DAO legal structure and regulatory challenges: Navigating the uncharted territory


18 May 2023
DAO legal structure and regulatory challenges: Navigating the uncharted territory

In recent years, the blockchain space has experienced a surge in popularity for Decentralized Autonomous Organizations, also known as DAOs. Operating through smart contracts on blockchain networks, these organizations are designed with transparency, decentralization, and autonomy in mind. The potential of DAOs to revolutionize traditional business and organizational models exists, yet it also brings forth distinct legal and regulatory issues. With the growing popularity of DAOs, it has become crucial to establish legal frameworks that regulate their functioning, creating a need for a clear "DAO legal structure."

Nonetheless, the legal aspects concerning DAOs are intricate and demand an in-depth comprehension of both blockchain technology and conventional legal systems. Presently, the prevailing legal frameworks for classic business entities such as limited liability companies and corporations do not directly apply to DAOs. This situation poses a challenge for regulators and DAO operators since there isn't an evident legal precedent concerning DAOs. In the following section, we will delve into the existing legal frameworks for DAOs. 

DAO Legal structures

DAOs utilize decentralized networks yet often need a legal structure for compliance and traditional system interaction. Various structures are available, each with unique benefits and factors. Common DAO legal structures include:

  • Limited Liability Company (LLC): By forming an LLC, a DAO gains a defined legal framework and limited liability for members. It enables participants to establish ownership, roles, and responsibilities while maintaining legal protection.
  • Cooperative Association: As another alternative, forming a cooperative association enables members to collectively own and operate the DAO. This model promotes democratic decision-making and profit-sharing, adhering to cooperative principles.
  • Non-Profit Organization: Philanthropic or community-focused DAOs may adopt a non-profit structure. This allows them to pursue charitable goals, access tax-exempt status, and use existing non-profit regulations.
  • Foundation: Some DAOs choose foundation structures, prevalent in crypto and blockchain fields. Foundations offer governance, resource allocation, and community management frameworks while pursuing specific goals like developing decentralized tech or promoting causes.

It's crucial to understand that each legal structure's suitability for a DAO depends on its objectives, jurisdiction, and operations.

Would you like to read about Smart Contracts Security Audits? Be sure to check out our article!

The advent of Decentralized Autonomous Organizations (DAOs) has been met with varying legal responses across the globe. Wyoming led the charge in the United States by recognizing DAOs as limited liability companies (LLCs) in 2021. This ground-breaking move has since inspired other states like Tennessee to revise their corporate codes to include provisions for decentralized organizations.

Switzerland, known for its forward-thinking approach to cryptocurrency and blockchain regulation, has also considered recognizing DAOs as legal entities. The Swiss Federal Council has pondered creating a unique legal entity specifically for DAOs, which could help integrate them within the purview of Swiss law.

Meanwhile, the Island of Jersey has introduced a hybrid entity – the Jersey Limited Liability Company (LLC), inspired by the LLC models of Cayman and Delaware. These LLCs are increasingly being used as legal wrappers for DAOs, effectively merging conventional legal structures with decentralized organization models. This innovative approach allows DAOs to benefit from the well-established legal structure of LLCs while simultaneously leveraging the advantages of blockchain technology and smart contracts.

In the United Kingdom, the government has tasked the Law Commission with the responsibility of studying DAOs. Given their growing relevance in the crypto-token and decentralized finance sectors, understanding DAOs' unique characteristics and potential legal implications is critical. The 15-month study aims to understand DAOs' legal treatment under English and Welsh law, their structure, and operation, along with potential legal barriers. The project aligns with the UK's broader ambition of becoming a global hub for crypto-asset technology, and clarifying the legal status of DAOs within the UK is an integral part of this vision.

For more on the legal aspects of Dao, read this

Are you wondering what legal structure to give your DAO? Read these questions, they may help you think through important issues

Should you form a DAO?  If your project doesn't require blockchain and decentralization, creating a DAO may not be beneficial, and another organizational structure could be more appropriate.

Is a legal entity structure necessary for your DAO? Legal entities often possess greater capabilities than those without entities. Some benefits include: managing community-controlled treasuries with ease, owning assets and intellectual property, employing people and generating income, and collaborating with external organizations. Essentially, legal entity status grants a DAO legal existence, reduces participant liability, and assists in determining and fulfilling tax obligations. Although no perfect legal entity structure exists for the majority of DAOs, selecting an appropriate one can help reduce risks.

What kind of DAO are you creating? The DAO's purpose will frequently direct the most fitting legal structure; however, no universal solution exists. A network/protocol overseeing DAO may not be adequate for other types of DAOs. Investment-focused DAOs might fare well as LLCs, similarly to numerous existing investment clubs. Collector, social or charitable DAOs could function better as LLCs or UNAs based on their specific circumstances. Meanwhile, cooperative and collective DAOs might find LCAs suitable—a format utilized by many existing co-ops. When determining a DAO's legal entity, referring to frameworks for existing analogues can be helpful.

