Just DAO It: A Podcast for People Starting DAOs

Hey guys, welcome to the Just Out podcast,

the podcast for people starting DAOs.

Today is a little bit of a

different episode in case

you haven't already noticed.

My name is Leo Henkels and

I'll be your host today.

A little bit more about me

is that I've been doing

business development at

MyDAO for a little over a year now.

And I also help produce the

Just Out podcast.

So bear with me.

We might have some technical

issues as we are recording live,

but I will edit this live

stream and post it to our

podcast feed at the end of

the day so everyone can listen to it.

Before I kind of dive into

our topic for today, Adam,

would you like to introduce yourself?

Sure,

so regular listeners know me as

usually the host of the podcast.

Today, I'm the guest, as you can see.

But I've been working on

myDAO for about three years.

Before that,

I was consulting for people

starting and operating DAOs.

And I got into crypto originally in 2012.

I've been researching the

space since then and

eventually got into it

professionally to work on DAOs.

Awesome, awesome.

So yeah, just again, we're recording live,

so there may be issues as usual,

but I'll try to edit them

out in the podcast feed for everybody.

So I think we should talk

about this episode that we're recording.

And I think the main topic

that we'll be touching on

is the DAO regulation that

was recently passed in the

Marshall Islands.

And we thought that there

would be no better people

to talk about it than me

and Adam as we worked on

implementing these changes

and then getting them ready

for our clients.

um so before we kind of dive

into the specifics of the

dow regulation and talk

about what it means for

current and future clients

um adam do you want to

provide a little bit about

my dow about the marshall

islands and its

relationship with dows so

that everyone has the

appropriate context before

we kind of dive into the regulation

Yeah, sounds good.

So first of all,

a little history of the Marshall Islands.

So the Marshall Islands

became an independent

nation around the end of

the 1970s after being a German colony,

a Japanese colony and a U.S.

colony or territory during World War II.

And shortly after gaining its independence,

started a shipping registry.

And the shipping registry

has led the Marshall

Islands to become one of

the top three destinations

or jurisdictions for

shipping related companies to domicile.

So they have about 40 New

York Stock Exchange and

Nasdaq companies that are

Marshall Islands companies.

So big player in the shipping industry.

Fast forwarding to about three years ago,

I was working on building

technology for some DAOs

when I realized that a lot

of DAOs had a similar problem.

And that problem was

actually a legal problem or

really a jurisdictional and

legal entity problem,

which is to say that there

was nowhere good to incorporate.

Now,

this came up because we were offered

that one DAO I was working

on was offered a million

dollar grant from the

Moonbeam Ecosystem Fund.

And they said to accept this grant,

you have to sign the grant agreement,

which means you need a

legal entity for your DAO.

Otherwise,

you can't enter into a contract.

And so we looked around the world,

we looked at Cayman, Swiss, Panama,

Delaware,

other popular corporate

jurisdictions and came to

the realization that all of

these options would have

forced us to make certain compromises.

So, for example,

we didn't want to be forced

to have a board or any kind

of management team for our DAO.

We wanted to put power

directly in the hands of

our members or token holders.

Additionally,

we wanted to be able to have

anonymous membership.

So we wanted people to be

able to hold our token and

be a member of the company

and not to have to know

their name and address, right?

Because it's not practical

when you have so many

members who are just

holding and trading tokens

and stuff like that.

And so both of these things

were impossible with any

legal entity that was

available at the time.

So we reached out to a

senator in the Marshall

Islands and started a

conversation that led to

first some brainstorming

and eventually passing the

first law in the Marshall

Islands in late 2021.

which created a nonprofit DAO LLC,

a new type of legal entity

that's made for DAOs and Web3.

And over the past few years,

we've passed two additional

laws at the end of 2022 and

the end of 2023.

And then finally, just a couple months ago,

passed the DAO regulation,

which is what we're here

primarily to talk about today,

but we're going to put it

in the context of the

greater story and

everything going on in the

marshall islands and in

that first year so in 2022

we created mydao which

stands for marshall islands

dao mydao is a public

private partnership with

the government of the

marshall islands and it

follows the same model that

the marshall islands has

used in the shipping

industry very successfully

which is that there is one

private company that acts

as the sole registered

agent of record for all

uh in the case of the

shipping industry for all

the shipping related

companies really all

offshore companies other

than dows are registered

through this one registered

agent that's in a

partnership with the

government and so mydao

follows the same model we

are the the registered agent for

DAO LLCs that want to

register in the Marshall Islands.

So I think we'll get into a

little bit more about our

legal entity itself, the DAO LLC,

and how it works and its benefits.

But that's a little bit of

history as far as how we got here.

And maybe I'll just add one more thing,

which is we're now

approaching about 200 DAOs

that are registering in the

Marshall Islands after just

about two and a half years

of this project.

So we're seeing some really

good growth of DAOs in the

Marshall Islands.

Yeah.

And I'd also highlight that

we have at least 50 clients

that are currently

interested and have signed on with us.

So over 250 clients that we

are in talks with total in

forgetting the DAO LLC,

which is really exciting.

