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American law allows for a very wide range of legal trusts. Courts will generally enforce any legal entity that the grantor chooses to structure. It's easy enoug

American law allows for a very wide range of legal trusts. Courts will generally enforce any legal entity that the grantor chooses to structure. It's easy enough to setup the DAO as a formal legal trust that grants ownership rights to whoever can demonstrate ownership of an NFT. Some people might ask what the point is. After all, you're still relying on a fair and enforceable court system at a base layer. That's true, but it allows you to abstract away all the other complexities from higher layers in the financial system. For example the cost of transferring title on land tends to be fairly high. You have stamp tax, title insurance, lawyers to review the contract, etc. With a DAO as the nominal owner, selling property simply becomes a matter of executing a smart contract transaction on the blockchain. From there, you can imagine increasingly complex structures built entirely in the blockchain. A mortgage based smart contract can allow for a specific owner, but transfer the property to the creditor once the payment is missed. Mortgage underwriters can pool their blockchain based loans into pooled securities, and sell CDO-like products as smart contracts. This allows investors to completely bypass all the financial regulations and restrictions that exist on subprime mortgages. It also cuts out an enormous amount of the legal, settlement, and due diligence costs associated with the creation of these securities. Everything's executed atomically and autonomously through smart contracts. The point is you can use a mix-and-match hybrid model, where some layers are secured through fiat law while other layers are secured through crypto law.

