Author: a16z crypto
Compiled by: Deep潮 TechFlow
a16z: From Company to DAO, DUNA May Become the Next Generation of Organizations
DeepOcean Summary: From the Marco Polo family's trade to the Dutch East India Company, the essence of every commercial revolution has been "how to enable strangers to cooperate." This a16z article traces the 500-year evolution of organizational forms and highlights the legal challenges facing DAOs—not a technical issue, but a vacuum of institutional frameworks. For professionals considering how to operate Web3 projects within compliance frameworks, this is a background piece worth reading in full.
For centuries, the core challenge of commerce has remained the same: how to enable people with different roles, asymmetric information, and divergent interests to collaborate toward a common goal? The answer has almost always been some form of organizational innovation—new structures that allocate risk, reward, and responsibility in ways previous generations could not achieve. The history of business is also the history of collaboration.
Corporate structures were the last great organizational leap, created for the industrial era to specifically address (and leverage) the collaboration challenges of that time. But software and native internet protocols are now reducing the once-inevitable costs of traditional corporations—multi-layered centralized management, bureaucratic bloat, and intermediation.
Existing legal structures were not designed for this new world. The only entity currently emerging as a strong contender for the next organizational leap is the DUNA—a relatively new entity and the only legal structure explicitly recognized in the once-in-a-generation market structure legislation currently advancing in the U.S. Congress. It can arguably be called the only structure truly built for internet-native organizations.
To understand why new organizational forms are emerging today, it’s helpful to recall what the corporate structure originally solved—and where we’re headed.
How do traders manage risk?
Before companies existed, business was a personal matter: imagine Marco Polo traveling on long-distance trade journeys with his father and uncle. In such family businesses, they truly risked their lives. If a contract went wrong, their personal assets could be completely wiped out—or worse, their lives could be at stake.
Merchants relied primarily on two forms of protection, neither of which was guaranteed. The first was geopolitical: the relative peace brought by the Mongol Empire’s Pax Mongolica. If you offended someone the Mongols favored, you were in trouble. The second was social: if you cheated someone, breached trust, or violated the Lex Mercatoria—a self-enforced code of honor among merchants from approximately 1100 to 1600—your reputation would be ruined, and you would be blacklisted from trading networks stretching from Quanzhou to Timbuktu.
In the absence of strong institutions, a merchant's word is truly worth more than gold. The Polo family had it relatively easy, as they relied on blood ties. Many other business partnerships were not so smooth.
In the absence of strong institutions, a merchant's word is truly worth more than gold.
A longstanding challenge in business has been the tension between principals and agents—in this case, between investors and merchants. The medieval commenda was an innovation that provided limited liability: investors were liable only for the amount they invested, and merchants were theoretically held to the same standard. Profits were distributed according to the initial capital contribution. The commenda emerged organically, predating any formal regulations. Yet each venture remained vulnerable to even minor setbacks and could easily collapse. This model also could not be scaled: the commenda dissolved at the end of a single voyage, upon bankruptcy, or upon death.
A further innovation was Florence’s “compagnia”—think of the Medici Bank. This form was a more durable and operationally complex legal entity than the commenda. A compagnia could sustain long-term commercial relationships among multiple parties, yet it still rested on the personal liability of all partners. It represented the most advanced pre-corporate tool of the Middle Ages—the pinnacle of medieval partnership—yet still left partners exposed to risk. While churches and universities had long enjoyed legal personality derived from the Roman concept of “universitas” (treating a collective as a single legal person), commercial enterprises never attained full independent legal status.
These shortcomings were not resolved until the 17th century, when early modern Europe invented something new. This innovation, along with its legal protections, made it easier for businesses to raise capital, allocate ownership through stock issuance, and shield owners from liability—the corporation. The most famous grant of these corporate powers went to the Dutch East India Company (VOC: Vereenigde Oostindische Compagnie), and like a revelation, once people realized how good an idea the corporation was, it quickly spread throughout Europe. (Although the British East India Company was founded a few years earlier than the VOC, its institutional structure was far less advanced, raising funds only for specific voyages and lacking a mechanism for public share offerings.)