And just one other thing I'd

highlight is that if you

guys want to dig deeper

into the Marshall Islands,

or if you want to hear from some of the

people in the Marshall

Islands government and talk

about and hear them talk

about their thoughts on crypto.

There's a great podcast on

Balaji Srinivasan's feed,

kind of talking about the

Marshall Islands and its

relationship with crypto.

So if you're interested in

learning more about that

and some of the background there,

I'd recommend checking that out.

And I'll make sure to link

that in the show notes

after the live stream.

So, Adam,

I think one thing that I know I

always have questions about

and I think other people

might is what is regulation, right?

And how is that potentially

different than legislation?

We touched on the legislation.

But what is regulation?

How is it different from legislation?

And then in a Marshall Islands context,

how is it different from

what the Marshall Islands

has already passed in the legislation?

It's a good question.

I would say the simplest

answer is just to say that

there are kind of a couple

layers of rules or policies

that guide how a system

works in a nation or a state.

Laws are probably the base level.

You could say the base level

is the constitution of the

country or the state.

The level above that is legislation.

Usually legislation has to be passed by

the democratically elected

governing body of that

state um and may be

approved by a president or

a governor uh and so then

that legislation becomes

the the another base layer

and then regulations are

usually passed in a sense

on top of the laws on top

of the legislation and it

becomes another set of

rules that you have to

follow usually goes into a

lot more detail so if a law

maybe goes over the basic core concepts.

It's like in the case of a DAO LLC,

brings it into existence

and defines what it is, right?

And it does go,

there's a more nuance in that,

but then a regulation instead says, okay,

well,

here's the forms you have to fill

out to create one of these DAO LLCs.

And here's the process you have to follow.

The regulation even goes

into what the government

has to do and how the

government is supposed to

operate to facilitate the

Dow LLCs in the Marshall Islands.

So it's a little bit

different probably wherever you look.

And Leo,

you brought this point up with me

earlier too,

which is you could also even

look at like case law and

once there's conflicts in the courts,

than those decisions that

are made by judges.

And by the way,

this was different in different places,

right?

We have people could look

into the difference between

like common law versus

non-common law societies.

The Marshall Islands follows

the same pattern as the

United States in terms of

how its legal system is structured,

except that it's just one country.

It's not a country with a

bunch of different states

that have their own rules,

which can really simplify things.

But you could look at court cases too,

and you could argue that

that's kind of another

layer even on top of the regulations.

So you have these different

layers and you could kind

of refer to all of it as

policy in a sense,

or you could refer to it as

a legal framework or a

regulatory environment, right?

That regulatory environment

for DAOs in the Marshall Islands,

if I say that,

I'm referring to all of it.

right it's everything from

the core laws of the

marshall islands to the dow

law to the dow regulation

to eventually there will be

court cases too and people

will have to look and see

well how are the courts

acting and let me consider

how that affects you know

my perception of the policy

environment the legal

environment the regulatory

environment yeah i mean i

think it's i think that's a

good point hopefully it

helps uh clear things up

for for other people besides me because

When I'm talking to DAOs

every day as part of my job here at MyDAO,

they're always telling me

about how there's

regulation in the US and

then there's legislation

based in other jurisdictions.

And then there's all

different types of crypto

things being passed and

they're not sure what to follow.

And I think that's the

reality is that crypto

regulation legislation is

pretty ambiguous and pretty

confusing worldwide.

And something that we're

trying to do at the

Marshall Islands is simplify it.

and give someone and give

DAOs really just one way to

follow so they don't have

to pull in from different

jurisdictions to try to

figure out what to do as a

global organization.

Yeah, go ahead.

I think it's worth

mentioning that the reality

is that unfortunately, if you're a global

project a global

organization you do have to

take into account laws all

over the world you know for

example wherever you hire

someone usually it doesn't

matter what your home

jurisdiction is they may

have rules you have to

follow but you have to

follow the rules the

policies where you're

hiring the person let's say

you're raising money from

an investor you have to

follow the rules where that

person is located and where

their transaction takes

place not just where your

home jurisdiction is

So there are certain core

things that depend

primarily on your chosen jurisdiction,

especially the structure of

your legal entity.

It's like, how do you track your members?

How do you make decisions?

Are you required to have a

board or officers or other things?

And we'll get into some of

the unique elements of the

Marshall Islands Dow LLC legal entity.

But there are all kinds of

rules that you do have to follow.

Let's say you're holding an

event in Switzerland.

There might be Swiss laws

that apply to holding events there.

It doesn't matter if you're

a Marshall Islands company

or a Delaware company in that regard.

So you do, I'd say,

I don't know if it's fair to say,

unfortunately, I guess,

just because it can be

challenging and costly.

We say, unfortunately,

but that's the nature of

the world that we live in,

is that if you're operating globally,

you do have to take global

rules into account.

But it's also important to

pick the right home

jurisdiction to domicile your company.

Gotcha.

That makes sense.

Yeah.

I think that clears things up.

Awesome.

So you want to kind of zoom in into,

into like the regulation itself and,

and how that might change

some of our current processes.

