12.2.1 A Short Review of DAOs and Blockchains

We start with a simple definition of DAOs, from Investopedia: “A decentralized autonomous organization (DAO) is an emerging form of organizational structure with no central governing body and whose members share a common goal of acting in the best interest of the entity. Popularized by blockchain enthusiasts, DAOs make decisions using a bottom-up management approach.”Footnote ¹

The simplicity of that summary hints at definitional and analytic complexity. Neither researchers nor practitioners have settled on a single, standard definition of “autonomous corporation” or “decentralized autonomous organization” (Hassan and De Filippi Reference Hassan and De Filippi2023). DAOs consist of groups of people who coordinate participation in decision making via technological systems in pursuit of a shared goal (or goals) or purpose(s). As Davidson et al. (Reference Davidson, De Filippi and Potts2018) have noted, blockchains are a new institutional technology, meaning a new configuration of people, practices, and resources. To blockchain promoters, these configurations offer “trustless” governance solutions to coordination dilemmas, in that decision making is irrevocably and traceably recorded on blockchains rather than subject to interpretation by managers or government regulators. They offer inclusiveness in the sense that DAO “membership” is documented by ownership of tokens that are recorded on the blockchain. Ownership enables the members to participate in governance by voting.

DAOs offer specific uses of blockchains: they consist of blockchains, executable software code operating as autonomous “smart contracts,” and digital assets stored in cryptographic wallets. Wright (Reference Wright2021) divides DAOs into algorithmic DAOs in which software coordinates everything (examples include Bitcoin, Ethereum, and other permissionless blockchains) and participatory DAOs that raise investment capital and engage in traditional commercial endeavors, such as venture capital investing or other financing.

Wright (Reference Wright2021) describes blockchains as the backbone of coordination and smart contracting as the glue that holds members to other members, including through transactions. Smart contracts are rules embodied in code that structure the facilitation and operations of DAOs. For example, investment capital may be raised by humans (often, of course, acting through firms) and pooled and recorded on the blockchain in the form of a named DAO, as a blockchain-based entity. The series of smart contracts that constitute the DAO in the first place are extended through investments of that pooled capital by the members of the DAO, investments that are likewise recorded via smart contracts on the blockchain (Reyes and Hurt, Reference Reyes and Hurt2025). Not all DAOs are investment vehicles or businesses, however. Their technical design and purpose-driven framing mean that the DAO form may be directed to social, philanthropic, or educational uses.

A DAO is characteristically decentralized rather than centralized or hierarchical because decisions are taken and recorded via the computer code that comprises the organization rather than via the design of a legally recognized fiction such as a corporation. Membership and participation in the DAO may be pseudonymous. It is autonomous in the sense that it owes its existence and functionality to coordinated social activity that is documented in code rather than assigned by legal rule to a corporate form. It is an organization in the casual sense of “a group of people or other actors,” rather than a corporation or other legally recognized entity, such as a partnership or a cooperative.

We do not suggest that DAOs are bounded definitionally by purposes or goals, as some have suggested (El Faqir et al. Reference El Faqir, Arroyo and Hassan2020). DAOs often operate amid ecologies of DAO-enabling platforms, peer relationships, teams, guilds, squads, and tools (Rawson Reference Rawson2021). Despite the intuition that DAOs operate entirely on blockchains, in practice, conversations, negotiations, and other DAO-relevant coordinating activities may take place in adjacent communications environments, such as the chat apps Discord and Telegram.

DAOs can be thought of as autonomous corporations in two senses. One, they do not depend on legal recognition for their existence and operation. They are, in an important sense, “autonomous” of corporate law and therefore of the state. Two, they represent distinct organizational solutions to contracting and other resource management dilemmas that have been addressed conventionally and classically by corporations. DAOs are in a sense “autonomous” of theories of corporate identity. How can law, policy, and practice determine whether actions or activities are appropriately and accurately associated with the corporation in the first place rather than with human decision makers (Gindis Reference Gindis2016)? How should law, policy, and practice distinguish among appropriate behaviors associated with corporate functions and purposes, on the one hand, and appropriate behaviors associated with humans who have ownership or management roles in the corporation, on the other hand (Berle and Means Reference Berle and Means1932; Jensen and Meckling Reference Jensen and Meckling1976)? Which decisions and activities are properly undertaken within the formal boundaries of the corporation, and which engage the corporation in relationships with outside parties (Coase Reference Coase1937)?

Their “autonomy” is therefore as much conceptual as technological, something that we note initially in order to create a broad potential space for our analysis and to sharpen the distinction between DAOs, conceptually, and conventional legally recognized corporations. By virtue of legal requirements of corporate organizations, in contrast to the fluid motivational impulses that may drive participation in DAOs, the formal boundaries of the corporation are defined by law. Employees, managers, and shareholders may come and go, but as a matter of identity, the corporation remains the same actor. Gindis and Cole (this volume) describe this as the “corporate mask.” A given DAO remains “the” DAO as transactions are recorded on the blockchain, and members participate, or not, not by virtue of the DAOs’ legally mandated identity but instead by virtue of the rules of technical recognition that permit DAO transactions to be recognized. To borrow metaphorically a slogan of early cyberlaw scholarship, in a DAO, as in a blockchain generally, code really is law (Lessig Reference Lessig2006). A point of alignment in these recent perspectives is that recognition is essential, whether legal and social in the case of the corporation, or technical, legal, and social in the case of DAOs.

