How to Form a Decentralized Autonomous Organization (DAO) in Wyoming?
When blockchain technology was introduced, it brought in the concept of a secure digital ledger. It was a technology that helped in tracking all the transactions online across the internet digitally, without any error as no transaction can be removed from it. This is also why it was given the name blockchain because it is like a chain of blocks of transactions. With this, the masterminds behind the DAO idea got the tools they needed to put their ideas out in the real world. And their idea was to easily be able to create a decentralized autonomous organization in Wyoming and many other states.
With the invention of the DAO using blockchain technology, Wyoming has now allowed companies to now get incorporated as a Wyoming DAO LLC. This article explains all you need to know about the DAO and how Wyoming has passed a bill allowing anyone to now form a DAO in Wyoming.
Decentralized Autonomous Organization or DAO
Blockchain technology is used in a DAO company, which offers it a safe and secure environment. It is basically a technique that is known as trusted timestamping to eradicate sham transactions. This system removes the need to have a single part of control in the company, and the database is held by all the users, eliminating all forms of corruption. The DAO LLC is basically a technology incorporated in the organization so that the company can easily run without any manager. Let us understand the DAO better before we can talk about how to form a DAO in Wyoming.
What is a Decentralized Autonomous Organization?
A DAO (decentralized autonomous organization) in Wyoming is an organization administered by a series of smart contracts that help the company run autonomously, without the need to have a central authority. The smart contract here is a simple set of computer code that runs using blockchain technology. This code self-executes pre-determined transactions when the specific conditions are met. The agreements and code that operate it, allows for trustless agreements and transactions to be carried out by anonymous people around the globe.
The code cannot be modified once it has been deployed. And when the smart contract is initiated, it can execute many tasks, including decision making, automatic profit distributions, voting, among other things, where the organization begins operating on its own without a central authority. With the help of the smart contracts, the DAO can work with the external information and work on the assignments and instructions based on that data. These DAO smart contracts need to include the creation and distribution of some form of native token. This token helps in incentivizing specific activities or is used for voting.
Tokens usually come with voting rights. And it is normal for decisions in a DAO to be made via proposals that are then voted on using the members’ tokens. This just creates a fully operational autonomous organization that does not have any central authority. And the main reason why DAOs are exciting and something many want to start is because they enable like-minded people worldwide to work together towards a common goal, regardless of whether they trust each other or not.
As a matter of fact, there is no need for the trust factor since the governance and rules of the organization are set in the DAOs code, which is transparent, verifiable, and immutable by anyone. In addition to this, DAOs create a lot of opportunities for people all over the world to collaborate without any central authority. And when you have a vision and do not have the funding for the idea; setting up a DAO can help you a lot.
Decentralized autonomous organization example
If we are looking into the DAOs, then one big example is the digital currency Dash. This is a decentralized autonomous organization. It is considered to be a DAO due to the way it is operated, governed and the way they have structured their budgeting system.
Some other examples include:
- BitShares – A decentralized cryptocurrency exchange organization.
- MakerDAO – A cryptocurrency called Dai that aims to offer any business or individual access to the benefits of a digital currency.
- Steemit – A social media and blogging site that offers users their unique cryptocurrency for curating and publishing content.
- Augur – A decentralized prediction market platform that has no limits (a betting platform). It aims to make the betting industry fair.
- Digix Global – It allows people to own gold in a digital format that shrugs off the difficulties of holding physical gold assets.
And with the new bill passed by Wyoming, soon, you will find many DAOs around you. Yours too can become one. Contact IncParadise for this!
Pros and Cons of Decentralized Autonomous Organization
There are always two sides to a coin, and so there are many pros and cons when it comes to starting a Wyoming DAO LLC.
Starting with the positives here is why the DAO is a great idea for your business:
- There is no central authority in the decentralized autonomous organization in Wyoming. Everyone is a member, even the minors who have a collective collaboration in the company.
- The DAO members have a very immediate and direct impact on the operations of the company.
- It is easy to code integration with suppliers in the algorithm, which would be executed based on the interactive algorithm. And if the deal is not disputed, the cooperation between the parties would be much smoother and cheaper as well.
- The distribution of shares is cheap since there is no middleman and the members communicate with each other directly for selling or burying DAO shares. This makes everything really simple and cheap.
- The dividends are also distributed easily and are cheaper for the decentralized organization’s members.
- Additional code for standard corporation activities can be added to the DAO algorithm. This would make the operations work automatically without the interference of a human. Things like accounting, auditing, tax payment, payroll, and so on would be handled so well like this. Plus, all these things would be done transparently without any employment costs and no human errors.
These things just make you want to form a DAO in Wyoming, right? But wait! Let us see the negatives as well:
- The programming in the DAO can have issues that can be very tough to correct as the smart contract is immutable, which can, in turn, cause money loss and liability increment.
- If a member loses their cryptographic private key or it gets stolen, the person would lose their access to the DAO and voting rights. And obtaining it via legal procedures would not be possible.
- Since the public blockchains are not controlled by a single party, their evolution can move in the wrong direction. This can cause the disruption of the DAO. If it gets worse, the DAO can just stop working and end.
- Many DAOs need data from outside the blockchain which is given via automatic or semiautomatic centralized oracle mechanisms. This can also give someone the chance to disrupt the operations and attack them through the oracle that the organization is based on.
