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Honest question, is this satire? The only hint is their mention of "KYC processes." As an investor, I am confused who would agree to this. I would like to hea

by jimhi 5y ago

Honest question, is this satire? The only hint is their mention of "KYC processes." As an investor, I am confused who would agree to this. I would like to hear from someone who has done this. Is there any binding legal action you could take if there is fraud? It says blended teams of anonymous and identified people but then you are just investing in the identified people and will have to go after them. One only has to look at the history of the Silk Road to see how this goes. There was repeatedly tons of "reliable" pseudonymous sellers there who would maintain their reputation until they took a bunch of orders and pulled the rug. Over and over.

bradleyjg 5y ago
> Honest question, is this satire? Tom Lehrer once said: "Political satire became obsolete when Henry Kissinger was awarded the Nobel peace prize." I feel like with Bitcoin at $40-50k and Tesla at $1T we are in a similar place when it comes to investing.
jimhi 5y ago
Upon further research - this was written by a general partner at https://volt.capital https://volt.capital. I assume they are trying to say it is possible to invest in decentralized companies with anonymous founders by their tokens and protocols. Like many do with bitcoin.
ahepp 5y ago
I don't think it's satire, but I do think it's one of the dumber ideas I've heard. My best guess would be it's a planted article to try and con someone into anonymously investing in a promising young DAO.
amscanne 5y ago
> Is there any binding legal action you could take if there is fraud? It says blended teams of anonymous and identified people but then you are just investing in the identified people and will have to go after them. You can simply encode the full financing agreement (along with all relevant agreements, articles and by-laws) as smart contracts, and perform all company operations exclusively on the blockchain.
- sbierwagen 5y ago
  "Simply" is carrying a lot of weight there.
  - rmbyrro 5y ago
    If you compare to the weight it carries in the traditional legal and financial markets, I'd say it's pretty balanced, or even in favor of blockchain.
  - amscanne 5y ago
    Fully intended as a joke :)
- geofft 5y ago
  Do you have an example of how you might do this? Can you encode "and we have recourse to the Delaware courts" into a smart contract? I thought you could only encode statements about things that happen on the smart contract's blockchain, but I'm not very knowledgeable about this. If you do not have access to real-world courts, in the case of fraud, how do you recover your money? That is, suppose that investor A invests a bunch of cryptocurrency in pseudonymous founder B according to a smart contract, for a certain project, and B uses the funding to hire engineer C to help with the work. However, B and C are actually the same entity, who had no intention of doing any work at all, and B pays a generous "salary" to C and then comes back to A a few years later and says "Yeah we ran out of runway, we're gonna shut down, sorry" and A says "Yeah it happens to the majority of startups, it's fine." Then A hears a rumor about what really happened. How does A go about substantiating that rumor and getting their money back? The only solution I can see involves B putting up collateral in the smart contract equal to the amount A invests in B, and that can only be released when some decision is made some years later that indeed B was non-fraudulent (let's imagine, for the sake of argument, there was a smart-contract court of chancery that could evaluate whether B was working in good faith and had subpoena powers, although I'm also curious about how that could work). That way, in the case of fraud, A could recover the amount they invested because exactly that much money is locked into the contract for this very purpose. But the market for venture capital where the founders already have as much money as they are raising, and are willing to lock up use of those funds while they work on their startup, is extremely small - such founders are necessarily capable of bootstrapping themselves. So I'm genuinely trying to understand how it can be done or better yet whether anyone has done it. (Smart contracts are generally public, right? So if this has been done, it should be visible?)