Building conceptually on that foundation, Wright (Reference Wright2021) notes that the software engineer who first proposed the idea of a DAO referred to it as a “decentralized autonomous company” in which the source code serves the function of bylaws. Reyes (Reference Reyes2021) draws attention to the idea of “autonomous corporate personhood” in the form of automated businesses operated entirely through computer code, embedded in sociotechnical architectures while acknowledging that several states have moved toward legal recognition of DAOs. Hence, technical, social, and legal recognition are in some cases converging.

12.2.2 Studying DAOs and Blockchains as Knowledge Commons

The role of code does not exempt DAOs from being classified as sociotechnical systems for resource governance. Despite the promise of efficient and adaptable “trustless” transacting, both DAOs and blockchains can neither fully escape social dilemmas associated with human beings interacting with one another nor fully convert social dilemmas into technical solutions. Inevitably, despite their arguably “trustless” character, DAOs and DAO members interact with humans and with other human-designed systems, including conventional corporations and legal structures. They are, therefore, participatory sociotechnical systems rather than purely “private” governance. DAOs are not governance-free. Rather, they instantiate governance in distinct ways.

In that respect, DAOs can be understood as extensions of commons-based peer production and open-source collaboration of the sort imagined by Benkler (Reference Benkler2004, Reference Benkler2013). We emphasize, however, that in pointing to commons concepts we do not argue that DAOs (or blockchains) “are” commons. Nor do we equate knowledge commons with commons-based peer production. Instead, we argue that there are important insights to be gleaned from characterizing DAOs as species of knowledge commons governance, community- or collectivity-based responses to social dilemmas associated with shared knowledge and information resources, building on the definition of knowledge commons developed in the GKC literature (Frischmann et al. Reference Frischmann, Madison and Sanfilippo2023).

Our emphasis on a GKC perspective joins analysis of blockchains as resource governance systems, with transactions “on” a blockchain providing an exhaustive and accurate record of resource ownership and transfer with respect to some relevant resource pool.

Blockchains are decentralized or distributed peer-to-peer computer networks that record information, including transactions. Human-specified rules as to what information and how it is recorded are embedded in the code of the computer networks themselves. Blockchains are “trustless” in the specific sense that they do not require trusted third parties to process or validate transactions. Permissionless or algorithmic blockchains enable essentially anyone to participate in transactions that are recorded on the blockchain. Permissioned or participatory blockchains, such as DAOs, may be more structured and involve additional rules, embedded in computer code, that determine who has the power to conduct and record transactions on the blockchain and what sorts of transactions may be included, and what cannot be.

The technical requirement that blockchains effectuate transactions by computational consensus rather than by human decision making implies that they formally involve fewer opportunities to exert human-based power or influence than organizations that rely on conventional managerial hierarchies. They are, therefore, represented by blockchain enthusiasts as both less corruptible and authoritative than conventional ledgers, or records of transactions. They can, for this reason, be thought of as comparatively free from power imbalances, thus contributing to opportunities for self-governance (Ferrari et al. Reference Ferrari, Leiter and Mannan2023; Spelliscy et al. Reference Spelliscy, Hubbard, Schneider and Vance-Law2024). This feature can be considered a response to economic power (in that blockchains and blockchain-based organizations may be regarded as providing alternatives to corporations) or to government power (in that blockchains may provide alternatives to recording systems administered by central banks) (Cowen Reference Cowen2019). By design, blockchain protocols constitute governance of the resources whose ownership and identity they record, of the actors who engage in transactions on the blockchain, and by the actors who control the code that makes blockchain-based transactions possible. The protocols are both literally and metaphorically constitutional structures that define “citizenship” in any given blockchain network (Alston Reference Alston2020).

As cryptocurrencies are well-known applications of blockchain governance, we draw on that sector for a brief illustration. According to De Filippi and Loveluck (Reference De Filippi and Loveluck2016), the two distinct governance mechanisms in the best-known blockchain-based currency, Bitcoin, are the technical infrastructure for cooperating in transactions and recording transactions, which governs all blockchain members (the operational layer, interpreting the underlying code), and the technical infrastructure for cooperating in managing the underlying code, which governs and is governed by a small group of core developers. Another aspect of governance involves the response to actor entry and exit in permissionless blockchains, such as forking (Berg and Berg Reference Berg and Berg2020). Focusing on the infrastructural character of blockchains yields yet another governance dimension, in that they offer structural solutions to downstream resource use. Blockchains can be thought of as innovation commons: institutions that facilitate cooperative pooling of innovation resources, including capital, ideas, and talent, thereby facilitating entrepreneurial discovery (Potts Reference Potts2019).

Alston et al. (Reference Alston, Law, Murtazashvili and Weiss2022) question the static view of blockchains as complete contracts and trustless transactions. Rather, blockchains are evolving organizations where the threat of exit by users conditions the mechanism of change in the protocol, which entails a layered and dynamic set of governance forces. Internal governance consists of protocols and collective choice rules, while external governance includes competitive pressure from public and private institutions relative to a blockchain’s performance, subject matter scope, and internal governance, shaped by competitors’ governance choices.

