XDAO, a protocol based on The Open Network (TON), has enabled over 367,000 decentralized autonomous organizations (DAOs) to achieve legal status through its initiative that automates legal recognition for such organizations.
In an announcement, XDAO said it had streamlined the DAO creation process to allow DAOs to achieve legal status. An XDAO spokesperson told Cointelegraph that the protocol offers a standard for other “sub-entities” within its legal framework.
“Basically, those sub-entities exist both in relation to each other and outside entities that had acknowledged their existence and assented to some articles of the XDAO Labs’ Constitution,” the spokesperson told Cointelegraph.
XDAO added that the parties recognize Singapore, where XDAO Labs is incorporated, as the primary jurisdiction where disputes may be resolved if necessary.
Signing legally-binding documents through Telegram bots
The protocol also said it could enable the signing of legally binding documents using Web3 wallets. XDAO said DAOs could archive their transactions using a Telegram bot.
When asked about the security and practicality of its Telegram bot-based legal framework, the XDAO spokesperson said agreements formed through the messenger work in “most jurisdictions.” However, the XDAO representative outlined its limitations, including “real estate, securities, and other matters that call for a prescribed procedure for the contract’s formation.” The spokesperson told Cointelegraph:
“However, when making agreements through a Telegram bot, it is important to approach the recording of all details and specifics responsibly, as this can later facilitate dispute resolution.”
The spokesperson added that the bot can store information that DAO participants consider significant. It can even be used to conduct basic Know Your Customer procedures.
How smart contract-based compliance would work in practice
When asked how their smart contract compliance models would work in arbitration scenarios, XDAO said the parties could form valid arbitration agreements through messenger or e-signature methods such as Docusign and Ethsign. This requires personalities to be firmly established and the “intention to adjudicate the dispute is clearly expressed.”
“Arbitration is a commonly recognized dispute resolution procedure, which exists under influential international conventions. Those conventions do not specify the exact way of making an arbitration agreement, apart from it being in writing,” the spokesperson told Cointelegraph.
The spokesperson added that if payment is required, an arbitrator can be added to the DAO with the right to a key vote. This would allow them to sign a transaction with their digital signature if the parties fail to reach a consensus.
