DAO already “bad street”? No you need to distinguish real DAO from fake DAO

In today’s Web3 world, “DAO” has lost its clear meaning.

Original: “Defining Real and Fake DAOs” by Gabriel Shapiro


In its purest form, a “DAO” refers to an unregistered association of people (“organization”) utilizing censorship-resistant technology to participate permissionlessly (“autonomously”) in a non-hierarchical, widely decentralized (“decentralized”) governance.

Organizations that do not meet this definition cannot be considered “DAOs”.

Therefore, there may be many reasons why an organization does not deserve the designation “DAO”

  • Because the organization is centralized (e.g., a board-managed Delaware corporation),

  • Because it requires government licensing (e.g., member-managed Delaware LLC)

  • Because it can be easily censored (e.g. Telegram chat groups)

I’ll further explain the nature of DAOs below.

Problem: “DAO” has lost its clear meaning

The term “DAO” has been applied to so many different organizations that it’s bordering on meaningless. I want to correct this.

Minimum Standards

In my opinion, whatever DAOs are, they must fall into three clear and well-defined conceptual categories:

  • decentralization;

  • autonomy;

  • organize.

My mind is screaming each word – “decentralization”, “autonomous” and “organization”, they have their reasons for being, and none of them can repeat the other words.

Therefore, “decentralized” cannot mean the same as “autonomous” – otherwise we would call them “DOs” (Decentralized Organizations) or “AOs” (Autonomous Organizations).

We don’t call them that.

We call them “DAOs”. This means that when evaluating whether something is a “DAO”, we have to examine each of these three aspects separately in order to conclude that yes, this thing is a “DAO” and nothing else.


Webster’s most relevant definition of “organization” is as follows:

“Association” is defined in relevant part as follows:

DAO already

“Society” is further defined in relevant part as follows:

DAO already

Thus, a DAO is some kind of common goal or association of individuals interacting with each other in a regular fashion. For those studying corporate law, we know that there are two main types of associations: unincorporated and corporations.

DAO already

Basically, we all know what an “organization” is – it is an unregistered or registered association of natural or legal persons. I use the word “natural person” on purpose because an association can also be a legal person. So there may be associations of associations or associations of associations and individuals.

I think organizations can be centralized or decentralized, autonomous or non-autonomous is non-controversial. For example, Twitter Inc. is centralized (its ultimate decision-making power belongs to the board of directors) and relatively non-autonomous (it is designed to make profits for the benefit of shareholders, who can appoint and remove the board of directors at will). The Ethereum Foundation, like Twitter Inc., is centralized (it has a board of directors or similar governing body), but unlike Twitter Inc., it is relatively autonomous (it abides only by its charter, which can be amended by its governing body, governing Institutions are not elected by committees of other powers or beneficiaries).

*Note: Neither entity fits into the stricter concept of “self-government” that I believe should be used for “DAO”, as described below.

DAO already


“Decentralized” is harder to define than “organized”, but not by much. Webster defines “decentralization” in the relevant section as follows:

DAO already

Decentralization occurs when power is widely dispersed or distributed.

This can be achieved in many different ways: for example, all organizational decisions could be determined by votes of token holders, but token ownership and voting turnout could be between many “minnows” (each holding the total token supply / a fraction of the total voting power) is widely dispersed. In addition, different types of decision-making can be delegated to different groups of people, and coordination between these groups can be informal and non-hierarchical.

A good example of the latter kind of decentralization is Bitcoin. Outside of the consensus protocol itself, there are no formal governance rules between mining nodes, non-mining nodes, users, exchanges, and core developers, but these groups have different types of influence over Bitcoin, basically through “rough “Social Consensus” governs Bitcoin on an emergent basis. The checks and balances imposed on each other by these different representative groups determine the power conflict between each other and determine the fate of “bitcoin” as a facade. (If you doubt this and think that there are different situations – e.g. Bitcoin is “governed by miners” – just look at the checkered history of “block size wars” and how they were resolved. )


DAO already

“Autonomy” is the hardest to define, and the most overlooked element of what makes up a “DAO”. Webster defines “autonomous” in the relevant section as follows:

DAO already

I believe that many people have misunderstood and incorrectly defined the term “autonomous”, and this has to do with a misunderstanding of “smart contracts”.

A widespread misconception of smart contract technology is that smart contracts can work “automatically” without human intervention – they are some kind of “non-human agent” that participates in the “algorithmic governance” of an organization. Instead, smart contracts are just passive object codes stored on the blockchain. When a user requests to call it, the miner/validator calls the code and offers to pay the miner/validator to make such a call and write the result into a new block. In other words, a smart contract will never do anything unless one of its functions is specifically and manually invoked by a human (or a human agent—for example, a “robot”). Smart contracts are the least automatic or autonomous — they are slaves to external input.