I think,

I think probably the most

applicable way is how is it

changing our processes for

future customers?

And I think,

I think the most common

question that we get are

questions around the

registration process.

So you kind of want to dive

in how the regulation is

changing things there.

I mean, yeah, first of all,

one of the goals for the

regulation is to be a plain

English document that anyone can read.

Now, admittedly, as I page through it,

it is 19 pages long.

Now, several of those pages are forms.

And that's one of the nice

things about the regulation

is that you can go and see

what are the forms you're

going to have to fill out

when you're applying for a

DAO LLC in the Marshall Islands.

It does look a lot like a law.

There's a lot in there.

but but but it's generally

speaking meant to be the

document that tells you as

someone thinking about

setting up a dow llc in the

marshall islands what you

have to do what the

requirements are so you're

going to find in there very

clear-cut definitions of

things like what is a

beneficial owner who has to

do kyc so you know one of

the benefits of dow llc's

in the marshall islands is

that you have relatively

limited kyc requirements um

you know the the nice thing about

doing everything on chain if

you are a DAO that does

everything on chain is that

all that information is

publicly available.

So my DAO and the government

and law enforcement can

verify that you're not

doing anything untoward.

So they don't necessarily

need to know who all of your members are.

they can look on chain and

make sure that you're not

engaging in any criminal activity.

And so most of the members

of a DAO LLC can be anonymous,

but if you want to know who

does have to do KYC,

and I'll tell you in a second,

it's pretty straightforward,

then you can find that in the regulation.

And basically what we're talking about is,

first of all, any beneficial owners,

which is defined as anyone

with 25% or more governance

rights of voting rights in the company,

By the way,

I always say company because

that's the legal term for

what you're turning your

DAO into in a sense, right?

Or leveraging as part of

your DAOs ecosystem as

you're creating a company.

And that's the term that

applies to all different

types of companies,

whether it's corporations,

whether it's foundations,

whether it's LLCs and DAO LLCs.

So I'll say company.

I know a lot of DAOs think

of themselves as something

different and that's fine, right?

Just because you're a

company doesn't mean you

have to act like other companies do.

But anyways,

when you're forming the company,

you need anyone who has 25%

or more voting rights,

which is frankly often no one, right?

If you're already a DAO at some scale,

you may have no one who has

25% or more voting rights.

If there's no beneficial

owners in that regard,

then all managing members have to do KYC.

Now,

you don't have to have managing members.

So managing members are kind

of the equivalent of a

board or officers or directors,

but for an LLC.

And in the case of the DAO

LLC in the Marshall Islands,

you don't have to have managing members.

But if you do,

they're next in line to have

to perform KYC as the

people who generally have

the most control over the organization.

If there's no managing members either,

then we default to one

person from the DAO.

Any one person has to do KYC.

And so a lot of our DAOs

have one person who has to do KYC,

whether it's the only

beneficial owner or maybe

at the time of founding,

there's only one member involved.

And then you're going to launch the DAO,

launch a token,

and that person has to do KYC.

For many of our clients,

it's just one person.

But at the most,

it's those beneficial

owners and or managing members.

So that's one thing that's

just a lot more clear now.

You can find it in the regulation.

You know that it's going to

be enforced consistently

because it's written into

the regulation and into the

forms in the regulation.

Another example of what's in

the regulation.

So we've created a concept.

So one of the challenges with DAOs,

as people listening to this probably know,

is that sometimes it's hard

to know who to talk to at a DAO, right?

Let's say you're going to a

DAO and you're trying to

ask them a question about their DAO.

Hey, what's the answer to this?

How does this operate?

Sometimes it's tough because

these DAOs can operate in

new ways that are much more

decentralized in their social, political,

you know,

kind of corporate structure such

that there's no one

necessarily in charge of

the question that you're

asking or no one in charge

of external relations or

communications or whatever it is.

So we at my DAO and the

government needs to know

that there's someone at the

DAO we can talk to about

official matters.

Let's say your DAO gets sued.

let's say your annual

filings are overdue and

you're at risk of facing a fee, right?

Like we need to know who to

contact to inform about

these important matters.

So we've introduced a

concept called a representative agent.

So different from the registered agent,

which is myDAO,

but the representative

agent is just a person who

gives us their contact info

and says we are available

to be contacted about this DAO.

And so there's a forum for that.

It's something that DAOs are

required to keep updated,

is who's that contact

person that the government

and myDAO can get in touch with.

Another nice thing about the

regulation that maybe

applies less directly to our clients,

but we've introduced

process improvements on the

government side so that

registrations will happen faster.

And we're currently in the

middle of implementing these changes.

And so the benefits might

not be seen for another month or two,

at least the greatest benefits.

But for example,

the whole registration

process on the government

side used to be very manual.

There was a lot of literally

printed documents, right?

Bring three copies of this

document to this office and

this office brings

one of them to this other

office and one to this other office,

right?

And we were always driving

around and trying to make

sure the documents were

going to the right place.

Well,

now the whole process is taking place

digitally.

Same thing for payments, right?

