Back in July, Wyoming passed a law legally recognizing Decentralized Autonomous Organizations (DAOs)—blockchain-based entities in which members vote on the group’s direction with tokens—so long as they are registered as companies in the state.
Now, one DAO that has aspirations of founding a blockchain-based city says it has actually purchased land in the state.
“Today, CityDAO is officially the first DAO to own land, using the new Wyoming DAO LLC law. This is just the beginning,” CityDAO tweeted, along with a video of a CityDAO flag being raised on a barren hill. “This parcel is a proof of concept parcel - it’s not in the most convenient location nor does it have an abundance of natural resources. It does have a well for water, a flat area for building, and is 45 minutes from an airport.”
CityDAO is an experiment that pitches itself as "building a city on the Ethereum blockchain." CityDAO is offering a basic form of citizenship through the purchase of one of 10,000 NFTs for .25 ETH (~$1000) that also confers access to a Discord, voting rights, and the ability to settle land after the "First & Founding Citizens."
First Citizen refers to the purchaser of a single NFT that sold for 6.52 ETH that gave the right to name the first parcel of land and gives first access to "land drops." Founding Citizens are those who buy one of 50 NFTs with a price floor of 10 ETH that give them access to land drops after the First Citizen, but still provide access to the Discord and voting rights.
At first glance, an actual land purchase puts CityDAO well ahead of many other attempts by libertarians, anarcho-capitalists, and crypto enthusiasts to create autonomous zones and cities. Many, like Liberland—nestled on a contested patch of land between Serbia and Croatia—have no residents and seem to have been designed as tax havens. On a closer look, however, it becomes clear there are some problems here.
In September, for example, DAO members were selecting a parcel of land to buy in Wyoming that was under $150,000, between 5 and 100 acres, and "minimal regulations to maximize freedom." They settled on two parcels that had easy road access, were relatively large at 35 acres, and would allow for a variety of "use cases" such as "mobile homes, RV parking, camping, hunting." They did not, however, have any water on site nor did either parcel allow for more than three permanent housing properties.
One post brings out an annual precipitation map, highlighting that without water on site things will be hard as it rains 6 to 10 inches a year on site. "Ever hear of a city without water?" the commenter asks. It was only at this point that it seems access to water was more seriously considered.
As a result of this discussion, a new parcel with water on site and power nearby was considered, voted on, and eventually purchased. This is the piece of land where the CityDAO video of a flag flying is, a 40 acre plot of land in the northwestern corner of Wyoming nestled atop an elevated craggy hill.
The discussion around which plot of land to buy went in some unexpected directions. By mid-October, as discussions surrounding new parcels of land began to pick up, DAO members began to reconsider an old idea: buying Kanye West's 3,888 acre Wyoming ranch for $11 million, or just over 3,000 ETH. "Currently unclear what we would do with the ranch," said the original poster. They also noted that Kanye is unpredictable, such a purchase might bring too much attention at this early stage, it could be seen as a superficial project, and—most importantly—could prove to "be a distraction."
Crucial to CityDAO will be how it’ll be run—a woman who began working for another DAO in Wyoming after losing her job in academia recently told WBUR that it was like working for “a group text with a bank account.” CityDAO tweeted that it “thinks a lot about the future of governance.”
Typically, DAOs are recognized as general partnerships. In effect, every member of a DAO would be potentially liable for any debts or in any legal actions incurred by the DAO. One benefit Wyoming DAOs will enjoy is what amounts to a liability shield that protects members from lawsuits and recognizing the community itself as a corporate person.
The law also distinguishes between two types of DAOs: those run by members and those "managed" by algorithms. The former is simply an LLC where the DAO articulates who is responsible for various roles in the organization. An algorithmic DAO is less clearly defined in the bill, but basically any DAO already governed by a smart contract is eligible to register regardless of what the contract actually entails.
One Coindesk op-ed paints an optimistic picture for DAOs and their regulation now that Wyoming—the first state to recognize the LLC legal entity—is now formalizing DAO legal status.
"For example, we anticipate Wyoming passing legislation in the future that will legally recognize DAO structures in corporations, foundations, trusts and other corporate entity structures," writes Andrew Bull. "The Wyoming DAO Law not only protects stakeholders in the industry, it also allows the traditional judicial system to evaluate and verify blockchain transactions and smart contracts as legitimate proofs of ownership and transfer."
History has shown, however, that digitization and decentralization in of themselves do not suddenly improve the politics and operation of a system. In fact, digitizing public goods and services can (and do) just as often privatize these assets and transform them into profit-seeking investment vehicles that gradually reduce coverage, constrain access, and increase prices.
CityDAO did not immediately respond to Motherboard’s request for comment.