Corporate structures enable large, capital-intensive enterprises by reducing operational risks and coordination costs—shaping much of the modern world.
The cost of scale
While the company addressed a series of real-world problems, it also introduced new ones. Its first achievement was getting participants to care about each other’s outcomes: by binding shareholders, directors, and captains to the same legal entity and the same profit line, the company forced all parties to internalize costs that could otherwise have been freely externalized onto others. But shared interests do not equate to perfectly aligned incentives.
Taking the VOC as an example, its legal structure is familiar yet complex: shareholders include many Dutch citizens eager for investment returns, but they are too occupied with their own lives to manage the VOC’s day-to-day operations or long-term strategy. The board of the "Heeren XVII" was responsible for planning how to generate profits for everyone. Meanwhile, captains and merchants on the front lines in Southeast Asia had to make the best possible decisions for the company under limited information and resources.
Theoretically, that's the case. In reality, the interests of these three parties are not entirely aligned; one party can sacrifice the interests of the others to gain more for itself.
Common interests do not equate to perfectly aligned incentives.
How could you ensure that captains, operating far beyond the oversight and control of the Seventeen Gentlemen, would not plunder other ships or abscond with funds? How could you prevent merchants from accepting bribes or making larger private deals for themselves? How could you ensure the board made sound decisions? And what if you were a group of shareholders who shared Protestant values and were dissatisfied with VOC’s sometimes predatory behavior? These questions gave rise to innovations in incentive design—options, dividends, audits, oversight, and even so-called efficiency wages—as well as new legal safeguards enforced by the state to ensure fair competition. Of course, they also spawned countless instances of abuse.
Yet! The corporate structure that has evolved over time remains our best available tool for aligning incentives, reducing collaboration costs, generating profits, and protecting all participants.
Shortly after the founding of the United States, corporate form was recognized through special legislative charters, but it was initially extremely rare. The First Bank of the United States, chartered by Congress in 1791, was among the earliest and most prominent examples. New York introduced the first general corporation law in 1811. By the mid-19th century, more states allowed companies to be registered without special legislation, and the concept of "limited liability" gradually became standardized across states. This was followed by an explosive growth in the number of corporations during the industrialization wave at the end of the 19th century, culminating in the landmark 1899 Delaware General Corporation Law.
Cooperatives emerged in the 19th century as another alternative. They explored a different coordination model: member ownership and democratic governance. Farmers, consumers, workers, and credit cooperatives used this structure to more directly align the interests of participants with the organization itself. Cooperatives achieved success in certain areas, such as agriculture (e.g., Land O'Lakes), but remain largely specialized. Meanwhile, the corporate form grew increasingly popular.
Another option is the limited liability company, or LLC. Although the LLC has earlier predecessors such as Germany’s GmbH or the UK’s limited company (Ltd.), the LLC itself appeared relatively late: Wyoming did not codify it into law until 1977. Before then, corporations offered limited liability but were rigid in structure and subject to double taxation, while partnerships were flexible but exposed participants to personal liability. The LLC combines the best of both—limited liability with pass-through taxation—making it better suited for a wide range of small businesses. Today, it has become the default structure for many startups, small businesses, and investment vehicles.
Subsequent variations emerged: the Limited Liability Partnership (LLP, 1991), the Low-Profit Limited Liability Company (L3C, 2008), the Public Benefit Corporation (2010), and more. These are undoubtedly useful refinements of corporate structures for specific purposes. But every so often, technology shifts the boundaries of possibility, giving rise to new forms that are comparatively revolutionary.
DAO and Its Challenges
Decentralization is such a revolutionary concept: enabling large groups to coordinate without centralized control or trusted intermediaries.
Before the emergence of the crypto space—especially prior to Satoshi Nakamoto’s invention of blockchain—this possibility existed more in the realm of philosophy than reality. One of the earliest great innovations in crypto was the DAO, or decentralized autonomous organization. A DAO is an organization governed by software-encoded rules and collectively managed by its participants, rather than by a central authority. There is no centralized management team or board of directors, no Seventeen Gentlemen.
But decentralized governance is difficult. Getting token holders to vote on important issues has proven harder than getting individual shareholders to vote for board members—whose voter turnout is already painfully low, comparable to U.S. municipal elections. Ensuring that power doesn’t concentrate in the hands of a few token holders is equally challenging.