On behalf of the DAO,

we would go to collect a pay slip,

bring the payslip to another office,

pay the payslip, get a receipt,

bring the receipt back in

triplicate to the other office.

And now we're going to have

all digital payments,

just normal credit cards

and stuff and checks or

checks within the next couple of months.

So there's that improvement.

Something else that goes in

the regulation is a list of

sanctions for violations.

So previously there was some

confusion as to, well,

what happens if you don't

report all of your

beneficial owners accurately?

What happens if you don't

take a step that's required

by the regulation or the law?

Well,

now it's very clear in the regulation

the fines are reasonable

compared to fines that are

levied on other companies

in other places.

and they're specific and you

know what to expect.

So those are some examples and maybe Leo,

if there's anything top of

mind for you or anything

else you want me to dig into,

you can let me know.

Yeah, I think that's a great overview.

And I think it was cool how

you touched on some of the

behind the scenes that goes

on in the Marshall Islands

and how much time we spend

working on these

applications for each of our DAO LLCs.

I think oftentimes I talk to

customers who,

I think everything's digitized,

but we are working to get

there and we are working to

make the process faster.

And I'm excited to see how

fast we can start pushing

through these DAO LLCs in

conjunction with the government.

But one thing I really did

want to zoom in on, Adam,

is the registration process.

So specifically, if I'm a new DAO LLC,

what has changed now?

what do I need to be aware

of when I'm signing up and

want to begin the

registration process with my DAO?

And I think you touched a

little bit on it with the

KYC and the representative agent form,

but there are two new forms,

the beneficial owner

information report and the

certificate of formation

has been updated.

And I'd kind of like you to touch on that

and what it means for future

clients and how ultimately

I think it will make the

future onboarding process

easier for some of these clients.

Yeah, sounds good.

And it probably sounds like

a lot when I go over it live.

We have, luckily,

a portal that Leo has built

that walks people through

the whole process step by step.

So once someone does sign up,

the whole thing, I think,

can feel a little bit more

straightforward.

But just to go through that

in a little bit of detail.

So a couple of things that are not,

we don't give examples in the regulation,

but MyDAO provides template documents for

is that every DAO needs a

certificate of formation

and an operating agreement.

And the certificate of

formation is just this

one-page template document

that states some basic

information about the company,

its registered agent,

its principal office address,

which we provide in the Marshall Islands,

although they can choose

something else if they want.

And one of the new things

we've introduced in this

regulation is that the

certificate of formation

has to include a list of

all of the smart contracts

owned or leveraged by the

DAO in certain ways.

So if you have a treasury on chain,

that has to be listed.

If you have...

a governance smart contract,

if you have a token that

tracks your membership,

those things have to be

listed in the certificate of formation.

And this goes back to the concept that,

you know,

we need to know how to observe the DAO,

right?

And this is, again,

the trade-off in exchange

for having almost complete

anonymity for most of your membership.

We just have to be able to

look at those smart

contracts and follow the

money and make sure that

You know, there's nothing bad happening.

And so that goes in the

certificate of formation

now for new DAOs.

And the operating agreement,

which we also have a new template for.

So anyone who's worked with

us before has seen our

template operating agreements.

It's one of the valuable

parts of the registration

process that we provide.

Now we have one giant template

that replaces all of the old

templates and really walks

you through all of the step by step.

Here's what the operating agreement means.

Okay, at this next step,

if you're creating a nonprofit LLC,

you need to do the following.

If you're creating a for-profit LLC,

you need to do this instead.

If you're using a token to

track your membership,

use the following paragraph

and modify it.

If you're not using a token

or using a multi-sig,

use the following paragraph.

Just throughout,

it goes through and talks about,

here's language you might

want to include in your

operating agreement.

Now,

maybe I should have started by saying

the operating agreement is

the document that defines

how your legal entity works

and therefore how it

connects to any activity

that's taking place on chain.

So a traditional operating

agreement and people may be

more familiar with the term bylaws,

which is usually used in

the case of corporations or foundations.

The operating agreement is the same thing,

but for any kind of LLC,

including a DAO LLC.

And a traditional LLC has an

operating agreement that

probably says the list of

our members is included on

Exhibit A. And then you

list the names and

addresses of all your members.

Well, with a DAO LLC,

what you can do instead is

you say the members are

tracked using the token on

this blockchain at this address.

And by holding a token,

someone is a member.

By acquiring a token,

they become a member.

By no longer holding a token,

they're no longer a member.

And now you've taken that

same corporate form that

everyone in the world is

fairly familiar with and

just made a small change,

which is instead of listing

the members on Exhibit A,

you're listing the members

in a smart contract on the blockchain.

And so throughout there's opportunities to,

you know,

you can do the same thing with

governance rather than

saying decisions shall be

made in a meeting and the

meeting shall be called at

least seven days in advance

and shall take place either

online or at our office.

And or a decision can be

made in lieu of a meeting

by email if the following

conditions are met.

Right.

Those are the kinds of

things you'd find in a

traditional bylaws or

operating agreement.

Now with the DAO LLC, you can say, oh,

decisions are made by

following the process

contained in the governance

smart contract on this

blockchain at this address.

