Issues and solutions for the Australian cryptocurrency market under the DAO regulation

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In Australia, lawmakers are attempting to regulate decentralised autonomous organizations (DAO). Oleksii Konashevych explains the dangers of stifling the emerging phenomenon of DAOs while also proposing possible solutions.

Regulating a decentralised autonomous organisation (DAO) as a firm first and foremost means obtaining company registration. But who remembers why we need to establish a registry in the first place? Will anybody question whether a blockchain-based DAO needs to be registered?

The organisational structure of a DOA

Historically, the government served as a trusted third party by maintaining records about a firm through its public agency, which is often referred to as a registry office. The registrar will take the register as the source of truth in any legal matter or dispute. If a company does unlawful business, it may have its registration canceled. Registration is also required for taxation

The registry is now electronic, and it requires a stable infrastructure: software and data centres, as well as cybersecurity measures. In addition, there are precise regulations and criteria for registration. As a result, each entry is verified against these standards by the registry office. The burden of monitoring this falls on the registrar’s shoulders.

Let’s start by looking at what a blockchain is. This technology allows for the creation of records with an un-rivaled level of security. There is no way to tamper with a record once it has been uploaded to a reliable blockchain, and users manage and publish their information without the assistance of third parties.

With blockchains, the registry office’s capabilities are no longer required:

● Users are not obligated to keep records — it is the registrar’s responsibility.

● The registrar does not have to maintain the registry infrastructure.

The difficulty here is that the organizations don’t have a clear handle on what they’re looking for. They just know it’s not right, and that something is rotten in Denmark. The most pressing issue for administrators and retrogrades is this: there’s no one to hold accountable. It’s an open, self-organised, self-governing network. People still do not believe or accept that this is taking place after all this time.

We don’t need a regular registry for a DAO registration since the blockchain is the registry.

Which blockchain and the role of regulation

I should clarify that not all blockchains are trustworthy. And now comes the government’s part in terms of regulation, with private and permissioned ledgers, even though they’re known as “blockchains.” Private and permissioned ledgers – even though crowds refer to them as “blockchains” – are not true blockchains in the Satoshi Nakamoto. They are not unchanging and decentralised. In fact, their architecture implies that there is a governing body, making it essentially a centralised technology.

The second issue is with blockchains themselves. Even though a network with three nodes, for example, and three thousand nodes are intended to be decentralised open networks, there is a big difference between them. They will have varying levels of cybersecurity resistance.

How a blockchain works

So, the government’s responsibility is to impose rules and standards in order to guarantee that individuals are aware that once a record — such as on Ethereum — is published, it will become irreversible and secure from thousands of active nodes all over the world. If you post it on a private distributed ledger network governed by a cartel, you’ll have to count on its good will

The following is the conclusion of this section. With blockchain, there’s no need for an external registry database because blockchain is the registry and there’s no requirement for the government to maintain this infrastructure since the blockchain network is self-sustaining. Users don’t need a registrar to publish and manage records on a blockchain, and there must be standards in place to tell trustworthy blockchains apart.

Compliance

Registration procedures have been formalised considerably during the last few decades. There was no procedure in which a registrar had complete control. Because all regulations may and must be implemented by algorithms, removing a clerk from the process of generating a record is essential. In reality, it is increasingly electronic and automated in most situations.

The main difference is that this must be made a standard requirement for the creation of a compliant DAO. Those who want to operate under Australian law must code their decentralised applications and smart contacts in accordance with these standards.

Replaceable rules

There are two methods to start a business: You can write your own company charter and other documents. However, if you choose replaceable rules (in some European countries, it is known as a model company constitution), you must.

A genuine DAO will operate on the basis of “code is law,” as Larry Lessig stated. There can’t be such a thing as replaceable regulations written in a human language. However, the rules themselves may and should be digitally enforced as machine code, which is then run and executed by computers.

If a DAO attempts to rely on the code and textual rules, there may be difficulties. The main issue is consistency. If there is a discrepancy between the written legal text and the machine code, the computer will be unable to read and interpret the text — it will execute the machine code.

The DAO governance

Furthermore, because blockchain transactions are permanent, you can’t modify anything about the chain’s history, reject a transaction, or alter deployed code.

The difficulty is that the two pieces of legislation are at odds. If the code and text have equal legal force, there may be a legal conflict. If lawmakers grant machine code unconditional supremacy over written texts, they will destroy the concept of DAOs entirely.

The best option is that regulators should not force DAOs to have their legal documents written in human language. It may appear harsh — there will be a temptation on the part of politicians and officials to paternalistically safeguard clients – but this is precisely what the digital economy and new technologies are all about.

Only those who want to use blockchain’s full capabilities should have this opportunity. Nobody is compelled to do so at the end of the day since we will still have traditional business models and registries.

Blockchain’s disintermediation and decentralisation increase the efficiency of the economy while lowering a variety of hazards. Politicians should allow the industry to move toward a “code is law” mentality, as this may be a better society for everyone in the future.

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