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Making crypto compliant without losing decentralization
Recorded: June 22, 2023 Duration: 1:00:48Space Recording
Full Transcription
Thank you for listening.
Thank you, Kyle, for joining the space and welcome to this, this Twitter space for all
of us who don't know, Kyle is one of the contributors at LexDAO and LexDAO is, you know, just give
me a second.
So LexDAO is basically a cutting-edge decentralized collective of forward-thinking lawyers dedicated
to shaping the next generation of smart contracts.
And that's heavy.
So basically, my first question really is, what is it that LexDAO does?
And Kyle, welcome to the show.
Yeah.
Thanks for having me, thanks for having me, I'm happy to explain what LexDAO does.
One way that might make it just more complicated, but we're the first place that legal engineers
are developing a professional body.
So we're the kind of initial guilds and we're going to be able to supply things like licensing and certification to legal engineers.
We actually do have an early stage certification for legal engineers.
Legal engineers are lawyers who practice law through codes of computational law, law that is highly automated.
And so oftentimes we work with Solidity because Solidity smart contracts are directly plugged into the financial markets.
And very often Solidity does legal work as computational automated work.
So LexDAO itself is, right at this point, it's a business association.
It's a place where crypto lawyers, developers, people interested in this field, congregate to discuss topics, discover each other.
And then oftentimes that culminates in a spinoff project.
So Kali.gg, Kali DAO, it's a way to summon a DAO, is an example of one of our projects that has spun off.
And that one, those are some of the LexDAO legal engineers who also worked on the MOLIC framework that quite a few of these DAO summoners use.
And for instance, DAO house uses the MOLIC framework.
That concept called Rage Quit was developed by the MOLIC framework.
And that is an example of code is law, kind of legal engineering thinking.
And then another spinoff is Real World Asset Consortium.
And that has a few projects in it itself.
And that focuses on oftentimes real estate and how to tokenize real estate.
And one example is if you buy a boost property, how that works is that you buy an NFT.
And then so somebody just transfers an NFT to you and then that's how you purchase that property.
That's amazing.
That's quite fascinating to hear.
So to get started and begin things, Kali, what has been your journey like?
How did you end up contributing to the Web3 space?
What did you used to do in your yesteryears?
And what got you excited about Web3?
Yeah, well, I'm a legal engineer.
So after law school, I decided to get into computer science.
And my background, the reason I did that is I worked quite a bit in enterprise music publishing, music rights management.
And that one is a very information-rich area of practice.
So our contracts, when we signed, one deal I did, it was that comes to the top of mind.
And it was buying from one of the top music publishers in the world, buying one of the better-known catalogs that had decades and decades of contractual relationships and lots and lots of titles in it.
And so the deal we ended up signing was about as complex as an international trade agreement.
But there's only, say, like a dozen or so people that actually engage with it.
And I saw some information supply chain issues with those really complex agreements and then how the administrative departments were implementing those agreements.
As the lawyers, once they were done the deal, they just left.
And admin was kind of had to, on its own, figure out how to actually administer the agreements without the expertise of the lawyers.
So I thought, well, hey, we actually should, the lawyers should have an extra step and these agreements should have basically an API that admin can then push a button and that helps them.
So that started my journey into connecting law and computer science.
And then I saw that the blockchain world was dealing with a similar problem, but focused on where trust is an issue, so in open markets.
And that's the trustless nature of what we're enjoying in the Ethereum world and other world virtual machine, world virtual machine systems.
And so I continued to build alongside that, with my issue being that trust wasn't the problem.
The parties trusted each other at least enough, but it was how much legal information had to be processed that was the main issue.
And so I finished my journey on that three or four years ago, filed a patent for a new kind of database system.
And then I jumped into Web3.
I was onboarded by a group called Kernel, which is affiliated with Gitcoin, kernel.community, if you'd like to look it up.
And then from there, LexDow reached out to me.
And I was really excited, actually, because I didn't really know what to call myself as a professional.
I knew some people were doing things similar to what I was doing historically, like Nick Zabel, who created smart contracts.
But it was only until I found LexDow, where the name legal engineer, I went, oh, yeah, great.
Okay.
And, hey, there are other people like me.
And so since then, working in LexDow, I've been spending quite a bit of time with the problems that happened in this market, because it's already well built out.
And I mainly do business development in the community.
So I just got off a call doing some business development.
And that's pretty exciting.
Eventually, when the time is right, I'll bring in those inventions I did before joining this network.
So, yeah, so it's been a relatively long path, but it's also multiple technical skills, having to be an expert in law as well as computer science.
And then I also am working still with the music industry, and so having that background in the entertainment.
But, yeah, that's a bit about me.
Awesome.
That's good to hear.
And a big shout-out to Kernel Parcel is also, was also part of Kernel Batch 1.
