What is Wyoming DAO LLC law? (real estate innovation).

Everyone thinks of Wyoming as the cowboy state, open land, cattle and cowboys. With DAO LLC law, they want it to be open land, cattle, cowboys and crypto. A 40-acre plot of land in northwestern Wyoming has a new owner, a group of around 6000 crypto investors, whose goal is to build a city using the Ethereum blockchain. They are imagining a kind of future where you see a parcel map of all the different pieces of land in one click basically and then you just buy a piece of land, then you will have the right to use that land. This group of investors is called CityDAO and it has no official leader, rather it’s owned and governed by its members. They are collectively governing this land so they are deciding what happens to the land, whether they’re going to build things, or maybe allow people to camp on the land. This type of organization is known as a DAO. There are about 200 DAOs tracked by the data service DeepDAO and they all have different goals, like collectively owning an NBA team, a rare copy of the US Constitution or a future blockchain-based city. So how exactly do DAOs work? Why have they become a part of Wyoming’s real estate? and what risks come with investing in them? 

DAO stands for decentralized autonomous organization. Think about a mutual fund which is an investment product created by a company, the company maintains it, the company is responsible for managing all the money, for deciding what the mutual funds purpose is and what its goal is. But unlike a mutual fund, DAOs don’t have a company or any leader to make these decisions. Instead, members pool money together and decide as a group how they want to spend it. Usually once members buy in, they receive a token which grants them voting rights, all of the DAOs functions are also written into code on the blockchain. Think about an investment vehicle, where all the components of the investment vehicle are written into a piece of software and launched and nobody actually owns it and it runs out on its own. Unlike a traditional corporate structure where the company looks for investors to raise money, DAOs let people find them through the internet. The real sort of ingenious idea behind this isn’t necessarily that they’ve come up with some new way to make money, it’s that they’ve come up with a new way to find investors. CityDAO became the first DAO to own land thanks to a new law in Wyoming that went into effect last july. The law recognizes DAOs as LLCs and LLCs can own real estate. Wyoming passed this law because Wyoming legislators a couple of years ago decided that blockchain could give the state a competitive advantage and they wanted to try to attract blockchain-based businesses. 

Wyoming has passed a number of laws to make it easier for blockchain-based companies to operate out of the state, one of which exempts cryptocurrency from state tax. Inspired by the Wyoming DAO law, Scott Fitzsimmons started CityDAO in the hopes that eventually people could buy land instantaneously and those transactions would be transparent for all to see on the blockchain. Fitzsimmons says CityDAO has raised around 7 million dollars from its membership since it was founded, members include Brian Armstrong the co-founder of coinbase and Vitalik Buterin co-creator of the ethereum network. To join CityDAO you have to buy a citizen NFT, which currently sells for about 0.4 ethereum which is around $800, once you’re a citizen you have the right to vote on proposals and propose your own ideas. For example some citizens already passed a proposal to get drone footage of the land. In January, 2022 CityDAO released a new batch of NFTs for citizens to purchase. Each one represents a lease to a specific plot of land in Wyoming, so CityDAO LLC owns this property, but they basically encode a lease as an NFT and say you have the right to use this parcel or build on this parcel. Fitzsimmons says they intend to treat this parcel as a test run and that they’re already looking at locations for their next purchase. He says the next one will be in a less remote area, so citizens can have the option to build on the land. He also says CItyDAO is looking into buying land outside Wyoming. 

DAOs are still considered an experimental business model. Even as awareness grows, DAOs are going to remain limited. DAOs can raise a lot of capital very quickly, but this also makes them a big target for hacking. Ultimately everything now becomes dependent upon the software, if it was not written well and it collects a lot of money somebody’s going to figure out a way to hack it and get into it. Even well-written software programs can be hacked and because most DAOs communicate through the messaging platform, there is a growing area of concern as well. On January 10th, 2022 someone hacked into a CityDAO administrator’s account and scammed some members into sending them tens of thousands of dollars. Fitzsimmons said that after the incident, CityDAO did a full review and increased security on its server, he added that this type of attack has been happening to several DAO servers.The company is working to prevent scams by investing significant resources in education and tools that protect its users. The lack of a traditional corporate structure could also make it harder for individual investors to hold DAOs accountable when it comes to fraud, scams and abuse. This is a very risky space and most of the people who are in it sort of understand those risks and are willing to take them. DAO enthusiasts like Fitzsimmons are hopeful that DAOs will improve and grow over time. He says eventually people will kind of realize the advantages of the system and imagines more and more land and assets coming on to blockchain and CityDAO being there when that happens, helping make it all possible.