Since 2017, our team of specialists effectively accompanies various technological and innovative projects and startups that are based on Web 3.0 technologies and aim to create and develop DAO ecosystems. We offer a comprehensive list of services necessary for the successful launch and operation of the DAO project – legal and financial consulting, various corporate services, development and integration of decentralized business models, as well as the implementation of advanced technological solutions Web3 in business processes of the DAO startup.
Our primary mission is to provide entrepreneurs with professional support in building their own DAO company within the global Web3 network and realizing the futuristic concept of a decentralized autonomous ecosystem. Our years of experience and expertise in Web 3.0, blockchain technologies and corporate law allow us to offer reliable and highly effective solutions and models for the DAO legal wrapper, tailored to the individual realities of each individual DAO project.
In this review, we will analyze in detail the main ideas of the DAO and the possibilities of its effective use in modern business models, as well as identify the main advantages of registering the DAO company in Estonia in order to create an effective corporate structure to ensure the dynamic development of the DAO start-up in the single legal field of the European Union.
WHAT IS THE DAO?
The DAO (decentralized autonomous organization) is a decentralized autonomous organization, which is a structure in which traditional centralized management is replaced by innovative technological solutions and open software code. The DAO concept is built largely on the idea of Web 3.0 and blockchain technology, which allows the use of smart contracts and tokens to ensure the continuity and transparency of management decisions and management of internal processes of the DAO project.
Within the DAO, ecosystem participants have the ability and right to make proposals, make decisions and participate in the management of the organization with the help of cryptocurrency tokens that provide their holders with the right to vote. The decentralized autonomous organizations can be used for a variety of purposes, such as financial management, service delivery, project management, and collective investment funds.
The main advantage of the DAOs is that they can provide much greater transparency and democratization of governance than traditional organizations. However, there are also risks, such as the possibility of hacker attacks or flaws in smart contracts, which can lead to loss of funds or reduced trust in the system.
THE DAO BASICS
The basic mission of the DAO is to create decentralized, autonomous and democratic ecosystems that foster cooperation, innovation and sustainable development. The basic values of DAO include transparency, fairness and equality of all participants in decision-making and resource allocation, as well as the desire to maximize the common good for community participants, partners and other stakeholders. Thus, the basic principles on which the DAO operates include:
Decentralization. The DAO concept is based on blockchain technology, which fully ensures the process of decentralized project management and makes it possible to organize various decisions outside of the centralized hierarchical structure of the classical management bodies of the legal entity.
Autonomy. The DAOs are controlled by software code and smart contracts based on blockchain technology, which allows them to automatically perform their tasks and make decisions without human intervention.
Transparency. All processes, operations and decisions, which were made or taken in the process of the DAO activity are recorded in the blockchain network, which provides full transparency of the DAO functioning and provides the possibility of reading and auditing for all participants at any time.
Democracy. Participants of the DAO ecosystem have the right to vote, in proportion to the number of tokens they own. This principle ensures a transparent democratic decision-making and management process for the DAO.
In this way, the DAOs offer an alternative approach to community organization and management based on decentralization, transparency, and democratic participation. Instead of traditional centralized structures, the DAOs allow the creation of flexible and adaptive ecosystems in which participants can jointly make decisions, share resources, and foster innovation.
In addition, the DAOs can become the driving force behind the development of Web3, the next generation of the Internet based on decentralization, openness and user control. In this context, the DAOs can help create dApps, services and platforms that can provide a more reliable, secure and democratic environment for the exchange of data and digital assets.
THE DAO OPTIONS
The DAOs provide a new way of organizing and managing that differs from traditional centralized structures. The DAOs can be the basis for building new business models and social and economic systems that can better meet the needs and values of today’s communities.
Due to its flexibility and adaptability, the DAOs can be used in a wide range of areas, from financial services and infrastructure management to culture and education. Here are some examples of areas in which the DAOs can be applied:
Finance and investment. The DAO concept can be effectively used to create a decentralized investment fund, allowing community participants to jointly invest in various projects and investment instruments, as well as providing decentralized financial management.
Technology startups. The DAOs can be used to manage and develop startups, where participants can propose ideas, fund projects, and decide on the strategy and direction of the company.
Art and culture. The DAOs can be used for shared ownership and management of art, as well as financing art projects, museums and galleries, and collecting and investing in digital works of art that exist as NFTs.
Education, science and research. The DAOs can be used to create decentralized educational programs and platforms, as well as to organize collective funding of scientific research and development of modern technologies, where participants can decide on the directions of promising research and the distribution of funds for scientific activities.