Murtazashvili et al. (Reference Murtazashvili, Murtazashvili, Weiss and Madison2022) consider blockchains as knowledge commons. They consider (1) institutionalized community governance with sharing of resources (code developers, miners, users, founders, each with shared access to code, internet, etc.); (2) social dilemmas (social and economic systems require describing objects and assets in secure, reliable, and timely ways); (3) resource sharing (shared resources include knowledge, data, and opportunities to use outputs; general openness of blockchains to entry and exit, especially algorithmic blockchains).

12.2.3 DAOs and Corporations as Knowledge Commons

The conceptual affinity between DAOs and corporations as organizational forms motivates analysis of affinities between DAOs and corporations as resource governance systems. In both contexts, we offer the GKC perspective as a critical analytic tool.

Looking at corporations, our GKC focus intervenes in a well-established debate on the character of the corporation as a resource governance system, contrasting a “communitarian” or “political” framing, identified long ago by March (Reference March1962) and updated by Whitford and Zirpoli (Reference Whitford and Zirpoli2016), and Levinthal and Pham (Reference Levinthal and Pham2024), with a predominantly contractarian or Coasean perspective (Alchian and Demsetz Reference Alchian and Demsetz1972; Hart Reference Hart1988). The scholarly debate has struggled at times to accommodate the fact of “corporate personhood,” or the factual and legal identity of the corporation as a recognized legal and market actor (Gindis and Hodgson Reference Gindis, Hodgson, Windsperger and Raha2026). The emergence of DAOs as “autonomous” entities with sociotechnical resource governance features has sharpened the terms of that struggle and opened a new front in the existing corporate governance debate (Reyes Reference Reyes2021).

Scholarship, in a way, is also struggling to keep up with practice. Questions as to both governance by the corporation and governance of the corporation have been extended recently via technology developments that are stretching the notion of a corporation’s boundaries even from a Coasean “nexus of contracts” perspective (The Economist 2023). These challenges include a blurring of the conventional boundaries of firms with increasing use of AI (Petrin Reference Petrin2024).

The chapter examines this cluster of challenges by extending the argument initiated by Deakin (Reference Deakin2012), who considers the corporation as commons in the Ostrom tradition, treating the corporate entity as a governance strategy for coordinating the development and distribution of many sorts of material and immaterial resources. In starting with DAOs, we focus on knowledge commons analysis rather than on Ostrom’s framework and on the knowledge governance attributes of both DAOs and corporations broadly. The distinction between the GKC framework and Ostrom’s approach originates in differences between social dilemmas associated with knowledge resources as opposed to those associated with biophysical or material resources (Madison et al. Reference Madison, Frischmann, Sanfilippo and Strandburg2022). In practice, the two may not be sharply differentiated, and the style of analysis is similar. The choice of framework may speak less to its functional importance and more to analytic emphasis and the potential for results to be generalized beyond the corporate governance context to other knowledge commons settings. By applying the GKC framework to DAOs, we aim both to clarify the understanding of corporations as solutions to governance dilemmas and to confirm the utility of the GKC framework as part of, rather than in opposition to, governance in market contexts.

Hassan and de Filippi (Reference Hassan and De Filippi2023) draw attention to the history of decentralized community governance generally and its role in adapting blockchain technologies to corporate and commercial applications. DAOs activate with specificity the instinct described by Allen and Berg (Reference Allen and Berg2020) that blockchain governance can be analyzed profitably with reference to corporate governance. The Coasean “nexus of contracts” framing of the corporation has a material analog in the manner in which DAOs are defined by transactions recorded via smart contracts.

Contrasts are as important as similarities. Some of the significant differences between DAOs and conventional corporate organizations include the following: (1) DAOs lack a centralized structure featuring formal managers or a managerial hierarchy in a traditional sense; (2) DAO membership is not viewed as necessarily durable or long-lasting; rather than a board of directors, distributed consensus – meaning transactions performed and executed by members of the DAO at any given time – is the basis for governance; and (3) DAOs operate with relative autonomy from external validation and regulation by traditional legal institutions. That list can be expanded as follows.

• Source of Law: DAOs are “rule by code,” where it is hard to change rules that establish procedures for anyone interacting (De Filippi and Wright Reference De Filippi and Wright2018). Corporations exist by virtue of and rely on law as text, as social institution, and as social practice. As Davidson (this volume) emphasizes, there exists an important distinction between “on chain” governance, or governance of the DAO by the DAO, and “off chain” governance, that is, (possible) governance of the DAO by external authorities.

• Nature of Interactions: DAOs are comparatively decentralized, by virtue of the underlying peer-to-peer network structure; corporations are comparatively hierarchical (Williamson Reference Williamson1996).

• Scale: DAOs have potentially unlimited geography and participation; conventionally, corporations – though their structures can transcend geographical boundaries, and outlive their founders – are linked to specific places and people.

