4 ms·

Judge Rules Decentralized Autonomous Organizations Not So Decentralized in Law

37 points by rntn 2y ago

brookst 2y ago
There’s a lot of innovation in crypto. There is also an unhealthy obsession with “one simple trick” schemes. Programmers often misunderstand law (it is not a deterministic algorithm). Crypto types often misunderstand not just law but the entire financial system (it is not a deterministic algorithm).
- treyd 2y ago
  It's difficult to get someone to understand something when their paycheck depends on them not understanding it.
  - pfdietz 2y ago
    [flagged]
  - tivert 2y ago
    > It's difficult to get someone to understand something when their paycheck depends on them not understanding it. It's not just that. It's also plain stupidity and the delusion to think you can live in a fantasy land of your own creation, and the whole world has to play along with you. IIRC, the people running one of these DAO organizations didn't understand the difference between owning a copy and owning the copyright to the work, and massively overpaid for a copy before they figured it out (https://www.esquire.com/entertainment/books/a38815538/dune-crypto-nft-sale-mistake-explained/ https://www.esquire.com/entertainment/books/a38815538/dune-c...).
    - drewcoo 2y ago
      Thoroughly agree. I've had many conversations with self-described "smart" "autodidacts" who claimed to understand entire fields better after essentially zero study than people who worked in those fields for a lifetime. They couldn't understand that other smart people studied (often in universities) and devoted years of practical work in those areas and who communicate with one another and might possibly understand what they were doing better than an isolated neophyte.
      - tivert 2y ago
        That's also a symptom "engineer's disease," where some engineer confuses their expertise in one area (e.g. programming) for expertise in all areas, and proceeds to swagger around like an idiot who thinks his every dumb idea is gold because he knows better than everyone else. Usually the dumb idea is just to assume everything is really, truly like the one thing he knows, and all those stupid experts in the other area somehow just missed that. DAO organizations are a perfect example of that, because their proponents really want code and law to be the same thing (code), without really understanding what the law does and how it is different.
- duxup 2y ago
  I want to throw something else out there with regards to Crypto. There seems to be a lot of "Bitcoin ideology" (my own very poor term) that feels disconnected from the end result. The folks I know into crypto seem to carry a lot of that ideology with them, very loose ideas about freedom, fear of government taking things from them, and a sense of empowerment. Yet the ecosystem they dive into seems to be full of scams and an incredible amount of complexity for them to safely navigate.
  - coldpie 2y ago
    > very loose ideas about freedom, fear of government taking things from them, and a sense of empowerment They're somewhere between being victims of a con, and gambling addiction. Both of those are really tough attributes to confront & overcome.
- bluGill 2y ago
  While there is a lot of innovation, this case is about things that fundamentally were innovations in the 1600s. They did a few tweaks, but they are variations on what people were doing in the "tulip bubble" - they just used computers and some math that wasn't possible then. This math of course is a real innovation, but what it was used for is not.
- deleted 2y ago
  [deleted]
zb3 2y ago
Very good, death to crypto which is only useful for scams and money laundering.
- contrapunctus 2y ago
  You forgot energy wastage and environmental destruction.
- MattPalmer1086 2y ago
  And regularly getting hacked.
jagged-chisel 2y ago
Even those with a libertarian bent want the law's protections when they lose, as evidenced by a class action lawsuit. It boggles my mind that anyone would put thousands of dollars (or more) into an organization that claims to live outside the law. What's to keep them from taking the money for themselves and doing nothing else?
- lenerdenator 2y ago
  > What's to keep them from taking the money for themselves and doing nothing else? Why, the invisible hand of the free market, my good person! Kidding. There's literally nothing but game theory and that no longer means what it did when humans interacted face-to-face in networks of no more than 300 people.
  - lolinder 2y ago
    > that no longer means what it did when humans interacted face-to-face in networks of no more than 300 people. Game theory originated as a discrete field of study with von Neumann in 1928, after the invention and popularization of both the telegraph and the telephone. People were already living in enormous cities and doing business with people that they would never meet face to face or do business with again. Game theory accounts for this by distinguishing between repeated games and single shot games [0]. What you might actually mean is that game theory has never perfectly accounted for human activity because at the individual level humans are deeply chaotic and irrational actors. [0] https://en.m.wikipedia.org/wiki/Repeated_game https://en.m.wikipedia.org/wiki/Repeated_game
    - lenerdenator 2y ago
