How Decentralised are ‘Decentralised Autonomous Organisations’ (DAOs)?

Blockchain applications to decentralise finance (DeFi) are quickly developing and are gaining more and more traction in practice as well as in policy and academic debates. One of the most far-reaching applications of this sort are Decentralised Autonomous Organisations (DAOs) whose aim is to decentralise entrepreneurial decision-making through smart contracts, creating a new form of business organisation.

Many only know DAOs because of the hack that happened in 2016 to ‘The DAO project’, a smart contract running on Ethereum that should have functioned as a venture capitalist. If the DAO had not failed because of the initial hack, the decision on which projects to undertake should have been made with decentralised voting by token holders. Since then, the technology has evolved considerably and sizably, and running projects already exist.

This post aims at informing the discussion on DAOs and business organisation theory. We discuss the theory of business organisation applied to DAOs, present preliminary anecdotal evidence on different levels of governance decentralisation of two successful projects and conclude briefly with a contrast of these theoretical and anecdotal findings.