Crypto Assets Inspire New Brand of Collectivism Beyond Finance

Near the edge of Yellowstone National Park in Wyoming, a group of cryptocurrency enthusiasts have started a new city-building experiment – just don’t ask who will be mayor.

The CityDAO collective has no official leader. His members get organized using the Discord chat app. Every major decision must be put to a vote.

Nonetheless, the group of 5,000 successfully mobilized in less than four months to purchase 40 acres of land in Park County, Wyoming, near the Montana state border.

Members are still debating what to do next, but DAO’s lofty goals include expanding access and reducing costs of ownership and developing new public finance systems. And they want to do everything using cryptocurrency software.

“It’s a community experience,” said Scott Fitsimones, the unofficial founder of the project.

CityDAO is one of the most visible examples of the hundreds of so-called decentralized autonomous organizations, loose groups of cryptocurrency users who come together for a central purpose, whether it is to rule open source software or to buy real world assets.

The groups have recently gained popularity among cryptocurrency enthusiasts, who envision a future where software code will play a greater role in the governance of large organizations.

DAOs can have more “accessibility and transparency” than businesses, said Linda Xie, co-founder of cryptocurrency investment group Scalar Capital. “No one is controlling it,” Xie said. “It’s like collective decision making.

But even some of cryptocurrency’s most ardent supporters have struggled to define DAOs, and projects still face many legal hurdles in the United States, where businesses and other organizations must comply with regulations. strictly defined.

“It’s not a binary thing, like you’re a DAO or not,” Xie said. “People use the term very loosely. “

Advocates of DAOs have said they are more democratic than businesses, allowing virtually anyone in the world to participate in decision-making. They also argue that blockchains facilitate the creation of permanent and unalterable records and govern large loosely organized groups.

DAOs take many forms, but they typically organize themselves on digital ledgers such as the ethereum blockchain that allow developers to write software programs, or “smart contracts,” that automatically execute transactions when the right conditions are met. . Many issue cryptocurrency tokens that give owners the opportunity to participate in governance.

“Web3 is starting to turn users and contributors into investors, and vice versa,” said Ian Lee, co-founder of software company DAO Syndicate, referring to a term for token-based cryptocurrency applications. which aim to create a new version of the Internet.

Concretely, most DAOs look like discussion forums with a shared bank account. More importantly, according to members, DAOs should not be controlled by a single person, although in practice some are more like centralized companies with venture capital funders and other insiders with holdings. important pieces of tokens.

DAOs are currently tiny compared to the rest of the corporate world, with a total of $ 12.1 billion in cryptocurrency assets on reserve and around 1.6 million members in groups followed by the DeepDAO data service.

However, they have already caught the attention of Wall Street. Bill Ackman, the billionaire hedge fund manager, has invested in Syndicate, which wants to make it easier for people to create investment DAOs.

In November, a group known as ConstitutionDAO raised $ 47 million to purchase an original copy of the US Constitution, before being outbid at auction by Ken Griffin, founder of the hedge fund Citadel.

Some DAO members have complained that they can be difficult to manage compared to centralized organizations. Like other new cryptocurrency experiments, they also face legal risks.

DAO’s first attempt, called “The DAO”, raised over $ 150 million in 2016 as part of a community-led investment experiment before an attacker exploited loopholes in the code to steal a third of the funds.

Weekly bulletin

For the latest fintech news and opinions from FT’s correspondent network around the world, sign up for our weekly newsletter #fintechFT

Register here in one click

In response, members of the ethereum community voted to effectively modify the code supporting the hacker’s funds, creating a new version of the blockchain and returning the funds to the DAO. Critics said the move undermined the alleged permanence of the software network.

The state of Wyoming, which first developed the limited liability company structure, passed legislation earlier this year that permitted the formation of “DAO LLC” managed by smart contracts.

More than 110 entities have registered as DAO LLCs in Wyoming since the state passed legislation, including four that have passed into normal LLCs, a treasury official said in an email.

Critics of the legislation have argued that its language does not clearly define how DAO LLCs should be managed. Lawmakers are considering making changes to the original law. Cryptocurrency attorneys said for-profit DAOs have largely registered as Delaware LLC, one of the most popular corporate structures in the United States.

“A lot of things people do are probably legal,” said Chris Rothfuss, a Democrat who co-chairs a Wyoming state Senate committee on blockchain technology. “Probably legal is not a comfortable phrase.”

Rothfuss said he hopes the law will attract more fintech entrepreneurs to Wyoming, helping to diversify the state’s economy away from mining.

Fitsimones said he was inspired to start CityDAO due to Wyoming law and that he hoped this would make it easier for large groups to own and manage land using blockchain.

“There is something really cool about the earth because the earth looks like such a primitive piece of the puzzle,” Fitsimones said. “If you can chain land, what’s the next step? “

CityDAO members must purchase one of 10,000 non-fungible tokens to participate in discussions. They can sell their NFT at any time if they want to quit.

Vitalik Buterin, co-founder of the ethereum blockchain, and Brian Armstrong, managing director of cryptocurrency firm Coinbase, both bought the so-called “Citizen NFTs,” which do not give holders a stake in the field. physical or rights to any income.

Fitsimones acknowledged that the project still faces obstacles, and members of its core team said most of their time is spent on legal matters.

“The worst case scenario for this law is that in court, a judge is like, ‘I’m not reading the smart contract code. It’s a bunch of nonsense, ” Fitsimones said. “And at best, this law becomes that fundamental link between digital assets, crypto, and the physical world. “

Previous Mumbai: retired bank manager tricked into Rs 12.5 lakh by fraudsters, FIR filed
Next In defense of the liberal arts