• Management: DAOs can have essentially no management (as in permissionless blockchains) or have a defined structure of core operators. Traditional legal entities are run by boards or managers. Participatory DAOs enable members to set parameters needed by the underlying smart contract and to update those parameters as needed, with governance determined through votes measured with blockchain “tokens” that represent records of transactions.

• Membership: For DAOs, membership is tracked with smart contracts and an underlying blockchain, with membership purchased or allocated as a reward for computing effort directed to maintaining the blockchain. “Membership” in a corporation is a legal relationship defined by role: shareholder, director, manager, or employee. For communitarian characterizations of the firm, “membership” may extend to the practical implications of long-term partnerships and supplier–customer relationship and to interdependencies associated with the firm’s physical presence in a community. For contractarian characterizations, “membership” is typically an inapt perspective with which to view the firm.

12.4.1 Relevant Knowledge, Information, and Data Resources

DAOs are concerned formally with digital representations of the products of computational processes: tokens, the products of proof of work and proof of stake processes on blockchains. These are outcomes of decisions to which economic and possibly cultural significance is attached by virtue of their technical and social visibility and by the computational permanence of the distributed ledger that we call “the blockchain.” Tokens, as digital assets or crypto assets and sometimes denoted NFTs (“Non-Fungible Tokens”), are the first and most important layer of knowledge and information resources with which DAOs are concerned.

A token itself is not a naturally shared object, with the attributes of a public good, but the construct of a DAO operates both technologically and socially precisely because each token in itself is useless and valueless. Whatever the purpose of a particular DAO, information about tokens must be shared: the investment or membership value that is associated with each token, creating its status in the DAO context vis-à-vis both other members and non-members, and the governance powers associated with each token, which represent the powers of DAO members to engage with one another. Shared information about token ownership is the baseline attribute of a DAO that allows owners to engage in decision making within the DAO environment, to exercise membership rights and for token holders to engage in economic transactions. The shared character of tokens as knowledge resources is inherent with respect to their essential role in the functions of the entity.

Tokens may and often do represent other knowledge and information resources, including information about material assets (such as land or material artworks), information about immaterial assets (such as financial instruments), or information about immaterial intellectual property objects, such as copyrighted works, patented inventions, and trademarks. Tokens on blockchains may even refer to confidential information and trade secrets and to “things” that have an ambiguous status as matters of conventional intellectual property law, such as material subject to characterization as Traditional Knowledge, the growing body of law known as Geographical Indications, and matters of “know-how” that may play important roles in transactions concerning industrial innovation.

As DAOs consist of multiple layers of technological infrastructure and application – blockchain networks, smart contracts, and payment systems – the relevant code is, at each layer, a shared knowledge resource in itself, as is the technological and educational expertise that is contributed to building and maintaining the code. The Ethereum blockchain is built with open-source computer software, a well-established shared resource in its own right (Schweik and English Reference Schweik and English2012). Blockchain networks are frequently characterized as “trustless” systems, but it is now well-known that this framing is at best a rhetorical mis-direction. Collective trust in the developers and maintainers of the code is essential to the claim that blockchain networks have a technical integrity that justifies treating applications built on them as “autonomous” relative to ordinary legal frameworks (Werbach Reference Werbach2018).

DAOs depend on further layers of tacit knowledge and expertise, notably trust (lending weight to the characterization of blockchains as nested, polycentric governance systems proposed in Murtazashvili et al. Reference Murtazashvili, Murtazashvili, Weiss and Madison2022), in the sense that DAOs are initiated by human beings who share some degree of trust in one another as to the agreed-upon purpose(s) of the organization. Trust, like privacy, is a social phenomenon (Gambetta Reference Gambetta1988); it should be characterized as a shared information resource. The hack of “The DAO” and the response that forked the Ethereum blockchain in order to restore investment capital to original investors suggest that DAO members are not always willing fully to “trust” the proposition that the “smart contract” code, and only the smart contract code, determines allocation of DAO resources. An appeal to extra-code values was made, and that appeal was successful.

The resources that shape DAO governance are analogous to but not necessarily or precisely the same as the resources that characterize the traditional firm and corporate governance. In a DAO, trust is an infrastructural immaterial knowledge resource that is integral to understanding governance practices in both contexts. Digital assets in the DAO setting represent works of intellectual property (in the case of NFTs) or financial interests, and in their representative forms (tokens) information about them is shared across the entity, even while ownership of a specific token is specific to a single actor. In a traditional corporate organization, money itself (in various forms), tangible assets, human capital and expertise, and intellectual property works themselves are related (possibly) shared assets, typically owned or controlled by the firm as an entity rather than by members of the firm (shareholders, managers, or employees) (Burk and McDonnell Reference Burk and McDonnell2007). Information about those assets, including their origins, values, and uses and purposes, is shared within the firm, though in nuanced ways. Different managers and employees will access and use different information on a shared basis (at times) and on an exclusive basis (at other times), and sometimes in tacit forms and sometimes in explicit ones (Brown and Duguid Reference Brown and Duguid2000).

