Why incorporate it if is a DAO?

“If there is an entity then is not decentralized” - A random clueless person on Twitter

In our opinion: Decentralization is not equal to being Outlawed, being a DAO shouldn’t be taken lightly because DAO participants could expose themselves to big liabilities if proper considerations are not considered by the creators of the DAO.

We believe that any legit project who wants to become something sustainable and last as long as possible should consider incorporating and setting clear rules that are compatible with its jurisdiction’s laws because otherwise, the future of the project will always be a “what if … ?“ dilemma.

Isn’t having an entity being centralized?

Short answer: No, just like not having it doesn’t automatically make a project decentralized.

Full decentralization is a myth, there is always centralized power at some point in any project/protocol/entity/etc and it is at that point where true decentralization procedures and rules are tested. You might ask “How is that tested?” well, is that centralized power the one who makes all the choices? Are there rules set so this central power can’t abuse its power over the rest of the participants? Are these rules public, clear, and understood by most of its participants?…

Doesn’t that sound familiar to you? If you started thinking about how countries work then yeah, that’s how decentralization needs to be approached because otherwise there are no guarantees the centralized powers won’t do whatever they want when they can, and if you say “Well my government does this and that without asking“… that proves how difficult is to reach real decentralization.

And no, code is not law and immutable code is like shipping microchips… Read about how dangerous can that be.

So answering the question “Isn’t having an entity being centralized?“: no, it is not because even if it wasn’t there the centralization will still exist so incorporating is a way to at least create rules and clarity so all participants understand where is the centralization and so this central power can’t abuse its participants.

Where is FxDAO incorporated?

As of today (April 16th of 2023), FxDAO is in process of incorporation in the only country that legally recognizes DAOs and understands its special requirements: The Republic of the Marshall Islands.

The process is not something fast (we recently were told that the process which was supposed to take 15 days will now take between 30 and 60 because of how much demand it is)… But we believe is worth the time.

Initially, we planned to incorporate a foundation in one of the jurisdictions which allow having a structure that allows DAOs to work, but we pivoted into the Marshall Islands as currently is the only country with clear rules and structures for DAOs. We believe that’s a plus to have.

Does it mean that participants need to follow the jurisdiction laws?

The protocol can be used by everybody without asking for permission, it is only those who would like to participate in the voting and make changes to the protocol the ones who need to keep everything in order and follow certain rules. We will explain more about this and how the voting system will work in our next article.

That being said, that doesn’t mean the protocol or its participant shouldn’t fight crime. As we mentioned at the beginning of this article we don’t believe being decentralized means being outlawed so if unlawful activities are happening on the protocol or the governance, all participants must fight it. The goal is to have a fair and healthy protocol, and if we want to reach that then we all need to help.

More news to come

The DAO is still in the process of incorporation, we will be making regular updates about the process and how everything is going. Keep checking our newsletter or subscribe to it to receive the news directly in your inbox.

It is a long journey, but we are all gonna make it 😉.