Multiplayer 5y ago
There are some pseudonyms that have built up large social audiences and are active investors in many projects that I have crossed paths with. At least one is a founder as well as an investor, etc. Check out @boredelonmusk as an example.
- ahepp 5y ago
  Not knowing where the money comes from is pretty normal. Not knowing where the money is going is generally a bad sign.
nabla9 5y ago
Moxie Marlinspike is a pseudonym. He co-founded of Signal Foundation. As the article says, pseudonymous does not mean anonymous. The real identity of the person is in the legal documents and known by everybody how needs to know. The fame and credibility the person has acquired has been done using pseudonym.
- democracy 5y ago
  And this is strange, since what they are talking about is obviously "anonymity".
  - nabla9 5y ago
    Clearly they are not. The most extreme case they mention is: > .. Assumes team is pre-product and does not want to reveal their identities to investors. However, there are teams that choose to only reveal their identities to stakeholders for legal and financial purposes.
  - simplestats 5y ago
    the footnote says that sometimes identities are revealed to stakeholders.
andrewfromx 5y ago
Look at https://www.deso.org/ https://www.deso.org/ and how Nader raised back when he was just “diamondhands”
rmbyrro 5y ago
A nominated founder promises you, investor, they have a miraculous lab machine and take a billion dollars. Turns out they defrauded you. With all the pile of legal papers you have, what can you do to take your money back?
- jimhi 5y ago
  I have been in two lawsuits related to my startups. Your legal options depend on the country the company is operating in and the home of the person you are dealing with. You can't serve them papers without knowing their identity. Not knowing their citizenship adds additional flight risk. A court can garnish wages and send someone to jail. Most lawsuits end in reconciliation before it goes to court because of the potential costs. Both of mine did. This is why investors prefer to deal with American C corps above all else. This is also why foreign investors want to deal with a Hong Kong subsidiaries with Mainland Chinese companies.
  - NavinF 5y ago
    I think you missed the Theranos joke. His point is that it doesn’t matter if the company is a C corp or some blockchain org, you can’t get your money back once it’s been spent by the company.
- HWR_14 5y ago
  If the money is irretrievable, at least identified people can be sent to jail.
searchableguy 5y ago
Why? This is exciting. There could be a way to prove your identity without revealing it using zero knowledge proof on the contracts. I'm seeing some of these pseudonymous companies take the form of a DAO with DAO members having say in how the tokens (funding) is distributed so the founder doesn't control 100% of it. The investors would also be part of the DAO and can vote on proposals. Distribution of funds can be controlled through smart contracts. It will make the landscape diverse too. There will be less biases for investors when they can't know the identity of the founder. This is making the place more inclusive. Also, I think Sam Altman wanted to do something similar which he started with the community. https://www.hyperscalefund.com/ https://www.hyperscalefund.com/

