalitarian.  Challenges to the model are its extremely democratic nature, i.e. voting on everything.  As a result, it can be overly deliberate and result in a slower process compared to a more centralized formed organization like a corporation.

With this nascent, but extremely powerful organizational structure, the regulatory landscape at the state level is nearly non-existent.  Wyoming, which has led the US on regulation for blockchain and cryptocurrency, recently codified rules for DAOs residing in the state. Therefore, a DAO could be created under the laws of the State of Wyoming. No other state enables this yet.  Further, there is a movement afoot for corporations in the cryptocurrency space to dissolve and become DAOs.  With potentially hawkish regulation on the horizon for cryptocurrency, DAOs, by their very nature, are code based, self-running, leaderless entities running via a decentralized network, which permits actions based on how users interact under brassbound, predefined rules. Theoretically, under the current regulatory landscape there is nothing the law can do about such an entity. The converted corporation to a DAO would no longer be in control of the platform, which reverts to a completely new decentralized model, unlike anything regulated currently.

According to the SEC guidance issued in 2017, they determined that “The DAO”, an entity raising money in an ICO, Initial Coin Offering, that it was indeed a security.  The difference here is that many of the DAOs created now are under the auspices of “investment clubs” or are simply voting mechanisms, whereby the SEC generally does not regulate, unless met by the “Securities Act of 1933” regulating the offer and sale of those membership interests, or under the Investment Company Act of 1940 (1940 Act), or if a person who is paid for providing advice regarding the investments of the club or its members may be an investment adviser under the Investment Advisers Act of 1940 (Advisers Act) or state law. (SEC, https://www.sec.gov/reportspubs/investor-publications/investorpubsinvclubhtm.html)

The SEC is reportedly looking into true DAOs like Uniswap in the decentralized finance (DeFi) space, as a decentralized exchange (DEX), which is a code-based organization that matches buyers and sellers of cryptocurrency.  One area of focus is lending pools, where users will provide their assets for other users to trade, which provide healthy yields, just as banks provide interest on your assets.  This may fall into the Howey Test investment contract realm. 

DAOs are in their embryonic stage with legislatures and regulators.  There is little question that this space if bursting with potential and therefore creating a framework with regulation is certainly on the horizon. 

Mind-shifting into blockchain, cryptocurrency, and the future of asset ownership in the metaverse

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Originally posted on Our Purpose – Thomson Reuters

Are you ready to jump down the rabbit hole? Well, so begins one of the most transformative periods in human history. What began as a widely dismissed experiment unleashed on the world by an anonymous author became a phenomenon that will alter corporations, governments and your own personal finances. As a technologist and futurist in a company widely respected for its ability to inform the way forward for professionals in the legal, tax and accounting and government sectors, I’m frequently asked how these technologies will shape the world we live in.  While some of the shifts are already underway, most are yet to come, Ultimately, these technologies will change commerce, law, taxes and wealth creation, and how we interact with each other. How is this possible? Let us start with the building blocks of our future infrastructure. 

Bitcoin invented blockchain technology in 2009 with their white paper. Blockchain enables a decentralized ledger to run on thousands of computers globally. Through sophisticated consensus mechanisms, the machines confirm transactions between two entities. They accomplish these trades without banks or government oversight. The underlying technology Bitcoin uses is called blockchain, which is the secret sauce of this monumental infrastructural shift. So, while Bitcoin is neat, blockchain is our future tech.

Foundational infrastructural blocks

Our history starts with Web 1.0, the early internet in 1990, when we read content and clicked links to viewable information. In the early 2000s, along came “Web2,” allowing direct user interaction, for example “likes” or “voting up” content. That was a computational marvel of coding at the time. We are now entering “Web3.” It is the most significant paradigm shift since the internet began. Web3 ushers in the ability to tokenize assets. This means you can leverage blockchain, a trusted database, to create the internet of value and a web of digital asset ownership that is provable and verifiable without third parties. For simplicity, tokens represent digital shares or ownership of something.