And, you know, it's so exciting to meet a lot of people who have, you know, started their Web3 journey with Kernel and got the right platform that we can all, you know, get started on.
So it's always great to hear a big shout-out to Kernel.
Yeah, I'm excited to actually learn more about, you know, how we can make, you know, crypto compliant without losing decentralization.
And one of the questions that I have in mind, you know, essentially thinking about this is how can we make smart contracts as, you know, enforceable agreements in meatspace as well.
So I'm not sure, like, I'm trying to understand, like, the first step of what it actually means in Web3 to have, you know, first of all, everything runs on smart contracts.
But then there is the real world where you have to have, you know, contractual agreements.
And so what does it actually mean in Web3 to be compliant using smart contracts?
Yeah, that's a great question.
And from my background in music, I think one of the reasons I am enthusiastic about Parcel is that oftentimes when we negotiate with, the artist negotiates with a label, especially high level, auditing is a really important part of it.
And royalties move from one country to another country, and so auditing is incredibly complicated and, or pardon me, accounting is incredibly complicated, which is one of the reasons auditing is, the contractual rights for auditing is something that the industry spends a lot of time negotiating.
Blockchain, blockchain as a technology is very exciting for what's possible for accounting as well as auditing on an international level.
So long term, I think it's a fantastic fit for the music industry.
I just wanted to say that since Parcel is building up more and more expertise and being able to provide the tools so that we can do those kind of things.
As far as connecting traditional legalese with on-chain, one of the pioneers in the jurisprudential theory here is koala model law, koala with a C, and then otherwise it's spelled the same as the animal.
And they, their concepts, they've got two concepts, two important, very important concepts.
One is regulatory equivalence, and the other one is, I believe it's called technical equivalence.
While we're chatting, I'll share a link to some slides I made that explain koala's perspective.
And then something that LexPunkArmy and LexStyle have kind of co-built together is something called code deference.
And so in the legal contract with code deference, we mentioned the designated blockchain.
And so there's two parts to it.
One is that people are supposed to, when they read the legalese, they're supposed to look at what the designated blockchain is,
and that tends to include a aux address and see what's happening there and recognize that's part of the contractual relationship between the parties.
And then the other aspect of it, the deference, is that if there is some kind of disagreement between the natural language that's written
and what's actually happening on-chain, then what's happening on-chain, all else equal, is what wins the day.
It's important to make it so that there's hardly any conflict there, because it will still take time and energy to figure out if there is conflict.
But having it so that there's a choice between whether it's the natural language or what's actually happening on-chain,
which one should win out if there is some kind of disagreement there, that makes it easier.
And then there are groups like Klaros and Nation3 that are having it so that arbitration, when disputes inevitably arise,
those are run on-chain and disputes happen very quickly.
Those are continuing to build those projects.
There's also Q blockchain.
I was actually just doing a BizDev call with them before this Twitter space, and they are spending quite a bit of time with ICC,
which is an international court.
So that's due to full of – it's like the Delaware Chancellor Court or something like that,
so it's not supposed to be quick on-chain only.
And that probably makes a little more sense for these enterprise DAOs and blockchain.
But those are – yeah, so those are the kind of the two strategies when disputes do inevitably arise.
Either we can have a full on-chain solution, move fast, or we can have professional judicial bodies that are willing to handle these matters.
And so both of those are building out relatively quickly.
Yeah, so I know I've said a lot.
I'm happy to answer some questions.
Yeah, a lot of great stuff there.
So I kind of understand why – like what could be the benefits.
So initially you talked about music, and there's a lot of people actually doing music on-chain or trying to do it,
and I can understand what that would look like.
But are you excited about – like what are the other things that you're excited about that comes from real world
but actually solves a big, big pain point as it moves on-chain,
especially with regards to legal contracts and makes it very, very easy?
Is there anything apart from music that you're always excited about?
Yeah, and even though music is my background, so I'm focused on that quite a bit,
that's not the one that is making the most progress, I would say, actually.
A lot of that is because the traditional music industry – it doesn't –
many people in the traditional music industry don't want to shift.
It would mean a lot of disruption for jobs and major issues that –
also the way that the industry works is that the databases tend to often be not even online,
let alone on-chain.
We have successfully gotten DDEX, which is the standard organization for –
there's only one standard organization.
It's only a small part of the music industry, but it deals with digital aspects of the music industry.
So DDEX came about when iTunes and Spotify became popular.
DDEX has started a NFT working group for metadata.
So the parts of the music industry that can and are already willing to work with on-chain are doing so.
But yeah, I would say the music industry is a very small part of what's exciting about this space.
The one that's taking a lot of my time right now, because it is already a big business, is real estate.
So there are – yeah, solutions are building out fairly quickly.
That also involves network states and network cities, which I don't know if you've read any of Balaji's work,
but he's helping move that forward quickly.
