Blockchain company buys land as a group under unique Wyoming law
On a snowy and foggy morning, I took the 30-minute drive from Cody to Clark to try to find 40 acres known as parcel 0 to the citizens of CityDAO, which is a blockchain community. After 20 minutes driving the backroads of Clark, I found it.
"That piece of land is kind of an experiment around how do we collectively use this DAO and govern what happens on this land, " said Scott Fitsimones, the founder of City DAO.
A decentralized autonomous organization (DAO) is a group of people working together towards a common goal by using blockchain or a digital ledger of transactions. It all started with a simple idea. Could a DAO buy physical property?
"It would be an asset on the blockchain that would basically say, 'You own this, there's this record of proof that this person with this cryptographic address owns this piece of property'," said Fitsimiones.
Fitsimones had the backing of people but they only could buy land in one state: Wyoming. That's because of the state's new DAO LLC law.
"This law went into effect last year, and basically created this very interesting new world of possibilities where a DAO, which is basically just a group of people on the internet, can come together and govern an LLC," he said. "So it basically creates this bridge between the internet world and crypto into the physical world of owning actual assets."
So far, Wyoming is the only state with this law. Matt Kaufman is a Cheyenne attorney and sits on the Wyoming Select Committee on Blockchain, Financial Technology and Innovation. The group that pushed this law forward. Kaufman said before Wyoming's law, blockchain companies could only form through unincorporated associations.
"The problem with that from a legal standpoint is the law characterizes those people when they're in business together, and they're unincorporated as a general partnership," explained Kaufman. "General partners, as a matter of common law, have unlimited liability for the debts, obligations and things that arise out of the conduct of the entity."
Kaufman said Wyoming saw this problem and decided they could solve it with potential future benefits to the state.
"It then gives them a vehicle to file taxes, get a tax ID, get the limited liability, like we talked about, the entity can then enter into agreements and hire employees and things like that, which was much more difficult before," said Kaufman.
Although the companies have to register in Wyoming, they are not required to physically be in the state but Kaufman said there are still many incentives for the companies to want to be in Wyoming and that's been playing out like low taxes, the benefits other companies see. Since the law came into effect in July, 150 DAO LLCs have registered in the state.
So far, CityDAO has plans to continue to buy more property in Wyoming. Oisin Lyons, a CityDAO citizen, said because of legal obstacles, citizens can only get the right to conserve land and not own parts of Parcel 0. But he said they are learning that local zoning rules can impact them and will adjust in the future.
"How can we tokenize other forms of ownership? How can we represent different types of ownership on a chain?" said Lyons. "And the exciting thing about representing ownership on a chain is that you are creating a new way for people to invest."
Lyons admitted that in a way CityDAO is a guinea pig for a decentralized version of ownership.
"A lot of the stuff that we've done so far is being experimental and being successful as far as I'm concerned. And you know, as we are aiming to innovate in this space, that is the goal," he said.
It is also Wyoming's goal to innovate in the space and it turns out it's not the state's first rodeo. In 1977, Wyoming was the first state to create a law authorizing the creation of LLCs. For Scott Fitsimones, the success story of the LLC is promising.
"Wyoming was the trailblazer then and seems to be the trailblazer now, and I have pretty high conviction that other states will start copying the DAO law once they see it's working," he said.
As a decentralized organization and the first of its kind, CityDAO hopes to continue to trailblaze this space to something that is as common as LLCs are today.