B. Introduction

The recent token sale in The DAO has received unprecedented levels of attention, not only from the crypto-community but also in more mainstream media, for whom the crowdfund tally provided easy headlines (such as This Company's Boss is A Code and They Just Made 127 Million Dollars or Chiefless Company Rakes In More Than 100 Million Dollars).

More sober commentators and most members of the community realise that the tokens sold so far are not as such “committed” capital in the traditional sense of real money allocated in a VC-type fund closing, but free optionality to send Ether to Proposals on which the DTH reach consensus.

In this respect, Daniel Larrimer, who stood at the cradle of BitShares, perhaps speaks for a broader school of skeptics when he deems the DAO "Dead on Arrival": a project fraught with such political, economic, technological and legal shortcomings that it is doomed to fail. Preston Byrne, counsel at Eris Industries, in his recent post on "#TheDAO: Broken But Worth Fixing" is seen by many to add a voice of reason by identifying one of the key legal shortcomings of The DAO as it is currently conceived:

My very strong suspicion is that the plain-English covenants made on funding proposals, the absence of legal certainty as to what The DAO actually is and the nebulous and ever-shifting nature of The DAO’s “membership,” will make it very difficult to properly assign ownership in these projects’ work product.

It is this very legal conundrum of The DAO wanting to break free from how working capital is currently allocated to ventures in need of funding, whilst preserving legal integrity without The DAO itself having to become a legal entity, that Otonomos proposes to solve.

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