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Practical applications of distributed autonomous organizations, or DAOs, are growing rapidly in business. These member associations, also known as trusted organizations, operate by blockchain technology and smart contracts. Theyre estimated to include over 11,000 active organizations, with 6.4 million token holders and over $12.5 billion in treasury holdings as of February 2023.

Ernst and Youngs Dennis Post and Jeff Wong say establishing a proper corporate legal structure is essential for these novel organizations to avoid personal liability risks imposed on partnerships.

Skepticism around unfamiliar technical terminology often prevents many legal professionals from recognizing these developments. For trusted organizations to fully flourish, communicating with the legal sector in clear, non-technical language may aid adoption.

Terms like blockchain, Bitcoin, cryptocurrency, NFTs, and FTX have alarming connotations in legal publications. Yet DAOs/trusted organizations, when properly structured, can be as trustworthy as any organization.

How can trusted organizations be practically applied in legal contexts? Here are some potential use cases.

A group of partners could form a trusted organization for internal governance and decision-making. This allows automated, democratic processes for proposing and approving policies and profit distributions anonymously based on ownership stakes, without lengthy in-person meetings.

Partners can review proposals and vote on their own time, rather than having to gather in person. This asynchronous engagement saves time and travel costs associated with traditional partnership meetings, freeing up partners schedules for more billable client work.

Trusted organizations could also help law firm partners collaborate on documents. Smart contracts allow setting permissions for accessing and editing files, tracking versions, and maintaining immutable records of changes. Streamlining documentation workflows can aid productivity.

Professional groups like bar associations could use trusted organizations to streamline sharing resources, facilitating decisions, collecting dues, and enabling professional development. For example, continuing legal education programs and seminars could be offered and paid for through the trusted organization. Event registrations, attendance tracking, and automatically issuing certificates of completion can be handled seamlessly.

However, some association members may still prefer in-person activities and networking. Trusted organizations would need to balance efficient automation with opportunities for relationship building.

Trusted organizations can encode client retainers as smart contracts, specifying deliverables, fees, costs, and real-time progress tracking. Payment releases can be automated upon milestone completions. This improves productivity, cash flow, transparency, and access to justice. But strong data protections are necessary.

Trusted organizations also allow faster international transactions for legal services. Multi-signature approvals encoded in smart contracts provide security, and payments can be completed in seconds rather than days. This facilitates cross-border engagements.

Trusted organizations can minimize costs and expedite pro bono and legal aid efforts through efficient operations. Organizations like Legal Services Corporation and local legal aid offices can connect verified low-income clients to pro bono attorneys and manage caseloads automatically. Standardized contracts can be created to speed document drafting. Chatbots can offer preliminary case assessments before connecting clients with an attorney.

While expanding access to justice for underserved groups, adoption challenges remain. Funding and lawyer participation must increase to fully realize the potential.

The regulatory approval of new legal practice models such as alternative business structures in some jurisdictions is well-suited to trusted organizations. ABS allow alternative fee arrangements, non-lawyer ownership, and tapping external funding. Trusted organizations provide the infrastructure to organize and operate these innovative models at scale.

Trusted organizations also hold promise for organizing communities and empowering social movements. The transparent and democratic structure creates trust and engages stakeholders. Funds can be pooled globally to support causes. However, proper safeguards are needed to prevent harmful uses.

Positioning DAOs as trusted organizations rather than complex technologies can make them more relatable. Use cases like law firms and associations demonstrate practical benefits like productivity gains, access to justice, and enabling new practice models.

Still, thoughtfully transitioning legal culture to accept these innovations will take time and dialogue. Trusted organizations potential to transform law for social progress gives the effort great promise, urgency, and purpose.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Larry Bridgesmith is a lawyer, professor, author, speaker, and trainer in all things related to legal innovation and technology.

Adel Elmessiry is a tech entrepreneur and Ph.D. expert on AI and blockchain.

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DAOs Would Flourish in Business with More Lawyer Participation - Bloomberg Law