skywhopper 5y ago
There’s a reason for all those legal, settlement, due diligence costs, and regulations. Finding ways around monetary regulations is called “money laundering” and “fraud” and it’s already illegal. So I wouldn’t recommend pursuing this path.
- dcolkitt 5y ago
  That's not really true at all. There are entire divisions at investment banking firms called "delta-one" desks. They exist solely for the purpose of creating synthetic equity positions to avoid regulatory, tax, capital, settlement rules on cash equities. I can easily sell you a "total return swap" in lieu of shares, which bypasses all kinds of existing rules. Fraud and money laundering are very narrowly defined, and require mens rea. If simply structuring alternative financial vehicles constituted fraud, then nearly all of Wall Street would be in jail.
nradov 5y ago
Courts don't look kindly on attempts to circumvent regulations through financial engineering. If they determine that the intent was bad then they may treat the transactions as shams.
cheph 5y ago
> With a DAO as the nominal owner, selling property simply becomes a matter of executing a smart contract transaction on the blockchain. Except legally speaking that means nothing unless you go through the legal process of transferring your title. Sure if governments ran on it, but the cost won't really go away, you will still have taxes, and you will still have lawyers, and you will still have disputes. Smart contracts does not fix the oven that was not working properly when the title was transferred.
- dcolkitt 5y ago
  You wouldn't formally transfer title, because the corporate entity owning the property would remain the same. Corporations can change ownership without triggering any title changes on the real property they own. For example if Hilton Inc. was acquired by a private equity firm, it wouldn't require any title transfer on the hotel properties they own.
  - cheph 5y ago
    Pretty sure it would but good luck when the tax authorities come for you.
dmitriid 5y ago
> From there, you can imagine increasingly complex structures built entirely in the blockchain. > It also cuts out an enormous amount of the legal, settlement Ah, yes. Because increasingly complex structures written in obscure esoteric languages are immediately absolved of all problems, are automatically correct, require no enforcement or verification.
- foepys 5y ago
  The first DAO iteration got promptly hacked and drained of funds. That's all you need to know about such ideas where "code is law". https://www.coindesk.com/understanding-dao-hack-journalists https://www.coindesk.com/understanding-dao-hack-journalists
  - vel0city 5y ago
    Not only that but then convinced the majority of the network to rewrite the transactions and alter history!
funfunfunction 5y ago
> Mortgage underwriters can pool their blockchain based loans into pooled securities, and sell CDO-like products as smart contracts. This allows investors to completely bypass all the financial regulations and restrictions that exist on subprime mortgages. This is exactly what https://www.figure.com/ https://www.figure.com/ is doing.
- etewiah 5y ago
  Hey, you mentioned in another post that you're working on a real estate application. Curious to know how that is going. Do you have a link to it that you can share?
knorker 5y ago
American law also allows for a court to invalidate any and all contracts deemed not legal, or not enforceable, or subject to a bankruptsy, or any of a billion other reasons. What now? What you have done here is make the simple case simpler, and the hard parts impossible. You made the ACTUAL problems WORSE, because you do not understand what the ACTUAL problems even are in the space where you try to sprinkle "blockchain" as if it adds any value at all.
- dcolkitt 5y ago
  There is no fiat contract to enforce. There's simply a legal trust (the DAO) that holds property in perpetuity. All contracts and liabilities exist in crypto space. The only way a fiat court could unwind the structure is if they declared the trust structure itself to be invalid. That's extremely rare in common law systems, because very few parties will have standing to challenge the trust formation. Moreover the risk can be minimized by making sure the DAO is incorporated in a friendly jurisdiction, like the Cayman Islands.[1] Since US law allows foreign entities to own domestic property, you're not tied to the jurisdiction where the property's located. [1]https://www.ogier.com/publications/the-foundation-company-as-a-decentralised-autonomous-organisation-dao-in-the-cayman-islands https://www.ogier.com/publications/the-foundation-company-as...
  - knorker 5y ago
    > The only way a fiat court could unwind the structure is if they declared the trust structure itself to be invalid. Right. Which it would do at the drop of a hat if it got in the way of a lawful judgement. It'd need to get there, sure, but yes a court can actually order the blockchain to be incorrect as it relates to ownership of a thing. If nothing else the government has standing. Emminent domain, for example. And once the blockchain is wrong, it's wrong. > by making sure the DAO is incorporated in a friendly jurisdiction, Ha ha ha, do you think a french court will allow a tax haven company to make french courts null and void within the borders of France? That's basically giving up sovereignity. Who's going to stop french police vacating a property? Math? I don't know if you've read court judgements ever, but it's extremely common that things involved in a crime are considered "spent", "consumed" (I forget the word). That means it's not yours anymore. Your "but It's mine on the blockchain!" means zilch.
funfunfunction 5y ago
This is an interesting idea, do you have any resources to help me better understand how this would work?
deleted 5y ago
[deleted]
mytherin 5y ago
I see two possible situations in what you describe: * Ownership of a land/property is tied directly to ownership of a cryptocurrency. In that case getting hacked means people can steal your house. Forgetting your password means losing your house/not being able to sell your house again. This is unacceptable and will never happen in reality. * Ownership of a land/property is not tied to cryptocurrency, but vaguely relates to it. It still sits in a blockchain, but does not correspond exactly with property ownership as ownership might diverge from true ownership in case of theft. Real ownership is still managed centrally by the government, and all of the property law around this will still need to happen all the same. Nothing changes, except we now have a blockchain. Am I missing something, or is there more to this?
- dcolkitt 5y ago
  > In that case getting hacked means people can steal your house... This is unacceptable and will never happen in reality. We already have institutions which entrust billions in assets based on the ability to keep private keys safe. Coinbase, BlockFi, Celsius, Next, Grayscale, etc. all are trusted by millions to hold crypto assets in custody. In many cases insurers are even willing to write policies against the risk of hacks. Existing DeFi protocols have tens of billions locked inside their smart contracts. I'm not saying that everyone will be comfortable with the risk. But clearly some non-trivial fraction of insitutional investors are already comfortable enough with crypto security technology and custodial services to trust it with "real money"
  - mytherin 5y ago
    I see. So this is specifically about speculation, not about replacing all property ownership. This then involves trusting a central authority (the DOA) to grant ownership of the property to who-ever owns the NFT (which can be seen as a derivative from the property). Then the idea is that transfer of ownership through the blockchain is cheaper faster than actual transfer of ownership of a property through the government. That is interesting, but it seems to me that the legal problems here are far from trivial. How do you, as someone that purchases a NFT that is supposed to grant you ownership of a property, supposed to be ensured that you are actually purchasing a property? What if the DOA simply refuses to give it to you? Are you trusting a central authority without any legal fallback? There are also laws on eviction. It's not as simple as "if you get a mortgage and don't pay for a month, the house belongs to the bank". The government will not be pleased if people try to wriggle their way around those laws using a setup like this. There is strong regulation in this domain for a reason.
arberx 5y ago
Any DAOs/examples practicing this currently? Extremely interested in the space, would love to explore further.

