How to manage a fully decentralized operation

Organizations around the world are exploring new ways to incorporate and manage businesses, especially within the Web3 community. A DAO is a new type of organization becoming increasingly attractive, as it can easily have a democratized governance model that fits its intended purposes.

As Web3 rises, organizations tend to follow along with the decentralization of their own processes. Today, there are more than 13.000 DAOs across the globe, according to EY, which is over 3 times more than the official number in 2022, when there were around 4.000 DAOs.

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Introducing the DAO concept

A DAO (Decentralized Autonomous Organization) is a blockchain-based structure created to manage a specific business, process, or project with clear goals and objectives. Within this model, several people can hold DAO tokens, which allows them to be involved in decision-making regarding voting rights or other advantages.

The first DAO was created on Ethereum in 2016 and was simply called The DAO. The goal was to raise investment from token holders in order to build a self-governing crowdfunding project on-chain. Despite raising more than 12.7M ETH, which is equivalent to $150M USD at the time, it failed to achieve its intended purpose, being ultimately dissolved.

From then on, the concept and its governance model have evolved, with multiple projects having been successful.

Since a DAO is, by concept, decentralized, the power is distributed among all voting members. This results in democratized access to DAOs ongoing operational decisions, instead of having the fate of the organization in the hands of one or multiple consulting boards. 

The goal of a DAO being on-chain is to give all members access to the decisions’ history, by recording them on the ledger, creating a very transparent culture and governance model.

With smart contracts at its core, governance rules are clearly written, making it easier to enforce them automatically and easily verifiable by all members. This ensures it is harder to make unilateral decisions or pursue personal interests at the expense of the greater good and community goal.

Having self-executing rules, a DAO does not need intermediaries to fulfill its purpose, such as external or administrative services, allowing it to streamline decisions, processes, and goals, thus making it a more efficient organizational structure.

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Incorporating a DAO

Today, incorporating a project within a DAO is easy, with partners like OtoCo that can manage all the bureaucracy. 

Before any action can take place, it is fundamental to clearly define why the DAO is the best organization model for the intended purpose, how it will be enforced by smart contracts, who are the key stakeholders that hold ownership of the DAO wallet, what are the terms and conditions of said DAO governance structure, and how this particular organization will create value and generate revenue.

Once the baseline has been established and clearly communicated to all interested parties, the DAO wallet must be created to set up all further steps of a legal entity. After that, the owners only need to provide this information and take responsibility for the management through a simple KYC process in the OtoCo platform.

You can virtually create a DAO anywhere in the world, although some places have more regulations on such new organizational formats. This is the case of Wyoming and Delaware, USA, and also RMI (Republic of the Marshall Islands). 

OtoCo can help you incorporate your DAO into an LLC or a Series LLC (learn more about Master or Individual Series LLC here).

To incorporate a DAO, stakeholders must have a multisig wallet connected with the legal entity with proof of ownership. Upon incorporation, a smart contract is generated to hold the LLC Operating Agreement, which acts as proof of existence. Ownership can then be confirmed using the public key associated with the address of the first Member of the newly created DAO.

OtoCo works as a preferred partner to ensure that all LLCs are robust and legal, with a sound structure, so that they can acquire an EIN, open bank accounts, and manage their business operations autonomously. It can also provide additional services, such as a free registered agent and physical address.

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Managing a fully decentralized operation

DAOs can now open bank accounts, but most of them prefer to stay on-chain and don’t rely on TradFi solutions. This is where Skyline Digital comes in, aiming to be the best solution for on-chain organizations by understanding their needs.

DAOs can join Skyline Digital with a simple KYB process, validating their ownership and business purpose in order to ensure compliance.

After that, they can use all the features available to other organizations and HNWIs as well, such as crypto to fiat payments, crypto to crypto transactions, tokenized securities, payables invoicing tool, and much more.

This allows them to manage their entire financial operation within a single all-in-one platform with a multisig wallet, granting several users access to transact and swap both crypto and fiat currencies, and manage their assets continuously.

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