The decentralized autonomous company has already been explored with things like Bitshares. Frankly, it kinda sucks. You have people providing decentralized funding, then the workers that take it have no real incentive or liability to perform unless the worker is already a huge shareholder...but that kind of extremely narrows down your field of workers doesn't it? You could issue legal contracts with the workers and sue them if they don't perform, but who is the figurehead of the DAO that handles all these things and appears in court? The DAO converges to centralization resembling a normal, publicly traded company because business is only efficient in a strict, hierarchical, top-down function.
So what exactly do you accomplish out of all this? If the DAO doesn't collapse on the way to it's evolution in becoming top-down controlled, your only real benefit is the ability to bypass the legal framework and issue a publicly traded stock from your basement (which will probably get people arrested somehow). So the pros are slightly less legal bureaucracy (only in the short term), with the cons of having nobody at the helm of the company who actually has any idea what they're doing with a valid business plan (you know, the actual important part of a business).
How does a project effectively function with the daily or even major decisions of a project delegated to the fluctuating whims and politics of voting?
Who decides how and which issues are organized and presented to the voters; and is that influence effectively centralized control?Does the DAO bypass the classification of an ICO as an investment security?
The voting aspect confers legal rights and requires centralized organization. Whereas, decentralized version control open-source has no elected center; and proof-of-work decentralized mining controlled protocols have no permanent voting shares.http://www.cuttingedgecapital.com/what-is-a-security-and-why-does-it-matter/“when a purchaser is motivated by a desire to use or consume the item purchased . . . the securities laws do not apply.”
“Finally, we examine whether some factor such as the existence of another regulatory scheme significantly reduces the risk of the instrument, thereby rendering application of the Securities Acts unnecessary.”
“The court formulated a new test for whether something is a security, called the “risk capital test” which considers whether funds are being raised for a business venture or enterprise;
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whether the investors are substantially powerless to effect [sic] the success of the enterprise”
https://coincenter.org/wp-content/uploads/2013/08/Bitcoin-Primer-2ndEd.pdf#page=35“
it [the protocol] would become truly nebulous, running on the shared resources of thousands of distributed computers and
not controlled by any central authority.”
https://coincenter.org/2015/02/cryptocurrency-investments-different-securities-investments/“As a result, these crowd sales share many similarities with traditional securities offerings where investors purchase stock as a bet on the future success of a company.”
“Although most people consider the dollars in their pockets as nothing more than a means for paying for goods and services, the truth is that those dollars are also an investment. The U.S. dollar fluctuates in value relative to other foreign currencies and relative to the goods and services that can be purchased with dollars. If today, you can buy more packs of gum, more light bulbs, or more Euros than you could have bought yesterday with the same amount of dollars, you have profited from your investment in dollars. The value of a U.S. Dollar investment fluctuates based on countless factors such as interest rate levels, trade deficits with other countries, and government policy. To some extent, an investment in the U.S. dollar is an investment in the U.S. economy relative to other countries’ economies.
Holding bitcoins is also an investment. But instead of an investment in a country’s economy, holding bitcoins can be seen as an investment in the network and technology behind Bitcoin.”
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No management structure – Indeed, most platforms that require users to transact with a proprietary coin are called decentralized applications because they operate not based on the decisions of a management team or central authority, but based on a defined set of protocols. (For context, a good analogy is to look at how email functions with no central authority behind it.) As a result, when purchasing a coin, unlike when purchasing a stock, an investor is not making the equivalent of a bet on a management team’s ability to operate a profitable company.
Instead, an investor is often making a bet on how useful and popular a particular network application will become.
This distinction is not as clear cut when a development team sells a proprietary coin during a crowd sale. In that instance, investors can also be seen as making a bet on a development team’s ability to launch some related project or platform like Storj.”
“Different information asymmetry –
Securities laws are based primarily on a principle that full disclosure helps close information gaps between management and investors. As a result, companies planning to offer securities to the public are required to publicize certain defined information about their operations and financial health. Due to the fact that cryptocurrency investors are often investing in a decentralized application and not a management team, they are likely most interested in learning how the protocol behind that application works, not how the initial development team operates. And
most popular decentralized applications are already open source, meaning that the protocol for how they will operate can be viewed by anyone.”
“No legal rights – Another key distinction is that cryptocurrencies do not grant their holders any traditional legal rights granted to securities holders.
Holding a proprietary coin does not legally entitle one to share in profits realized by the project funded by the sale of that coin or to vote on key decisions that may need to be made about that project’s future.”
