 We want to talk a little bit about the structure here. Yeah, so let me back on video and then yeah, so you're on that right now All right, and we'll figure out getting the link to you in a second So I yeah, we're gonna talk about a topic in bankruptcy which is sort of an interesting one It is starting to pop up in a couple of cases. I saw there was one a bi publication American Bank of seems to publication That actually addressed this and it's the question of what happens If you have a company that has issued tokens over block changes and they file bankruptcy And how are the tokens treated and how are the holders of these tokens treated? So we're looking at this in the context of a chapter 11 case and essentially the idea of a chapter 11 bankruptcy Inside the United States is you have a company and you are trying to reorganize it You're trying to get it restructured You're trying to deal with the deaths in this very sort of structured and controlled way so that you can reduce the total debt load and allow the the business to continue and In doing this in US bankruptcy, we use this kind of waterfall idea Which is that everybody who has an interest in the company workers owed money by the company? They get their share of whatever is available In a particular order and the people at the top of this waterfall get their Their money or their assets first and then you go down to the next step and the next steps and the next steps And you until you get to the step where there's almost there's not enough money left And then those people get a percentage now in practice. There are some negotiated Revision so that but that's the basic idea that each step gets its share of the money Until the money is all gone if you're too low on the waterfall You don't get anything if you're high on the waterfall you get everything you wrote now so This raises a couple of questions about a token where on the waterfall are the holders of the token so We have a list of clean ideas here and when we get the the screen back up with the Sharing site, you'll be able to see them. They're listed there. So the first question we'll deal with is Do you have a claim as a as a holder of this token? But you have a claim against the company is the company owe you something and this breaks down into two Possibilities one a claim is there's a right to payment or or There's a right to an equitable performance as a result of the debtor's breach of some obligation So if you have either of those two conditions then there is a claim if neither of those conditions exist Then you do not have a claim against the bankruptcy estate and you would just have a token Which if there are other people out there who would like to acquire the token or the token has some inherent use to it Then you could obviously sell it or make use of it But otherwise you would just have this claim. Okay, if you have a claim What kind of claim do you have and going down the waterfall the first might be a secured claim We call it secured claim and we may go into that and then the second is Down the waterfall is something called a consumer deposit claim and to break that out a little bit. This is section 11 USC 507 a7 of the bankruptcy code. There's a number of conditions that have to be met in order to have a Consumer deposit point. So first the holder of the token has to be an individual They have to have provided a deposit of money so that this token has to represent some some deposit of money it has to have been for Purchase lease or rental of something and that something has to be property or services and Finally the property or services need to be for personal family or household use So you have this list of sort of five and Statements and you have and conditions you have to satisfy all five of these conditions to have your consumer deposit claim the claim itself is also limited to $2,850 so you would add that as a sort of separate site condition or Limitation on that part of the claim The next on the waterfall so we had secured claim consumer deposit claim Next is unsecured claim Which will end up being as you'll see our catch-all? Next down is what's called a 510 B subordinated claim. That's a claim That's an unsecured claim, but it is treated it gets paid after the unsecured claims Because of a statute called 11 USC section of 510 B Let's pause and maybe say an example of some situations in which that happens and why it's significant, you know Right, right. Yeah. So for example What happens sometimes is Somebody buys a security and this is what a 510 B is it's a claim that let me give the conditions are okay first it has to be a claim and Then in addition to that you have to satisfy one of two conditions the first being It arises from a rescission of a sale of a security and the second is damages from the purchase of a security So let's say theoretically somebody's out there They're starting a company and they go out and they tell people look. I want you to invest in my company I'm gonna give you stock in the company And they go out and they sell a whole bunch of stock and it turns out that they lied about whatever I mean they lied about the product or they lied about the company's capitalization or they just lied about something So that gives these equity holders a claim for damages under the US securities laws So what 502 10 B says is that claim is going to be treated not as a regular claim Like any other claim against this company, but at a lower priority than say trade creditors Or people who have who made bank loans to this company. We're gonna essentially sort of treat you like you are equity investors and there are some tweaks on that we may talk about those later, but Because of course tokens are in our are generally considered to be securities and because a lot of times It's a way that the companies is they're using the tokens for the ICO as a fundraising venture and You know that you have the possibility that a claim against the company Either because you have a right under the securities law to undo the sale or because you be damaged in some way That might be subordinate. So Secured claim consumer deposit claim unsecured claim 5-0 5 10 B subordinate claim and finally at the bottom of the waterfall are equity or ownership interests So essentially the people who own the company and 5 5 10 B we talked about One standard for support nation I think we'll probably more or less leave it there because we want to simplify things a little bit But there is another one which is sort of and it's relevant which is if you have Insiders company insiders who own a large number of tokens as a result of You know getting the first tokens whatever they're doing some of the early mining whatever it happens to be They mean that being treated like equity holders or subordinated so that those insiders Get paid after all the all outside creditors, and they're various legal various that can go to that So I just wanted to add something in there I think that starts to highlight what I think is very useful about Analyzing, you know is something is security or the utility in terms of that being a major problem with the SEC right now it's you know equity and Like in bankruptcy since there's this question between like a security and equity and equity is defined You know in this bankruptcy universe as You know putting forward Like support of the company that like enables it to exist in the first place or that's like a type of Characterization that the court can choose to put forward so there ends up being this question of like You know even if something is a security token like is it a security token because it is You know a secured claim and the definition of you know in the bankruptcy definition which is you have you know a This right to get paid back to the extent that you know you are prioritized You know as he was talking about this waterfall effect It's like you know if you have a secure claim Then you are one of the first people who has to get paid and there's this you know if you have just an equity claim You know you're a secure credit or you're not necessarily going to get paid You know that you were helping the company move forward and you know the thing that I think is very significant to look at about this is the fact that You know unlike the SEC conception, which is saying you know how does this token act as an asset? It's saying how does this person act in relation to how they chose to? You know support this company and like kind of the one that they chose to make in this company or you know To use blockchain language. Well, how have they staked into this company? So it's like you know the whether you're a secure or unsecured creditor is almost like you know proof of You know proof of stake in like an interesting way, so We're going to go through this sort of Idea and try to use some dynamic systems approaches to create a little bit of a computational structure Obviously the idea of what a token is is unique but the I think the idea of this project and we'll get some input from people on the board in turn in addition to which is You know, how do we look at What a token is and at the characteristics of the toe of the particular token to try to apply it to this particular Structure that I have outlined now before we do that, right? You wanted me to tell this little cautionary story I'm not relying on this. Yeah, and I think it's it's very interesting on the code Relying on where you're relying on this sort of let's look at the statutes and maybe poem some case law and create this very rigid kind of decision tree structure and Because at the end of the day, right these kinds of decisions end up in front of a judge if they don't get resolved amicably and It turns out that when you get in front of a judge all sorts of things can happen So here's a cautionary story and it's a little bit of a war story But I was representing a fellow who was cheated by his business partner. All right. This is the story So he's cheated by his business partner. We sue his business partner and his business partner being in bankruptcy We are arguing over the question not only about what's owed, but also whether or not the debt goes to the bankers so we have a whole trial and This was a really bad guy the business partner and the trial went very well for us But while we were waiting for the judge's decision We found out that this business partner was about to sell his house and that there was a lot of money a lot of value in this house So we went into court and asked the judge to give us what's called a pre-judgment Real estate attachment in other words we get the right And we asked for this before the judgment has entered in the trial We want the right to the money from that house. We want it sort of safe And so I filed the pleadings and the attorney for this business partner Files a brief in response that essentially points out a provision in the bankruptcy code that says that Because the house is this fellow's personal residence that the money is protected the value is protected and I looked up I did the research and I concluded that he was right That all of the case law with one exception all of the case law Said that the bankruptcy code was very clear and that I was going to lose but there was this one case from a completely different state Where the judge had essentially said that the the fraud here is so bad that I'm just going to allow the attachment So I told the client look we can go through the analysis of You know what the code says What the facts are how we apply it and I can tell you we're gonna lose 99% we're gonna lose But there is this one case so I feel comfortable going in and arguing it But I want you to know that my expectation is I'm just gonna lose so we get into court and Low and behold we don't lose Right. I mean and I will say this the other attorney never actually got a