DAO Constitutions establish the foundation of going beyond code-is-law. At the most fundamental level, the Constitution is a document, that lays out how the DAO works and creates a common base of understanding for everyone involved in the DAO. The constitution defines who is a member, what kind of different roles there are and how decisions in the DAO are made. It also includes how to deal with conflict and disagreement in the DAO.
A DAO Constitution is important for multiple reasons, some of which are listed below.
- The Constitution increases security and transparency for all members. It serves as a source of truth for new and existing members to check what’s going on at any time. The constitution can lead the code – so any technical implementation will have to follow the decisions of the DAO and not the other way around. This can be for example used for truly decentralized code upgrades.
- The constitution sets a DAO up for legal and regulatory challenges because in the absence of clear and enforceable rules, the DAO could literally be interpreted as anything. But if the members of a DAO define and agree in writing on how decisions are made and who has how much power – the DAO structure is much clearer to an outsider. Additionally, the DAO can decide to opt in for private arbitration to resolve disputes based on the constitution.
- A Constitution can make a DAO robust and sustainable by including rules to change the rules, which means deciding how the constitution itself can be changed. This is important because nobody can think of all eventualities and changes in external factors when initiating a DAO.