I'm right now actually staying at Cabindal, which is a network city.
And then Azuzulu in Montenegro in April and May was very successful, I hear, from my friends who went there.
And there will be another Azuzulu in Zanzibar at the end of July, if anyone is interested about that.
So really we can do – we can put anything on-chain because NFTs, a big use of NFTs, besides their own internal value,
but in the traditional world, is that they can be certificates of authenticity,
much more efficient than, say, if you have – I don't know if you've ever had, like, a diamond ring or something like that,
and you get a certificate of authenticity with it, and it's a piece of paper,
and it's got some security measures in it, but it's really a piece of paper.
Well, having that stuff fully digitalized and probably even better security,
that works for all certificates of authenticity.
So in some ways this is a library management, like really, really low-level information technologies
that can manage a variety of assets as well as legal entities.
Interesting.
And you mentioned CabinDAO and other DAOs, I think they're really great examples.
And for some of us who don't know about, like, CabinDAO and what they're trying to do,
could you please explain what does CabinDAO do and how is it beneficial to get that model on-chain versus keeping it off-chain?
Yeah.
Well, Cabin uses tokenomics, so that's one of the reasons it's good to have it on-chain.
So Cabin members vote on various measures, and they have Cabin tokens.
And so if you've interacted with DAOs that have token governance mechanisms, it's similar to that.
So somebody who has 10,000 Cabin has more voting power than somebody who has 25 Cabin,
but somebody who has 25 Cabin can still do things that someone who has zero Cabin can't do at all,
like, say, put up a proposal or something like that.
And then another aspect, which I guess could be used in traditional web,
but it's much more trustless and reliable than just traditional web systems,
is that it's a network of communities that are spread throughout the world.
So the city isn't, so in a traditional physical city, the neighborhoods are right next to each other.
The boroughs that are adjacent, New York, for instance, actually uses boroughs.
With Cabin and other network communities that are happening, it's, say, it's crypto nomads who want to be in next month.
They want to be in one place, and month after that, another place.
But they still want to be within the same social group.
So hopefully many of us have experienced how we get a, we spend a lot of our time working with our people remotely, right, on our computers.
And then when we go to these crypto conferences, we finally get to hang out and be physically around each other.
So these network cities, more so than the network states, that's probably one of the more important distinctions between the two,
is a way to have a city similar to a traditional city, but the actual different parts of the city are spread throughout the world.
And then, yeah, using blockchain just means that it's much more reliable what happens there.
And if, say, some government doesn't like what's happening for some reason, it can't also be shut down.
So if we start to, this is more probably on the network state side of things, but issue passports for ourselves,
and then petition the UN so that the passports have some kind of international recognition,
well, then we might get some pushback from a traditional government, and they might want to shut things down.
Well, on the blockchain, that's much more difficult to do than if everything was just running on Amazon web server.
Very interesting.
Yeah, one of the other reasons that I like, you know, something like Yevindau to be on-chain is probably transparency.
Like, you don't really get to see transparency in the real world among the community members.
Like, it can be forged, and, you know, we've seen many instances of, you know, people running a centralized organization,
and, you know, the financials are not right, or there have been some tamperings there,
but with everything being on-chain, I think this is one of the most underrated facets of it.
Yeah, exactly, and that gets back to what I was saying about how the music industry could benefit from this.
I mean, that's the reason why it's taking some time, but the ability to, you don't even need to put auditing rights into the contract.
You just look on-chain and do whatever forensics you need to do, and you know that it's correct.
Yeah, you can look at Cabin's treasury and see where the money is being spent and who made those decisions,
especially with something like Tally XYZ, where it's the entire Dow's decisions are, is how money is actually transferred,
as opposed to something like Snapshot, where you still need to have a trusted kind of centralized group that actually administers it.
And then also, yeah, it's also plugged into liquidity.
So Cabin token, I don't actually, I have to speak with John and all that about what the plans are with the Cabin token,
and we all know that there's major SEC issues with having tokens be evaluated in the open market.
But once we figure that out as a world community, that's also, I mean, that's one of the most exciting things about this blockchain space, digital assets, right?
That's the things that actually have, we've always had, for a long time we've had something like a Chuck E. Cheese token, right?
But that doesn't really have any, you can't stake a Chuck E. Cheese token or swap it out for USDC or something like that.
But all of those are quite possible with Uniswap.
And so there's a way to recognize equity that has not existed yet.
It's a genuine innovation.
I mean, we're able to have computational currency.
So not just computational law, but computational currency.
Yeah, I love that.
I think Chris Lickson talks about it a lot when he says read is for Web 1, write is for Web 2, and then own is for Web 3.
And that's, you know, exactly what we're all here for, a piece of the ownership of the projects that we make it work.
Awesome. I want to switch gears real quickly and talk about DAOs.