Or you can reference

Snapshot if you use Snapshot, right?

Or any kind of cryptographic

governance protocol.

So that operating agreement

is really important.

The new template, I think,

really helps people think through...

what they might want to put in there.

I should remind people, you know, my DAO,

we're not lawyers and

nothing that we provide is legal advice.

Now we've worked with

leading lawyers from around the world,

including someone,

many of you are probably

familiar with Tatiana Cerullo,

who's a leading Marshall

Islands DAO lawyer,

has especially helped us

with a lot of our work, including,

this template.

But there's input from

lawyers all over the world,

but every case is different, right?

And that's why it's

important to hire a lawyer

if you can't afford one or

if there's anything

complicated about figuring

out your operating agreement.

So disclaimer aside,

so you've got your

certificate of formation

and your operating agreement.

Now, the next thing is these other forms.

So there's something called

a foreign investment business license,

which is required of all DAOs.

It's an old-fashioned

concept in Marshall Islands law.

that we've carried over to

the world of DAOs.

But now for the first time,

DAOs have their own form

and their own set of

requirements for the

Foreign Investment Business License.

We call it FIBL for short.

And so you can see that form

in the new regulation.

And part of that form says, also,

please attach your

Beneficial Owner

Information Report or BOIR.

The BOIR form,

which you can also find

towards the end of the regulation,

that's the form that

captures the people who are

effectively quote unquote doing KYC,

right?

That's the form where we put all that.

The applicant puts

information about those

beneficial owners or other

people that need to be listed.

And then that information

gets verified by us using a

third party KYC tool and by

the government through

their own research.

So am I forgetting anything, Leo,

or are those the four

documents that people have

to submit during their registration?

Yep.

Yep.

I think you,

you touched on everything there.

And I think also an

important part is the

reason that we're so

excited about the operating

agreement and certificate of formation,

having those smart

contracts listed is it kind

of goes back to the origin

story that you talked about, right?

Where you're trying to

mirror what you're doing on

chain with what you're doing and

off-chain, right,

and when you establish your legal entity.

And so the ability to

recognize something in your

DAO also in your legal

entity is really unique and

is kind of what gets me

excited and us excited

about our legal entity and

the Marshall Islands DAO LLC.

But I think there's another part of it,

Adam,

where you can also create a fairly

simple DAO LLC,

and maybe you don't want to

reference things on chain.

And that's also possible.

And I think maybe not a lot

of our clients know that,

or some of our clients

think that you need to be a

DAO to set up a DAO LLC.

And that's not the case.

Some of our clients look

very similar to a traditional LLC.

But did you have any

thoughts on that point?

And maybe want to clarify

anything there as well?

Yeah, it's a good point.

So look, first of all,

the Dow LLC is an LLC.

It's governed by the LLC

laws of the Marshall Islands,

except where they're in

conflict with the Dow LLC laws.

And that's really beneficial

because that way you can go

anywhere in the world and

everyone can recognize, oh,

I'm looking at an LLC and it is an LLC.

The difference is that you

put a couple of sentences

in your certificate of

formation and your

operating agreement that

basically say this is a DAO LLC,

not a regular LLC in different words.

And that makes you subject

to the new DAO Act law that

we've written as amended,

as well as the new regulation,

which gives you new capabilities.

And so, for example,

a regular LLC does have to

have managing members.

A DAO LLC does not.

A regular LLC has to know

the names and addresses of

all of its members.

A DAO LLC does not.

And so you're kind of

getting the benefit of being an LLC,

but also getting the

benefit of all of the laws

and regulations that we've

written that allow you to

truly wrap your DAO.

So yeah, to your point,

going back to the origin story of my DAO,

we want to allow a DAO

or anyone who can get the

benefits from these kind of

unique treatment.

Or even if you don't want to

use the benefits today,

but maybe you like the idea

of potentially using them in the future.

Or maybe there's a tax

benefit to using this entity.

Maybe you're just five

people making investments

together and you need a

legal entity that's going

to allow you to do some

activity on-chain rather than off-chain.

Or you want to be in a

jurisdiction that is

friendly to Web3 and crypto in general.

Maybe it has nothing to do

with your corporate structure.

Maybe you want access to the

Marshall Islands regulatory

environment where you're

allowed to have a governance token.

You can have a security

token if you want to.

You can do almost anything

you want with tokens aside

from there's some things

that are still restricted,

which is you can't be basically a bank.

or a centralized exchange

and be a DAO LLC or any

kind of legal entity in the

Marshall Islands.

You can create a

decentralized protocol of

any kind that does DeFi and

other types of finance,

but you cannot be a

centralized financial service provider.

And so there could be a lot

of situations where you

want to get access to that

environment and maybe you

want to structure like a regular LLC,

but you want access to that environment.

So I think we're still

learning all the ways that

people are going to want to

use the DAO LLC.

But to your point,

you don't have to be a DAO

in the traditional sense of the word.

In fact,

I think one of the interesting

things about the term DAO

is that people still

disagree on what it means.

And usually they're not

using it as a legal term, right?

