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    "BORGS": a hybrid model of governance involving blockchain and self-directed AI (and the future of the DAO)

    In an attempt to create an alphabet soup of new organizational models (don't ask why), several "new" corporate models have emerged in the crypto community. While this article will focus on BORGS, it's important to know that DAO is first and foremost.  

    So what is a DAO? 

    Simply put, a DAO, an acronym for decentralized autonomous organization (pronounced dow), is a structure built with blockchain technology. Think of a DAO as a type of crypto cooperative organization that allows a group with a common goal to use a crypto-based governance structure built on smart contracts to make decisions. Basically, groupthink crowdsourcing replaces the centralized governance structure typically used by traditional organizations (owners-board-employees), which in theory allows the group to make decisions in a transparent and, some argue, democratic manner. And DAOs have become popular. According to a May 10, 2022 Harvard Business Review article, "communities are forming DAOs around a wide range of concepts, including investments, management of other blockchain-based projects, and content production."  

    However, while DAOs were all the rage in 2022, they are now out. And BORG are in! And we're not talking about the borg - the "blackout rage gallon" - drink. 

    From DAO to BORG 

    A BORG (or CybOrg) is a type of decentralized autonomous organization (DAO) that is designed to operate within a hybrid governance model. According to Delphi Labs, a BORG is "a traditional entity that leverages autonomous technologies (such as smart contracts and AI) to augment the governance and operations of the enterprise." Delphi Labs also notes that "BORGs don't just use autonomous technologies... BORGs are legally governed by autonomous technologies through technology-specific rules implanted in their charter documents." 

    With a hybrid governance model, a BORG can serve as a decentralized platform that allows stakeholders to participate in the management of a particular network or ecosystem while maintaining some level of centralized control or oversight. It is a blend between a DAO and a legal entity, sort of like a limited liability company is a blend of a corporation and a partnership. 

    How BORGs work 

    BORGs are typically designed to operate on a blockchain platform that allows transparent and immutable record keeping of all transactions and decisions. This can help increase transparency, accountability and trust in the governance process, as well as reduce the risk of fraud or corruption. 

    In BORG, stakeholders can participate in decision-making processes through various mechanisms, such as voting, pledging or delegating authority to trusted representatives. The rules and governance structures of a BORG are typically encoded in smart contracts that are automatically executed in the blockchain and ensure that decisions are made in a transparent and decentralized manner.  

    Unlike DAOs, BORGs are consistent with established regulatory frameworks and can be assimilated into existing company charters. The implementation of a BORG can be done by almost any existing entity, as its existing, traditional, off-chain legal structure can also be enforceable using hopeless, self-governing smart contracts in the chain. 

    The advent of decentralized blockchains and artificial intelligence (AI) has made a new type of organization possible: the trust-minimizing BORG. 

    But why bother with BORG? The importance of blockchain organisations 

    BORG utility arises when the human incentives of stakeholders and intermediaries are imperfectly aligned. Traditional corporate governance models have many costly "frictions" or tensions, such as turf battles and mandatory disclosure, that can be managed by BORG. A corporation can encode its charter in smart contracts and bind itself to shareholder votes in the chain. It can also use self-directed AI within the BORG to handle burdensome disclosures, financial accounting and reporting. 

    Because BORGs are neutral programs, they can be calibrated and customized to different business circumstances within existing SEC regulations. However, as blockchain entities, they may be immune from government interference. 

    Developments in legislation regarding DAOs and blockchain organisations 


    In California, Assembly Bill 1229 proposed a change to the state's corporate code to include DAOs (decentralized autonomous organizations), blockchain networks, and smart contracts. This bill potentially provides legal clarity and regulatory relief for these types of entities, which have been considered either LLCs or partnerships. If enacted, this legislation could set a precedent for other states to follow and provide clarity to the regulatory landscape for DAOs and blockchain generally.  

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