You've alluded to DAOs a little.
We've talked about that somewhat with Cabin DAO.
But, you know, DAOs actually became a rage in 21.
And then, you know, it's slightly now going down in 22 and 23.
What do you think is the state of the DAOs, especially with regards to, you know, having a legal entity or not having a legal entity?
And then, you know, what's the current state?
Where is it headed?
Are you seeing that a lot of DAOs will have legal rappers or they won't have?
I think it's, you know, the answer is more nuanced.
So I'll let you, you know, talk about the nuances as well.
Yeah. I'm also president of DAO Coalition, so I'm spending quite a bit of time helping lobby to make sure that DAOs on the government side, specifically the U.S. federal, that's mainly what DAO Coalition right now is focusing on, that regulation is done in a way that supports the evolution of DAOs rather than tries to quash them or something like that.
It seems like, I'm optimistic about it.
I know there are certain different groups that are adversarial, but ultimately, I think the movement is heading in a way that's going to be going to have some consumer protection or just, you know, retail protection,
while also taking advantage of the exciting possibilities in this space.
Gabe Shapiro and Delphi, they've got a concept called Borg.
It's probably helpful for DAOs.
On the legislative level, the DAO word has been a bit watered down, and it is being already implemented in bills like Tennessee's law and Wyoming's law, and it's using the word DAO.
It's not using the word Borg, but just quickly to say a Borg is where it is a traditional entity.
It has traditional entity elements, but it also has DAO elements, so oftentimes when people think of DAO, they're thinking of something that's just completely on-chain,
and something like Uniswap can fit that, where it is really just a pure protocol, but a lot of the area were just thinking about how,
now using a more liberal sense of the word DAO, how it's beneficial, just how groups can organize themselves anyway.
Then, yeah, there'll be more and more of these entities that are using DAO tooling, in the very least,
even if they are large part acting like a traditional organization, and a real property kind of necessitates that,
and that is one of the areas that is being built out relatively quickly.
It's kind of by definition, it's territorial.
So, one thing that seems a lot of groups are in agreement on is that co-ops are already,
they've got a lot of values that the DAO space has, stuff that is owned by the members,
rather than a very hierarchical ownership structure like traditional corporations have.
But I've also worked with, we've worked with FIRM, FIRM.org, and that one is using traditional C-Corps,
but NOSA is safe, so shares are completely on-chain, and there's value out for that as well.
So, yeah, so I would say there's a full spectrum from something that's a pure DAO, like MakerDAO,
and the ones that we pioneered this space, all the way over to something like a traditional C-Corporation,
Delaware C-Corporation, with very clear, here's the CEO, and then here's the employee type of dynamics we're all used to,
but it just runs a bit smoother, and then people can trust each other a little bit more.
It's a little bit more transparent, because it's using these blockchain technologies.
Perhaps, maybe I should have a chat with them a little bit more before I say this,
but it seems like Kevin Milwaukee, his path, he's got Gitcoin going,
and then Gitcoin then went into a full-on DAO owned by the community.
So then he exited it, so instead of exiting to an IPO onto something like NASDAQ,
it's exited it to member-owned, and now he's doing super modular,
and that one, when he described that, when I was on panel with him at the ReFi conference,
he's the CEO, and he's kind of enjoying having that very clear relationship between him
and the people he's co-working with.
So I personally, I like in certain instances where there's a clearer hierarchy,
and then other instances where it's much more community-orientated.
So like, for instance, here at Cabin, it's about co-living,
so it would be pretty funky if the people were co-living with each other,
one person is on top, and other people have to kind of listen to them.
But in a kind of wild-oiled machine where people are trying to get work done quickly,
and there's obviously the expert who should be dictating what's going on,
then in that case, I would probably prefer having a more hierarchical relationship.
So it tends to be, you know, what you want to get done, what tool is right for the job,
and then also it's good to remind oneself that composite materials are really helpful.
So like thinking about a really nice winter jacket or something like that,
it doesn't just have one aspect to it.
It has, if you look at different layers, they have different performance requirements,
but together as a whole, that that's kind of the whole, the full solution.
Even just thinking about the body corpus like a person, the brain works a lot different than the gut, right?
And if you had the gut directly interact with the brain, it would start eating the brain up.
And I know that sounds kind of weird what I just said there,
but hopefully that helps us kind of think a little bit more creatively about what DAOs are
and what DAOs can be and not necessarily get so dogmatic.
It's really great to sometimes be a maxi to build out kind of a newness in the world,
but we can maybe occasionally take a step back and see whether or not that is serving us ultimately.
An example of maybe a little bit more just baseline is Code is Law.
Well, when Ethereum got hacked, that really big hack that had the fork of Ethereum Classic,
was that the right move?