12.4.2 Social Dilemmas

Commons governance is often stereotyped as a response to the classic “tragedy of the commons” social dilemma, where resource users rationally overconsume a shared resource. However, with knowledge and information resources, overconsumption is typically not a primary concern. When identifying other important social dilemmas in this context, we must move beyond such stereotypical thinking. As Madison et al. (Reference Madison, Frischmann, Sanfilippo and Strandburg2022) note, the networked information economy sharpens some existing dilemmas relative to knowledge and information resources, particularly in identifying and promoting positive spillover effects of knowledge production and use; limiting harmful spillover effects relative to adjacent interests in privacy and security; and producing education and capacity for effective participation in (or exit from) relevant governance systems. “Knowledge commons governance” as a macro category includes different possible subsidiary categories, including innovation commons (in which knowledge pools facilitate productive coordination and combination) and infrastructure commons (in which knowledge pools offer resources to a multiplicity of different uses and users).

Social dilemmas associated with DAOs are in part species of the social dilemmas associated with any organization. Because our focus is on knowledge commons dimensions of DAOs, we focus on dilemmas associated with shared knowledge and information resources. We distinguish, where possible, between dilemmas associated with forming organizations (dilemmas for which DAOs and other organizations are meant to be governance solutions) and dilemmas associated with operating organizations (dilemmas that DAOs and other organizations may create).

Because social dilemmas are defined in the first place as conflicts between individual interest and collective interest that interfere with productive collaboration or cooperation (Dawes Reference Dawes1980; Kollock Reference Kollock1998), it is appropriate to begin by reducing all social dilemmas to problems of agency relationships (Ross Reference Ross1973), meaning the risk that one party as principal, having relied on a second party as agent to act faithfully on the principal’s behalf, risks betrayal or defection by the agent. One partner may rely on a second partner to act faithfully in the joint pursuit of the partnership’s goals, but the second partner may fail, or defect. Those risks are compounded by the possibility that the principal cannot effectively monitor the agent’s performance, by the agent’s not being subject to effective accountability measures even if monitoring is present, and by the likelihood that expectations of the character of faithful performance are ambiguous or may be embodied in tacit rather than explicit understandings. It is worth noting that to a substantial extent, those elementary outlines of agency costs are matters of shared knowledge and information: The interests of principal and agent may be misaligned because they lack effective mechanisms for sharing knowledge about each other and about the conceptual and material conditions of effective cooperation.

A related set of social dilemmas arises with respect to the design and character of the organizational framework or infrastructure itself. The first-order social dilemmas described in the preceding paragraph are compounded by the second-order likelihood that both principal(s) and agent(s) will address those social dilemmas by relying on intermediaries of one sort or another – the corporate form, defined by relevant law; partnerships, nonprofit associations, or cooperatives, also defined by relevant law; material forms shaping social practice, such as cities; tradition, custom, and social norms, as in universities and faith traditions; and – in the case of open-source software, Wikipedia, and DAOs – combinations of contract and code. Each of those contexts both solves social dilemmas in part (principals need not rely directly on their knowledge of agents’ behavior; they can rely on monitoring and enforcement powers of the intermediary) and creates new ones, again characterized significantly in terms of shared knowledge and information: How can both principals and agents be assured that the intermediary and its own agents and decision making are trustworthy, safe, fair, uncorrupted, and reliable?

Second-order social dilemmas may be compounded by third-order dilemmas, as second-order solutions (such as corporations) rely on additional layers of intermediaries, producing what one might refer to (depending on one’s preference for spatial metaphors) as a pyramid of social dilemmas, or an ecology. Corporate partnerships may depend on relationships with lawyers, accountants, financiers, insurers, and so on, adding to the inventory of possible productive outcomes and to knowledge-based social dilemmas.

That broad description can be brought to ground in the following brief inventory of specific social dilemmas. None of these is wholly distinct from the others.

12.4.3 Social, Cultural, Technological, and Economic Context

Like blockchains, DAOs have been characterized both by proponents and by some researchers as examples of governance “by code” (Esener Reference Esener2024). There is a kernel of accuracy in that description, in the sense that formally and technically, transactions and records of ownership on blockchain networks appear to be entirely “on-chain,” that is, endogenous to those networks and to related smart contract and payment layers.

In multiple respects, however, the claim is misleading. Multiple commentators have observed how DAOs and the idea of DAOs as autonomous, self-governing communities have histories and motivating ideologies, going back not only to the idealism of the mid 1990s and late 1990s internet (Turner 2008; @keikreutler 2021) but also earlier, to a range of phenomena operating both outside the market (utopianism in communal living) and in polycentric and decentralized decision making in industrial and public sectors (Seidman Reference Seidman1952).

The key here, as in other knowledge commons governance cases studies, is recognizing that the virtues and drawbacks of DAO governance should not be assigned fully to the operation either of human or technological agents operating within the boundaries of the entity, coordinating their actions and then causing the entity to interact with others. Here again, the “autonomous” corporation or DAO is functionally autonomous only in part. At multiple layers of practice its human operators have histories, ideologies, and preferences that cause the entity to be constructed and operated as it is. Case studies of traditional corporations usually have little trouble distinguishing between an idealized model of the firm as an imagined “nexus of contracts” and an actually functioning corporation (Stout Reference Stout and Parisi2017). The study of DAOs should not be seduced by the premise that DAOs are, analytically, entirely different from the latter.