They're referring to this

new type of community oriented,

often community oriented organization,

often nonprofit,

often governing a protocol,

but not always doing any of those things.

And so, you know, for example,

you could run your organization,

like a traditional

corporation if you want to, have a CEO,

have a management team,

have all the policies, have HR, right?

Just look totally like a normal company.

Maybe you still want to create a DAO LLC,

whether you think of

yourself as a DAO or not, right?

So yeah, to your point,

there is a lot of

flexibility in terms of how

you want to use this entity.

And I do think, look, if someone says,

well, I don't like the term DAO,

that's okay.

I mean,

it has to go in your legal

documents only.

If you want to form a DAO LLC,

it's kind of like being

like a corporation.

You might not like the word corporation,

but if that's the right

legal form for you,

that's the right legal form for you.

And you don't have to use

the word corporation, right?

You could just call yourself

Microsoft and not Microsoft Corporation.

Yeah.

Yeah,

the goal is one day that everyone

will be using a DAO LLC,

whether they're involved in

crypto or not.

And hopefully that happens

sooner rather than later.

But yeah, that's- I wouldn't say that,

Leo.

I think there's a really

good use case for lots of

legal entities all over.

And there's also reasons why

you might pick one

jurisdiction over another.

So the Marshall Islands is

gonna be the right place

for a lot of projects, but not all.

DAO LLCs are gonna be the

right fit for some projects, but not all.

So I don't,

it's not the goal that

everyone's gonna use a DAO LLC.

So it's just a goal that

it's made available to, you know,

the people that are in the

circumstances where it's the right fit.

Gotcha.

Gotcha.

Not the goal,

but it wouldn't also it

wouldn't be bad for business, would it?

That's true.

Awesome.

Awesome.

So, yeah,

I think I think we touched on I mean,

I can provide a quick summary,

but but I think we touched

on the registration process

and we will link the

regulation in the show

notes so people can review it.

And like Adam mentioned,

we have the arrows,

we have like an onboarding portal, right?

And it's really simple once

you start the registration

process to see in what

order do I need to complete these steps?

What forms do I need to fill out?

And so while it may be

overwhelming when you're

listening to us talk about it,

once it's in front of you,

it's pretty simple and

fairly easy to operate.

So I think we should also

touch on current customers, right?

Hopefully some current

customers are listening to

this podcast or live stream.

What do they need to know

about the regulation?

How does that impact them, Adam?

Yeah,

so maybe a little bit less because a

lot of the regulation has

to do with the application process.

But the difference is there

is a annual filing that

DAOs need to complete.

And this regulation includes

that new annual filing form.

And so if people want to

know what you're going to

have to fill out and submit in January,

because we do all of our

annual filings and annual

fees in January in the Marshall Islands,

you can go look at the

regulation and look at that

annual filing form.

And one thing you'll see is

that you have to attach the

Beneficial Owner

Information Report or the

BOIR to your annual filing form.

And so it's the same KYC

requirements now that apply

to new applicants,

apply to existing DOW LLCs,

even if it was different before.

So, by the way, generally,

these requirements are a

little bit less stringent

than what existed before.

So, for example, for many of our Dow LLCs,

and by the way,

these requirements have

changed over time because

it wasn't clear from the

law exactly who should have to do KYC.

And so at certain points in time,

and I'm not even just

talking about the Dow Act,

but it turned out when you

combine the Dow Act, the LLC Act,

the Business Corporations Act,

the Banking Acts Act,

you know other regulations

that have been passed in

the marshall islands there

was room for a lot of

subjectivity around well

who should have to do kyc

so at times all been all 25

plus voting rights holders

and all managers if and if

there are were any managers

had to do kyc now it's just

beneficial owners 25 plus

or if there are none then

all managers have to do it um

We always had the minimum of

one person when when no one

fell into either of those two categories.

But I think that's that's

the key for existing LLCs

is to now you can see what

you're going to have to

fill out in January and

it's not going to change

until the next law or

regulation gets passed.

So you can have some

consistency and knowing what to expect.

Yeah, so like at a high level,

we're trying to simplify

things for our current

clients and our future clients.

trying to create an

objective standard for everyone to follow,

which I think is now in place.

So we're not having to

reference different laws

and we're unsure about things.

And lastly, we're just expediting things.

I mean,

we talked about the technology

improvements with the government earlier,

but I think the three

things that we're focusing

on are simplification, objectivity,

and then expediting the

process in general.

So I'm excited to see where

this goes in the future.

And yeah,

I think we touched on everything

with the process, Adam.

Is there anything I might be missing?

It's a good question.

I mean, I would just say that, you know,

every situation is still different.

And, you know,

what I'd recommend is folks review, again,

review the regulation,

read the regulation.

If you have to,

especially if you're a

lawyer that deals with these DAO LLCs,

read the regulation,

let us know if you have any questions.

And just also remember that we,

my DAO is always here to

help people through the process.

So as you're going through

your onboarding portal, you know,

you can always reach out and

ask questions about how to

fill out a certain form or, you know,

whether something meets a

certain requirement and we

can help people out with that.

