DAOs can become a disaster more quickly than you think
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DeFi protocols need to reconsider the DAO model. For protocols with securities-like governance tokens, the best option may be abandoning the DAO structure altogether. In the United States, established legal entities such as private funds may offer protocols considerable flexibility while clarifying and strengthening legal protections for tokenholders.
Similarly, DeFi protocols should consider housing their full-time core teams within registered limited liability companies, or their equivalent in jurisdictions outside the United States. Corporate structures are critical for protecting team members from personal liability and building effective, streamlined organizations.
DAOs have the potential to make a huge difference in both Web3 and mainstream businesses. The solution is not pitting decentralized and traditional finance against each other as adversaries — it’s integrating the strengths of both.
Alex O’Donnell is the founder and CEO of Umami Labs and worked as an early contributor to Umami DAO. Prior to Umami Labs, he worked for seven years as a financial journalist at Reuters, where he covered M&A and IPOs.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
