DAOs cause job loss and loss of financial capital.

The human layer of corporate action is reduced and obscured; the algorithm would be the agency by which the “group-mind seeks realisation in the external world.” The range of these actions is not necessarily confined to “cyberspace,” either. The company that brought us The DAO was an “Internet of Things” start-up, named after an automated lock. The ultimate aim is not just to automate online transactions, but to enforce Ethereum smart contracts into the physical world.

From the perspective of a disruptive technologist, a DAO lacks human organs, and this obviates the need for corporate governance norms. Viewed from the perspective of legal theory, however, it would seem to entail either that (i) the “actions” of smart contracts are to be attributed to humans, in which case the smart contracts are merely muddying the waters, or (ii) that some actions by smart contracts will be acts-in-the-law (and/or acts with legal consequences) in their own right, or (iii) that a DAO has human organs, but they are poorly identified and sub-optimally regulated. All of these options speak to the need for further scrutiny.

Corporate governance in the “bazaar economy”

Corporate personality is not just facultative, but also regulative. Legal recognition of an entity makes it a known quantity within the world of law. It makes a set of internal financial records; for example, a “register of members” impressed with a public character that is subject to legal directives. This explains the dynamic tension between the legal system and the market it regulates. Market participants devise patterns of interaction, often expressly to avoid regulation. The law responds—not only through prohibition but also by accommodation, in which the new pattern is brought into the fold of legally cognisable activity. Regulation is a quid pro quo of vindication.

Wood’s expansive vision of the “bazaar economy,” conversely, assumes that novel ICT can and should remove activity from the domain of conventional law. Crucially, he sees “no entity, legal or otherwise” subject to regulation. Such views rest on immature ideas about the interaction of law and parallel social (and socio-technical) domains and presuppose a conception of individual autonomy that requires a counter-factual level of equality between transacting parties.

When we consider the problems of the platform and “gig” economy, it seems questionable whether a DAO-based platform economy is desirable at all. As J.J. Kroncke argues, there is no clear evidence that the reduction of job security protections leads to economic revitalisation. The empirics on job tenure, firm productivity, and general economic growth have become more obscure as the methods and data of labour market economics have improved. Job insecurity rather tears at the social fabric on which the economy depends:

While it may seem that the productive energies of a revitalized labor market are ever-waiting to materialize for potential reformers, the truth is that work across the globe is becoming precarious enough… We are already witnessing the dislocations of this secular trend in any number of social contexts, and the more serious question should be how to create a global legal equilibrium that matches the organic realities of human capital formation rather than the digital velocity of financial capital.