This guide was built to help you understand the benefits of incorporating your DAO and how the process of DAO incorporation works. We help you answer questions like:
Why should I incorporate my DAO? In what geographic jurisdiction should I incorporate my DAO? What legal entity type should I choose?
Get all the information you need to make the best decisions for you DAO by reading this guide.
By
Leo Henkels
As decentralized autonomous organizations (DAOs) continue to gain traction in the Web3 space, their potential to revolutionize traditional business models has become increasingly apparent. By adopting DAO structures, real-world businesses can enhance operational efficiency, foster stakeholder engagement, and unlock new opportunities for growth and innovation. In this article, we will explore the benefits and challenges of integrating DAO models into traditional businesses, drawing on insights from industry experts and real-world examples.
Integrating DAO structures into traditional businesses can offer a range of potential benefits, including:
As Adam Miller, co-founder of MIDAO, noted in the Just DAO It podcast:
"Even just the fact that thanks to tokens, it's so much less expensive and easier to distribute governance rights and ownership rights much more widely than you can even do with a traditional shareholder corporation. I mean, if Starbucks wanted to give one-tenth of one share of their stock to every single person who walked in the door, they physically could not do it. The infrastructure does not exist. Those people need brokerage accounts; you'd have to fill out a bunch of forms. It would take hours for every single person you want to give like five cents of Starbucks stock to. And leaving aside whether or not Starbucks would want to do that—although I have a feeling maybe they would if they could."
By leveraging blockchain technology and tokenization, businesses can efficiently distribute ownership and governance rights to various stakeholders, fostering greater alignment and engagement.
While DAOs have primarily emerged within the crypto and Web3 ecosystem, a growing number of non-crypto businesses are exploring the potential of decentralized governance models.
One notable example is the fashion brand DSTLD, which launched a DAO in 2022 to give customers and stakeholders a say in key decisions, such as product design and sustainability initiatives. By empowering its community through a DAO structure, DSTLD aims to create a more inclusive and responsive brand that better reflects the values and preferences of its customers.
Another example is the music streaming platform Audius, which uses a DAO model to give artists and listeners more control over the platform's governance and revenue sharing. Budius seeks to create a more equitable and sustainable ecosystem for music creators and fans by decentralizing decision-making and aligning incentives
While the adoption of DAO models in traditional businesses is still in its early stages, some notable examples of successful integration exist. One such case is the decentralized cloud storage provider Filecoin, which has partnered with traditional data storage companies to offer a hybrid solution that combines the benefits of decentralization with the reliability and scalability of conventional infrastructure.
Another example is the e-commerce platform OpenBazaar, which uses a DAO model to govern its protocol and incentivize buyer, seller, and developer participation. By aligning the interests of all stakeholders and providing a decentralized marketplace, OpenBazaar aims to create a more efficient and resilient e-commerce ecosystem.
As more traditional businesses explore the potential of DAO models, it is essential to learn from the successes and challenges of early adopters. Some key lessons and best practices include:
As Isaac Valadez, a leading developer, investor, and thought leader in the ICP ecosystem, advised in the Just DAO It podcast:
"I want to someday see people who are not just political scientists but something new, a new discipline focused on the science of governance using on-chain mechanisms. This discipline would conduct research studies and develop new mechanisms. We need to start getting formal and serious about exploring this space because I believe that in the future, many assets, resources, organizations, and even people will be automated by smart contracts."
As traditional businesses adopt DAO models, they will likely face a range of evolving challenges, such as navigating regulatory uncertainties, ensuring security and resilience, and managing the transition from centralized to decentralized governance.
However, the potential benefits of DAOs are significant, and many experts predict that they could transform various industry sectors in the coming years. Isaac Valadez shared his vision for the future of DAOs:
"I want to write a paper on it soon, but that's the kind of creative thinking that you could actually use to block someone out, or burn the funds that they had staked, or do something really, truly powerful with ICP tech. Making those kinds of DAOs could be groundbreaking."
As more businesses experiment with DAO models and share their experiences, we can expect to see accelerated learning and innovation in this space.
The integration of DAO structures into traditional businesses represents a significant opportunity to enhance operational efficiency, foster stakeholder engagement, and unlock new growth opportunities. While the adoption of DAOs in non-crypto sectors is still in its early stages, the examples and insights shared by industry experts suggest that this trend is likely to accelerate in the coming years.
As Adam Miller noted:
"I think in the future, most events, most recurring events will be DAOs, or at least they'll have a DAO component. I mean, events are something where, if you like the event enough that you go every year, you're already pretty invested in it. That's however much money, it's a lot of time, and so, two things: one is, wouldn't you want to have some governance rights going forward, even if it's like helping choose the food that's going to be served? Like, probably even more than that, maybe speakers and other things. But also, why not share in the upside of the event? For example, if you went to the event when it had 50 people, and 10 years later, there are 5,000 people going every year, you should get to share in some of that upside for being early, for helping turn it into what it is. I mean, events are about the people who go; it's not just about the content."
As traditional businesses navigate the challenges and opportunities of decentralization, they must learn from the experiences of early adopters, experiment with new models and mechanisms, and foster a culture of transparency, collaboration, and continuous improvement. By embracing the potential of DAOs, businesses can position themselves for success in an increasingly decentralized and stakeholder-driven future.
