Redefining Accountability: Navigating Legal Challenges of Participant Liability in Decentralized Autonomous Organizations

TL;DR

This paper explores the complex legal challenges of defining participant liability in DAOs, emphasizing the need for legal reforms due to their decentralized, autonomous, and anonymous nature.

Contribution

It provides a detailed analysis of how current legal frameworks are inadequate for DAOs and proposes considerations for adapting laws to address participant liability.

Findings

DAOs' decentralized structure complicates liability attribution.

Smart contracts automate actions, blurring liability boundaries.

Existing regulations may be insufficient for DAO governance.

Abstract

In the digital era, where innovative technologies like blockchain are revolutionizing traditional organizational paradigms, Decentralized Autonomous Organizations (DAOs) emerge as avant-garde models of collective governance. However, their unique structure challenges existing legal frameworks, especially concerning the liability of participants. This study focuses on analyzing the legal implications of the decentralized nature of DAOs, with a particular emphasis on the aspects of participant liability. Such considerations are essential for understanding how current legal systems might be adapted or reformed to effectively address these novel challenges. The paper examines the specificity of DAOs, highlighting their decentralized governance structure and reliance on smart contracts, which introduce unique issues related to the blurring of liability boundaries. It underscores how the anonymity of DAO participants and the automatic execution of smart contracts complicate the traditional concept of legal liability, both within the DAO context and in interactions with external parties. The analysis also includes a comparison between DAOs and traditional organizational forms, such as corporations and associations, to identify potential analogies and differences in participant liability. It explores how existing regulations on partner liability might be insufficient or inapplicable in the DAO context, prompting the search for new, innovative legal solutions.