Charity and social projects. The DAOs can be used to organize and fund charitable and social projects, ensuring the principles of democracy and full transparency of the organization, as well as full decentralization of management decisions.
National administration. The DAOs can be used in democratic communities to conduct votes and referendums, as well as to govern various aspects of public life.
Thus, the DAOs can be successfully adapted to different areas of activity, from financial services to education and culture. In the future, the DAOs may become an important tool for transforming traditional organizational structures and developing dApps and platforms within the Web3.
THE LEGAL WRAPPER FOR THE DAO IN ESTONIA
Every DAO startup, as part of its formation and development, sooner or later faces the need to register the legal entity, or the so-called legal wrapper, for interaction with the traditional financial and legal systems, as well as registration of legal relationships with the system participants and potential investors. Depending on the type and goals set for the DAO, as the legal wrapper and subject of law, can be chosen as the company or the non-profit organisation (NPO).
Company registration in Estonia may be the preferred option for such DAOs that are focused on commercial activities, development of products or services, and seek to attract investment and generate profits. In this case, the legal structure in the form of the commercial company will allow efficient asset management, contracting, paying taxes, and responding to regulatory requirements. On the other hand, the creation of the NPO may be a more appropriate solution for the DAOs that focus on social, educational or cultural goals and do not pursue commercial interests. In this case, the legal wrapper in the form of the NPO will help ensure transparency in decision-making and resource management, as well as openness of the organization to partners and community participants.
The creation of an effective corporate structure is an extremely important circumstance for the further development and attractiveness of the DAO project, which at the initial stages of formation is strongly recommended to pay sufficient attention, because, for one reason or another, not all jurisdictions are suitable for the establishment of the DAO startup.
At the moment, the most promising jurisdiction to create the legal wrapper for the DAO is Estonia, which, as a member country of the European Union, has a favorable investment climate and is one of the most progressive countries in Europe in the development and support of technology and innovation.
THE ADVANTAGES OF ESTONIA FOR ESTABLISHING THE DAO COMPANY
Estonia offers a number of advantages for the creation and development of the DAO projects, due to its progressive approach to technology and innovation. However, the main advantage of Estonia as the legal field for creating the legal wrapper for the DAO is the peculiarities of the corporate legislation. Thus, the provisions of the Estonia Commercial Code allow the holding of general meetings of company or NPO participants, as well as organizing votes and making decisions remotely electronically, whereby decisions made digitally (including through the blockchain network) will have the same legal effect as decisions made in person by the organization’s participants.
Registration of the DAO company in Estonia is sure to be an effective tool for the development of the decentralized autonomous organization. So, in addition to the above, among the key advantages of Estonia in choosing the jurisdiction for the establishment of the DAO project are the following:
Simple and clear legislation. Estonia has a transparent and stable legal basis that, among other things, is adapted to the realities of the modern community and takes into account the potential impact of technological progress, which makes the country attractive for technology startups, including blockchain and DAO projects.
Attractive tax system. Estonia offers a competitive tax system, the distinctive feature of which is 0% tax rate on retained profit, which is an extremely attractive factor for the development and growth of the DAO companies of commercial focus.
Simple registration. The Estonia Commercial Code provides for a simple and quick registration procedure for companies, NPOs and other legal entities, which is an indisputable advantage when creating the legal wrapper for the DAO.
Digital infrastructure. Estonia has a well-developed and powerful digital infrastructure, with many government e-projects and services, such as e-Residency, which simplifies company registration and business management for entrepreneurs from all over the world.
Openness to innovation. Estonia is known for its openness to innovation and rapid adaptation to new technologies and concepts, which creates a favorable environment for the development and application of blockchain and the DAO.
Thus, the registration of the DAO company in Estonia is an obvious and logical choice for creating the decentralized autonomous project. However, before starting to operate the DAO in Estonia, it is highly recommended to consult with local lawyers and specialists in blockchain technology to update information, conduct individual analyses of the features of the management model and intended business flows of the DAO company, and develop the best strategy to register the legal wrapper for the DAO project in the Estonian legal environment and bring the DAO startup to the single market of the European Union.
Do you want to establish the corporate structure for your DAO project in the European Union? If you are interested in registering your decentralized autonomous company in Estonia for your DAO startup, feel free to contact our lawyers and consultants! Together we will find an effective solution for creating the legal wrapper for your DAO in the Estonian legal environment.