chance to make the argument About this bankruptcy code provision because the bankruptcy judge kept cutting him off and It occurred to me that she was cutting him off because she did not want to follow that rule This was a bad guy and she heard all the evidence already at the trial She'd already decided that she was gonna rule in our favor She was gonna give us all these damages and she wanted to have some meaning She knew that if he walked away with all the money from the house we'd be getting nothing so we She granted the the attachment and the lesson from that is that you There's sometimes equities that do go into these kinds of decisions and you you can't always rely Completely on these kinds of computational lockstep approaches unless you have somehow made them Sensitive enough to capture those kinds of intangibles that might lead to Exceptions But having that let's talk about dynamic Yeah, well, I think that is you know, but before we do that wait, we have more people who have raised their hands So should we should we introduce them? Yeah, so I would love to Yeah Rendon Mayer who liked my story Luciana tells Who just I guess you didn't raise the hand emoji Uh In week eight Perez at Thompson waiters who's also here cool Brian and I think that's it. Hi Yeah, that's it and we're back to Ricky so cool and I want to make sure you know for any people who joined that you saw the Yeah, that you saw the link to the arena board because that has you know some greater context about all the stuff and has some You know Going into case law that I don't know if we'll have time to delve into in specifics today but if you you know are interested in this and want to Apply what we're doing on the real-time board to saying, you know, what are some of these specific case law? scenarios that act upon the code and This way that allows for greater complexity and is kind of how I think of being the dynamics at play here So yeah, if you if you will send that link again Okay, cool, I guess it's I don't really understand what the pigeonhole widget like exactly shows But if it's very clear in there, then yeah, hopefully I'll concede it Yeah, so going into talking about you know this concept of dynamics, you know, I think Well, yeah, I would love if you know if you would kind of repeat the last thing that you said in terms of what the moral of the story is and then we'll reframe that in terms of You know this framework that I think will be very useful to think about with like these novel topics Yeah, so I'm sorry what yeah, so I was looking at the pigeonholes. That's why I think Dazza wanted us to have somebody else looking Yeah, Brian is our Yeah, I was looking at the pigeonholes and not listening. Yeah, so what I had said was you know at the end of That anecdote then it was very useful how you mentioned What the moral of the story is and I was wondering if you would share that again and then we'll use that as kind of a framework for starting to take this bankruptcy overview and Go into applying it into this dynamics framework, but I guess before then I would love to hear Any questions that people have or you know opinions or something that we're thinking about I want to make this as Interactive as possible with the you know kind of weird setup that we have so, you know if Any way any way that yeah people would be able to get involved and sharing Their relationship to the stuff would be great. So right and of course ideas So I guess I just won't move through the problem a little bit and And trying to get ideas from people as well of how you might approach it all part because from the description I gave you would think it would be very easy to sort of create a series of if then statements and yeah some sort of flow chart And then that would give you your idea of what questions you have to ask about your token, but I at the end of the day I mean, it's a little bit more complicated than that for one thing is you have to Understand the characteristics of the token and those may not be entirely clear, right? So you have to sort of build that into the framework you take a particular token You what what are those characteristics that token? How do you describe them? How do you plug those into the framework? The second part is and this is the lesson for my story is that there's a certain level of fuzziness to all of this All right, it's not it you're taking a legal structures You're trying to turn it into a computational structure and computational structures for the most part are not really fuzzy so but there's a fuzziness to To a legal structures So you have to sort of identify those areas of things that are fuzzy how fuzzy are them and come up with some techniques to address the fuzziness in a way now, I mean We can talk we'll talk about that I guess in terms of the dynamics and thinking about how you think about that in terms of actors and Actions, yes, right. So this sort of I I almost called the noun verb subject Which is a way a good way for me to think about it But you know the noun verb subject you have these two things so you you have one thing and another thing in and the action and Within that framework you can try to sort of break things down a little bit And then within the sort of structure that I had were described with each of these kinds of questions Like is something a deposit of money? Well, what goes into that decision? Yeah, how do you decide that? How do you plug that particular point into your? Into your structure and especially with the layers that we have at play where it's like, you know These overarching questions that arise. It's like a question. You know is something in deposit of money. That's very clear in Most cases with a token. It isn't clear is a token money is a token of deposit is a token What you pay for what you pay for the token so you've got in the token But it's a token. Here's an example of a deposit of money in the real world No in terms of things that are well understood If you buy a gift card Right, so you've given a company a gift card you bought what a gift card so that basically you have you've given the company money That's going to be used to purchase something in the future The gift card is is for the most part just a recognition of that And so for example in a large company that has a lot of gift cards out there Files what they'll often do is they will ask the court permission to honor the gift cards and the rationale is These are all just consumer deposits. They're going to get paid anyway They're really high up on the waterfall. We're going to be making these payments and it makes more sense to let us pay People give people the value Perform rather than just have them all file claims in the bank. Yeah, which is I think there was some very clear examples from this and the Toys R Us bankruptcy if anyone was following that since it was Was it there was I think like things that people had on layaway or Layaway is a perfect exam. So could you you know, could you do like a you know a brief intro about what happened with the Toys R Us case? And Like you know, what would have happened with layaway because I think this this is a good thing to kind of spend a few minutes on Because of the fact that you know all these terms like secured creditor and secured editor It can be hard to conceptualize Especially since you know when I think of a secure creditor the first thing that comes to mind is you know a mortgage person who gives you a mortgage a bank So this is a good example of how The you know the person who made a layaway is also a secure creditor, right? So I mean not really a secured creditor I I I I don't know actually what happened with the layaways or just yeah an example with all of these kind of Bankruptcies that are happening in big-box stores. Well, the thing was yeah, I actually represent a creditor in Toys R Us But yeah, I wanted one of the few actual I don't do a lot of like work for outside companies or Clients right now in in the bankruptcy field, but this is like one of them. So but I did not know that Is a very unusual case because They basically sort of failed I mean the whole idea of rerunning the company and opening up failed and there was so little value That they did not they would not have enough money to pay the secured creditors The people who did what are called veteran possession loans that it lent the money for the bankruptcy process and all the professionals So and for the people who did work after the filing and these are all people all the way up at the top of the waterfall so Whether they had money for layaway payments the layaway they wouldn't have reached consumer deposits, frankly And which and which is what he what this thing is referring to with the waterfall though He says they wouldn't have reached it It's you know referring to the fact that there's only so much money that is getting paid back to people So right you know it goes in a certain order of hierarchy based on you know As we mentioned how much somebody has stayed but this is one of the funny things about bankruptcy We're sometimes you upset the rules because very often the case like that one of the first things that they do when they go into Where they they file what they call first-day orders So it's they file a whole bunch of things that they want the court to deal with literally in the first week We can have the case and one of them is permission to do certain things The way they always do it and so for example if you had a lot of clients with products on layaways The last thing you want to do is have people showing up with their last payment and not getting their stuff Because if you do that You do that Nobody will come to your store. Those people are not going to come for the next thing Yeah, and you need them to come back because you need to keep getting that money from consumers, right? So if you if you cheat all your customers suddenly the customers don't show up they go elsewhere and It's very common that they'll get permission from the Bank of C court to honor the layaway plans They'll get permission to honor gift cards Payroll that might be do is another example They'll get permission to make the payroll so they do all these things and there's a little bit of fuzzing of the rules On that but it's it's such a practical thing and in the overall scope of the money involved These are usually very small numbers. Yeah, okay, so but I just I really do want to emphasize the point about You know this friction between You know the rules are laid out in a certain way that enables a particular type of fuzziness and the type of fuzziness that Enables is for each individual situation to adjust in a practical way to number one like enable You know payment to keep flowing in like, you know into the business Even if that means adjusting the priority in a way that you know might be unusual like you know as he mentioned It's like, you know, they the business needs to keep proceeding normally and sometimes the business proceeding normally is You know in conjunction with the bankruptcy code proceeding normally and sometimes it's not and the You know the bankruptcy code is very useful for This like codified fuzzy space. Yeah, that makes some sense. Yeah And again that particular problem is one that could end up in tokens I think the example there would be one of the companies that does an ICO and They tell you that if you have a token you'll be able to use it to purchase some value of their services when they finally launch So they might have some product that's gonna cost you, you know a thousand dollars or five thousand dollars But if you have that token, it's gonna allow you to have a thousand dollars often what they may do in a chapter 11 cases going and say You know what your honor? Doesn't matter what kind of claim these people have There are customers Right where we want to launch this