On February 15th, The Republic of Marshall Island (RMI) passed the Non-Profit Entities (Amendment) Act 2021. The country has now legalized Decentralized Autonomous Organizations and has become the first sovereign nation to do so. Also, a native organization named MIDAO will be actively working with the organizations to help them in legalizing their DAOs within the country.
The new law is framed in a manner to permits DAOs to work in the same way as any limited liability corporation (LLC) works. This will allow DAOs to hold any real estate establishment and encourage individuation.
Shipyard Software’s Admiralty LLC is the country’s first organization to achieve the legal status as DAO. Bobby Muller, the former RMI Chief Secretary and President who also happens to be the Co-Founder of MIDAO considers the world is under a blockchain revolution. According to him, “a large population is exploring new ways and making decisions in a more efficient and egalitarian manner.” He also observes DAOs as an enormous opportunity for people who want more efficiency in structural organization and less hierarchical in manner.
“We think of [decentralized exchanges] and DAOs as ships. They live in international waters, right? So when trying to figure out where to incorporate [Shipyard Software], we realized, oh, let’s look at ships. And it turns out ships are all registered in the Marshall Islands. And that’s what led us here.”Mark Lurie, CEO of Shipyard Software, RMI
To understand more on Decentralized Autonomous Organisation (DAO) and why you should pay attention to it, let’s hit the next section.
What are DAOs?
DAOs are preferably Ethereum blockchain-based ‘decentralized autonomous organization’. The DAOs are member-owned communities managed by their members without centralized leadership. Also, they have integral treasuries that no one has authority to access except the community member. All the community members have equal fundamental rights and have access to voting for any made proposals.
However, DAOs are much different from traditional organizations which are managed by employees, boards, and a committee of members. On the contrary, DAOs use a set of rules and logic drawn in the form of codes and enforced through computer networks. This computer network runs on the shared software platform.
To become a member, one must hold its cryptocurrency. Generally, holding the respective cryptocurrency gives more privilege to the member and voting powers respective to the share of crypto holding.
How DAOs work?
Usually, DAOs have ‘smart contracts’ according to which they perform smoothly. These smart contracts are a set of defined rules and regulations for the organization and group’s treasury. Under these smart contracts, nobody can spend money without the group’s approval.
Moreover, DAO’s working hierarchy model is different from that of traditional running organizations. They are rather executed on the aligned mutual interests of the members of the community to achieve the goal. Interestingly, DAOs use their capital to stimulate the community members who make sure that the organization runs smoothly.
Also, any person going against the rules and logic codes will eventually fail. As DAOs don’t need a central authority, the decisions are made collectively and payments are automatically authorized through voting.
Today, the expansion of the Decentralized Financial (DeFi) sector, has led to the new emergence of curiosity in DAOs.