Because that then prioritized that we as a community wanted to succeed
rather than whatever happened with the code, tough luck, that's what we have to go with.
I personally am on the side of all this stuff is in service of humanity.
So if it's not, if it's doing the opposite of that,
then we should be more flexible and maybe make concessions
and not let perfect be the enemy of good type of mentality.
Very interesting.
Yeah, we were just internally discussing about the DAO has that happen
and you just alluded to that.
So, yeah, as I said, you know, there's lots of types of DAOs.
There's protocol DAOs, there's social DAOs, collector DAOs,
investment DAOs, and so I believe like different types of DAOs
require different legal wrappers as well.
And, you know, we're seeing, you know, from our experience,
you know, working with a lot of DAOs at Parcel,
we see that protocol DAOs tend to have payments foundation usually
and, you know, other investment DAOs or, you know, collector DAOs
still likely have an LLC in the U.S. or a C-Corp.
And do you see that this is going to be the way that it's going to be
where you have different types of DAOs and different types of DAOs
have different legal structures?
Or do you think since, you know, also bringing in the situation
in the U.S. with respect to them suing Binance and Coinbase
and now we don't know what's going to happen in the U.S.?
Are they going to still support, you know, the way that they did DAOs earlier?
Are they still going to support them?
Or is it going to be the other way around?
And if that happens, like, how do you see from here
what DAOs could be in terms of having legal entity?
And for all these different types of DAOs that I just talked about,
do you see a different legal entity framework coming up?
Or do you see that this is probably going to be the norm from here?
Yeah, well, already different legal entities are happening.
So Utah actually did adopt QALA model law.
That's the first state that has done that.
I've heard some concerns from experts in the U.S.
that the liabilities of QALA are more European liabilities.
And so Utah isn't going to have to deal with that case law
that is going to try to find a translation
between common law liability philosophy
and civil law liability philosophy.
But right there, though, that is the fact that there's common law out there
and civil law out there, and those are the two systems
that have a huge amount of the world's GDP.
There's going to have to be different legal entities for different issues.
What I mentioned before with the composite,
maybe a little bit more kind of concrete example of that,
is what's called a Cayman sandwich.
And in a Cayman sandwich, there's to have Latin American founders
that they get funded by U.S. VCs.
It requires, I think, three different legal entities for that to work.
There has to be the Cayman Foundation.
There has to be wherever the Latin country,
the company is actually operating in.
And then there has to be a U.S. Delaware C-Corp.
So the VCs are comfortable putting their capital into that.
So I was spending quite a bit of time the past couple of days with Prospera.
They're one of those network states
developing a product that is like the Cayman sandwich,
but it's using Prospera.
So it'll be a lot cheaper and a lot easier to use
than the Cayman sandwich.
And so, yes, I would classify that as one of those composite solutions.
I shared a link just now, what I was mentioning before,
about the Koala system.
I started a few slides there, but, yeah, it goes over code as law,
code difference, and all that.
Have a look at that.
And then I'm going to share, I'll find it, something I,
basically a Venn diagram that explains how we can kind of think about
how DAOs and legal entities can, they're, in a sense,
they're different layers of thinking.
The DAO itself can be, include multiple legal entities within it,
and also can have legal entities that are partially the DAO
and partially just their own thing.
So we can think quite flexibly about it,
but there's not going to be a one-size-fit-all.
It's just going to get more and more diversified as we go,
plurality of solutions, depending on what the underlying problem is.
And that makes sense since we're saying that the Web3 is,
in some ways, a panacea.
Well, practically, if that's going to, in practice,
that's going to mean that it's going to have many, many faces.
If we're actually able to use Web3 for something as different
as just an investment club or a community of people sharing resources
in an intentional living environment, I mean, the list goes on.
I'm actually not being very creative here on all the different ways
that we can use Web3.
I mean, ultimately, Web3 is a ledger system,
and so ledgers are used for all types of things already,
and we can really, we're just expanding the possibilities
of what ledgers can do.
Math came out of ledgers accounting back in ancient Egypt,
and so how much has math and accounting changed humanity
since that time?
I suspect we'll see that much, if not more, diversification.
So I bring up Milwaukee again.
He talks about kind of like Cambrian explosion, right?
But I think that we'll see that with legal entities as well.
But the governments,
at least I'm focusing mainly on the U.S. government,
I think there's just a dialogue going on.
And even people like Eric Gensler,
who are very much against this,
looking at the response to those types of decisions,
I'm confident in the end that,
sure, it's a bit of trial by combat,
but law oftentimes is a blood sport.
Ultimately, the right path will win the day.
Yeah, for sure.
Yeah, I think I completely agree with what you said.
I think it would require like a bunch of entities
to get the work done for DAOs
if the right frameworks don't exist.
And I think we'll see more experimentation with DAOs,
so it's going to get a lot more weird
and a lot more different use cases that are going to come up.