      There were already people living in cities and doing business over long distances with people they'd never meet again, but those people were in the minority. Even today, only about 56% of people, globally, live in cities [0], and back then, city dwellers were in the minority. In 1928 many American households didn't have telephone or telegraph services. My great-grandparents, who lived on the outskirts of a major Midwestern city, had a party line during WWII, meaning they had to share the phone line with people in geographic proximity. It would have been even rarer elsewhere around the world at the time. You paid your landlord or mortgage holder face-to-face, often in cash. Same with your grocer, doctor, lawyer, handyman, and employees. Humans were far less likely to act irrationally in social contexts when they had to face that same social context (groups of people in situations) over and over again. They might have thought irrationally, and weren't perfectly rational actors, but we're a social species, and enforced normal behavior through social situations. DAOs are another attempt to abstract all of that away, and they suck at it, because we're not wired to care about what some abstract concept of decency means. [0] https://www.worldbank.org/en/topic/urbandevelopment/overview https://www.worldbank.org/en/topic/urbandevelopment/overview
tivert 2y ago
> An LLC representing the DAO has leaned heavily into web3’s notion of “decentralization,” in an effort to get Lido and its associates off the hook. Dolphin CL, LLC, which represents Lido, has made the claim that the organization is just “software” and does not represent a “legal entity” and, therefore, cannot be held liable for its action, court documents claim. By that logic, if I create an "autonomous" software-controlled gun that then kills people at my direction, I'm off the hook because the gun was fired by software? > Judge Vince Chhabria found that, under California law, Lido represents a “general partnership” and is therefore subject to the same regulations that such arrangements are beholden to. He also found that those organizations deemed Lido’s “institutional investors”—that is, the large companies that fronted much of its money and managed its operations—should be deemed members of that partnership and, therefore, held liable. Those companies include investment firm Paradigm Operations, well-known venture capital firm Andreessen Horowitz, and investment firm Dragonfly Digital Management. A fourth firm, Robot Ventures, was excluded as a partner. Ouch, IIRC the liability of a general partner is unlimited. Serves them right, though.
red-iron-pine 2y ago
[flagged]
jmyeet 2y ago
First, libertarians can't be taken seriously. Roads and courts are like kryptonite to libertarianism. Keep pressing and they'll either wave away any issues or slowly reinvent everything we have now. Second, most people pushing crypto simply don't understand the financial system. That's sort of the "disruptor" mentality run amok. But thing slike reversible transactions are a feature not a bug. Third, crypto has a lot of former gold bugs who bemoan the death of the gold standard. It's necessary to point out that the US dollar has never been 100% backed by silver and/or gold. What really backs the US dollar is the US military. Lastly, to tie all of this to together with the topic at hand: it would take one law (possibly just one regulation) to completely kill the crypto ecosystem. If the US government decides to use its power against the crypto ecosystem, crypto will collapse like a house of cards. The decentralization will mean absolutely nothing. For example, if the US said today that a requirement for access to the US financial system was to bar converting fiat currency to and from crypto of any kind thencrypto would die. Yes, the blockchain can technically survive but it's the utility in the real world that gives it value. What initially drove Bitcoin was wealthy Chinese people using it to escape China's capital controls (ie mine Bitcoin in China, cash out the Bitcoin outside China).
- Eddy_Viscosity2 2y ago
  > it would take one law (possibly just one regulation) to completely kill the crypto ecosystem Instead, the newly elected US officials will very likely create a "strategic bitcoin reserve" where the US government buys bitcoins, enriching the whales who will finally have a large enough buyer to absorb all their mounds of coins. It'd be like if they had created a 'strategic beanie baby reserve' in the 90s.
- duxup 2y ago
  I wish there was a libertarian type system / political party that did operate with some sense of reality. That whole space though is either completely unrealistic / absurd, or owned by folks more interested in corporatism.
- lolinder 2y ago
  > First, libertarians can't be taken seriously. Roads and courts are like kryptonite to libertarianism. This is a very sweeping statement about a political ideology that varies as much as "liberal" and "conservative" do. Believing that roads and courts shouldn't exist isn't baked in to some official libertarian Bible—all libertarianism necessarily signifies is that someone believes that both personal and financial freedoms should be given roughly equal consideration, where a liberal might prioritize personal freedom and a conservative might prioritize financial freedom. Where someone falls on the spectrum of how much government involvement is appropriate in either type of freedom can vary quite a bit. (The average libertarian who runs for office as a Libertarian does seem to be extreme in the way that you describe, but I think that's a side effect of our FPTP voting system—only a fanatic would truly believe that it's better to run on their own than get behind the least-objectionable candidate—than it is a result of libertarianism as a philosophy.)
deleted 2y ago
[deleted]