Therefore, some people will misunderstand the meaning of the word “autonomous” in “DAO”, interpreting “autonomous organization” as “organization utilizing smart contracts”. This misunderstanding is a huge “deception” that allows many arrangements that are not “autonomous” in Webster’s sense to be considered “DAOs” simply because they involve so-called “autonomous” technology – smart contracts. However, “autonomous” does not mean “automatic,” and even if it did, smart contracts are not automatic. Smart contracts are also clearly not autonomous, as they are unconscious and inert rather than autonomous and self-controlled.

Therefore, the word “autonomous” used in “DAO” does not refer to a certain technology (smart contracts), but to a certain form of organization. In other words, “decentralized” and “autonomous” in “DAO” are adjectives. “Organization” is the noun that these adjectives modify. Therefore, “DAO” is a decentralized and autonomous organization.

Remember when we said that “organization” meant “association of individuals”? This means that “autonomy” cannot be a quality of a smart contract – it has to be a quality of the people – i.e. the organization using the smart contract.

So, what does “autonomous” really mean? Well, Webster’s definition is quite correct:

  • have the right or power to self-administer;

  • conducted or performed without external control;

  • independent existence.

This definition clearly reveals the role of “self-government” and therefore “censorship-free technology” or “dissent technology” of “DAO”. For example:

  • Facebook groups, Telegram chat groups, Slack workspaces, Discord servers, etc. are not “autonomous” (and thus cannot be DAOs), because the company owning these platforms can close the group at any time, add and remove group members, or Change, add or delete the contents of this group without resistance;

  • A group of Google employees who research and develop AI for Google as part of their employment relationship is not “autonomous” (and thus cannot be a DAO), because Google automatically acquires all resulting intellectual property rights under the Invention Assignment Agreement it signs, controlling the group. and enter into a non-compete agreement with each member of the group—it can remove and replace members at will, or disband the group at will, or unfund the group at will, and can even require them never to use any intelligence-related ideas;

  • A community watchdog group is not “autonomous” (and thus cannot be a DAO) as it is only authorized to observe problems and report to the police/government, not to conduct its own policing and adjudication of violations, if its members exceed this limit, the police And the government will consider them criminals and censor their private activities.

Importantly, all of the above examples are associations of people (and thus organizations) and are (at least potentially) decentralized (e.g. by having no hierarchy and having a one-person-one-vote decision-making system). But they’re still not DAOs. This is because they are not autonomous; the technologies, associational methods, and resources they rely on are subject to too much arbitrary external control, making these groups “dependent on the kindness of strangers.”

In contrast, any of the following is more likely to be considered more autonomous and thus potentially a DAO:

  • A chat group running on the open source federated matrix protocol;

  • Bitcoin Core or Ethereum Core development community;

  • A sci-fi sex cult living on a yacht floating in international waters; or

  • A dark web market that runs on Tor.

Many good past, present, and/or fictional examples of autonomous organizations include Hassan i Sabbah’s Assassins, The Pirate Bay, WikiLeaks, Bitcoin, Anonymous, The Joneses, The Boundary, The Free Folks of Dune, Soko The Avengers before the Via Accords and the fictional F. Society in Mr. Robot. Needless to say, states are also autonomous (especially superpowers).

Ironically, the original “theDAO” was not very autonomous. The way the Ethereum hard fork changed the DAO’s operating results demonstrates that theDAO can be externally scrutinized by a small group of influential Ethereum developers and miners. However, today’s DAO on Ethereum is more autonomous than the original “theDAO” because the contentious Ethereum hard fork was much more difficult and costly to coordinate than it was in 2016.

Likewise, many so-called “DAOs using smart contracts” are not “autonomous”. The five seven Gnosis multisig is indeed a smart contract, but the organization governed by it can hardly be considered “autonomous”. Smart contracts are tools – they increase or decrease autonomy depending on their characteristics and how they are used.

*Note: I am not saying that the 2016 hard fork constituted a censorship of theDAO. The fact that the hard fork changed theDAO’s state logic, using external capabilities separate from theDAO token holders’ voting rights and theDAO’s state change engine, simply shows that theDAO is more censorable (and thus more autonomous) than initially described. Low).


OK, stop using the term “DAO” to refer to organizations that make little attempt at self-government (like Wyoming LLC). While decentralization and autonomy are a continuum, the term “DAO” should be reserved for those organizations that approach relative decentralization and relative autonomy in as many dimensions as possible within the scope of current technology, and at the very least aspire to promote dissenting technology by promoting Innovate organizations that become as decentralized and autonomous as possible in as many dimensions as possible.

Merely using blockchain or smart contracts in some superficial way is not enough for an organization to be considered a “DAO”. For organizations that use smart contracts but are not DAOs, I prefer the term “enhanced network organizations” (cybOrgs). Consider using that term, or something similar, instead of polluting the meaning of the “DAO” concept in order to create hype.

Now let’s build better DAOs.

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