Unpacking Web3

As a result of blockchain, myriad cryptocurrencies were born leveraging this tech. Some will have real potential to compete against a national currency like the dollar.  Sixteen thousand cryptocurrencies exist today. Eighty-three central banks around the world are now fast-tracking Central Bank Digital Currencies (CBDC) (to compete against this shift to cryptocurrency.) Regulators the world over are also attempting to keep up. Many of the 16,000 will falter, but the appeal of these cryptocurrencies is that they are building new use cases of the internet of value. Some have programmed into their code, scarcity, and some deflationary attributes. For people living in countries with high inflation, these cryptocurrencies act as a hedge. Importantly, people can hold assets individually, cryptographically, without a bank. The owner has a lock and key to their money and need only to interact with the blockchain via their digital wallet. As a result, the valuation of cryptocurrency reached 3 trillion dollars recently.  

DeFi

The next building block for this vision is transforming the financial industry. Decentralized Finance  (DeFi) is reimagining what the industry could look like without intermediaries. By its nature, blockchain removes third parties because the code and underlying math does the verification. Currently, DeFi has hundreds of billions of dollars locked into various blockchains, using “smart contracts” and cryptocurrency. A smart contract is a few lines of computer code that creates an “if/then” statement, for example, if Amazon® stock is at $2,000 on January 1, 2019, then sell it.

What is special about smart contracts on the blockchain is that once an agreement has been reached by two parties, it is programmed onto the platform and becomes self-executing and immutable – without any human intervention, what a human or bank would have done to record something. For example, in DeFi, if I wanted to earn 20% interest on my cryptocurrency (my money), I could sign a smart contract within my digital wallet telling the blockchain to hold in custody the money for an agreed period, netting me 20%. Nearly every imaginable financial instrument is being ported over into DeFi.

NFTs and the Metaverse

The next stage of blockchain, cryptocurrency and DeFi are Non-Fungible Tokens (NFTs). They represent anything physical or digital registered to the blockchain. NTFs give an asset a unique code or hash or name that can be checked and is verifiable on that digital ledger. We will use this to prove ownership of assets, such as the deed to your car or house. Recently, NFTs have taken the art and music world by storm. Billions of dollars of digital art have been purchased in the last year. As we move into the Metaverse, an eventual virtual place for business and entertainment, those assets will have even more value in virtual homes or in a digital Times Square. It is surreal to contemplate, but this will happen in the next handful of years, all enabled by blockchain.

DAOs – The future of organizational structures

Going forward, the final building block to the blockchain stack are Decentralized Autonomous Organizations or DAOs. These are essentially entities built on code, leveraging smart contracts and tokens permitting token holders to vote on decisions that the organization is considering. In the next several years, I predict a major sports franchise will be owned by a DAO. Imagine being a token holder in that DAO and being able to vote on who is drafted. Recently, a copy of the Unites States Constitution was nearly won at auction by a DAO. This will be commonplace soon.

These are early days of blockchain and what it has birthed – cryptocurrency, DeFi, NFTs and DAOs. The emergence of these technologies will mean that professionals in the legal, tax and accounting and government sectors can expect to see significant changes in the years ahead. The abundance of new opportunities in nearly every field, including legal, tax, and government, is immense. The legal industry will see nearly every angle impacted for both the business and practice of law. Contracts will be automated and interactive leveraging blockchain. Litigation will rely on truth from transactions on the chain. In tax, applications will need to digest and interpret these ledgers, but will provide even more clarity about global transactions.  Governments will likely need to regulate and help interpret how these amorphous systems are framed in our world. There is little doubt that this will transform both our personal and professional lives, especially as we move into the Metaverse.

Buying the Constitution: The rise of DAOs in legal

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Originally published on Thomson Reuters Institute on November 18, 2021.

Could Decentralized Autonomous Organizations (DAOs) become the model for future business structures and transform the legal industry in the process?

Update: After this blog post was published, the ConstitutionDAO fell short in its bid to buy a rare copy of the US Constitution in an auction held by Sotheby’s. The crypto-consortium was edged out by another buyer with a winning bid of $43.2 million, a record price for a printed text and twice the price that had been predicted for the document. This post has been updated to reflect this event.

With the dropping of Sotheby’s hammer late Thursday, ConstitutionDAO fell just short of its bid to purchase one of the last remaining copies of the United States Constitution. It is one of two remaining copies still owned by private hands of the 13 in existence. Despite being beaten out at auction, this is a monumental moment in the recognition of Decentralized Autonomous Organizations (DAOs), which raises awareness of a system that will transform the legal industry.