we want to have the product if we don't treat these people the way they expect to be treated They will not Participate in our goods and services and and and we might as well shut up now shut up our doors now So if we want to stay open We have to treat this particular cohort right because we need them to come in and buy that product even at a discount We just need that we need the trade so So that's a that's another sort of thing. Do you want to explain a little bit about dynamic systems? Yeah, so I think that leads into it very perfectly because of the fact that You know this question of you know, we want to treat these different categories, you know They're called classes, you know in the province of bankruptcy. So it's like we want to treat these different categories of people You know, right, so it's called, you know Comparative advantage is I guess a way to think about this where it's like, you know, we want to make sure that Like as many people are getting paid as much money as they could be, you know, based on the amount of You know faith that they put into this company and You know the degree to which You know the priority of who would be paid first in that situation changes I think that is what is really useful to think about in terms of, you know dynamics. So going to the The real-time word actually yeah, does anyone have any like comments or thoughts about that because yeah, so the Questions so far that we've got the one with the most Popular Brian And his question is does This discussion kind of like generally apply across only cryptocurrencies or does it also work with other tokenized assets? So maybe something that's not tied to any sort of money, but it's kind of it's some Generated by some sort of smart contract. It could be an NFT like a non-fungible token So Bora who'd left so you if they were tokenized like songs, right? Right, so I mean and my perception I think you know, whenever I'm talking about these different blockchain You know type of entities I am meaning cryptocurrency Which is why I kind of had that side comment about you know, is it even like is it even money? And I think it is more useful to think and you know in all situations of a cryptocurrency as being an asset not a You know currency which I think is what you meant Yeah, so I think you know this example You know is able to extend to any type of You know asset that somebody would have secured or unsecured claim in it And you know, I guess if you could just do a quick reminder like once again about like how we define Unsecured and unsecured claim so that we're all using the same language I would say first of all one of the questions here would be any token so we're trying to think about it from any token if we start to limit the Idea the framework down to a particular type of token. We are starting with a conclusion, right? So Let me let's talk about cryptocurrencies for a second and think about this concept of Parties and actors this this kind of that kind of structure So you have you have two parties and if well, you have what let me ask this question You haven't you have a cryptocurrency that it gets issued by the ICO issue or the ICO sure is file a chapter 11 Who are our two parties if we're thinking about this in terms of? Actor acted upon action kinds of hierarchies Oh, I'm seeing if anyone's like answering this on It'll be at the top Yeah, I'm sorry continue. So You know, I mean I'm thinking about that. Well, obviously the person who holds the crypto is is an actor I Don't know who the other actors and I don't think it's necessarily the issuer because Does the what's the responsibility of the issuer under the So under under the crypto, I mean, I guess it depends on the crypto And yeah, I would love to put that's an example of a question that we would write Let's say for example, that'd be the question who's the other party and and what's the what's the action and I Think you have to answer it almost on a on a crypto by crypto basis because they're obviously a come in different flavors I mean if you were talking about a Bitcoin Of course, I don't know how you know Bitcoin Issue where it goes bankrupt because it's so distributed. Yeah, but let's say you had something sort of like that You have one actor you have the holder and so you don't you don't have another side of the transaction I and if you go to the question of is there a claim, right? You have two parts of that equation one is a right to payment, which is basically that you have Company as an actor pays Hey right So you could you could sort of document like that you have to you you could say As as and there may be other ways of sort of structuring it but you may be able to sort of structure a descriptor as You know debtor being the company that filed debtor pays and then payee the party that's entitled to payment And the other one is a right to an equitable performance And that might be a little bit more Well, I can performance basically means that you would have a prior obligation, which is that debtor performs an act or Or performs an act for again your your payee or a boogie and So it'd be you'd have it would have sort of two conditions to it probably Well, let's say let's say again, we're gonna play with it play with the facts a little bit here Let's say we have a issuer that is not distributed Okay, so that the issuer of the token has some obligations that they have taken on to Maintain the system. Yeah, okay So that people can transaction it and they can mine it and they can generate more tokens, whatever They they have taken an obligation to maintain certain servers and other services in order to do that In that case, right? do those Parties that have acquired tokens acquire a right an equitable right to sue The issuer to keep those servers going and if they if they do then that they would have a claim So you would want to try to break down both sides of those Both of those are work conditionals write the payment and write the equitable formants for breach and and see If those conditions are one of those two conditions returns true And if it does then you have a claim if it doesn't then You could take that token and say well under that particular token Does not give rise to a claim against a particular debt or the fact that I own it and I'm sort of at my own And honestly, I think I think that It could be like that I mean, it's it's a little hard to know because your money is such a funny thing But I I I don't know that holding a token Gives you a right against the issuer in a sense And obviously for some tokens, you don't really have an issue. Yeah Can you go into what you mean by that a little more? Well, let's let's take it step back I'm gonna give you sort of looking at this from a sort of traditional viewpoint If you had a promissory note Yeah, right promissory note has an issuer of the note It has a holder of the note the holder has a right to payment under that promissory. Yeah, that's pretty clear That's a claim that that's pretty black letter now anybody can issue a note to anybody else promissory note to anybody else and You can if you satisfy the conditions of what's called the negotiable instruments law that no can be passed around So you have somebody who issued it and then other people can pass that around they can sell it to each other They can in theory Although we don't do this anymore, but they can in theory Use that as as currency right so instead of paying you wanted to buy say a chicken You would give somebody and you were holding a note from individual X You would give that note to the person who has the chicken the person who has the chicken gives you the chicken Then they have the note and if person X is reliable enough in terms of payment And that would be you know, you wouldn't have a discount so you could literally use that as currency Now there was a point and I think most people probably aware of this where banks started issuing those notes and We ended up calling that money Right, so banks would issue out the note and people would use that note as currency and Eventually they could if they wanted to they could go back to the bank and the bank would give them cash But they generally didn't so those notes would float around in society being used as cash And that that's what became currency and it wasn't until you got well into the 1700s early 1800s that you started getting governments issuing this Without without the right to go back to the government. So I mean essentially currents that that's what retro currency came from It was these promissory notes where you had an issuer So would you consider a token to be analogous to a promissory note because that comes back to Yeah, I mean, it's an interesting question. I don't know the answer I mean, even if you look And I'm not sure that this is the case when you pull a dollar out of your pocket if you've got a dollar and maybe I still have a line and I that that says it can be Uses lawful tender So there was certainly a period of time when the US government promised that if you walked in with a dollar To a central bank that they would give you gold Well, there was one there's certainly one period of time when you they promised they would do that and they would hold cold reserves And most countries were like that and they would hold gold reserves to make sure that if enough people wanted it Does it still say something like that? This note is legal tender. Oh, yeah Center for all that's public and private That's public and private which basically is a way of saying that if you I don't think the government US government will give you gold anymore or give you any other kinds of of Goods, but if you owe money to the federal government, uh, they will with the exception of pennies Which they get I understand they get very constricted about still but They will they will let you use that dollar To pay that debt so at the very least That's there's a backing for the dollar bills, it's not just floating out there As some sort of you know useless piece of paper that people have sort of adapted As as currency now But let me just say this so this is really the interesting part when you go back and back and back before the promissory notes and all of that stuff You did have things that Were out there and some of them frankly didn't have a lot of real use to them Some of them had decorative use But other than that they didn't have any real use and people would use them as currency So I mean gold being the obvious one. I mean it was a useless useless thing except to Make jewelry out of uh and pretty objects But it got used as as tender and salt which you know really was only useful flavoring And preserving food but you it was used for a long period of time as as currency so we've almost with ICOs and crypto gone back to that where you have this thing uh Which is basically just a ledger item and uh And it it has no inherent value or usage Well for some things I think that's what was being asked because you know that could be true for differences But for non-fungible tokens that might be different for stable coins that also might be different Well, yeah, right. So if somebody has accepted to you We'll take that that token and either let you have a discount or we'll give you some money for or we'll trade it for something else Then it has that it has like But other than a currency value, um So it's almost going back. It's almost going back to the beginning in a way And it's it's I mean it's obviously a very interesting sort of phenomena I mean, could you speak to how that might be different with stable coins? Um And you know I You know more about stable coins than I do frankly. I think Well, okay I will have to think more about My own answer to that and if anyone wants to get in on the comments because um, you know, I think that What does somebody think if we're talking about stable