In the case of network/protocol DAOs, consider the following: does significant U.S. membership or activity exist? Does the DAO control network/protocol income or a treasury? If none of these factors apply, an Entityless structure might be a suitable choice. However, if any one of these conditions is met, the DAO's activities may lead to U.S. tax obligations for the DAO or its members. Opting for U.S. entity structures is recommended as the most straightforward method of satisfying these obligations.

For the visually oriented, here’s guide in the form of a decision tree made by a16zcrypto


The global adoption of Decentralized Autonomous Organizations (DAOs) has begun to impact existing legal frameworks. As DAOs gain popularity, it becomes increasingly essential to establish clear legal structures that accommodate their unique characteristics. Although the traditional legal frameworks for business entities do not directly apply to DAOs, multiple legal structures such as LLCs, cooperative associations, non-profit organizations, and foundations can still provide some compliance and interaction with conventional systems. Innovations in legislation, like those seen in Wyoming and Jersey, demonstrate growing efforts to integrate decentralized organizations into existing legal contexts. While countries like Switzerland and the United Kingdom explore the possibility of new legal entities or study existing laws' adaptability, it is evident that DAO's legal and regulatory landscape is constantly evolving. Stakeholders must remain informed of these developments to navigate the uncharted territory of DAO legal structure and regulatory challenges successfully.


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What is Account Abstraction?


10 Nov 2023
What is Account Abstraction?

Account abstraction is a new way of thinking about how users interact with blockchains. Instead of using traditional externally owned accounts (EOAs), account abstraction allows users to create and manage their accounts using smart contracts. This has a number of potential benefits, including improved security, enhanced privacy, and increased flexibility.

What is account abstraction?

Account abstraction is a concept that, at its core, aims to simplify the user's interaction with blockchain networks. It is a transformative approach that seeks to mask the technicalities of blockchain operations from end-users. It is making transactions as straightforward as sending an email. Account Abstr. allows users to interact with the blockchain without worrying about the underlying technical details.

How does account abstraction differ from the traditional model?

In the traditional account model, each user has an EOA. EOAs are controlled by private keys, which must be kept secret in order to protect the user's funds. Acc. abstraction allows users to create and manage their accounts using smart contracts.

Historical Context

The journey towards acc. abstraction began with the first generation of blockchain technologies, characterized by their "one-size-fits-all" approach to account management. Bitcoin, for instance, introduced the concept of accounts and transactions in a form that was accessible to tech-savvy individuals but remained perplexing to the layperson. Ethereum expanded on this by introducing smart contracts, which opened the door to programmable transactions but did not alter the fundamental account structure. The idea of acc. abstraction has been discussed in the Ethereum community for several years as a part of various Ethereum Improvement Proposals (EIPs), particularly as a feature to be potentially implemented in Ethereum 2.0. It is a direct response to the need for a more versatile and user-centric design that can cater to a broader audience and spur the widespread adoption of blockchain technology.

The Technicalities of Account Abstraction

Account abstraction is not merely a theoretical construct but a technical innovation with specific mechanisms underpinning its operation. In essence, it alters the way transactions are initiated and executed within a blockchain network.

How Account Abstraction Works

Under traditional blockchain models, initiating a transaction involves an externally owned account (EOA) signing a transaction with a private key. This transaction is then broadcast to the network for validation and inclusion in the blockchain. Account abstraction, however, replaces this process with a more flexible one. Here, every account is a smart contract, and transactions are messages sent through these contracts. These smart contracts can encode complex rules for transaction validation, beyond what EOAs can do, such as multi-signature requirements or conditional transactions based on certain triggers.

The technical crux of account abstraction lies in the smart contract’s ability to define its own conditions for transaction execution. This means that user accounts can have unique security protocols or automated operations without the user needing to understand the underlying smart contract code.

Hey! Are you interested in the latest technologies in the blockchain area? be sure to read the article 'Top Zero-Knowledge Proof Projects to watch in 2023'

The Benefits of Account Abstraction

The implications of account abstraction are profound, offering a range of benefits that can enhance the blockchain experience for users and developers alike.

Improved User Experience

One of the most significant advantages of account abstraction is the improvement it brings to user experience. By abstracting away the complexities of key management and transaction rules, it presents a more intuitive interface for users.

Enhanced Security Features

Account abstraction also allows for the implementation of advanced security measures. Since each account can define its own logic, users can tailor their security settings to their specific needs. For instance, one might set up an account that requires additional verification for transactions exceeding a certain value or restricts withdrawals to certain addresses.

Future Implications

The future implications of account abstraction are vast. As the technology matures, it could become a standard feature of blockchain networks, potentially making the current distinction between user accounts and smart contracts obsolete. This could lead to a new wave of blockchain applications that are both powerful and accessible, bringing us closer to the vision of blockchain technology as a seamless part of everyday life.

