Unlocking the Potential of DAOs: Solutions to Overcome Coordination and Regulatory Costs

• Decentralized Autonomous Organizations (DAOs) are increasingly being used to manage and govern real-world assets.
• Challenges such as coordination and regulatory costs are holding DAOs back from achieving their full potential.
• Solutions such as new DAO laws and the collective governance of land by CityDAO are helping to address these issues.

Decentralized Autonomous Organizations (DAOs) have been gaining traction in the crypto-sphere for their ability to manage and govern digital assets and financial protocols. In 2021, however, DAOs made a break into the real-world, spurred on by new DAO laws in Wyoming, Vermont and Tennessee. These laws enabled a wave of crypto-collectives to pursue audacious acquisitions of real-world assets, such as rare art, a golf course, a copy of the U.S. Constitution, a National Basketball Association team and real estate. CityDAO, an experimental project that is looking to bring real world assets on-chain, even managed to collectively govern 40 acres of land in Wyoming.

Despite this progress, however, DAOs are still held back by various coordination and regulatory costs. The coordination costs arise from the need for DAOs to coordinate with multiple parties in order to achieve their goals. This can be a difficult and time consuming process, particularly when dealing with real-world assets. Regulatory costs, meanwhile, are a result of the need for DAOs to comply with various legal regulations, such as taxation and property law.

In order to address these issues, various solutions have been proposed. One such solution is the passing of new DAO laws in various states that enable DAOs to purchase real-world assets. CityDAO has also pioneered the use of collective governance, allowing members to collectively manage and govern land in Wyoming. These solutions are helping to reduce the coordination and regulatory costs that have been holding DAOs back from achieving their full potential.