coins? What do people think might be a characteristic of stable coins? that would take it out of uh That would bring it into the quality of being a claim Or giving rise to a claim You mean by a stable coin? Um, I'm not entirely sure I am not going to veer into that but I would love to my understanding that stable coin is is linked to Some currency in other words you you're supposed it's not supposed to flow So it acts the same way as um, this is probably I'm sure somebody has a better um, like definition than me But you know off the top of my head and I know that this has contingencies. Um, it's essentially a coin that's able to act like Um, it has basically the equivalent of the gold standard I don't know what the term for you know a currency that is backed by the gold standard is but that's essentially how a stable coin acts so Well, I think that's what the stable coin is trying to do right? So it's like, you know, instead of being this completely conceptual like speculative Entity, then it's like backed by a you know what what I I I I don't know enough about stable coins And so I would ask the question of the audience Uh is and I understand the idea of a stable coin is the value is linked to Some other more traditional store value So it might be linked to the dollar so that one stable coin equals one dollar and it doesn't fluctuate now What I don't know is how they achieve that so the question for the audience is whether uh, that has achieved a and maybe it's Done all three ways or different ways by different people A there is some trusted entity that agrees to give you one dollar for every stable coin Okay So that you would never want to pay more than a dollar for a stable coin And you would always be willing to pay a dollar for a stable coin So because somebody somebody who you know has a lot of dollars has promised to give you a dollar for every stable coin Uh or two Um There is somebody out there who is buying and selling stable coins So as to keep the value Uh close to a dollar which happens a lot with with international currencies by the way, so In other words, if in fact the Value of a stable coin looks like it is going up. They will start to Sell a bunch of stable coins are pegged to another asset in a ratio or dynamics A much better explanation that that that is good. Well, that was going to be my number three, which is somebody says it is so And you just hope the market believes you Uh And and it just works, um Which is uh and posting these is that is that and the thing? Yeah, so we'll see if somebody tells me that So obviously somebody said yes, it's linked Um, we're looking right now The third well the third the third is that it's just somebody says it's linked and we're just going to say One stable coin can always be traded for one dollar And it just works. Yeah, which to be honest seems unlikely to me to just work that way because uh, You know like you can do that um And maybe maybe it ends up being true and maybe it doesn't end up being true You don't seem to have a mechanism there to make sure it is true unless you're again You have somebody who's adding or removing stable coins from your monetary. Well, that's that's where like You know blockchain is able to come in and be very useful with verification that that is in fact true and you know, it's all about whether people a few people are trading this stuff and You can always get it in balance I Um Yeah, this will be um, yeah I regret that um, I didn't think about the fact of how much um stable coin should be involved in this conversation So we'll definitely be having a follow-up conversation specifically focused on big coin explicitly is not designed to keep Uh a peg value. I mean it was designed. It was designed to increase In value at a particular rate A rate that is probably exceeded Yeah, you know, but it was not supposed to be as unstable as it is in terms of valuation It was supposed to be sort of stable what is designed to increase at a certain rate Uh, and probably the the idea would be it would sort of track inflation. Yeah And it would become a little more valuable as as the as the supply increased So that's a different sort of dynamic. So we have yeah, we have a good um update to that question. Thank you Brendan This is very um, this is taking an interesting direction So the question is then regarding stable coin. Is there a claim on to the pegged asset because remember it doesn't have to Just be money. It could be um, you know another asset like property or um, you know a different Like a different kind of stable coin like the thing that's so important about that is that um, so I think it might act Like an sbc or something like maybe or you know Some kind of bankruptcy like entity that might be protected in bankruptcy and be a specially defined entity Okay, so then we're still back on this first question of the waterfall or the first conditional which is there a claim and If I wanted to rephrase this a little bit we say we'll take the fact that we have a stable coin Uh stable clinic implies an issuer and I think most of them do have an actual issuer as being as opposed to a Sort of very widely distributed kind of of network with some authority mechanism. Yeah, um, so we have an issuer of the stable coin Uh So we have we have two parties, right? I think we can describe there We have the holder of the token and we have the issuer of the token So we have two parties. What does that action look like? Well, I think there's also the question um Is it actually three parties because we're also talking about The holder of the asset that the stable coin is pegged to if that makes sense Um, so we have we have a very um, also, um rika. We think uh, thanks for another um contextualizing question They're also uncollateralized stable coins So they're not pegged to an asset where the design is that the stakeholders are incentivized to keep the coin at a certain value So that so I take this Comment, this is a great comment. You give me a photo give them a photo for me Oh, yeah, y'all are getting the upper And I would say It brings up two questions. One is it implies that there are collateralized stable coins, which would be You would collateralize it obviously somebody's saying I have this and I you know, I have whatever Explain a little bit about what collateral means in bankruptcy. Well, I don't think this is, you know, I'm sorry annotated I will tell you I've never looked at the details of any of the What do you call the transactional documents? Um, like a KYC KY whatever it's called, but I I never looked at one so I when he says collateralized I don't know if he's using it the same way that you might I'm just saying let's step back for a second and think about what collateral means in bankruptcy in general because that's, you know Not potentially a jargon term to some people I think that's true and we had talked about secured claims So secured claims would be the same as a collateralized claim and essentially it's a claim where you have the right to particular property If the payment obligation is not satisfied So I would I would say that I would put that down in a nutshell. So an example would be a real estate mortgage Yeah, you have a note and if the note is not paid then You have a if you if you're the holder of the note the note is not paid then you have the right uh to take the property and There's two aspects to that. So I'll tell you so one is having the right and the second is having the right as opposed to other third parties Yeah, okay, so to explain that for a second. Let's say The real estate's not a great example. Let's say it's a car loan, right? And I've collateralized the car loan so I'm owed money and under that car loan. I have the right to go and take that car Under law if I'm not paid and pause that mean that is literally the definition of being a secure creditor You have a lien against property. Is that right? I mean, yes We all are sharing this That's what it is. I have the right under Some law to take that property. So and we have a stable coin could theoretically be Like pegged to this car Right in this example. Yeah, but the question becomes What's the right to the property? Is it a very specific right or is it a sort of generalized right? and Where does the right arise and their statutes are usually in the us and the us at statutory uh in Basically all cases in the bankruptcy code or in state statutes explain the difference for a second So it's usually going to be state statutes. So mortgages. There's usually one sort of state law Governance for that. Um For almost everything else you're looking at article nine of the uniform commercial code Which is which which is basically a state uniform state statute governing secured transactions in In most property with some exceptions and that that every state except louisiana has enacted Article nine of the uniform commercial code. So and so yeah, just louisiana has something else based on french law And I don't know exactly what it is. Oh, yeah, so definitely not going to go into that right now. Um, so Um, so that's the I I mean if you want to put it down in a nutshell and it is a little more complicated than that But but basically that's what a secured claim is. It's a right to the specific property Uh as and it has to also be and this is a sort of important question. It's something we call There's two concepts to it one is attachment And when it's perfection so to get back the overarching idea is the You have a right to payment you have a right to some property if you don't get paid And then you want to have attachments and for Perfection so attachment is that your right to get the property has become legally viable The way of describing it. Okay, and there's certain conditions within the various statutes that govern attachment Perfection is the more important one in this concept perfection is basically that If there's a dispute over who gets that property between you and somebody else You win you have taken certain steps so that you win and going back to the example of the car Uh, let's say you had this car loan And it's attached and perfected against the car and somebody else who's owed some money Goes to the debtor and says give me that car Instead of paying me and the debtor gives him the car Okay If you have that secured if you have that secured creditor You win as against that car you can go get the car still You don't lose to the other creditor Uh, assuming you're perfect. Yeah, so let's um, uh, okay, so um, you know Let's tie that into the stable coins example and somebody made a really great comment that I think could inform your answer So, um, brian says, uh, so a stable coin bankruptcy would be exactly like a bank bankruptcy That's a really interesting question. There's a really simple answer to it. It's not even close uh So for two reasons I one is that there are a lot of rules that specifically apply to bank bankruptcies and they are Not stuff that I've studied in depth and frankly, but I I I very much doubt They would apply to a stable coin bankruptcy. Okay, so but when they're because the definition I mean, they're definitional and the don't go to specific parts of the banking industry and the federal statutes apply to banks and also and so forth and so on and They probably wouldn't apply the second is uh Well, let's say there might be some parallels if you got past the fact that we have specific statutes that govern a bank break bank bankruptcy That are very specific and very complex Uh, if you got past that it's hard to imagine that would be exactly like a bank bankruptcy Maybe there are parallels. Okay, so I accidentally facilitated a tangent going back to um, well, I don't think you did Okay, I don't think you did drawing that back into this collateral I don't think you did because you get into this question of again Think about think