The legal environment in recent years has further exacerbated these challenges. Unfortunately, the previous administration’s Securities and Exchange Commission refused to provide clear regulations for crypto projects, while weaponizing this ambiguity through aggressive enforcement actions against the industry. Entrepreneurship struggles to thrive in uncertainty—even when rules are clear, running a business is hard enough.
Entrepreneurship struggles to thrive in uncertainty; even with clear rules, running a business is already difficult.
The core of the legal issue lies in one of the three criteria of the so-called "Howey Test"—used by the SEC to determine whether an instrument constitutes a security: (1) investment of money; (2) a common enterprise; and (3) profits derived solely from the efforts of others. For public companies, "the efforts of others" includes the management team operating the company. For crypto projects and their DAOs, the SEC considers that ongoing protocol development—even if carried out by a group of unrelated individuals who may or may not hold tokens—subjects the associated tokens to securities regulations, making broad participation and on-chain trading impossible.
Equally important, because DAOs are not formally recognized by any state, project owners cannot benefit from any of the aforementioned protections, such as limited liability. In other words, DAO members may face unlimited personal liability, making crypto governance legally akin to the medieval era.
As a result, crypto projects followed their lawyers' advice by establishing foundations overseas as independent entities to oversee the ongoing development of protocols, thereby severing the connection between that work and their U.S. operations—or by setting up operational entities directly outside the United States. Both of these "solutions" harm U.S. innovation, as well as U.S. employment and tax revenue.
Overseas crypto foundations, put nicely, are roundabout solutions. These legal workarounds shift power and ongoing development to an "independent" entity in an attempt to evade securities regulation. While understandable in an era of hostile regulation, this strategy reveals deeper flaws: weak incentive alignment within foundations, limited capacity to drive growth, and an inevitable tendency toward consolidating centralized control.
But when projects are caught between being sued by the SEC and setting up a strange organizational structure that creates misaligned incentives, what choices do they really have?
This is why DUNA—the Decentralized Unincorporated Nonprofit Association—is so significant. It draws on a long history of business structures and governance design, pursuing the common goal of all enterprises: efficiently coordinating people around a shared purpose. But it achieves this without relying on centralized management control, thereby reducing the principal-agent problems and information asymmetries common in traditional corporations. Precisely for this reason, DUNA departs from a core assumption of the Howey Test: that participants rely on the managerial efforts of others to create value.³
The group obtained its legal form.
Before DUNA, there were only three options for organizing and governing crypto projects: DAOs lacked legal recognition, exposing members to potentially devastating liability risks; traditional corporate entities forced projects into unsuitable hierarchical structures while inviting SEC regulatory action; and offshore foundations were legally and operationally cumbersome, driving much of the industry overseas.
Until recently, there was no clear way for a group of users to govern a decentralized network while enjoying some of the protections of a corporation—an organizational form that blockchain technology has only just made possible. Now there is.
In simple terms, DUNA turns a group of people into a legal entity. Three states—Alabama, West Virginia, and Wyoming—have already passed laws authorizing this new business structure. It combines the legal advantages of existing organizational forms with the ability to enable decentralized control, making it fundamentally different from traditional corporations and something no prior entity has ever truly achieved.
Simply put, DUNA turns a group of people into a legal entity.
What specific protections does DUNA provide? Its powers include legal personality, limited liability, perpetual succession, and state recognition—these are also the core elements that enable modern corporations to function. Recognizing a group’s “legal personality” allows the entity to enter into contracts on behalf of its members; limited liability ensures that members are not personally liable for the organization’s obligations. Together, these features enable large, loosely connected groups to collaborate—raising capital, holding assets, hiring managers, paying taxes, and conducting transactions—without exposing members to excessive risk or catastrophic liability.
Organizational forms do not take root overnight; they gradually spread through competition among states, increasing familiarity among lawyers, and growing trust from entrepreneurs. Before Delaware became the preferred state for corporate incorporation, New Jersey held that dominant position;⁴ today, Texas and Nevada are catching up. LLCs were first approved in Wyoming, and after their tax treatment was clarified, they had been adopted across all fifty U.S. states by 1997. As for DUNAs, Wyoming again served as the pioneer, enacting legislation in March 2024. Cryptographic protocols and communities, including Uniswap Governance and Nouns DAO, have already adopted them.
