The world’s legal systems are straining to adapt to transactions facilitated by smart contracts, cryptocurrencies, digital assets, and other developing blockchain technologies. One of these innovation — commonly known as “Decentralized Autonomous Organizations” or “DAOs” — offers potentially revolutionary mechanisms for conducting governance and transactions among participants.
DAOs offer a different approach. from these more traditional forms of community-delegated actions. DAOs are enterprises that enable a diverse group of participants to conduct transactions as a coordinated unit according to software code implemented on a public blockchain without the need for delegations to a board, officers, or other centralized executives.
The most significant legal risk is that DAO developers, administrators, and participants are subject to joint and several liability for losses realized by a DAO. In contrast, shareholders of corporations enjoy “limited liability.” That is, if a corporate shareholder invests $100, the shareholder is only exposed to losing that investment due to corporate activities, and the rest of the shareholder’s assets are protected.
Other legal uncertainties exist for DAOs . However, the conceptual starting point should be to enact a legal framework that recognizes DAOs as legal entities and grants its participants limited liability.As stated in the Final NH Commission Report, New Hampshire intends to become a leader in establishing sound and flexible rules governing the legal status of DAOs.