Interpretation of DAO Organizations: Opportunities and Challenges of a New Organizational Form

As the innovative concept of DAO creates waves in the Web3 world, this new organizational paradigm based on blockchain technology not only reshapes traditional organizational forms but also incubates a number of star projects. From project parties to investors, and to ordinary players, there are high hopes for DAO, which is seen as the key to future organizational forms. However, the definition of DAO presents diverse characteristics in different scenarios, making it difficult to summarize in a single statement.

This article will organize and answer the following core questions for readers from a professional perspective, combining regulations and practical experiences from various countries.

• What are the essence, advantages, and limitations of DAO organizations?
• How to create a DAO organization? What processes need to be followed?
• Which countries and regions have clear legal regulations for DAO?
• Can a DAO serve as the issuer of tokens for a physical asset project?

1. The Essence, Advantages, and Limitations of DAO Organizations

The core characteristics of a decentralized autonomous organization (DAO) ( are "decentralization" and "autonomy". Compared to traditional companies, DAOs have the following unique aspects:

) 1. Decentralized organizational structure

The DAO does not have a centralized decision-making management body but is managed collectively by all members. Its operational rules are implemented through smart contracts, which are open, transparent, and cannot be arbitrarily changed. This architecture effectively mitigates the moral hazard issues of management found in traditional companies.

2. Member-autonomous governance model

The DAO typically uses token voting for governance. Token-holding members can propose and participate in voting, with the voting results automatically executed by smart contracts. This model breaks the traditional hierarchical system, promotes equal communication, and enhances member participation.

The two major characteristics of DAO complement each other and jointly construct a new type of organizational form. It not only changes the management model of traditional companies but also reflects a people-oriented organizational philosophy.

However, DAO also has some limitations:

• Smart contract vulnerabilities may lead to security risks
• Decision-making efficiency is relatively low
• Lack of a comprehensive legal regulatory framework, facing compliance challenges

![Latest Interpretation by Web3 Lawyers: What Exactly is a DAO Organization? How to Create a DAO Organization? Can it Serve as a RWA Token Issuer?]###https://img-cdn.gateio.im/webp-social/moments-ca0dbca97f6bc79079c5efbe056e852f.webp(

2. The Basic Process of Creating a DAO Organization

Although the specific creation process of each DAO varies, it usually includes the following key steps:

1. Establish the organization's purpose and operational rules
2. Write the rules as smart contracts
3. Conduct strict testing and auditing of contracts
4. Raise funds through methods such as token issuance.
5. Deploy the smart contract on the chain to officially establish the DAO.

It is important to note that "establishment" here only refers to the creation on the chain and does not equate to registering an entity with legal personality under the real legal framework.

![Latest Interpretation by Web3 Lawyer: What is a DAO Organization? How to Create a DAO Organization? Can it Serve as the Issuer of RWA Tokens?])https://img-cdn.gateio.im/webp-social/moments-8ce682ded4c0d55a03cf594fe1d41b21.webp(

III. The Current Legal Regulation Status of DAO

Currently, some countries and regions have begun to formulate specific laws and regulations for DAO.

) 1. UAE###

The "DAO Association Regulations" published by the UAE RKA DAO provide a clear legal framework for DAOs:

• Grant DAO independent legal status
• It is required that the DAO must be deployed on a permissionless distributed ledger.
• Require the DAO code to remain open-source
• Establish registrars and auditors to oversee the DAO.

( 2. USA

Wyoming has passed the "DAO Supplementary Act," allowing DAOs to register as limited liability companies and making provisions for their establishment and operation.

Tennessee revises state law to allow limited liability companies to register as "decentralized organizations".

) 3. Other Regions

Countries such as the Marshall Islands and Malta have also introduced relevant regulations, but their influence is relatively limited.

![Web3 Lawyer's Latest Interpretation: What Exactly is a DAO Organization? How to Create a DAO Organization? Can it Serve as an RWA Issuer?]###https://img-cdn.gateio.im/webp-social/moments-ab91ee4d40a12008541c2b13391e55f2.webp###

4. The Feasibility of DAO as the Issuer of RWA Project Tokens

Regarding whether DAO can serve as the token issuance entity for the physical asset ( RWA ) project, it is necessary to distinguish between the following two situations:

1. If the DAO is registered locally as an independent legal entity, it can theoretically issue tokens as long as it meets the relevant financial compliance requirements.

2. If the DAO exists only on-chain without a corresponding off-chain entity, it cannot directly serve as the issuer of tokens. In this case, it is necessary to use "legal wrapping," that is, to establish a traditional legal entity to assume part of the DAO's functions in order to complete compliant token issuance.

Conclusion

DAO, as an emerging organizational form, has made significant progress on the chain. However, to further integrate into the real world, relevant laws and regulations still need to be improved. DAO project parties should also pay more attention to compliance requirements to address potential legal risks.