• Scott Fitsimones is the co-founder of CityDAO and author of “The DAO Handbook”, which discusses how decentralized autonomous organizations (DAOs) are being held back by coordination and regulatory problems.
• In 2021, DAOs began to venture into the real world and pursue acquisitions of real-world assets, such as rare art, a golf course, and a National Basketball Association team.
• These ambitious projects have been hampered by immense regulatory and coordination costs, but there are solutions to these problems.
The dawn of the 21st century brought with it a new wave of technology-enabled projects that leveraged the power of the internet to decentralize and democratize the way we organize and fund projects. Decentralized autonomous organizations (DAOs) emerged as a powerful way to coordinate and fund projects on a global scale, with no need for a centralized authority.
In 2021, these organizations began to break out of their blockchain confines and spill out into the real world. Leveraging a set of new DAO laws in Wyoming, Vermont and Tennessee, a wave of crypto-collectives began to pursue audacious acquisitions of real-world assets. These projects included the purchase of rare art, a golf course, the U.S. Constitution, a National Basketball Association team and even 40 acres of land (purchased by CityDAO, which was founded by the author of this article).
However, these ambitious projects have been hampered by immense coordination and regulatory costs. For instance, the purchase of the 40 acres of land required an extensive legal process, including working with multiple regulators, navigating complex tax rules and more. Additionally, there are the challenges of coordinating a decentralized collective of stakeholders, who all have their own interests and goals.
Fortunately, there are solutions to these problems. For example, a DAO can be structured to ensure that it always remains compliant with existing regulations. Additionally, DAOs can use technology such as decentralized governance protocols and stakeholder voting systems to ensure that all stakeholders are properly represented and their interests are taken into account.
Ultimately, the success of DAOs will depend on finding the right balance between freedom and responsibility. By leveraging the right technology and legal framework, DAOs can unlock the potential of the decentralized economy and usher in a new era of collective organization and funding.