So pretty excited about that as well.
And that reminds me of actually bringing in more talent for DAOs, right?
So who's going to build more DAOs
if you don't have enough talent?
And this is a question that I keep asking myself
and a lot of people ask me as well
as someone who contributes to the DAO ecosystem,
is that there are a lot of contributors
who are attracted towards DAOs,
but they also have like a very secure, high-paying job.
And the first question for them
after they're convinced that, you know,
they want to join DAO is,
how am I going to get my health benefits, right?
How am I going to get, you know,
all the benefits that come up,
that come with a, you know, very secure FANG job?
And is it really legal or not, right?
So there are a lot of concerns
from contributors all around the world,
especially with DAOs that are not,
you know, legally registered anywhere.
What do you think can we do about that?
How can we ask more contributors
the next time I have a conversation with them
to join the DAO
and still not, like,
not feel the risk of being insecure all the time?
And where do you see this going as well?
Do you think the contributors have to,
you know, legally registered as a business
to make sure that the liability
is limited towards them?
Or do you think DAOs will get registered eventually?
And so that will restrict the liability itself.
Yeah.
That's very case by case.
And one of the things we do
at the clinic at LexDAO,
and the clinic is an apprenticeship DAO
where we, on the job,
teach law students
how to be crypto lawyers and legal engineers.
We have a checklist.
We go through a questionnaire
that was developed at ECC.
And we go over the business model
that people that are starting
from zero to one on DAOs
are thinking about.
It can even be kind of useful
for a mid-sized DAO or something like that.
But it's especially useful
for these really early-stage DAOs
and see if there's just too much
of a legal hard problem
that the DAO doesn't necessarily want to take on.
So, for instance, Uber, right?
Uber took on one of the areas
that Uber had to deal with
was legal hard problems.
So it wasn't just using the app
and all that innovation
that Uber had to do.
It also had to deal with regulators
and how CABs worked and such.
And so DAOs,
because they have so many applications,
one of them is crowdsourcing.
So a motivation to get DAO Coalition running
actually was because
the crowdfunding lobby group
sent a letter to Congress
concerned how the DAO space
is doing its own crowdfunding.
So, yeah, so each person
really should think about
what their own,
what kind of risks they want to assume
and be realistic about
the legal hard problems.
At this really early stage,
it's very rare that DAOs
have zero legal hard problems.
Down the road,
there will be DAOs
that can form that
really only have to deal
with their own technical hard problems
and not take on the legal.
But, yeah, we're so early on
that almost all of them
have to take on legal hard problems.
One of the main reasons
LexDAO exists
and is building out
is so that we can help solve that.
So fewer and fewer DAOs
have to take on
the legal hard problem.
As far as getting,
like, especially in the U.S.,
health insurance,
because the state
doesn't provide that,
there's Opolis that's around
and then there's also Toku.
And Toku worked great for,
it also deals with paying contributors.
So Toku has special purpose vehicles
around the world.
So legal entities
in different territories
that then directly pay their contributors.
So a lot of legal headaches
are being solved by Toku.
Toku itself is not a DAO.
So one of the ways
that DAO contributors
can avoid certain legal hard problems
is to accept that
their overall solution stack,
a good chunk of it,
will be traditional methods
and maybe down the road
they can diversify a bit more,
decentralize a bit more.
So one of the concepts
that the DAO world is accepting
is progressive decentralization.
So don't try to start out
at 100 miles an hour,
you know, build it out slowly.
Initially, when you're the core team,
it really is just a centralized team
and maybe not, yeah,
deal with those legal hard problems initially
because it is a central core team.
And I mentioned in Gitcoin again,
or Gitcoin,
which is to,
believe it was just a,
yeah, we actually worked with them
when they switched to foundation.
So it is,
it was a Delaware holding company,
very, very traditional.
And then when it exited the community,
it had enough success
that it could actually pay the lawyers
for the Cayman Foundation,
which is really expensive.
Cayman's always expensive, whatever,
but especially because
this is legal innovation,
it's legal innovation.
It's quite costly.
And, but Gitcoin could take that on
because it had enough success.
So I was able to do that
and API3 did that before Gitcoin
and I think Dash did that before API3.
So there was already
a precedent that helped lower cost.
And as the space matures more and more,
people will be able to kind of stand
on the shoulders of giants
as, yeah,
so to help deal with that a bit.
But as far as people
that really want the same exact thing
and as they enjoy
in traditional web too,
I don't know if we were 100% there.
Again, we have something like Toku
that can help us get there.
And that wasn't even really around last year
or it was just starting out.
So we're moving quite quick.
But I would just say that
you might not be a good fit
for the space
at the super early stage
if you aren't willing
to take on that entrepreneurial risk.
But of course,
the point of the risk
is that you can be very successful
if you're an early adopter.