about how you would set out these obligations This question if you had a stable coin the sort of peers of after Act and acted upon and how you would write that out um And then you might look at that and say, you know what that looks just like a bank You know, that looks just like a bank. So what is is that analogy useful? Or does that end up being like a falsely useful analogy because of the fact that bank bankruptcies are governed by all of these I think it's falsely. Yeah That's that's why it's tempting. Yeah, here's the other thing too if a Well, think about what a well first of all banks don't issue coins anymore I mean other than the federal reserve bank and other you know, at least not in the u.s. And Uh, there might be other countries where banks non central banks are still doing it. I mean I think in most Most european countries it's being it's being done by central banks um And I don't know. I mean that that's a whole different realm going to central bank insolvency. So the Um So it's a little bit of a false analogy in a way. Yeah, well, okay Well, in that case, let's zoom back up and say, okay So we've established that the bankruptcy code applies much more clearly to stable coins and maybe Um, you know what are now, you know influx about like is it a security or utility token? You know, I see a tokens and So can I go back to the other one? I mean, I just just saying because obviously people will think about this There are things that banks do issue That might be similar. Uh treasury checks for example Yeah, would be an example, right and for people who don't know what a treasury check is It's it's basically an instrument In iou that's issued by the bank So that people purchase so if you have you know, you owe somebody a thousand dollars you might go to the bank you give the bank a thousand bucks the bank Issues a treasury check for a thousand dollars And then you can pass that around to people and then they can go back to the bank and the bank will give them a thousand dollars So a treasury check operates a little bit like that. I think the kicker is that that That our financial and bankruptcy system have built into the process Things to protect people who hold instruments like that um Because they only work At least in in in that world. They only work if they are very low risk So you have specific protections that are built into the system to protect against stuff like that Yeah, um But so I mean, I don't know. So I think it's interesting because it's like I think this is why a lot more people are turning to stable coins And I think there's some interesting questions that arise that You know, I don't know enough to speak to as much as would be a very interesting conversation And I would love if somebody you know waited on this in the comments But the fact that you know, there starts to be questions with you know Shit coins whether maybe those should be backed by stable coins or bonded to stable coins You know, there's some interesting things that could arise there that I think are highlighted very well by this bankruptcy example, but um, you know, so if anyone wants to weigh in on that That would be amazing. Um, and You know going to the overarching question. What does what we just established about what would happen with stable coins? emphasize about Like the fuzziness or volatility of like ICO tokens like what what is it about stable coins that make it fit so clearly into the bankruptcy structure and the overarching financial structures that it's a part of that are not true about regular, you know regular tokens and um, you know, how might that impact the classification of regular tokens if at all I'm not sure I know. I mean, I guess it would depend a little bit. I I have as I said I haven't had the experience like looking at the actual issuing documents, uh of of of ICOs for stable coins to understand The extent to which or the nature of the promise that's being made by the company Oh, yeah, right. So you're thinking about again that acting Kind of part the action. What what are the obligations? What what's the action? So you have the holder of the coin is as a as as a one party and you might have the issuer as a counterpart um Yeah, and And again, it might be more complicated than that. I don't know but um What's what's that intermediate action look like? What's the obligation? Scope look like and then I think once you start to define that out you can start to draw parallels Yeah, so I think and um, I know that the name is escapee me, but I know that there is about to be a stable coin. Um a stable coin bankruptcy coming up like a company that um You know how if anyone remembers. Yeah, definitely comment. There's uh, it's like they had a ton of funding and um, they just weren't different enough from other or they had maybe oh, no, it wasn't sec problem Does anyone do you know what I'm talking about? It was um, uh, I'll share it in the arena if anyone is interested after Um, I do want to draw back for a second. Um, rika had a really good question Could you restate briefly and as concretely as possible the desired output of the session? I have some difficulty following the train of thought. Um, yeah, I am so sorry about that I it is it's challenging because we had this um, you know mapping whiteboard thing that um you know, I I hope should we go better in terms of you know, um Connecting all of us from disparate perspectives and it's also kind of challenging when I can't uh, when we can't see you guys because It is you know, kind of an interactive discussion. So I am uh, so sorry that it's been jumping around. Uh, I guess um, once we figured out how to look at the comments then, um Yeah, we have been working those in an less linear fashion than um intended So yeah, thank you for your patience and hopefully it is um progressing in kind of a sensible way. Um, You know a brief statement about what we're hoping to do over with this is just to highlight Um, you know since it didn't really work out to be mapping on the board, uh, you know what, um Uh Yes, exactly. So this is um Uh, yeah, this is what keeps happening with the comments. So we keep seeing them like out of order. Um, yeah So basically the main point of the session is to say, um, you know bankruptcy is an example of um Uh a system in which the like these fuzzy, um, yeah Trying to restate this in such in a clear way is um now i'm Telling myself it not. Well, I think the real question is like, what do we would we want audience the people listening to sort of come away from Take take away from this Yeah, so I think the answer there, you know going back to our overarching question how our token holders um, how would token holders be classified or paid out in a bankruptcy and um, You know just starting to form an answer to that question that I think can form You know an understanding of the difference between, um, you know, ico cryptocurrencies stable coins You know tokenized, uh non-fungible assets and you know, these different classes that are starting to arise You know is the beginning of a longer discussion that I think is a very rich Framework for looking at kind of cryptocurrencies in general. So it's kind of going through an exercise of using the framework of you know within a system where definitions are very clearly defined actors are very clearly defined and um a like hierarchy of How staking into the system, um, you know in terms of you know having a secure claim like how that hierarchy, um impacts Uh the potential classification of tokens and just you know going through So we have somebody listening who really knows their stable coins because they gave a very succinct statement of What it is that makes stable coins stable and what they said was uh That the algorithm the issuing algorithm behind the coin Is essentially designed to keep The coins value pegged To whatever its sort of anchor is uh, which makes sense so To restate that another way I as I and i'm paraphrasing perhaps here The algorithm is designed so that if your value looks like it might drop too low Then you might have it may become harder to mine it basically and then if it's if it's starting to creep up you would Your algorithm would be automatically designed so that you have a it becomes easier to mine and That you so you'd have more maybe not easier to mine is not the right way of looking at it That you'd have more tokens going up. So essentially the algorithm itself is designed to Adjust the supply. I think that's what's going on there, right? So we I had talked about it in the sense of Having a person there who is adding tokens and removing tokens From the supply side in order to maintain it and this is actually a fourth option Which is the algorithm itself is designed to expand or To well, I would say to accelerate or decelerate the addition of new tokens In order to maintain value And so I you know I could see that that would work unless you've got too extreme. Yeah So I kind of want to switch we have some other good questions coming in and so to kind of change tack And then we can hopefully you know tie all those things together as we wrap up. So Um Another question is are there any bankruptcy remoteness examples other than holding cryptos in an escrow That are applicable to a cryptocurrency and token transaction You know, we've kind of been covering this but um if you want to speak to that Um Which all the the bankruptcy remoteness examples. Yeah, I think it's an interesting question but maybe we should sort of stick with Not get too far field. Um, yeah, and I think um, there's also a great question from luciana Would tokenized assets be supportive for helping with splitting the pie and bankruptcy cases? For example, if Um an individual's property was tokenized. Could you simply address token values to be part of the sale? When they say if the properties mean that the asset base includes tokens Do you think that's what she means? So are you familiar with a non-fungible token? Uh, I mean like like a tokenized asset is so it's basically like if you had um, You know if you had a loan. Oh, yeah, here's a great example. Okay. Thank you. We got this is um, perfect And yeah, thank you all so much for um engaging directly as we're speaking this will help me much more one year Um, okay, and you're up the issuer of the token is often not the operating company where the value is captured The issuer is a foundation and invest in loans to a limited liability company this adds complexity And here's another um, here's another question that I think is related. Um Okay, good. Well, okay, we'll touch on that one This is somebody who wants to know about whether some might be a secured debt others treated by equity is Unsecured debt, which I think is an interesting question And and the idea that you have a third party issuer other than the operating company Doing the issuance is an interesting one Uh I I honestly I think that'd be uh, it would add it's a very interesting fact pattern I think it adds a lot of sort of complexity to the analysis I mean part of the idea thinking about this in a computational Of course isn't just the fact that there's tokens which I think is an interesting fascinating question but um It's starting to think about the process by which you answer some of these questions. Yeah, I think that's what we're hoping to get at Yeah, right, right, right, right. So you you want to try to be able to talk about this in some, uh Without getting into Maybe not too much over complexity But let you know what let's talk about that issuer kind of thing. So now we have We have three parties, right We have the the holder We have the Uh issuing authority We're issuing entity and then we have the operating company Yeah, and then you know, I just a useful split which is um You know why this can be really great for um, you know a mapping scenario when you