Emerging Issues in Decentralized Governance and the Lessons of Corporate Governance

[...]DAOs' tokenholders and developers do not owe, or have the benefit of, fiduciary duties, and conflicts of interest may abound without adequate safeguards; * Some DAOs require frequent technical decisionmaking by non-experts, with attendant inefficiency and risk of low voter participation; * Although there are nascent efforts to recognize DAOs as legal persons (for example, Wyoming has enacted a DAO statute), there is a risk that some DAOs could be found to have the legal status of general partnerships, exposing founders and tokenholders to unlimited liability; * Some DAOs form traditional business entities to conduct important operations (for example, banking, hiring employees, retaining service providers, etc.), but this practice poses many legal and regulatory questions; * Many DAOs enable unchecked voting-related activity, wolfpack-like activity, solicitation activity, and undisclosed voting arrangements; * DAOs often have unclear or suboptimal dispute resolution mechanisms; and * Computer code may be susceptible to design flaws, cyberattacks, and exploitation, and the inherently decentralized governance in DAOs may impede adequately nimble responses to a security crisis. (Reciprocally, blockchain technology may eventually yield innovations that could benefit traditional corporations' governance, such as by streamlining some of the mechanisms of the US proxy system.) We do not contend that all features of modern corporate governance bear precise applications in the DAO context. The fundamental purpose of enabling corporate law statutes like Delaware's and of the business judgment rule is to ensure that business leaders can innovate and can take risks without fear of undue liability or inhibition.