skywhopper 5y ago

There’s a reason for all those legal, settlement, due diligence costs, and regulations. Finding ways around monetary regulations is called “money laundering” and “fraud” and it’s already illegal. So I wouldn’t recommend pursuing this path.

dcolkitt 5y ago
That's not really true at all. There are entire divisions at investment banking firms called "delta-one" desks. They exist solely for the purpose of creating synthetic equity positions to avoid regulatory, tax, capital, settlement rules on cash equities. I can easily sell you a "total return swap" in lieu of shares, which bypasses all kinds of existing rules. Fraud and money laundering are very narrowly defined, and require mens rea. If simply structuring alternative financial vehicles constituted fraud, then nearly all of Wall Street would be in jail.

nradov 5y ago

Courts don't look kindly on attempts to circumvent regulations through financial engineering. If they determine that the intent was bad then they may treat the transactions as shams.

cheph 5y ago

> With a DAO as the nominal owner, selling property simply becomes a matter of executing a smart contract transaction on the blockchain. Except legally speaking that means nothing unless you go through the legal process of transferring your title. Sure if governments ran on it, but the cost won't really go away, you will still have taxes, and you will still have lawyers, and you will still have disputes. Smart contracts does not fix the oven that was not working properly when the title was transferred.

dcolkitt 5y ago
You wouldn't formally transfer title, because the corporate entity owning the property would remain the same. Corporations can change ownership without triggering any title changes on the real property they own. For example if Hilton Inc. was acquired by a private equity firm, it wouldn't require any title transfer on the hotel properties they own.
- cheph 5y ago
  Pretty sure it would but good luck when the tax authorities come for you.

dmitriid 5y ago

> From there, you can imagine increasingly complex structures built entirely in the blockchain. > It also cuts out an enormous amount of the legal, settlement Ah, yes. Because increasingly complex structures written in obscure esoteric languages are immediately absolved of all problems, are automatically correct, require no enforcement or verification.

foepys 5y ago
The first DAO iteration got promptly hacked and drained of funds. That's all you need to know about such ideas where "code is law". https://www.coindesk.com/understanding-dao-hack-journalists https://www.coindesk.com/understanding-dao-hack-journalists
- vel0city 5y ago
  Not only that but then convinced the majority of the network to rewrite the transactions and alter history!

funfunfunction 5y ago

> Mortgage underwriters can pool their blockchain based loans into pooled securities, and sell CDO-like products as smart contracts. This allows investors to completely bypass all the financial regulations and restrictions that exist on subprime mortgages. This is exactly what https://www.figure.com/ https://www.figure.com/ is doing.

etewiah 5y ago
Hey, you mentioned in another post that you're working on a real estate application. Curious to know how that is going. Do you have a link to it that you can share?

knorker 5y ago

American law also allows for a court to invalidate any and all contracts deemed not legal, or not enforceable, or subject to a bankruptsy, or any of a billion other reasons. What now? What you have done here is make the simple case simpler, and the hard parts impossible. You made the ACTUAL problems WORSE, because you do not understand what the ACTUAL problems even are in the space where you try to sprinkle "blockchain" as if it adds any value at all.

