When is a DAO Decentralized?

While previously a nascent theoretical construct, decentralizedautonomous organizations (DAO) have grown rapidly in recent years. DAOstypically emerge around the management of decentralized financial applications(DeFi) and thus benefit from the rapid growth of innovation in this sector. Inresponse, global regulators increasingly voice the intent to regulate theseactivities. This may impose an excessive compliance burden on DAOs, unlessthey are deemed sufficiently decentralized to be regulated. Yet, decentralizationis an abstract concept with scarce legal precedence. We investigate dimensionsof decentralization through thematic analysis, combining extant literature with aseries of expert interviews. We propose a definition of “sufficientdecentralization” and present a general framework for the assessment ofdecentralization. We derive five dimensions for the assessment ofdecentralization in DAOs: Token-weighted voting, Infrastructure, Governance,Escalation and Reputation (TIGER). We present a discretionary sampleapplication of the framework and five propositions on the future regulation andsupervision of DAOs. We contribute new practical insights on the topic ofcompliance and decentralized organizations to the growing discourse on theapplication of blockchain technology in information systems (IS) andmanagement disciplines