Decentralized Organizations: The Theory of the Firm and Ostromian Perspectives

This chapter examines Decentralized Autonomous Organizations (DAOs) through two theoretical lenses: the theory of the firm and Elinor Ostrom's institutional analysis framework. We argue that DAOs' diverse organizational structures preclude broad generalizations about their economic and institutional nature. Some DAOs implement hierarchical arrangements characteristic of firms, others adopt different organizational models. The use of smart contracts does not definitively determine whether DAOs should be classified as contractual, firm-like, or hybrid arrangements. The chapter critically examines the concepts of autonomy and decentralization in DAOs, revealing them as aspirational rather than fully realized characteristics. This analysis contributes to the legal scholarly discourse by providing a nuanced understanding of DAOs' organizational nature and challenging simplistic categorizations of these emerging entities. It also assists practitioners in analysing and developing the structure of particular DAOs.