Decentralizing an organization

The possibility of running an organization by aid of a smart contract remains. It is likely that the organization would still need one or more directors to carry out the directives of users and otherwise carry out the duties of running an organization. The DAO claimed zero employees, and that may have been true to a point. Given that it's effectively gone, it actually is zero now.

For a decentralized asset organization to be legal, a good start would be for it to have a legal entity, as suggested previously—something to provide limited liability to investors. For it to raise money, it would be a good start for it to admit that it's a securities offering, instead of claiming to be a utility token. The offering would then have to register as a security with the appropriate regulatory authority, or file for an exemption.

Much of the legal trouble with offerings such as the DAO perhaps could have been avoided by adhering to forms—there's nothing inherently wrong with a token as a security, except that to start, we should probably admit that most of the ones that people are buying speculatively are, in fact, securities.

Doing an issue under Rule 506(c) in the US allows unlimited fundraising among accredited investors, and general solicitation is allowed—you can advertise your offering. If you want to raise money among investors other than accredited investors, you can do that with a different exemption, the Reg A+, albeit with certain limitations and substantially more cost.

The core concept of users voting on corporate governance is a good one. The notion that organizations such as the DAO formed legal entities only as compatibility measures with real life speaks to the enormous arrogance of certain elements of the crypto community.

Corporations exist for the benefit of shareholders. In practice, layers of management and pervasive rent-seeking suck tons of productivity out of organizations. The thinking that eliminating people from an organization would fix its problems, however, is fundamentally flawed.

Algorithms are written by people. Smart contracts are written by people. True, an organization with zero employees has no payroll expense but if it's replaced by $50 million in oops-our-money-was-stolen expense, it's hard to say that that's an improvement.

Still, the basic concept of an organization truly run by stakeholders, where every deal is vetted by the people whose capital is supposed to be grown and protected—that really may work in some instances. Much has been written about the popular wisdom averaging out to be quite good.

In much the same way that actively managed mutual funds, net of all fees, tend to underperform index funds, professional managers of a fund that invests in a given asset might not earn their keep. A crypto real estate fund, in which the investors are primarily seasoned real estate investors who had previously been in syndication deals and so forth, would likely yield good results.

The value of blockchain in this instance is that stakeholders, running specialized software or clicking around a web interface, have a fast, consistent, verifiable way to participate in board elections or run the entire organization themselves.