by jimhi 5y ago

bradleyjg 5y ago

> Honest question, is this satire? Tom Lehrer once said: "Political satire became obsolete when Henry Kissinger was awarded the Nobel peace prize." I feel like with Bitcoin at $40-50k and Tesla at $1T we are in a similar place when it comes to investing.

jimhi 5y ago

Upon further research - this was written by a general partner at https://volt.capital https://volt.capital. I assume they are trying to say it is possible to invest in decentralized companies with anonymous founders by their tokens and protocols. Like many do with bitcoin.

ahepp 5y ago

I don't think it's satire, but I do think it's one of the dumber ideas I've heard. My best guess would be it's a planted article to try and con someone into anonymously investing in a promising young DAO.

amscanne 5y ago

> Is there any binding legal action you could take if there is fraud? It says blended teams of anonymous and identified people but then you are just investing in the identified people and will have to go after them. You can simply encode the full financing agreement (along with all relevant agreements, articles and by-laws) as smart contracts, and perform all company operations exclusively on the blockchain.

sbierwagen 5y ago
"Simply" is carrying a lot of weight there.
- rmbyrro 5y ago
  If you compare to the weight it carries in the traditional legal and financial markets, I'd say it's pretty balanced, or even in favor of blockchain.
- amscanne 5y ago
  Fully intended as a joke :)
geofft 5y ago
Do you have an example of how you might do this? Can you encode "and we have recourse to the Delaware courts" into a smart contract? I thought you could only encode statements about things that happen on the smart contract's blockchain, but I'm not very knowledgeable about this. If you do not have access to real-world courts, in the case of fraud, how do you recover your money? That is, suppose that investor A invests a bunch of cryptocurrency in pseudonymous founder B according to a smart contract, for a certain project, and B uses the funding to hire engineer C to help with the work. However, B and C are actually the same entity, who had no intention of doing any work at all, and B pays a generous "salary" to C and then comes back to A a few years later and says "Yeah we ran out of runway, we're gonna shut down, sorry" and A says "Yeah it happens to the majority of startups, it's fine." Then A hears a rumor about what really happened. How does A go about substantiating that rumor and getting their money back? The only solution I can see involves B putting up collateral in the smart contract equal to the amount A invests in B, and that can only be released when some decision is made some years later that indeed B was non-fraudulent (let's imagine, for the sake of argument, there was a smart-contract court of chancery that could evaluate whether B was working in good faith and had subpoena powers, although I'm also curious about how that could work). That way, in the case of fraud, A could recover the amount they invested because exactly that much money is locked into the contract for this very purpose. But the market for venture capital where the founders already have as much money as they are raising, and are willing to lock up use of those funds while they work on their startup, is extremely small - such founders are necessarily capable of bootstrapping themselves. So I'm genuinely trying to understand how it can be done or better yet whether anyone has done it. (Smart contracts are generally public, right? So if this has been done, it should be visible?)

Multiplayer 5y ago

There are some pseudonyms that have built up large social audiences and are active investors in many projects that I have crossed paths with. At least one is a founder as well as an investor, etc. Check out @boredelonmusk as an example.

ahepp 5y ago
Not knowing where the money comes from is pretty normal. Not knowing where the money is going is generally a bad sign.

nabla9 5y ago

Moxie Marlinspike is a pseudonym. He co-founded of Signal Foundation. As the article says, pseudonymous does not mean anonymous. The real identity of the person is in the legal documents and known by everybody how needs to know. The fame and credibility the person has acquired has been done using pseudonym.

democracy 5y ago
And this is strange, since what they are talking about is obviously "anonymity".
- nabla9 5y ago
  Clearly they are not. The most extreme case they mention is: > .. Assumes team is pre-product and does not want to reveal their identities to investors. However, there are teams that choose to only reveal their identities to stakeholders for legal and financial purposes.
- simplestats 5y ago
  the footnote says that sometimes identities are revealed to stakeholders.

andrewfromx 5y ago

Look at https://www.deso.org/ https://www.deso.org/ and how Nader raised back when he was just “diamondhands”

rmbyrro 5y ago

A nominated founder promises you, investor, they have a miraculous lab machine and take a billion dollars. Turns out they defrauded you. With all the pile of legal papers you have, what can you do to take your money back?

jimhi 5y ago
I have been in two lawsuits related to my startups. Your legal options depend on the country the company is operating in and the home of the person you are dealing with. You can't serve them papers without knowing their identity. Not knowing their citizenship adds additional flight risk. A court can garnish wages and send someone to jail. Most lawsuits end in reconciliation before it goes to court because of the potential costs. Both of mine did. This is why investors prefer to deal with American C corps above all else. This is also why foreign investors want to deal with a Hong Kong subsidiaries with Mainland Chinese companies.
- NavinF 5y ago
  I think you missed the Theranos joke. His point is that it doesn’t matter if the company is a C corp or some blockchain org, you can’t get your money back once it’s been spent by the company.
HWR_14 5y ago
If the money is irretrievable, at least identified people can be sent to jail.

searchableguy 5y ago

Why? This is exciting. There could be a way to prove your identity without revealing it using zero knowledge proof on the contracts. I'm seeing some of these pseudonymous companies take the form of a DAO with DAO members having say in how the tokens (funding) is distributed so the founder doesn't control 100% of it. The investors would also be part of the DAO and can vote on proposals. Distribution of funds can be controlled through smart contracts. It will make the landscape diverse too. There will be less biases for investors when they can't know the identity of the founder. This is making the place more inclusive. Also, I think Sam Altman wanted to do something similar which he started with the community. https://www.hyperscalefund.com/ https://www.hyperscalefund.com/