12.4.4 Action Arenas and Rules-in-Use

“Governance” is often reduced analytically to “the rules,” both formal and informal; we take a broader view of governance as practice in context.

As Sanfilippo et al. (Reference Sanfilippo, Frischmann and Strandburg2018, 122–123) observe: “Action arenas serve as the core units of IAD and GKC analysis, functioning as policy analysis equivalents of social action and interaction settings or Goffman’s frames. An action arena is simply a recurring type of situation in which community actors interact with one another.” Recognizing the challenges of identifying and analyzing a single “right” action arena in a polycentric social system, McGinnis introduced the concept of “adjacent action arenas” (McGinnis Reference McGinnis2011), which has been adapted to the GKC setting by Dekker and Kuchař (Reference Dekker and Kuchař2024) and Gindis and Cole (this volume). Investigating arenas of all sorts means focusing on functional attributes and implications of patterns of interaction rather than only on definitional specificity.

We therefore do not limit the focus of GKC analysis of DAOs to “the DAO” as such as “the” or the only relevant action arena. Identifying action arenas in a polycentric context means asking whether the DAO is being characterized accurately in context, so that useful levels of details are captured relative to the DAO itself as well as relative to activity taking place off the blockchain and in ways that permit the data to be compared effectively with data generated from other cases – specific DAOs, or non-DAOs, such as the traditional corporate form. Proceeding at the right levels of generality facilitates comparison across DAOs and between DAOs and other governance systems.

Questions here include both how DAO resources are created and used, and also where and how membership is determined (to the extent to which that might be treated independently of transactions); where administration takes place; where enforcement takes place and disputes are resolved; and where and how rules are formed and interpreted. This perspective aligns with Dekker and Kuchař’s (Reference Dekker and Kuchař2024) framework in identifying key governance functions – resource allocation, membership, administration, enforcement, and rule-making – as structured by different actors within a system. Governance is not monolithic. Rather, governance structures vary based on who controls these functions and the degree to which these functions are integrated or stratified.

“The rules” are critical, and they are critical in part because of their definitional roles as well as their operating roles. Per Ostrom, we refer to these as “rules-in-use” to connote their significance as practices rather than only as structure or architecture. As Allen et al. (Reference Allen and Berg2020) observe, one of the most important contributions that Ostrom makes to the field of blockchain governance is the priority that should be given to building a “grammar” of relevant rules.

We focus on three types of rules-in-use, though in practice they reduce to a single technological construct, and we distinguish among several “action” arenas.

The three key types of rules are membership rules, decision making rules, and conflict resolution rules. In DAOs, all three are combined technically in code. In principle, anyone can become a member of a DAO by acquiring a relevant token; anyone who is a member can participate in DAO decision making; disagreements or conflicts about DAO governance are resolved on-chain, via the consensus mechanism. Unlike a classic firm, which relies on hierarchies of human responsibility, capability, and judgment, from a technical standpoint DAOs fulfill their promise of egalitarian decentralized practice. DAOs largely avoid the perils of power asymmetries and domination that are said to contaminate firms operating in market economies (DuPont Reference DuPont, DuPont, Kavanagh and Dlan-Ennis2024).

That said, there is no full avoidance of power dynamics, a fact that is exposed once we examine different action arenas as intersecting but distinct governance settings. The blockchain layer as such is a species of shared infrastructure, control of which is embedded in individual propertized objects – tokens – distinguishing it from shared physical infrastructures such as highways and bridges (Grimmelmann and Windawi Reference Grimmelmann and Windawi2023) and shared social infrastructures such as organizational hierarchies (Amin and Hausner Reference Amin and Hausner1997; Borrup Reference Borrup2011). In the material infrastructure setting, power dynamics are expressed as dilemmas of underproduction and possible monopoly control, leading to governance framed as government ownership, regulated industry ownership, or open access – a species of commons (Frischmann Reference Frischmann2012). In the blockchain setting, power dynamics are expressed in terms of “standard” dilemmas of wealth accumulation rather than in terms of access to the resource (Pistor Reference Pistor2019).

12.4.5 Relevant Legal Frameworks

The typical start to a knowledge commons case study includes attention to relevant legal frameworks, as those may define relevant resources (such as patents and copyrights) or community or collective entities (such as open-source software development communities, which are defined in part by open-source software licenses). With DAOs, that approach founders: the premise of these entities is that they are self-governing, with membership, decision making, and dispute resolution processes closed off entirely from formal legal systems.

In practical terms, walling off DAOs completely from legal institutions is not feasible, even if (to some) it is desirable. Each actor with interests in DAOs at different levels – including developers, miners, users, token holders, validators, all of whom may be either organizational/institutional or individual – has a legal, economic, and social status that exists outside of the DAO environment. Just as the classic firm faces a boundary question, so do DAOs. Just as the boundary question for the classic firm leads to important interventions from a law and regulation standpoint, DAOs are increasingly exposed to the question: should they be regulated or otherwise subject to “legal” ordering, and if so, how (Reyes Reference Reyes2021; Reyes and Hurt Reference Reyes and Hurt2025)? Importantly, how do the responses to those questions affect our characterization of DAOs as knowledge commons?