know, everyone is in the same room It's like then you have a split. What if the issuer is a private company versus, um, you know a government like, um Like we can mention like, uh, I think an institution. Let me just go back to the question But yeah, it's like, you know, would it matter at all who the issuer is and The the type of issuer that it is, um Well, I think you have the question mark is that you you want to try to map out these relationships between those three parties so the the issuer You know the thing is I think you would want to think about And it's hard to I think it's hard to answer this specifically right because You will want to start to look at The Uh, I think I think the specifics of the deal, but let's let's let's lay out some possible Aspects of that triangle, okay, so so let's take first the Issuer Holder aspect. Okay, so one option might be there is no relationship No obligations on the part of the issuer to the holder token holder Yeah The second might be that you have so what are these? There are three Three with three three parties. So think parties and one is the token holder The chicken holder I don't let's do like a little circle with the name so we can draw lines Um I think that's done. Yeah Uh, is this okay? So is this what you know? Um Right. So anyway, she's what she's working on that. So let's say we have three We have the token holder a little bit of a triangle token holder issuer operating company So what are some of the possible relationships between the token holder And the issuer so one option is is is none. Okay another one may be a A maintenance obligation. So the issuer may have maintained some obligations to Uh maintain services or some governance function And that might not that okay um That's you said and I yeah, so token holders one So maybe maybe some people on the board might have some other ones other thing thoughts about what those kinds of Action items might be between the two So maintain a system maintain authority nothing Um, your token holder and your issuer. This is going to depend upon what it is. Um, It may be a right to profits Okay, what is the token holder yet? With respect to the issuer and what what are the obligations of the issuer with respect to the token? So one might be as I said A right to profits, which is what you'd find off these if you had an equity security Right, you have a right to the profits right to dividends and so uh, another one might be Redemption right. I don't think anybody issues tokens with redemption rights, but maybe there's one in there. Yeah Uh Well The issuer that wouldn't be with the issuer the token holder, uh, right. Well, we're talking about with third party So between token holders there might be a right of Transferability, but I think that's pretty much definition over the token, right? But I mean if you want to look at it from that standpoint, then that's about maintaining the chain so that would be one would assume that the issuer is maintaining the chain or Exercises some authority function over maintaining the chain or isn't involved at all if it's completely distributed so just uh But transferability is a function of the chain Yeah, by the way, we're gonna um I I realized it's easier just with the how this format is if we Go through and make this flow chart after and we'll share it. Um with the class materials So and again people might I what I encourage people to do is to chime in if you can view one of these kinds of action Action connections between the parties because when we can do that then we can start to fit in obligations, right? Yeah, you can take those those user those two party chains with an action in the middle and you can start to link them up into Sort of our structural Format for the laws that are involved and this can this can lead you to the insights as to what actually is going on And and how it gets treated legally um So another one with the token holder and the issuer might be a right to a discount or a right to a product or service Right when you're talking about one of those what do you call those when you have that? You can trade the token You have the right to transfer the token Back to the issue back to the operating company and you get a product or service Utility token, right? Oh, I mean supposedly yeah, right, okay, so That would be enough that would be between the token holder and the operating company again you might have uh Right to a service or a right to a product Okay, or a discount on that Um and between the operating company and the issuer Uh an obligation to maintain transferability. I would think right the issuer will maintain or uh Silly transfers uh to the operating company Because that's again if you had a utility token that's sort of a key aspect of that relationship that the blockchain continues to maintain and operate. Um And identification Okay, so in other words so that the the operating company may need to know Uh In a sense, uh, who's holding the tokens? And again, for example, if you were you were handling equity tokens and people have a right to dividends or profits or something like that from the company operating company You need to have that blockchain maintained Uh so that the operating company has a way Identifying those people and again when I say identify, I don't necessarily mean know exactly You know their name and address and phone number, but it may simply be The maintenance of some mechanism That allows you to reach out to these people so Those are the ones I can think of We have a we have a lot of great questions here A few of them are not necessarily on point to hear Like I noticed when people upvote right it goes to the top Which it's useful to know Which questions are getting a lot of attention, but on the other hand then they I have I see them to the top There's there's a way to just see the latest ones too. Oh, yeah What's an airdrop? Yeah Um Well, let's go into that later. Um, if we're still going through this other example, right, right, right, right You want it can we sit? Oh, I don't know how to do it either. Oh here. No, we have top voted. So let's put it up to latest Okay All right, so the latest is Vanessa's question with I think that's what we're talking about The yeah, I mean, well, so we're talking about here is really the framework of figuring this stuff out because it's not easy to figure out Right, um We used to run into this problem I'm going to digress for a second because I think it'll help people explain what we're trying to accomplish Um when the internet was first coming out you had these questions about Um copyright or things like how do you treat a domain name? Is it a property? Is it a contract? What is it? um and The initial thinking of a lot of people was Uh, we have to come up with new stuff This is a whole new thing um And we'll come up with all sorts of new ideas on how to address it and I think like jurisdiction, right? If you do business on a website Does the court have jurisdiction over your company even though you're operating out of a different state or a different country, right? And so we ended up with uh a A decision called zippo in the u.s. Which was very influential for a while And it was this whole new sort of thing about it depends on how much activities on the site how interactive it was and so forth Uh, but what we went out in the end in terms of dealing with all these questions was a return to basics And what ended up happening is the courts and academics and so forth would eventually go back to very rude principles And they would they would say okay, well we were talking about whether something is or is not property Let's look at what the rules are for what makes something property And they literally would go back to the principles from the 1700s and the 1800s when people really were thinking about This question in the context of things like sheep, you know um In foxes Right and you'd have these decisions from way back when That would talk about the question of well who owns a dead fox right and and From those cases came certain ideas about how we treat property and ownership And what they found was you could take those same ideas And you can apply them to things like domain names and websites and so forth and you get pretty usable answers So and the same thing with contracts and so forth and so forth and so on so it was really about going back to these basic concepts And then looking very closely at what what characteristics? Were important back then Why they were important And then coming forward and looking at this new asset and thinking okay What are the characteristics of this new asset and and how does it tie in with the things? Frankly, we've we've come up with hundreds of years ago and that have worked pretty well and this framework tends to tends to Deliver fairly good results not necessarily always but it tends to deliver very good results And so what we're trying to do with this is is break it down We can break down These kinds of rule structures But then you get into the question right and I think it's very good one with tokens is how does it fit in? So you want to be able to go back and look at That idea of a token and what it actually means um And that's what we mean by dynamics design by the way this like dynamic designs is yeah process of drawing back to you know the kind of foundational principles that we're talking about and You know abstracting just enough to say, you know, this isn't like it doesn't it's not necessarily about you know blockchain or a new fangled technology. It's just goes back to these basic questions of like, you know Um power and money Well, who are the who are the parties who are the parties and what are the actions? What what are they actually doing? And that allows you to I mean so we're using this very specific framework of looking at parties and the relationship between the parties and sort of building up as possible a graph for any particular asset so You end up at the end of the day not talking about a Of my computer came up like that is going to Yeah, it's gonna die though Here i'm just taking a second to make sure my computer's plugged in because it's old and it's old like me and the battery's low so, yeah The idea is it's one thing to go and say well, we have a utility token or we have uh, we have A stable coin or whatever we have And think about it at At an abstract level What we're trying to do is to break it down Into a description of the relationships between the parties Yes, and then once you do that you can start to fit that into legal constructs Uh, and then once it's fitted very clearly into legal constructs It's fitted into a contractual framework that's able to be ported directly into a you know A machine readable framework so that then you can translate, you know these real-life scenarios into You know a legal framework required to actually represent it in code and have kind of you know this digital governance Yeah, I mean you you absolutely could do that and I think That can be very useful. Um, and you can start to fit it into and I would call this um Maybe semi computational where At least the structure is automated and you may be Reaching out to other sort of information sources. Like it just may be a person Uh With uh plugging in some of the holes So that In doing the analysis, you're not doing the whole thing from scratch But you're asking very specific questions about the product and one that that fit into the statutory Schema and then you can go back and say, okay, does it have this character or not? So for example, so for example, we might look and say Uh, does the issuing authority? Oh, wait, we have any we have a question now that um, okay Um, oh, yeah, okay. We'll we'll get to that question very soon. Um, the tokenized assets are held under itself We'll get to it after we finish saying this part or disposal of