And then also,
if you don't really believe
in things like decentralization
and such.
So if you don't have
an underlying
kind of more philosophical reason
to be in this
and you really just want a paycheck,
then yeah,
there might be more headaches
than you really actually want to deal with
at this super early stage.
But just check back in
a few years later
and you might really enjoy it.
So, you know,
onboard at the right time
for yourself.
And I personally waited
until a certain point.
I was watching it
so I was paying attention
so you can get updates
and then when you feel
the time for you,
jump in.
And Colonel was the way
that I felt
that was the right time
when I saw Colonel
and the kinds of teachings
Colonel had.
I went,
okay,
this is now my moment.
This is brilliant.
Yeah,
this is probably
the best response
of God
and I've asked this
to about five,
six people
on this Twitter space
is amazing.
So, yeah,
I mean,
just to stretch on that,
you know,
Caymans Foundation thing,
I really understand now
what I could answer
probably to anyone
who's trying to ask me
the question next time.
With regards
to the Caymans Foundation,
I know a lot of people
actually go towards that.
You said Gitcoin,
you mentioned API3.
I know ENS
is also Caymans Foundation,
so is DeveloperDAO.
And one of the things
that happens
with Caymans
is that,
you know,
now the liability
comes back
to the contributors
and you mentioned
Toku,
which is pretty interesting
and how that can help.
So just to understand
it correctly,
if Gitcoin has
a Caymans Foundation,
using Toku,
it can still
employ legally
all the employees
in the respective
countries
the contributors
reside in.
and so,
could you explain
how does that work?
Yeah,
well,
I mean,
and it might be good
to reach out to Toku.
I can connect you,
at least one member of Toku.
Jeff,
he's a really good friend.
He helped me out
one time.
Yeah,
so he's a close friend,
Jeff.
But anyway,
Toku,
yeah,
the special purpose vehicle
thing that I mentioned earlier,
that's just a fancy way
to say a legal entity
that is supposed
to do one thing
for the overall organization
and they're usually used
when the organization
is a multinational
and so the organization
might be based in the U.S.,
but it needs to do business
in Germany
and so it has a German
special purpose vehicle
that they can then
do that business
within Germany
and so Cayman foundations
are even more likely
to have to do
a special purpose vehicle.
We had
a really great conversation
and one of our
study groups
every Friday
in Lextel server
we have study groups
and we had one
parcel just last Friday.
It was a great study group
and I think it was
the beginning of January.
Hopefully,
we do have the recording
somewhere.
We've got to
make it more accessible
to the public.
But anyways,
this one was with ApeCoin
and in that conversation
with ApeCoin,
they were furthering
their decentralization
with their Cayman foundation.
Yeah,
we discussed
in more detail
what special purpose
vehicles are
and Jonathan,
he's done,
he kind of led
that dialogue
and he's done
I think over
a hundred Cayman foundations
for various groups
in this space
and so he was,
you know,
basically said,
yeah,
the special purpose vehicle
is another aspect
of having a fully functional
Cayman foundation
and again,
those are,
really,
they're just legal entities
but they're
for one particular purpose
and usually it's
so that the main organization
can operate
within multiple jurisdictions.
And so Toku,
just real quick,
Toku has spent
a lot of time
and energy
doing this purpose vehicle thing.
so they've got quite a few lawyers
on their team
and yeah,
that's why
they're a legitimate value add
for our space.
Yeah,
awesome.
You know,
always good to see,
you know,
people solving
legal issues
that can bring
an onward
millions of people
in the space
so that's always great to see.
Yeah,
I want to,
you know,
really touch base
with regards
to what LexTao does
and for our listeners,
we talked about
what LexTao is
but for someone
who's wanting to,
you know,
learn more about
what legal compliance
mean
in Web3
or want to start a Tao
but does not really know
what legal and compliance
would come
with forming a Tao.
could you talk about
how LexTao
could really help
someone who's trying
to form
their own Tao?
