The users cannot do anything with the funds outside of what is dictated by the contracts, and there are various forms of incentives for executing specific contract actions for varying amount of actors.
I.e. if you want to borrow stablecoins against ones assets on aave, you must deposit up to 150% (and the limits of how much one can borrow are up to 100% of the value of the assets) of those assets and they will be liquidated if you do not pay back the debt before its due.
There more complex examples than this. Law doesn't stop people from breaking laws or not upholding contracts in the same way that code on the evm doesn't force users to interact with it (people break laws and get arrested after the fact and get liquidated all the time).
Ok, so it makes sense that you can build certain financial derivatives out of it.
However, there is no explanation of how you build an ‘organization’ out of this.
> Law doesn't stop people from breaking laws or not upholding contracts in the same way that code on the evm doesn't force users to interact with it (people break laws and get arrested after the fact and get liquidated all the time).
Agreed. However this Subthread is a follow on to this earlier comment from another commenter:
“Because it can be enforced without being tied to a specific jurisdiction, expensive lawyers and army of accountants.”
> However, there is no explanation of how you build an ‘organization’ out of this.
There's not a one size fits all of what being a DAO is (and many people bicker about those calling themselves a DAO when they may not be[0], and some protocols are more decentralized on day one than others), maybe this can help you understand some of what's going on by some of the examples listed [1] and the various actors (there are non financial DAO's not talked about here).
> And it seems like you are saying this isn’t true.
It is true to the degree that for the positive/negative incentives to take place -- “a specific jurisdiction, expensive lawyers and army of accountants” -- are not needed like they are with centralized organizations who incorporate in a particular jurisdiction.
Sure, but the point is that there is no mechanism for building ‘organizations’. Nobody is explaining how to build anything other than financial derivatives.
This is useful, but really just an optimization on finance as usual.