dcolkitt 5y ago
There is no fiat contract to enforce. There's simply a legal trust (the DAO) that holds property in perpetuity. All contracts and liabilities exist in crypto space. The only way a fiat court could unwind the structure is if they declared the trust structure itself to be invalid. That's extremely rare in common law systems, because very few parties will have standing to challenge the trust formation. Moreover the risk can be minimized by making sure the DAO is incorporated in a friendly jurisdiction, like the Cayman Islands.[1] Since US law allows foreign entities to own domestic property, you're not tied to the jurisdiction where the property's located. [1]https://www.ogier.com/publications/the-foundation-company-as-a-decentralised-autonomous-organisation-dao-in-the-cayman-islands https://www.ogier.com/publications/the-foundation-company-as...
- knorker 5y ago
  > The only way a fiat court could unwind the structure is if they declared the trust structure itself to be invalid. Right. Which it would do at the drop of a hat if it got in the way of a lawful judgement. It'd need to get there, sure, but yes a court can actually order the blockchain to be incorrect as it relates to ownership of a thing. If nothing else the government has standing. Emminent domain, for example. And once the blockchain is wrong, it's wrong. > by making sure the DAO is incorporated in a friendly jurisdiction, Ha ha ha, do you think a french court will allow a tax haven company to make french courts null and void within the borders of France? That's basically giving up sovereignity. Who's going to stop french police vacating a property? Math? I don't know if you've read court judgements ever, but it's extremely common that things involved in a crime are considered "spent", "consumed" (I forget the word). That means it's not yours anymore. Your "but It's mine on the blockchain!" means zilch.

funfunfunction 5y ago

This is an interesting idea, do you have any resources to help me better understand how this would work?

deleted 5y ago

[deleted]

mytherin 5y ago

I see two possible situations in what you describe: * Ownership of a land/property is tied directly to ownership of a cryptocurrency. In that case getting hacked means people can steal your house. Forgetting your password means losing your house/not being able to sell your house again. This is unacceptable and will never happen in reality. * Ownership of a land/property is not tied to cryptocurrency, but vaguely relates to it. It still sits in a blockchain, but does not correspond exactly with property ownership as ownership might diverge from true ownership in case of theft. Real ownership is still managed centrally by the government, and all of the property law around this will still need to happen all the same. Nothing changes, except we now have a blockchain. Am I missing something, or is there more to this?

dcolkitt 5y ago
> In that case getting hacked means people can steal your house... This is unacceptable and will never happen in reality. We already have institutions which entrust billions in assets based on the ability to keep private keys safe. Coinbase, BlockFi, Celsius, Next, Grayscale, etc. all are trusted by millions to hold crypto assets in custody. In many cases insurers are even willing to write policies against the risk of hacks. Existing DeFi protocols have tens of billions locked inside their smart contracts. I'm not saying that everyone will be comfortable with the risk. But clearly some non-trivial fraction of insitutional investors are already comfortable enough with crypto security technology and custodial services to trust it with "real money"
- mytherin 5y ago
  I see. So this is specifically about speculation, not about replacing all property ownership. This then involves trusting a central authority (the DOA) to grant ownership of the property to who-ever owns the NFT (which can be seen as a derivative from the property). Then the idea is that transfer of ownership through the blockchain is cheaper faster than actual transfer of ownership of a property through the government. That is interesting, but it seems to me that the legal problems here are far from trivial. How do you, as someone that purchases a NFT that is supposed to grant you ownership of a property, supposed to be ensured that you are actually purchasing a property? What if the DOA simply refuses to give it to you? Are you trusting a central authority without any legal fallback? There are also laws on eviction. It's not as simple as "if you get a mortgage and don't pay for a month, the house belongs to the bank". The government will not be pleased if people try to wriggle their way around those laws using a setup like this. There is strong regulation in this domain for a reason.

arberx 5y ago

Any DAOs/examples practicing this currently? Extremely interested in the space, would love to explore further.