The Blockchain Dictionary published by Türkiye's Digital Transformation Office defines decentralized autonomous organizations ("DAOs") as "autonomous organizational structures and management processes in which decisions are made jointly by all network participants where the rules defined by blockchain protocols or smart contracts guide the decisions of the participants and an automated managerial consensus is established."
Participants in a DAO may be compared to investors in a public company, with the tokens they hold functioning like shares. Each governance token gives its holder a voting right and therefore a say in the management of the DAO. Actions or transactions coded into smart contracts are carried out automatically once a majority of the participants reach consensus. DAOs have no corporate body involved in their management, and every decision is taken through a vote among the participants.
Although the way DAOs work is fairly clear, the question of where they fit within the legal system remains open because there is no legislation on the matter.
By analogy, DAOs may be likened to ordinary partnerships. Under Turkish law, an ordinary partnership agreement is one in which two or more persons undertake to combine their labour and assets to achieve a common goal. In the same way, all participants in a DAO share a single goal, namely achieving a common objective through the DAO's activities. The Turkish Code of Obligations provides that partners in an ordinary partnership must share among themselves all earnings belonging to the partnership. DAOs, by contrast, may automatically use any earnings for another collective purpose, such as a charitable donation, which does not necessarily or directly benefit the participants. A further similarity between the two is that neither ordinary partnerships nor DAOs have legal personality.
Viewed more broadly, however, DAOs are far riskier than ordinary partnerships. One point to consider is that DAOs face a high risk of attack by malicious participants. If the number of malicious participants is large enough to exceed the consensus threshold, they may exploit the system. That said, such an attack may not be a wise move, because the DAO may cease to benefit the malicious users if all other participants leave the system afterwards. Alternatively, the smart contract embedded in the DAO may contain coding errors, as in the notorious "The DAO attack" of 2016, which led to the theft of more than USD 50 million. One might also consider that DAOs could be treated as similar to commercial companies.
For the time being, however, DAOs cannot be regarded as commercial companies within the meaning of the Turkish Commercial Code, because (i) they are not legal entities and (ii) although they resemble public companies as explained above, they are not subject to the strict supervision that applies to public companies.
In conclusion, although DAOs resemble ordinary partnerships, we believe these similarities will not suffice for the Turkish courts to treat DAOs as ordinary partnerships unless this is expressly regulated. We also believe that expressly introducing DAOs into the legal system would be beneficial since, in theory, they have great potential to bring like-minded people together in pursuit of a shared objective. Provided their code is free of errors, DAOs may well be used for trustless crowdfunding or charitable purposes. For example, a DAO may be set up to donate a sum of money as soon as the participants have collected the amount set in advance. Once the target amount has been collected, the money or tokens raised will be transferred automatically to the account of the relevant charity.
The convenience of DAOs for crowdfunding is undeniable, since anyone with an internet connection can easily take part in fundraising. Unless DAOs are very well regulated, however, it is nearly impossible to rule out the possibility that their smart contracts are faulty or come under attack.