Awesome.

Awesome.

So, yeah,

I think we I think we covered the

regulation pretty in depth.

And I think we I'd like to

just talk a little bit

about some use cases we

published on our website,

on our blog section.

You can find that at

www.mito.org slash blog.

But the first one I'll talk about is pith.

And I think it's one of the

most common use cases we

see for our clients.

And that is the protocol DAO.

And

Adam can help me out if he wants,

but I often talk to a lot of DAOs,

and we talked about this a

little earlier in the live stream,

where they have a decentralized protocol.

In this case, Pith is an oracle.

And basically,

they are trying to operate

the protocol or govern the

protocol with the DAO.

And the reality is that a

lot of these protocols,

whether they be a DEX,

an Oracle,

some sort of decentralized app

on any blockchain doesn't

need to be incorporated

because they really exist

as a set of smart contracts.

But what does need to be incorporated,

and in this case,

what Pith did is they

incorporated their DAO,

which governed the protocol.

And so I think

I think with our new

regulation and the

precedent that Pith and

other DAOs have set with us,

I think the protocol DAO

emerges as one of our best

use cases and becomes a

really good example for

clients going forward in the future.

And if you think you

resemble Pith or if you're

excited about what Pith is

doing and you are a client

or you are a lawyer that's

working with these types of clients,

I encourage you to read the

blog as it's really,

really in-depth and it

really does a good job of

explaining how Pith used us.

And I just remind you that

now that we have this new regulation,

hopefully it will be even

easier for these new DAO

LLCs to incorporate and get

through the process faster

and in a simpler way.

Adam,

I think you wanted to talk about

another one of our clients as well.

Yeah.

So, you know, and Pith, by the way,

is I think the leading,

if not one of the leading

oracles on Solana,

if anyone doesn't know.

And I think one of the cool

things about the DAO LLC

legal entity is that it can

be used for a variety of purposes.

So in the Pith case,

the DAO is governing a protocol.

Let's also talk about MoonDAO,

another popular DAO that

people may have heard of.

So MoonDAO's mission,

if I'm remembering correctly or precisely,

is to help colonize the

moon and do so in a way

that's not controlled only

by giant private companies

and governments, but done in a more fair,

distributed, decentralized way.

On the way to colonizing the moon,

since that's still

something that's in

progress or maybe a little ways away,

they've been sending people into space.

and creating this amazing

community of people that

are interested in space travel,

in the moon, in colonizing space,

starting to build the

infrastructure that will be

required to eventually do

something as massive as

colonizing the moon.

So this is not an on-chain protocol.

Now they do a lot of cool stuff on-chain.

There's all kinds of

interesting on-chain stuff they're doing,

like a lot of DAOs,

but they're not governing a protocol.

This is a project that could

just as easily, well, not just as easily,

but could have chosen to

operate as a traditional

nonprofit company.

It could have been a cooperative,

could have been a charity,

could have been just a community.

They didn't have to be a DAO

because they're not

governing anything on chain per se,

but they're leveraging the

DAO structure because it's

a more compelling way of engaging people,

of raising money for a cause,

of coordinating around a

massive shared mission.

And so that's why I like to

use it as an example because

they're not governing an

on-chain protocol.

They're governing the

colonization of the moon in

the long run and everything

that has to take place in the meantime.

That's a pretty cool dichotomy.

You have an Oracle that's

working with large-scale

financial institutions,

and then you have a DAO LLC

that's trying to colonize the moon.

And so you have a complete

different use cases,

but equally awesome and equally cool.

And I think the third one

that I'll talk about is probably the most

out there from an

organizational standpoint.

It's using something we call Futarki,

which is basically a organization,

or in this case,

a DAO that's completely

governed by markets.

And it's just as confusing as it sounds.

So I encourage you to check them out.

They're called MetaDAO.

And they're probably, in my estimation,

or my perspective, the most decentralized,

autonomous,

DAO that we've incorporated.

And I know all DAOs are

decentralized or autonomous,

or as Adam mentioned earlier,

people can't even agree

what the word means.

But in the traditional sense of the word,

MetaDAO is really as close

as you can get to the ideal

standard of a DAO.

And they found our DAO LLC

to be a really good

solution for them as they

were able to do things like

mention their governance

smart contract in their

operating agreement or

mention their governance

token in their operating agreement.

and define membership in

that decentralized manner.

And so MetaDAO is probably

the DAO most excited about today.

I encourage everyone to

check out all of these DAOs.

They're all doing really,

really cool things,

and they're all using the DAO LLC.

And the last reminder is if

you want to check it out,

any of these DAOs out or do more research,

they're all available as blogs.

We have customer spotlights

of all of them as blogs on our website.

And let me also just touch

on the meta DAO case

because I think what it highlights,

what all these cases in

conjunction highlight is

you can do almost anything

you can imagine with a DAO

LLC in terms of how your

DAO is organized and structured,

its business purpose, et cetera.

And you're really limited

only by what you can put in

code or in English, which is anything,

right?

Again,

as long as you don't go against like

the specific things that are not allowed,

right?