Challenges and Considerations

Technical Limitations

One of the primary technical challenges of Acc. abstraction lies in its integration with existing blockchain protocols. Current networks are optimized for the EOA model, and introducing a new account structure necessitates significant changes to the core protocol. This includes modifications to the way transactions are propagated in the network, how gas fees are calculated, and how the state of the blockchain is managed. Ensuring that these changes do not compromise the network's performance or security requires careful planning and extensive testing.

Compatibility with Current Systems

Another consideration is the compatibility of account abstr. with the vast ecosystem of existing blockchain applications and services. Wallets, exchanges, and other services have been built around the traditional account model. Transitioning to an acc. abstraction model will require these services to update their infrastructure, which may be a complex and resource-intensive process. Furthermore, there is a need for standardization across the industry to ensure that different implementations of account abstr. can work seamlessly together.


Acc. abstraction represents a significant leap forward in the quest for a more user-friendly blockchain experience. By streamlining the transaction process and offering enhanced security features, acc abstraction has the potential to make blockchain technology more accessible to a broader audience. However, the path to widespread adoption is not without its obstacles. Technical challenges and compatibility issues must be carefully navigated to integrate it into the existing blockchain landscape.

Key Takeaways

How to Add Gnosis Chain to MetaMask: A Simple Tutorial


03 Nov 2023
How to Add Gnosis Chain to MetaMask: A Simple Tutorial

As the cryptocurrency ecosystem expands, there is an increasing need for various blockchains with distinct capabilities. Gnosis Chain enters the scene, offering a selection of unique characteristics. By integrating Gnosis Chain with MetaMask, users can access a more comprehensive array of decentralized services. We will walk you through the steps to add Gnosis Chain to your MetaMask wallet in this tutorial.


Setting up MetaMask

Before exploring the integration of Gnosis Chain, it is crucial to have MetaMask installed and operational:

  • Download and Install: If you have not done so already, visit the official website to download and install the MetaMask browser extension.
  • Setup Account: After completing the installation, create your account and make sure to remember the provided seed phrase. This phrase serves as your primary means for account recovery, so keep it secure.
  • Secure Your Account: Protecting your MetaMask account is of utmost importance. Use a robust password and never disclose your seed phrase to anyone.

Gnosis Chain

It is always helpful to have a basic understanding before incorporating any new blockchain into your wallet:

  • Gnosis Chain Overview: Gnosis Chain, a rising star in the blockchain world, brings a range of decentralized solutions to the table, such as prediction markets and decentralized trading platforms.
  • Benefits & Features: Among Gnosis Chain's main selling points are its accelerated transaction speeds and potentially lower fees when compared to congested networks.

Tutorial: How to Add Gnosis Chain to MetaMask

In the top right-hand corner of your browser, you'll find the wallet. If pinned, click on the MetaMask fox icon; if not, click the three dots in the top-right corner. The following screen will appear:

An option to expand the wallet to a new browser page is available by clicking "Expand view:"

This action will launch MetaMask in a new tab:

By clicking on the ‘Ethereum mainnet’ in the top left corner, you can add another network. Click ‘Add Network’

Choose option ‘Add a network manually’

Then, input the information below:

Network Name: Gnosis Chain formerly xDai

RPC URL: https://rpc.gnosischain.com

ChainID: 100

Symbol: XDAI

Block Explorer URL: https://gnosisscan.io

After saving the settings, Gnosis Chain will be added to your network.

The Benefits of Adding Gnosis Chain to MetaMask

With multiple blockchains becoming more common, integrating Gnosis Chain with MetaMask offers numerous advantages:

Expanded Capabilities: Accessing Gnosis Chain through MetaMask opens up a collection of exclusive applications and features inherent to this particular blockchain, which may include unique dapps or cutting-edge financial products.

Diversification: The crypto domain is extensive and constantly growing. By incorporating various chains like Gnosis into MetaMask, you broaden your potential investment opportunities and decentralized application experiences, ensuring no opportunities are missed.

Speed & Cost-Effectiveness: Network congestion and high gas fees on established platforms like Ethereum can discourage many users. Gnosis Chain's architecture has the potential to provide relief through quicker transaction times and more affordable fees.

In summary, as the possibilities within the crypto sphere continue to evolve, tools like MetaMask grant users access to this expanding world. By adding chains like Gnosis, users can stay ahead in this decentralized revolution.


By bridging platforms like Gnosis Chain with accessible tools like MetaMask, individuals not only amplify their engagement with decentralized applications but also fortify their position in this expansive realm. The integration of Gnosis Chain to MetaMask epitomizes the evolution of the crypto landscape – a testament to its ever-growing diversity and potential. As we continue to delve deeper into the decentralized future, tools and integrations like these will undoubtedly play a pivotal role in shaping our digital experiences and opportunities. Whether you're seeking more efficient transactions, diverse dapp interactions, or simply a broader understanding of the crypto ecosystem, this guide's steps open doors to a new horizon.