The second question has a more straightforward answer than the first. We believe that the GKC framework remains useful and important for studying DAOs even as various forms of legal order intrude more deeply into DAO operations and begin to shape their boundaries. Dekker and Kuchař (Reference Dekker and Kuchař2022) demonstrated that knowledge commons concepts are broadly applicable to private market settings as well as to more self-evidently “communitarian” organizations. The question to be analyzed is not whether an organization “is” a commons or not but rather whether the knowledge commons framework is useful in understanding governance of a shared resource.

The first question – what is the likely character of “legal” regulation? – has both conceptual and technical answers.

The interesting conceptual question has to do with the fact that DAOs claim not only functional self-governing powers but also a kind of right of self-determination. In that effort, DAO organizers are aligned, at least indirectly, with numerous valuable social institutions through history, all of which have achieved dramatic degrees of governance autonomy relative to both markets and states: universities, religious organizations, philanthropies, and neighborhood and volunteer organizations. That is not to say that formal law is irrelevant to these things; they are regulated in many different ways. Nor are they fully independent of the market. To own real or personal property, to hire employees, to publish and promote materials all require engagement with market firms and processes. What matters, instead, is the existence of the community or collective as a source of normative order. The university as an institution (not to mention individual universities) sets and enforces its own normative priorities. The virtue of self-governing communities has been recognized repeatedly, from De Tocqueville through Putnam (Reference Putnam2000). In that respect, DAOs may tap into a robust tradition, and as knowledge commons governance research is useful to study those phenomena, it likewise remains useful to study new things such as DAOs.

Using the GKC framework means not only adhering to conceptual integrity but also getting the empirical details right, and here the technical aspects of law and DAOs will be fascinating to observe as they evolve. To a significant extent we expect to see regulators trying to “domesticate” DAOs, especially in the US and Europe, by attempting to assimilate DAO structures and capabilities to what has been tried and found effective with respect to corporations. DAOs and related artificial entities may be given recognized entity identities or personalities, as “things in themselves,” akin to but not identical to corporations or corporate-like actors, with legal rights and powers and with legal obligations (Li, 2004).

Corporations have forms of accountability to people and entities outside the boundary of the firm, both as corporate undertakings and, under limited circumstances, in the names of their managers. Particularly in financial markets contexts, corporations have legal obligations to identify, manage, and disclose various forms of risk, to deter and refuse to participate in fraudulent practices, not to engage in money laundering, and to devise mechanisms to reasonably ensure that the entity and its people and assets are secure and stable. As interests of the state and of the broader national and global so-called “community,” equivalent themes are likely to be expressed vis-à-vis DAOs, or have been expressed already (Naudts Reference Naudts2023). We do not think, however, that the push to wrap DAOs in certain forms of legal order compromises their essential character as decentralized decision making entities.

The possibility of wrapping DAOs in one or more legal frameworks adds an additional, important nuance to our GKC examination: Classic law and legal institutions bring into focus the relative importance of human judgment and human communities of expertise in both the internal dynamics of DAOs and in external evaluation and regulation of DAOs. Blockchain networks are famously and powerfully self-executing; decisions are made and recorded on the chain, giving rise to the belief that the “trustless” character of blockchains is part of their special power. There are no humans to corrupt, or to defect, or to make errors. By contrast, law is full of humans, often formed into expert communities: trained lawyers, judges, and (often) legislators, developing and interpreting the codes and texts of the law and using law as normative order to constrain both lay humans and also the imaginations of humans as expressed in machines. There is a sense, in short, that the very purpose of the law is called into question by the very idea of the DAO.

Notably, framing the topic in that way steps well beyond existing debates about the theory of the firm, the character of corporate governance, about the relationship between shareholders and stakeholders, between the relative importance of maximizing profits or returns, and that of the normative purposes that a firm is created to serve, whether those are to deliver valuable products or services or productively employ citizens of a community. In one respect, DAOs offer a somewhat conventional case study of a sociotechnical knowledge commons. In others, DAOs challenge researchers to think imaginatively about the ends of law and social science.

12.4.6 Outcomes

Assessing the outcomes of a commons governance system is notoriously difficult. Ostrom’s work was largely premised on the idea the commons management of a natural resource system could be as productive as a market-based or state-managed system, with added benefits accruing via the spillover effects of community participation in governance. In the knowledge and information context, “productivity” has no accepted definition, and it is also widely acknowledged that knowledge and information often have social virtues that far exceed their value only as industrial-style “resources,” inputs into production mechanisms. Sometimes characterized as cultural infrastructure, sometimes as economic asset, sometimes as a source of hedonic goods, sometimes as an attribute of a well-functioning civic sphere, knowledge and information often have to do with individual and collective well-being across multiple dimensions. It is unlikely that a single analytic framework can capture that range of purposes using a single evaluative rubric.

