In April 2016 The DAO was launched (see https://daohub.org/, The DAO on Wikipedia). It enables people from all over the world to invest money in different projects. Those investments are regulated by "smart contracts" which may contain payment terms so that investors can receive a return on their investment.
One of the core features of DAOs is that they are not localized in a specific country / region but spread over an arbitrary number of countries while the whole "work" is done by the computer code behind it.
Another core feature is that those investments are made completely anonymously.
So when a group of anonymous investors gives money to a certain project / startup and this project refuses to return anything although it was fixed in the contract, what steps can be taken in order to enforce the terms of the investment?
Which law would apply in such a case? The law of the country the project is located in?
And for submitting the case to court some person or organization would have to step forward and do so. How could this be handled (without abandoning the anonymity of the investors)?

So what steps should be taken / what improvements should be made in order to make investments via a DAO safe?

  • Definitely not, it asks for a way to enforce the terms of a contract in this specific situation (one of the contractors is anonymous to some degree and in fact consists of many individual persons that are not represented by a central organization). The question is about which steps are possible from the perspective of jurisdiction in such a case and if not, which steps could be taken in the future (as this will be an important topic). – a_guest Jun 3 '16 at 13:14
  • Are the investors party to a contract that requires the project to return dividends/profits/whatever? – jimsug Jun 3 '16 at 13:25

For those willing to use smart contracts, the DAO can use smart contracts. In this case, the DAO can enforce the contract because the contract is self-executing code. No court or law is needed.

For those not willing or able to use smart contracts, the DAO can use an agent. In this case, the agent makes the contract, not the DAO. The agent can sue if the contract is breached.

The DAO protects itself from betrayal by the agent several ways:

  1. The DAO can use only agents willing to enter into smart contracts.

  2. The DAO can use only agents who make a living as DAO agents and who stand to lose their livelihood if they betray a DAO.

  3. Some members of the DAO can have a contract with the agent giving them standing to sue if the agent betrays the DAO.

  4. The DAO can delay payment until the agent performs. The agent can build some extra amount into its fees to cover the risk that the DAO may be unable to pay (because its members don't vote to pay when they should). A DAO that betrays its agent will have a hard time finding new agents.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.