37 points by rntn 2y ago

There’s a lot of innovation in crypto. There is also an unhealthy obsession with “one simple trick” schemes. Programmers often misunderstand law (it is not a deterministic algorithm). Crypto types often misunderstand not just law but the entire financial system (it is not a deterministic algorithm).

treyd 2y ago
It's difficult to get someone to understand something when their paycheck depends on them not understanding it.
- pfdietz 2y ago
  [flagged]
- tivert 2y ago
  > It's difficult to get someone to understand something when their paycheck depends on them not understanding it. It's not just that. It's also plain stupidity and the delusion to think you can live in a fantasy land of your own creation, and the whole world has to play along with you. IIRC, the people running one of these DAO organizations didn't understand the difference between owning a copy and owning the copyright to the work, and massively overpaid for a copy before they figured it out (https://www.esquire.com/entertainment/books/a38815538/dune-crypto-nft-sale-mistake-explained/ https://www.esquire.com/entertainment/books/a38815538/dune-c...).
  - drewcoo 2y ago
    Thoroughly agree. I've had many conversations with self-described "smart" "autodidacts" who claimed to understand entire fields better after essentially zero study than people who worked in those fields for a lifetime. They couldn't understand that other smart people studied (often in universities) and devoted years of practical work in those areas and who communicate with one another and might possibly understand what they were doing better than an isolated neophyte.
    - tivert 2y ago
      That's also a symptom "engineer's disease," where some engineer confuses their expertise in one area (e.g. programming) for expertise in all areas, and proceeds to swagger around like an idiot who thinks his every dumb idea is gold because he knows better than everyone else. Usually the dumb idea is just to assume everything is really, truly like the one thing he knows, and all those stupid experts in the other area somehow just missed that. DAO organizations are a perfect example of that, because their proponents really want code and law to be the same thing (code), without really understanding what the law does and how it is different.
duxup 2y ago
I want to throw something else out there with regards to Crypto. There seems to be a lot of "Bitcoin ideology" (my own very poor term) that feels disconnected from the end result. The folks I know into crypto seem to carry a lot of that ideology with them, very loose ideas about freedom, fear of government taking things from them, and a sense of empowerment. Yet the ecosystem they dive into seems to be full of scams and an incredible amount of complexity for them to safely navigate.
- coldpie 2y ago
  > very loose ideas about freedom, fear of government taking things from them, and a sense of empowerment They're somewhere between being victims of a con, and gambling addiction. Both of those are really tough attributes to confront & overcome.
bluGill 2y ago
While there is a lot of innovation, this case is about things that fundamentally were innovations in the 1600s. They did a few tweaks, but they are variations on what people were doing in the "tulip bubble" - they just used computers and some math that wasn't possible then. This math of course is a real innovation, but what it was used for is not.
deleted 2y ago
[deleted]

zb3 2y ago

Very good, death to crypto which is only useful for scams and money laundering.

contrapunctus 2y ago
You forgot energy wastage and environmental destruction.
MattPalmer1086 2y ago
And regularly getting hacked.

jagged-chisel 2y ago

Even those with a libertarian bent want the law's protections when they lose, as evidenced by a class action lawsuit. It boggles my mind that anyone would put thousands of dollars (or more) into an organization that claims to live outside the law. What's to keep them from taking the money for themselves and doing nothing else?

lenerdenator 2y ago
> What's to keep them from taking the money for themselves and doing nothing else? Why, the invisible hand of the free market, my good person! Kidding. There's literally nothing but game theory and that no longer means what it did when humans interacted face-to-face in networks of no more than 300 people.
- lolinder 2y ago
  > that no longer means what it did when humans interacted face-to-face in networks of no more than 300 people. Game theory originated as a discrete field of study with von Neumann in 1928, after the invention and popularization of both the telegraph and the telephone. People were already living in enormous cities and doing business with people that they would never meet face to face or do business with again. Game theory accounts for this by distinguishing between repeated games and single shot games [0]. What you might actually mean is that game theory has never perfectly accounted for human activity because at the individual level humans are deeply chaotic and irrational actors. [0] https://en.m.wikipedia.org/wiki/Repeated_game https://en.m.wikipedia.org/wiki/Repeated_game
  - lenerdenator 2y ago
    There were already people living in cities and doing business over long distances with people they'd never meet again, but those people were in the minority. Even today, only about 56% of people, globally, live in cities [0], and back then, city dwellers were in the minority. In 1928 many American households didn't have telephone or telegraph services. My great-grandparents, who lived on the outskirts of a major Midwestern city, had a party line during WWII, meaning they had to share the phone line with people in geographic proximity. It would have been even rarer elsewhere around the world at the time. You paid your landlord or mortgage holder face-to-face, often in cash. Same with your grocer, doctor, lawyer, handyman, and employees. Humans were far less likely to act irrationally in social contexts when they had to face that same social context (groups of people in situations) over and over again. They might have thought irrationally, and weren't perfectly rational actors, but we're a social species, and enforced normal behavior through social situations. DAOs are another attempt to abstract all of that away, and they suck at it, because we're not wired to care about what some abstract concept of decency means. [0] https://www.worldbank.org/en/topic/urbandevelopment/overview https://www.worldbank.org/en/topic/urbandevelopment/overview