Yeah,
so right now
the main offering
we have for that,
I mean,
people can just
do their own research
and we've got projects
like an interactive
chat AI
that people can,
yeah,
on their own time
do that type of thing
but right now
what we've got
that is focused
on helping
early stage
Taos with that
is what I mentioned
earlier with the clinic
so with the clinic
the way it works
is those people
are interested
they become a patron
to the clinic
and that's a $300
contribution
and then we
we have a questionnaire
that they fill out
and that questionnaire
was developed
by really sophisticated
lawyers in this space
at ECC
and that goes over
and so it's basically
a liability checklist
all the different kinds
of compliance concerns
people just have
at the back of their mind
and then we have
a two one-hour calls
with the team
after they fill out
the questionnaire
and we ask them questions
and kind of
once we understand
what they want to do
we can kind of
more tailor
our suggestions to them
and oftentimes
what comes out of that
they now
we basically go
oh okay
I could use
an unincorporated
non-profit association
or I could use
an LLC
or it was
two or three
different options
that are
a relatively good
fits for them
and then that's
kind of
where they
end up
and also recognizing
oh if I have it
say for instance
I have
if I want my tokens
to be transferable
then there's this
whole extra
compliance burden
I have to keep
back in my mind
but if I have them
as non-transferable
that's less of an issue
and then
for instance
Kelly
I mentioned earlier
that DAO Summoner
on the Moloch
framework
it's possible
to actually have
a token be
non-transferable
and then
just do a
proposal in the DAO
and switch it to transferable
those solutions
are really good
because
whatever choice
is made
at an early stage
isn't
written in stone
forever
it can be modified
when the DAO
gets a little bit
more sophisticated
but yeah
so that's basically
what we're
offering at this point
you'd be working
with law students
and those law students
down the road
will be
hopefully
really well known
or at least
highly capable
crypto lawyers
so you'll be able
to build those
relationships
with the legal community
that's relatively
necessary in this space
by going through
the clinic
and the clinic
charity
well it's not yet
we're in the process
but eventually
at least within US
that 300
should be tax deductible
but yeah
as far as
kind of white glove
that's the only thing
we really have
right now
we're continuing
to grow
so we'll be able
to offer more
sophistication
down the road
but if you're
interested in
working with the
clinic
you can
just send me
a DM
and we can get
the ball rolling
that way
and then if there's
any kind of
special work
that needs to be
done
we do a minimum
around
3k worth of work
but then yeah
you can work
with law students
and that also
helps lower
the legal costs
quite a bit
we're not a law firm
so we can only
help to a certain
extent
and then
you still have
to hire a law firm
for everything
you need
but considering
how expensive
lawyers are
especially in this
field
if you use it
strategically
you can
really lower
your legal costs
and the law firms
enjoy it as well
because
when you ask
some questions
they don't have
to kind of
educate you
you already
know what
you want
and so
then they
can do
their job
easier
so yeah
so just
DM me
if you're
interested
in a
working clinic
otherwise
LexDAO
is totally
anyone's
welcome
to join
LexDAO
and hang
if you want
to become
a member
of LexDAO
that's also
that one's
per year
it's not
you can get
a lot of
the benefits
as a non
crypto lawyer
within LexDAO
without being
a member
and if
you can go
to LexDAO's
discord
at LexDAO
dot chat
HTTP
so just
don't
don't put
the S
in there
I'll just
move you
over to
the discord
invite
so yeah
LexDAO
dot chat
and you're
welcome
to say
I mentioned
earlier
every Friday
we've got
study group
so that's
a way
to kind
engage
and start
to learn
about
this
space
and then
we have
put it
down
took it
down
for now
because we
some
issues
with somebody
misusing
but we
have a
directory
that when
it's back
up you
can search
through that
directory
and find
professionals
to answer
your questions
awesome
this is
great
yeah I
can I
can speak
from first
hand
experience
that lawyers
are really
really expensive
and this
is this
is a great
strategic move
that you
can do
for yourself
we're frankly
really tired
of you
know
refilling
retainers
that come
with expensive
lawyers
so I
completely
understand
what you're
saying
all right
cool I
think
we're about
to wrap
up but
before that
I have
one last
question for
you Kyle
you know
Web3 is
about communities
and about
belongingness
and I think
you found it
first with
Cornel and
then with
LexTower and
all the other
subsidiaries
my question
is apart
from the
communities
that you're
already a
part of
which is
your next
favorite
community
and why
it's
interesting
because usually
if I really
like that
community
then I
try to
join it
I guess
yeah it's
the communities
that I
just didn't
have enough
bandwidth to
continue to
spend time
with them
I've already
mentioned it
before but
yeah GetCoin
I had to
not spend
so much
time
with my
friends at
GetCoin
and occasionally
I get an
excuse to
say hello
to them
but otherwise
I don't
get to
and then I
probably
communities
I don't
get to
I am a
musician
myself
and I'm
a very
creative
person
and it'd
be fun
to hang
out with
those
creative
groups
within
communities
say like
one of
a marketplace
something that
like really
clearly comes
to mind
yeah I don't
actually have
an answer
it's a good
question
though so
I'll think
about it
awesome no
worries we'll
get this
question again
to you next
time we do
a Twitter
space
awesome all
right thank
you so much
Kyle for
joining this
Twitter space
it's a wrap
this time it's
been a pleasure
talking to you
I'm looking
forward to
many more
conversations
and again
thank you so
much for being
a sport and
explaining
everything to
all of our
listeners have
a good day
you too
thank you
very much
you too
thank you
very much
thank you
thank you
very much
thank you
very much
thank you
thank you
for being
thank you