- The algorithm does exactly what it has been coded for. So, if there is a case where some other factors need to be considered, it won’t be able to consider such facts and will end up making biased or bad decisions. The only way to overcome this issue is if the program was made where there is always human interference in it, which would take back the automatic decision-making.
- Parties may not be explicitly defined in the smart contract. Hence, it would become tough to resolve if there is a dispute via the traditional legal system.
Although there are negatives to this, the positive points just make this kind of company a great option. That is why a lot of entrepreneurs want to open a decentralized autonomous organization in Wyoming.
Decentralized Autonomous Organization in Wyoming
Did you hear about the Wyoming DAO bill? It was recently accepted where you can now easily start a Wyoming DAO LLC. Here is what you need to know about it.
Wyoming DAO Bill
During the mid of April 2021, Wyoming’s state senate, Mark Gordon, signed Bill 38, which was to pass the Decentralized Autonomous Organizations Supplement (DAO Supplement) bill. This bill was aimed at allowing Wyoming to recognize decentralized autonomous organizations (DAOs) as limited liability companies. This bill was sponsored by Wyoming’s Select Committee on Blockchain, Financial Technology, and Digital Innovation Technology, and it took effect on July 1, 2021.
Wyoming’s DAO Supplement is designed to provide a legal framework for an entity that federal or state legislatures have not yet contemplated. The bill applies to the Wyoming LLC Act to DAOs, giving them legal status as LLCs. This Wyoming DAO LLC would be controlled by its members and would not have any central authority. And just like any DAO, it would be governed by a set of smart contracts that were built on a distributed ledger technology or blockchain. These smart contracts automate a lot of the decision-making processes that are normally taken care of by the management in a traditional company.
How does a traditional LLC differ from DAO LLC?
As mentioned above, the DAO operates through a series of smart contracts that are not the same as the traditional legal contracts in a traditional LLC. Smart contracts exist and operate autonomously via the internet without the need for human intervention. And even though the complete system is automatic, there are some actions that the DAO cannot complete on its own. For instance, some interactions with the legal system.
This autonomous action of the DAO allows for a DAO system to operate outside of the administrative structure of a traditional organization. And instead of a top-down management system, each member has an equal say in deciding what the organization should do. All the management would be taken care of by a computer program that is outside the control of the establishing party, unlike the traditional LLC where the manager has to handle everything.
How to form a DAO LLC in Wyoming?
Forming a Wyoming DAO LLC is very similar to forming a simple LLC in Wyoming. A DAO can be formed online or by mailing the paper form. The filling of the form will include you choosing the business entity type. You need to select the type – Limited Liability Company. In this step, you also have to select the Decentralized Autonomous Organization option as the Additional Designation from the field near the business entity. Fill in all the other information as per the fields and when you reach step 6, you will have to follow the instructions on the screen to fill in for the DAO specifically.
You will also have to give your Articles of Organization to be elected as the DAO. With this, you will also have to give the following information:
- Pursuant to W.S. 17-31-104(c), a Notice of Restrictions on Duties and Transfers if it will not appear in the operating agreement;
- If the Notice of Restrictions on Duties and Transfers appears or will appear in the operating agreement, a statement of such;
- Pursuant to W.S. 17-31-106(b), a publicly available identifier of any smart contract directly used to manage, facilitate or operate the DAO; and
- Pursuant to W.S. 17-31-106(a), a statement that the entity is a decentralized autonomous organization.
Remember to add the fee (cash or cheque) in the mail if you are filing for the conversion or forming of a Wyoming DAO LLC.
Here are some additional points that can help you form your DAO LLC in Wyoming:
- Naming requirements – The name of the decentralized autonomous organization in Wyoming has to include “DAO LLC” or a combination of these entity indicators. It has to include either LAO or DAO, pursuant to W.S. 17-31-104(d). And pursuant to W.S. 17-29-108, the name also has to have either Limited Liability Co., Ltd. Liability Co., Ltd. Liability Company, L.C., LC, Limited Company, L.L.C., or LLC.
- Cost to form DAO in WY – The cost of the filing is $100, which has to be paid when filing the form. It can be paid online, or if you are filing the form via mail, it has to be paid via cash or cheque with the form.
- Do DAO need a registered agent? – Yes, just like every other LLC, you need a registered agent to form a DAO in Wyoming. IncParadise can help you here and can be appointed as your registered agent for your WY DAO LLC.
- Management and membership of DAO LLC – The management of the DAO are vested in the smart contract if it is algorithmically managed or in its members, if it is member-managed. This is only unless it has been provided in the Articles or the operating agreement. If the specification has not been made, you can presume that the DAO is a member-managed one.
- Annual Reports of DAO LLC – The annual report is due every year for the decentralized autonomous organization in Wyoming. You will have to fill this and file it with the fee, usually a minimum of $60. The fee is calculated based on the assets that are located and employed in Wyoming for the company. The tax is $60 or two-tenths of one mill on the dollar ($.0002), whichever is greater.
Ready to Form a DAO in Wyoming?
If you want to form a DAO in Wyoming, then we can help you with it. IncParadise will assist you in not just forming a new DAO LLC but also with additional services like getting the EIN, mail forwarding services, business address services, annual reports, and so on. However, if you already have an LLC and want to convert it into a DAO LLC, then we can help you with this too. Contact us today to know more!
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