tivert 2y ago

> An LLC representing the DAO has leaned heavily into web3’s notion of “decentralization,” in an effort to get Lido and its associates off the hook. Dolphin CL, LLC, which represents Lido, has made the claim that the organization is just “software” and does not represent a “legal entity” and, therefore, cannot be held liable for its action, court documents claim. By that logic, if I create an "autonomous" software-controlled gun that then kills people at my direction, I'm off the hook because the gun was fired by software? > Judge Vince Chhabria found that, under California law, Lido represents a “general partnership” and is therefore subject to the same regulations that such arrangements are beholden to. He also found that those organizations deemed Lido’s “institutional investors”—that is, the large companies that fronted much of its money and managed its operations—should be deemed members of that partnership and, therefore, held liable. Those companies include investment firm Paradigm Operations, well-known venture capital firm Andreessen Horowitz, and investment firm Dragonfly Digital Management. A fourth firm, Robot Ventures, was excluded as a partner. Ouch, IIRC the liability of a general partner is unlimited. Serves them right, though.

red-iron-pine 2y ago

[flagged]

jmyeet 2y ago

First, libertarians can't be taken seriously. Roads and courts are like kryptonite to libertarianism. Keep pressing and they'll either wave away any issues or slowly reinvent everything we have now. Second, most people pushing crypto simply don't understand the financial system. That's sort of the "disruptor" mentality run amok. But thing slike reversible transactions are a feature not a bug. Third, crypto has a lot of former gold bugs who bemoan the death of the gold standard. It's necessary to point out that the US dollar has never been 100% backed by silver and/or gold. What really backs the US dollar is the US military. Lastly, to tie all of this to together with the topic at hand: it would take one law (possibly just one regulation) to completely kill the crypto ecosystem. If the US government decides to use its power against the crypto ecosystem, crypto will collapse like a house of cards. The decentralization will mean absolutely nothing. For example, if the US said today that a requirement for access to the US financial system was to bar converting fiat currency to and from crypto of any kind thencrypto would die. Yes, the blockchain can technically survive but it's the utility in the real world that gives it value. What initially drove Bitcoin was wealthy Chinese people using it to escape China's capital controls (ie mine Bitcoin in China, cash out the Bitcoin outside China).

Eddy_Viscosity2 2y ago
> it would take one law (possibly just one regulation) to completely kill the crypto ecosystem Instead, the newly elected US officials will very likely create a "strategic bitcoin reserve" where the US government buys bitcoins, enriching the whales who will finally have a large enough buyer to absorb all their mounds of coins. It'd be like if they had created a 'strategic beanie baby reserve' in the 90s.
duxup 2y ago
I wish there was a libertarian type system / political party that did operate with some sense of reality. That whole space though is either completely unrealistic / absurd, or owned by folks more interested in corporatism.
lolinder 2y ago
> First, libertarians can't be taken seriously. Roads and courts are like kryptonite to libertarianism. This is a very sweeping statement about a political ideology that varies as much as "liberal" and "conservative" do. Believing that roads and courts shouldn't exist isn't baked in to some official libertarian Bible—all libertarianism necessarily signifies is that someone believes that both personal and financial freedoms should be given roughly equal consideration, where a liberal might prioritize personal freedom and a conservative might prioritize financial freedom. Where someone falls on the spectrum of how much government involvement is appropriate in either type of freedom can vary quite a bit. (The average libertarian who runs for office as a Libertarian does seem to be extreme in the way that you describe, but I think that's a side effect of our FPTP voting system—only a fanatic would truly believe that it's better to run on their own than get behind the least-objectionable candidate—than it is a result of libertarianism as a philosophy.)

deleted 2y ago

[deleted]