Just as corporate law has given large enterprises their first native form, DUNA is bestowing upon open, internet-scale decentralized networks their own legal form.
The New Era of Organizational Design
Think of DUNA as a legal shell that enables the governance mechanisms of a decentralized network to operate without introducing traditional centralized management. It is built upon the Unincorporated Nonprofit Association (UNA)—a legal framework adopted by 17 states and Washington, D.C., that helps groups such as homeowners’ associations, civic organizations, recreational sports leagues, religious congregations, and interest clubs formally organize. UNA provides lightweight governance without the burdensome structure of a corporation or LLC, allowing these groups to hold property, enter into contracts, and sue or be sued in their own name.⁵
Just as corporate structures have not replaced all partnerships, DUNA will not replace everything that came before it.
DUNA is similar: it allows a group of token holders or contributors to govern through on-chain rules or token-based voting, without relying on a board or management team. Members enjoy limited liability protection, separating entity obligations from personal assets; the organization can also be understood and interacted with by courts, regulators, and counterparties.
But DUNA doesn’t solve everything. It doesn’t eliminate governance challenges, doesn’t guarantee decentralization (although to qualify for DUNA, a DAO must have at least 100 active members), and can’t magically bypass securities laws. What it does accomplish is filling a specific gap: enabling decentralized organizations to become legally recognized entities.
From informal networks of merchants to partnerships, to corporations, to LLCs, and now to DAOs, each new organizational technology has emerged when people needed new modes of coordination. DUNA may mark the beginning of a new era in organizational design. But just as the corporate structure did not replace all partnerships, DUNA will not replace everything that came before it—it simply expands the menu of options. And for the first time, it enables decentralized networks to be represented by fully recognizable legal entities.
For most of human history, scaling organizations—even small ones—meant taking on immense personal risk. Bold entrepreneurs like the Polo family relied on family ties, reputation, and fragile conventions to hold everything together, vulnerable to ruin from a single shipwreck.⁶ The corporate structure changed this equation by separating the fate of entrepreneurship from the fate of its individuals. DUNA extends this separation into a new domain: community governance of blockchain-based decentralized networks.
Now, even a loosely organized group of strangers on the internet can act as a single entity—entering agreements, holding assets, assuming risk—without any participant risking their livelihood. In this sense, it is a new solution to one of the oldest problems in business history.
Acknowledgments: Thank you to Aiden Slavin, Alejandro Flores, Miles Jennings, Scott Duke Kominers, Sonal Chokshi, and Steph Zinn for their valuable feedback and revisions. Any errors in this article are the author’s own.
Cooperatives seem spiritually aligned with internet-native organizations like DAOs, but cooperatives assume a relatively stable and identifiable group of members and a hierarchical leadership structure, which many decentralized networks lack.
Interestingly, another major American contribution—corporate bankruptcy law—was not widely adopted globally for a long time. This legal framework codifies the idea that "a person can take risks, fail, restructure, and try again," serving as an engine of American vitality.
Wyoming attempted to address this issue in 2021 by allowing DAOs to organize as LLCs. However, LLCs still assume a clear list of members, K-1 tax filings, and a profit motive. While suitable for some small investment clubs, this structure is ill-fitting for a permissionless, anonymous network driven by a nonprofit mission, and offers little help in resolving the Howey question—whether the members' interests themselves constitute securities.
In other words, it was only when Woodrow Wilson, then governor of New Jersey, cracked down on the state’s business-friendly incorporation laws that Delaware inadvertently gained a major advantage.
Trusts appear on the surface to be natural vehicles for decentralized communities, but they are in fact ill-suited. Trusts are designed around the relationship between identifiable trustees and beneficiaries, making them an awkward choice for organizations that deliberately pursue decentralized governance.
By the way, Marco Polo commanded a Venetian warship during a war between rival trading powers and was later captured and imprisoned in Genoa, where he dictated his famous travelogue.
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