Abstract
This paper reviews the recent case of The DAO “hack” in June 2016 and analyzes The DAO's response in its time of crisis, and its implications for corporate and IT governance. There was no human-led governance in The DAO. Instead, The DAO placed its trust in the smart contract they had built together on the blockchain, which became its governance mechanism. The events that follow allow us to see hitherto unobservable organizational behaviors that are unique to trustless organizations, and hence The DAO gives us a glimpse at a new species of corporate governance. This paper explores the implications of these ideas: we propose the emergence of a spectrum of organizations based on the alienation of trust, we consider the economic impact and legality of decentralized autonomous organizations (DAOs), smart contracts, work and job design, and what happens when corporate governance is managed solely by IT governance.
Highlights
This paper examines the curious case of “The decentralized autonomous organizations (DAOs),” a decentralized autonomous organization established on the Ethereum blockchain in 2016 (DuPont, 2017; Leonhard, 2017)
IMPLICATIONS AND OPPORTUNITIES FOR THE FUTURE. This curious case of The DAO highlights the role of trust in current governance structures and identifies it as an underlying assumption in key governance theories; trust, or the lack thereof, TABLE 1 | Summary of opportunities for future research, and type of research
1) Confirm the spectrum of organizational design that emerges from the alienation of trust by blockchain and smart contracts when used for firm governance
Summary
This paper examines the curious case of “The DAO,” a decentralized autonomous organization established on the Ethereum blockchain in 2016 (DuPont, 2017; Leonhard, 2017). The code of the smart contract gives all investors voting rights and establishes a flat model of governance which is the right and duty of all participants (Jentzsch, 2016a; DuPont, 2017; Leonhard, 2017) Since their decision-making structure is implemented and managed solely by the code, The DAO is an interesting case study for corporate governance and strategy because the issues introduced by DAOs in general stem from the “digital democratization of business” (Wright and de Filippi, 2015; Atzori, 2016; Garrod, 2016; Fenwick et al, 2017; Leonhard, 2017). Courts will have to decide whether DAOs are protected by any legal jurisdiction and, if so, what is the legal standing of the entity (Hinkes, 2016; Gudkov, 2017)
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