Legally-constituted corporations are long-standing vehicles for producing commercial goods and services, and they are incredibly effective at doing so. Despite tremendous hype, today’s DAOs are generally less competitive and less efficient at producing goods and services than comparable corporations. But there are several ways that DAOs could disrupt the thousand-year-old corporate model. - Scaling. One demonstrated feature of DAOs is their ability to scale up funds incredibly quickly. DAOs might demonstrate a comparative advantage in raising and deploying capital, especially for software projects. - Community ownership. DAOs, as variations of online communities, offer better support for large-scale community ownership and governance. In turn, community ownership might enable faster growth and better alignment between firms and their users, locking in network effects. - Tech-based network effects. DAOs, as net-native organizations, can more efficiently exploit network effects enabled by technology and the internet. - Investment management. Investment DAOs and DeFi DAOs will become more efficient patterns for holding and growing the value of governed assets, including traditional corporations, than traditional banks or private equity firms. - Public goods. Compared to traditional corporations, DAOs are a more efficient vehicle for funding, building, and protecting digital public goods. - Shared infrastructure. As an organizational platform with an interoperable technical stack, DAOs can adopt and benefit much more directly and quickly from shared infrastructure, ecosystem-wide technical improvements, and even scientific research. - Long-term trends. Economic production will be organized according to a new pattern of production that emphasizes decentralized forms of peer production over a centralized firm; DAOs are well-suited to organizing and compensating such forms of peer production. - Digital jurisdiction. Digital and blockchain-based forms of alternative dispute resolution will advance to the point where companies will simply prefer to operate in a digital jurisdiction rather than a traditional legal jurisdiction. - Legal innovation. DAOs can be mapped to both typical corporate entities such as LLCs as well as new forms of legal entities. Those new legal entities may entail comparative legal and tax advantages for DAOs as well as other benefits for the governments and courts that adopt them. An addendum to this prediction: A DAO is defined here as an organization whose governance is organized primarily through a blockchain or blockchain-based application. For accounting purposes, we will count legally-wrapped DAOs as DAOs and not as traditional corporations. Since the definition of a DAO is still unstable, we will determine the precise definitions of “DAO”, “digitally-constituted organization”, and “traditional corporation” by mutual agreement at some point before the end date of the prediction.
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