How Can a DAO Structure Itself to Limit Individual Member Liability?
A DAO can limit individual member liability by forming a legal entity, such as a Limited Liability Company (LLC) or a non-profit foundation, in a jurisdiction that recognizes and provides liability protection for DAOs (e.g. Wyoming, USA).
This legal "wrapper" acts as the entity that enters into contracts and assumes liability, shielding the individual token holders.
Glossar
Individual Member Liability
Exposure ⎊ Concerns the extent to which an individual member of a decentralized autonomous organization or a validator pool can be held legally responsible for the protocol's liabilities, debts, or regulatory infractions.
Dao Structure
Governance ⎊ The DAO structure defines the framework for decentralized autonomous organizations, where decision-making authority is distributed among token holders rather than centralized leadership.
Limited Liability Company
Structure ⎊ A Limited Liability Company (LLC) operating within cryptocurrency, options trading, and financial derivatives represents a distinct legal entity, offering liability protection to its members while providing operational flexibility.
Liability Protection
Framework ⎊ The concept of liability protection within cryptocurrency, options trading, and financial derivatives centers on mitigating legal and financial exposure arising from market volatility, regulatory uncertainty, and counterparty risk.
Liability
Exposure ⎊ This quantifies the potential financial downside an entity faces from its obligations, whether stemming from unhedged positions in options or from collateral shortfalls in lending protocols.