the assets of a bankrupt charity Oh, yeah, well, let's talk about that in a second. So we're not going all over the place Um, so what was the point you were making? Let's let's let's go back to our particular token. So let's look at the issuer Versus the token holder and our our triangle that we had talked about and If the issuer has this obligation to provide management services or Authority services you or or or control services And they stopped doing it Then You may look at that and say, okay, we identified this this Relationship and we can look at that relationship and say, you know what? Uh, that may be a contractual relationship. Yeah, we know what a contract is We know what the remedies for a contract is. Uh, they it's either damages or specific performance And we can go from there to sort of think about what it means in the context of a bankruptcy If this issuer Suddenly stops doing what it's supposed to do. Yeah, and you may have a claim against the issuer And we understand what that claim is. So if we look through Uh, and we'll go back to the waterfall for a second. We know what that is. That's an unsecured claim Okay Because you have this promise from somebody to do something. They haven't done it now again If you're an equity holder, let's say your token is akin to being an equity holder Yeah in a company Then our claim is gonna we can look at that and say, you know what? We know how an equity holder's claim is treated in bankruptcy. Yeah, and just, you know, quick annotation But what is an example of that situation? It's usually when you hold stock I know most coins are not labeled that way as being equity related, right? Yeah, but but they could be with re-characterization for example Like so what what would be an example of where you think a coin might end up being like an equity? Well, let's say you look at the coins characteristics and you're looking at the relationship again between the issuer operating company and the token holder And let's say the token holder has a right To get money if this company is sold okay Then that that sounds like equity that's like sounds like stock Let's say they have a right to any excess profits that might be distributed out to stockholders Again, sounds like stock Okay, and we're leaving aside the securities loss issues, which are obviously relevant So I don't think there's any tokens where people get voting rights Does anybody issue those but I mean that that's a major That is a major property of a lot of token systems that they have a right to Vote on things like who's operating the company. Totally. That is like it. That's kind of the function of dowel. So I don't know Yeah, so that's a follow-up discussion. That's interesting. That's that sounds like an equity interest Yeah, that that sounds like an equity interest. So again You get in the specifics of things but you can look at those sort of characteristics now to actually answer the question of what That relationship is between the two parties You you need to look at very specific things and that's where the lawyer comes into it um Where a lawyer may have to pull out the operating documents and the rights documents and and and maybe maybe get copies of The operational documents for the company And then and then the lawyer would be able to look at that and say, you know what? Yeah, you're acting like a stockholder here with respect to control. Yeah control rights um, and so That is going to fall and bring you into that characteristics of being you know equity owner And then in a bankruptcy, it's very likely that you're going to end up Subordinated between all these levels as a result of holding your tokens and and uh, just elaborate quickly because I think that's one of the Very foundational points that's useful For thinking in this framework You know just to draw back to what we were talking about at the beginning with the waterfall and the reasons that people are Subordinated and why the central question is such a big deal So just describe where the money goes like yeah, this kind of briefly why being an equity holder would cause one to be subordinated Well, because that's sort of that's what the code says Everyone might not like I understand that but I mean, you know, that's It is a function. It's a basic function of corporate law. So Uh Again, there's a number of things that tie into it Um, you know, and we don't necessarily need to go into those just knowing that that's another kind of dimension of complexity It's a dimension of complexity, but I think it's Well understood. I mean again, it's one of those kinds of questions where you're not you're never you're never really If somebody like own stock like they are hopefully again tokens aside They have literally a whole common stuff accompanying. Yeah, you're not going to find somebody arguing in a court That they get paid before the trade predators This is this is a well enough established principle that that you're not going to argue about it The roots of it the roots of it go back into Corporate law primarily But they are reflected in the bankruptcy code Yeah, and the thing, you know, one thing that's so great about what we're able to do now with having um, you know If if we uh, you know, this is um, kind of where my work lies if we create, um, you know Smart enough contracts, you know smart contracts for cardian contracts contracts that are able to control for complexity and control for You know this um wide range of inputs and still have you know a trusted output that um You know these variables are actually being um, you know all considered then you don't necessarily have to have a lawyer who's expert And you know this particular jurisdiction and this type of corporate law and you know all these possible bankruptcy You know, uh all the different things that have to be considered with bankruptcy since you know We've talked about securities tax like all of these different areas of law that you know You would need an entire uh legal team to have an expert in each of those So, you know one reason that it's incredibly valuable to be looking in this bankruptcy framework is that um, it can provide um, you know potential mechanisms for uh, Computationally encoding and you know automating as many parts of um, this process as possible like into the smart contracts themselves So I think that's pretty cool. Um, so yeah, I would love now to go to the question that um I like um caused us to pause away from for a second before. Um, a really interesting question from denis Um, Dennis butagi. Yes, I don't think we've been introduced to oh, yeah So hi hi Dennis Um, yeah, so he says, you know, would you be glad? I'd be glad to hear your views on bankruptcy cases where tokenized assets are held under a trust or disposal of the assets To a bankrupt charity of a bankrupt charity. So yeah, I think that where The bankrupt is the issuer or company that it's issued on behalf of or that the company is holding them And I don't know whether Dennis can actually respond to that if you hear that might be I I'm not yeah, it's a little hard so I and he looks me asking for two right where the tokenized assets Oh the token So in other words, you've got tokens and they're linked to an asset particular asset Um, oh somebody else has something about bankruptcy remote entities before too. Yeah, so that could be um Yeah, let's like come back if those two questions combined conceptually and and I'll get away for you. Let's well the trust is usually I mean Putting putting assets. So for those of you who do not know what a bankruptcy remote entity is I'm going to give you the high level of what it is. Yeah, so if you have particular assets That for one reason or another you do not want to be affected by bankruptcy processes You put it into a separate entity Uh, is that like an sbc? Yes, special purpose entity So that that's special purpose entity that they sometimes call them bankruptcy remote entities Uh is a separate entity and that entity might be a corporation. It could be a limited liability company It could be what's called a business trust Uh typically in the u.s. You would find business trusts Incorporated in Delaware or Connecticut, which has specific laws that make it easy To set up these bankruptcy remote entities and are designed for them And what you do is you set up the corporate structure Oh, yeah, or entity structure Yeah, svp or dst special purpose vehicle. Yeah, that's what I'm not sure what a dst is So Yeah You set up the structure of these entities in such a way as to make it very difficult For them to end up in bankruptcy. So for example, uh Business trusts and specifically Well, this is you get a little careful But if you are a state law trust state law created trust including Connecticut trusts and Or a Delaware trust Um, you cannot fit into the definition of an entity that is Qualified to be a debtor under u.s. Bankruptcy law. So why? Uh, it's just how the statutes are written What what do you think is their intent to being well? I try to the way the attention was it was uh, It's primarily jurisdictional and constitutional and scope Right somebody says Delaware statutory trust. So again, yeah um The the idea really was to keep probate trusts and trust people set up for their kids and so forth from being covered but Put it this way It's definitional the bankruptcy code has a very specific definition of what kinds of persons And persons is a defined term. What kind of persons can file bankruptcy? And there are certain kinds of the term means Persons. Yeah, why would they use that? I don't know but I don't have my code in front of me. I mean we could go through this at length But it's basically section 101 of the bankruptcy code and you can look up the definition of person And there's just this is a definition of the term corporation And and so an entity is a defined term. So all these things are defined and You know only a person Can file for bankruptcy and uh state law trusts with some exceptions Do not qualify as a person. So that's one way Another way people do it is they may write something into the corporate charter prohibiting The company from filing bankruptcy Another way they do it is they require the supermajority votes of directors To file a bankruptcy and then they put on to the board individuals who Have incentives never to vote for bankruptcy So there's these different ways of doing it Bankruptcy remote vehicles have a I will say a poor record of working Yeah, for those of you who are interested in the topic There are all sorts of mechanisms that can be used to get them into a bankruptcy anyway and The the the number of cases where it has worked Are outweighed by the number of cases where it has not worked But still so what are some of you know overview of some of the situations where they might work and not work? well, I So there's one case that was Decided where What happened is the the direct the directors had a blocking vote so What the other directors did is they went out to the creditors And they had the creditors file in voluntary bankruptcy against the corporation. Yeah, so the corporation ended up in bankruptcy anyway uh Usually what happens is the bankruptcy courts just ignore The separateness of the entity and there was a very large Real estate investment trust case that involved thousands of these things And that's what the court did in that circumstance So they they tend to only work when all the parties involved want them to work and and that does tend to be the case sometimes so And that's really interesting to think back on you know this example you started with where um, you know these this code is very specifically laid out it has um you know, uh constraints and um contingencies put on it by case law and yet when there is this desire by You know the majority of the parties for to work out a certain way It still can end