A DAO is a blockchain structure (think of it as a safe database), that anyone can leverage to self-govern through participation, authored by rules, baked into code, and permitting voting through digital tokens (think cryptocurrency) — all while leveraging smart contracts. What does this mean? A DAO is a newer legal structure that humans (for now) are creating, which has a stated purpose and a plan to execute decisions via code. In this instance, the intended purpose is to win the Sotheby’s auction and retain a copy of the US Constitution. Also stipulated in the DAO is its governance — for example, where does the community want the document to be stored or displayed?

Had the ConstitutionDAO won the auction, these questions of governance would have been proposed, and the individuals who own these digital tokens in their wallets, could have then voted. Indeed, individuals now can create wallets to store tokens or cryptocurrency that not only allows them to own digital assets like cryptocurrency, digital art (NFTs), or land in the Metaverse, but also sign or vote on a topic that a DAO has offered. (They must own those specific DAO tokens in their wallet in order to vote.) These wallets are the future of identity, asset ownership, and your ability to prove something, vote, or sign agreements.

ConstitutionDAO started with the idea that the general population could own a copy of the Constitution. They gave themselves six days to raise the high end of the projected winning auction, $20 million; and at the time of this writing, 7,500 people had contributed to this DAO, at a sum of well over $40 million, blowing past the original goal. (Since ConstitutionDAO did not win the auction, all funds will be returned to those who donated them.)

DAOs
Day 1 of 6 for ConstitutionDAO

If anyone wishes to participate in a DAO, you first must purchase tokens, which typically gives voting rights that will allow the owner to guide what that organization does in conjunction with the rest of the community that also owns the tokens. We may also see DAOs using factional ownership of an asset — for example, a Picasso painting, London Bridge, or the Empire State Building. In this instance you have the ability to influence decisions, but you also have a partial ownership of the underlining asset as it appreciates or depreciates.

DAOs
Where it started (left), and where it went (right)

As I have written previously, DAOs may become the future of businesses or organizational structures not only in the Metaverse, but in the real world. At the Thomson Reuters Institute’s recent 2021 Emerging Legal Technology Forum, I sat on a panel discussing the evolution of blockchain and tossed out a prediction that a DAO will own a major sporting franchise within the next four years. My comment was received with a collective gasp in the room.

Imagine the ability for you and others to vote on which players the New York Giants pro football team acquires… yet, by owning tokens of the NYGiantsDAO or whatever it may come to be named, you in combination with others who own said tokens could vote to acquire the next greatest player or even possibly vote on who to bench in the next game. The implications are profound.

The sums of money that DAOs will raise likely will be staggering, such that they could overwhelm current ownership models with a flood of money from massive numbers of private individuals interested in participating. We have seen this with ConstitutionDAO now having raised more than $40 million and counting in just six days.

DAOs

Here is one simple example of a DAO translated into real life. Think about the interaction you have with a vending machine. In essence, it is a legal contract that you are entering. You approach the machine in your breakroom, and it takes your money via credit card. You choose your candy bar, and the machine dispenses the snack. As a DAO, it uses that money to re-order more Snickers bars, when it knows that that row is nearly empty. It can also order cleaning services and pay the rent all by itself. As you put money into that machine, you and its other users have a say in which snacks it will order and how often it should be cleaned. Ultimately, it has no managers, and all of those processes were pre-written into its code.

Most initial DAOs will have a board or controlling entity, of course, but they will use code and voting rights-governing models to establish equitable means of responsibility and decision-making. However, ultimately it is a system whereby the code could be fully autonomous, meaning a business could be established and run nearly or completely autonomously.

In the Decentralized Finance (DeFi) space, many of the exchanges are code-based executions of asset swapping or purchases of assets like cryptocurrency or synthetic assets that mirror stocks. These organizations are increasingly DAO-centric and will eventually not have much human intervention, because much of its operations should be programmed into the organizational structure, only needing tweaks of code voted on by the DAO members.

DAOs are the future of organizations. They will create an amazing world of possibilities, but simultaneously disrupt many structures we currently have in place now. On the legal side, there is incredible opportunity for lawyers in both transactional practice areas as well as the eventual litigation side of the business. When regulation comes, it will be fascinating to watch how we embrace and adapt to this decentralized model with our current lens.