And if you're...

You know, we could talk about again,

like centralized exchanges

and banks one day may be

actually licensable in the

Marshall Islands.

But in terms of your governance structure,

right,

you could create even like Leo's

describing a market that

ends up leading to

governance decisions that

are that are enforceable

and valid for your company, for your LLC,

for your legal entity.

Such that if you end up in

court or if some other

organization or a member wants to know,

what was the official

corporate decision on this matter?

In a traditional corporation,

you got to ask the CEO.

And if CEO can't decide,

you got to ask the board.

In Futarki with the DAO LLC,

you look at the result of

the market mechanism.

That is the company's decision.

That is the final

enforceable legal decision.

And so that's really never

been possible before.

And I mean, also compare it to, you know,

it reminds me of like,

we often compare it to the

foundation structure, right?

In a foundation,

because a lot of DAOs still

use foundations, right?

We still see a lot of people doing that.

A lot of projects use foundations.

In a foundation, a board is in charge.

Right.

And sometimes you say, well, OK, well,

we're going to have the

board sign a contract

saying that most of the

time they're going to act

in accordance with the

wishes of the token holders.

Or if it's a few Turkey,

you could say with the

wishes of the market outcome.

But that person or persons

on the board always has the

right to decide, well,

it would be illegal for me

to take this action that

the doubt voted on.

or unethical for me to take this decision.

Or we, for some reason, we're deciding,

and this is the extreme case,

but we're deciding that we're going to go,

you know,

we're going to shut down the DAO

and give the money back to ourselves,

right?

And this is like the worst

case scenario that happens sometimes.

I'm not going to name names right now, but

And it leads to all kinds of

conflict and lawsuits and stuff.

But if you want to avoid that extra step,

which makes things less autonomous,

right?

It's really the step of like, okay,

we make a decision through

whatever mechanism and now

the board decides.

Right.

Versus in a DAO LLC,

you can have that structure if you want.

You can use managers and

give them those rights,

but usually they don't.

In a DAO LLC,

normally whatever your

governance mechanism,

which is anything you can

put in code or write in

English in your operating

agreement or reference in a

smart contract is the

enforceable legal decision

of your organization.

And so whether that is, you know,

you want that because you

want full security.

direct democracy or

something in between a

traditional corporate

governance and direct democracy,

or you want Futarki or whatever,

that's all possible with the DAO LLC.

Yeah.

And I think just another

crazy thing that blows my

mind is that Futarki was a

theoretical concept

proposed by Robin Hanson

that had never been

implemented effectively.

And the person and the

people who created the DAO

wanted to implement Futarki

for the first time.

And they thought that the

DAO was the best way to do so.

So if you're not bullish on

DAOs and you're not a believer,

I think that the MetaDAO

example is a great way to

kind of conjure some belief

in DAOs because people had

tried to use this Futarki model,

this theoretical model before,

and the DAO was the only

thing that allowed them to do so.

And so I think DAOs are here

to stay and that

DAO specifically always gets

me so excited.

And I love talking about

them because I think

they're doing some really cool things.

Any other thoughts, Adam?

Anything you wanted to talk

about before we kind of

wrap things up about

anything that we touched on?

I'll just add a quick note,

which is I'm going to be at

DAO Tokyo and Fairness 2024

in Tokyo and at ETH Tokyo all next week.

That is the week of August 19th.

So if anyone's listening to

this before then and

happens to be in Japan or

is going to be there for the same events,

please let me know so we can meet up.

But no, Leo, I think this has been great.

Thank you.

awesome awesome as a

reminder um if you're if

you're interested in

reaching out please do we

have a huge um a lawyer

network that you can talk

to and i know this whole

episode has kind of been

like an ad for mydao but we

really do want to help you

um so if you're a lawyer or

if you're a dow looking to

get set up, please,

please do reach out to us.

We can add you to our lawyer

network that we're working on,

and we can put you in contact with,

whether you're a lawyer,

we can put you in contact

with a potential client,

or if you're a DAO,

we can put you in contact

with lawyers that can help you out.

Lastly,

you can find us on Farcaster at MyDAO.

You can find me on Twitter

and Farcaster at Leo Henkels.

Um,

always check out our Twitter or Twitter

for my DAOs at my doubts,

M I D A O D S. Um, and then Adam,

did you want to show some of your, uh,

socials as well?

Yeah.

Find me on Farcaster at the

thriller or Twitter is zero

X thriller because the

thriller wasn't available and, uh,

happy to chat with anyone

who wants to talk about DAOs.

Awesome.

We're always here to help.

So please do reach out if

you want to talk.

If you would consider liking

the podcast or leaving us a comment,

we'd love to.

We love our fans and we'd

love to hear from you guys.

And as a disclaimer and a reminder,

none of this was legal,

financial or tax advice.

Please consult the

respective professionals

for that type of advice.

We're not your lawyer.

We're not your

tax advisor, et cetera.

So if you have any of those questions,

we can point you to people

who can't answer them,

but we can answer them ourselves.

Lastly,

are you thinking about starting a DAO?

Just DAO it.