Defining Real and Fake DAOs

Using blockchain or smart contracts in some superficial way is not enough for an organization to be considered a DAO. For organizations that use smart contracts but aren’t DAOs, Gabriel prefers the term Cybernetically enhanced organizations.

However, “autonomous” does not mean “automatic” and, even if it did, smart contracts are not automatic. Smart contracts also obviously are not autonomous because they are unconscious and inert, not spontaneous and self-controlled.

Thus, a misunderstanding of the word “autonomous” within the term “DAO” would interpret “autonomous organization” to mean “an organization that makes use of smart contracts”. This misunderstanding is a massive ‘cheat’ which lets many arrangements that are not “autonomous” in Webster’s sense nevertheless be deemed “DAOs” merely because they involve ... See more

A popular misunderstanding of smart contract technology is that smart contracts work “automatically” without human intervention. Smart contracts are just passive object code stored on the blockchain. This code is called by miners/validators when users request it to be called by offering to pay miners for making such calls. In other words, smart con... See more

A good example of the latter type of decentralization is Bitcoin. Other than the consensus protocol itself, there are no formal governance rules existing among mining nodes, non-mining nodes, users, exchanges and core developers, but these groups all have different kinds of influence over Bitcoin and essentially govern Bitcoin on an emergent basis ... See more

This could occur in many different ways: For example, all organizational decisions could be determined by tokenholder voting, but token ownership and voting turnout could be widely dispersed among many “minnows” (persons each holding a small % of total token supply/total voting power). Alternatively, different types of decisions could be delegated ... See more

Webster defines “decentralization” in relevant part as follows: "the delegation of power from a central authority to regional and local authorities". This means that decentralization occurs when power is widely dispersed or distributed.

For example, Twitter Inc. is centralized (it has a board of directors as its ultimate decision-making authority) and relatively non-autonomous (it exists to generate profits for the benefit of its stockholders). The Ethereum Foundation, like Twitter Inc., is centralized (it has a board of directors or similar governing body), but, unlike Twitter In... See more

An organization is some sort of association of individuals for common ends or who interact with one another in a patterned way.  For those who have studied corporate law, we know associations are of two main types: unincorporated and incorporated.