up working out that way whether that was you know In this situation where it works for everyone sometimes to have there be this like separate You know separate asset store or it can be um and a situation where somebody is you know getting away with an unfair outcome and Uh, yeah, the code is applied that way and I think there was there was one case I remember reading about again I don't remember the citations of these things, but just these are fact patterns that have come up uh Where a a law firm Advises client to rely upon a bankruptcy mode entity into a law And they took a security interest not against the assets in the bankruptcy remote entity But against the equity in the bankruptcy mode entity So the idea would be that the bankruptcy would not affect this asset pool And the creditor would then control it because they would have the equity They would end up with the equity units and the bankruptcy court basically just said you know what these are really The operating company and this bankruptcy or entity are really the same organization They merged them together and And and the secured creditor basically lost its asset And I will say the loss of the law firm. I think got sued for malpractice so Because they well because the traditional approach is about when you're doing that is you do belt and suspenders You get a security interest in the asset itself And you get a security interest in the equity of the bankruptcy remote entity Now there are reasons why sometimes that does not work, but um or people don't do that But let's talk about how that might might apply to bankruptcy and we have you know, it's five more minutes Tokens and maybe people can tie into this So the thing with with tokens if you're Securitizing the token the question then becomes have you really securitized it against the asset? So I can see why people might want to put the assets into this bankruptcy remote entity a trust or some other sort of separate entity And by assets you mean like ICO tokens I I don't know what they're putting. No, I'm guessing it's not the coins themselves. I'm guessing is something to back up the coins Yeah, I I I guess there may be collateralized coins Yeah, are there you know I mean people somebody should tell me because honestly, yeah, I don't know that's definitely possible I mean that would be a function of both non-pungible tokens and Stable points that someone could achieve if they were purpose, you know If they were intentionally using these mechanisms to protect themselves, you know, so Yeah, I mean if you were talking about the collateralized asset one reason you would do it is either because you I mean you may be concerned About being able to actually have an effective security interest. You might be concerned about having an effective Claim or debt that can be collateralized And so you put everything in a separate entity and you hope it all works out at the end of the day I have a feeling for most of these kinds of things very well may not But it depends on on the Incentives of the parties and again if you did have a situation where all the parties That get involved in the bankruptcy Want this separate it is to work and it should work. Are we on mute? I don't god. I hope not. Are we on mute? No, I think if you click on that, you're on mute. Oh Are you sure? Yeah? Oh, okay so All right Um, oh, yeah, so brandon came um through with has to do with the government Clarifications number one with governance. Yeah, so the first thing he said was Clarifying that dst is referring to the business entity at the Delaware secure trust and then also, you know That the iCO trust has to do with governance Which is kind of what we were saying and one of the reasons that you know, there's An infinite amount of things that we could be applying these bankruptcy frameworks too But you know with what you asked about is governance which you know voting rights voting order Is that it were tied to like this and yeah, you know the answer is Yes, like it and it works in a very similar way that it does in bankruptcy in terms of absolute priority and comparative advantage I I had expressed to you before my my skepticism that any iCO Would the value of any token would survive the bankruptcy filing of its supplier and I did note that we we had come across an example of what was a great domains I think was the bankruptcy that I tap for us. Yeah, and their their Token basically had failed months before And it was the securities fraud claims that forced them into bankruptcy. So there It's an all point the token value was already Gone the whole structure was gone I'm very skeptical that anybody would be interested in playing around with a token or buying a token Once the main company goes and once the once once you and then of course who cares about the governance now I can see the point of And somebody has dst, which is a business That's the other okay. It's some sort of company. Okay We have a clarification from brendan mayor, which is that dst is a business. So, okay Um, I can understand the idea of separating out governance though because the idea there being that You know, you have somebody at third party Making sure that that chain of the ICO Your your chain is continued to be managed the third party is an offer right even if the company Well, that's fine, too And even if the company goes away because or or maybe the company doesn't go away But you're worried about whether it's going to continue to do what it's supposed to do Or maybe it loses effectiveness Was also to ensure that, you know, the governance of the entire system does what it's supposed to do from the beginning, you know Right, right, right to try to control for it Which is also, you know, one of the things that I think is so valuable for You know answering some of these questions, which is, you know, like We have moved into a new phase where ICOs Um, you know companies who are choosing to do an ICO can look at the mistakes of past companies and protect themselves by building and Um, you know, like utilizing some of these mechanisms like, you know, um Like these remote entities and stuff like that. So, you know, a kind of a question to tie up and then we'll all, you know, set The possibility for people to ask, you know, one more additional question. Maybe so, you know, based on everything we've talked about, um It's, you know, one of the main things that kind of stands out to me is the fact that right now the blockchain industry is so concerned about Classification as a security and yet in bankruptcy, that's how, you know, you protect your company That's how you protect, you know, the individuals who are involved. So it's Kind of this interesting cognitive dissonance where it's like, um, you know in the bankruptcy universe like You know, something meaning a security conveys, um, You know, like this level of safety. So yeah, so, you know, um, what do what do you think will not like What do you think will happen? But what could companies do? Um to protect themselves, you know going forward with some of We're talking about issuers. Yeah why I I'm not saying anything Because I don't know, I mean I'm not saying anything that most of the people I think listening who are in the blockchain universe don't already know because Uh, you know, I I'm certainly not an expert In that whole field beginning a sense from a lot of these questions that there is a lot of complexity That's being developed in a lot of these issuances to try to build that kind of structure and reliability um Let me point it out. Ethereum has an ethereum foundation, which is good point. Um But I I don't think there's a an issuer An operating issuer on ethereum. So I think that's sort of a little bit of a different company Question, I mean, what would happen if the ethereum foundation went bankrupt? That's a really good question, right? Yeah, um You know and that also just ties into you know, the cascade that um, you know, not time to talk about now But a very interesting idea, which is um, you know, if people are interested in talking about this I think I might create a telegram group, you know That people could share and continue this conversation because there's so many good questions here. It's like, you know within um Ethereum there's you know, the ethereum foundation. There's coins that are built on top of ethereum both as, you know, ERC 256 like uh, I don't like you're 271 like, um You know non-pungible tokens, but then there's also, you know, regular ERC tokens that are built on ethereum Like what happens if um, you know, if ethereum itself goes bankrupt, what happens to all of these? Um, You know other I guess it depends on who's been paying the chains. I mean ethereum is essentially a A platform. I mean anybody can boot it up. It's a You can dive in. I think I think we did I did a uh hackathon with a friend of mine Uh last year and and we built an ether ethereum Network on his laptop. Oh, yeah, well you can do it completely remotely now Uh, but that's not obviously we're not going to get any Well, I think the question that I think is very valuable there is more of a thought experiment of You know ethereum is used as a base for um, you know, so many other structures What does ethereum owe to? You know those other companies that are using its protocols. That's a really good question. Yeah, that's a really good question I think it's that that's a really good question. Yeah, so I think I don't know I think we're gonna close with that because I think we've reached two hours. I've learned a lot I gotta tell you I learned a lot in this discussion because you know, I know a lot about bankruptcy But not you know, not enough about all the different types of Chains that are out there. Yeah. So yeah, thanks for asking some really incredible questions that led us to think about stuff In an interesting way. So, you know, what we're going to do to follow up to reiterate You know, I would encourage anybody to uh, you access the arena. Um, which is that um Yeah, the the board that shared on our workshop page that's um, you know, it enables You know uploading PDFs uploading links like anything that you think would be contributing to this body of knowledge I think that would be pretty cool to share and kind of have as a living resource for anyone who's interested in this Um, similarly, you know, within that there's a link to the um real-time board that you know we're going to take a lot of the questions and subjects that we talked about during this talk and um Like actually map out some of them. So we have that to share with y'all by the end of today But that's also um collaborative to a certain extent Where you know, if you add comments on there, um about things that you would want us to add It doesn't let people like every person collaborate because you have to pay for each individual person But you know, what we'll do is um, you know, you can access that board you can comment it and we'll you know Take your suggestions into account. So that's um the real-time board. That's a mind mapping board that's uh linked on the arena, which is linked on our workshop page And similarly, you know, I would love to continue this discussion in some format such as telegram So we'll share all of those links in our um, kind of wrap up thing that apparently is happening at the end of today So yeah, thanks so much for listening and participating. This has been really interesting. So thank you very much. Yeah And I think there was one more comment. I'm just trying to look at like this. Oh great great Bread and like what we did. Well, maybe maybe just happy. We're ending Definitely valid Yeah, so thank you. I'm just gonna make sure that there's not something I'm supposed to do for closing this. Oh, there's not No, we're supposed to just walk away. I think Yeah, we'll talk to y'all soon. Hopefully on the internet. Bye