Given that difficulty, knowledge commons case study research has come to focus increasingly on the idea that successful knowledge commons governance systems do not necessarily only produce and sustain “more” or “better” knowledge. Instead, the resolution of social dilemmas involving shared knowledge often resolves via commons governance in sustainable, resilient, and equitable communities. Focusing on the interdependence of knowledge and community enables us to suggest that the future of research on DAOs and analogous “autonomous” entities lies not in a focus on their productivity but in the ways in which the DAO structure sustains and is sustained by some wholly or partly exogenous value or sets of values. Similarly, in suggesting that focus for DAOs, we draw on a diverse array of existing knowledge commons case studies, where the knowledge implications of knowledge commons governance are functionally indistinguishable from the community implications. That diverse array includes early citizen science collectives (Madison Reference Madison, Frischmann, Madison and Strandburg2014), research universities (Madison et al. Reference Madison, Frischmann and Strandburg2009), and contemporary “smart” urbanism (Frischmann et al. Reference Frischmann, Madison and Sanfilippo2023), as well as blockchain networks themselves (Bodon et al. Reference Bodon, Bustamante and Gomez2022).

In short, there are multiple possible “outcomes” of knowledge commons, some more clearly described using perspectives external to the system and to commons analysis itself, and some more clearly described using commons-specific and internal perspectives.

“External” perspectives on DAOs are chronicled well by Micheler, Werbach, and Kremer in their overview of DAOs and corporate law (Micheler et al. Reference Micheler, Werbach and Krenner2026). Analogizing DAOs to original joint stock corporations during the Industrial Revolution, DAOs arguably offer flexible, efficient, and equitable coordination of financial and human resources, aiming, as the corporate form does in principle, at productive social and economic uses. At the same time, and again reflecting patterns of corporate practice, DAOs have experienced internal conflicts and governance failures. Their decentralized premise means that it is far from certain that DAOs represent a viable long-term complement to the corporate form.

Similarly, looking at DAOs as systems that may or may not meet social needs successfully, Reyes (Reference Reyes2021) and Reyes and Hurt (Reference Reyes and Hurt2025) have investigated the comparative strengths and weaknesses of DAOs relative to various business organizations, including not only corporations but also partnerships and joint ventures. Those analyses detail comparisons with the DAO form with respect to ways in which law traditionally domesticates and disciplines organizational forms: centrally imposed, state-mandated fiduciary duties, securities law, accounting standards, transparency regulation, compliance with security obligations and money laundering rules, and so on. The persistence and viability of any particular organization is linked closely to centralized state regulation – or to its absence. Indeed, to a significant extent investors in DAOs tend to be entities themselves that operate largely outside the purview of securities regulation, so long as they do not seek public investment (venture capital funds, for example). It is fair to consider whether DAOs are, from this perspective, a form of regulatory avoidance.

The GKC framing brings to this question an explicit focus on two dimensions of DAOs. The first is its stress on DAOs as overlapping layers of shared resources rather than as simple objects for law or other governance. The second is the GKC framework’s interest in examining the details of DAO communities. DAOs, like many knowledge commons, are concerned not only with producing knowledge or information “outputs” and supplying those to the broader world beyond but also with the producing and sustaining DAO communities themselves. The distinction between the two phenomena is not sharp but is worth considering in several respects relative to the question of assessing outcomes. How do DAOs perform not only as knowledge producers, relative to criteria used for other business organizations, but also as dynamic self-governing communities?

It is evident from the discussion that the idealized aims of DAOs may not be realized in practice. DAO governance conversations taking place on Discord or Telegram channels suggest that members signal their participation and preferences not simply via their behavior in transactions recorded on the blockchain but also via private chat. That fact creates the possibility of power imbalances and an absence of transparency. As in any community governance setting, some voices may be louder or more persuasive than others, and some voices may add little value to governance processes.

Moreover, DAOs have yet to demonstrate that their self-governing sociotechnical character can sustain specific DAOs over time, as members come and go and as the purposes of the DAO may evolve. GKC research increasingly draws attention to questions of voice and exit in commons governance as measures of the durability and legitimacy of a commons system (Sanfilippo et al. Reference Sanfilippo, Strandburg, Frischmann, Sanfilippo, Frischmann and Strandburg2021). A corporate shareholder who wishes to “exit” can do so, usually, by selling their shares but without necessarily involving more than a moment’s reflection about the shareholder’s participation in governing the firm or jeopardizing the continued existence of the firm or its business. Even the transfer of all of the shares will not necessarily lead to the demise of the entity.

By contrast, a DAO member does not own marketable “shares” in the same respect; a wholesale liquidation of the interests of a DAO member (sometimes known as “rage-quitting”) will lead, at scale, to the end of the DAO, which will either go out of existence in its entirety or be reconstituted via forking. A sizeable amount of investment in DAOs comes from venture capital funds, whose decisions to remain or exit any investment are rarely unconsidered (Alon et al. Reference Alon, Berthelsen, Bjellerås and Silva-Rêgo2025). (The practice of “rage-quitting” also highlights the fact that assessing outcomes from a GKC perspective may require examining DAOs at different points in time, that is, when the DAO is in formation, when it is operating, and when it is resolving conflicts or ending.) Subgroups within a DAO may “exit” in part by forming sub-DAOs, which either enhance the functionality of decentralized DAO governance or recreate a governance hierarchy that makes DAOs less “communal” or distinguishable from corporations. It is possible that durable DAOs look more like classic corporations on the inside as well as being at least partly assimilated to classic legal regulation on the outside.