 Welcome, everyone. Thanks for coming. Thanksgiving Eve. You guys are dedicated to blockchain. But you're at Legaliz, which is a movement of technologists, lawyers, policy hackers. We're now 70 chapters strong, about 8,000 people around the world, so part of the growing movement. And thanks to other meetup holders for helping advertise these events that we've been holding around the blockchain space. Blockchain is actually one of several things that we as Legal Hack care about from a tech law and policy perspective. We've got another event in a week, which is all about freeing the law. And that's going to be much more looking at some use cases around how we hack open all of the court records. There's a very cool speaker, Mike Lisner, who's going to be kicking off that panel event. And that's going to be a new series that we're setting up around freeing the law. But this is our blockchain series. And I think we're about six events in now. So through the course of the year. So if you're coming back, thank you for coming back. I want to just make a few very short announcements from a few different people before I hand over to Raphael, who's the main event this evening. And we're all going to learn about asset tokenization, which is one of the incredibly cool parts of what I think blockchain is going to enable us to do. And whether it's legal or not. But I want to hand over, first of all, to our host, Tim. So Tim Nichols is the managing director of this beautiful space here at the Impact Hub. I run a company called Legal.io. We moved in recently into a beautiful office here. And we've just been able to take advantage of this incredible community. So Tim, if you've got a little bit more about the space. Definitely. My name is Tim Nichols. Tim. You stand here. Sure. Thanks. Thanks all for coming out. The Impact Hub, have you guys been here? Anybody been here before? Got one. Got one over here. I know Jesse in the back there's a member. Yeah, so we're a community of social and environmental entrepreneurs, people that work in corporations, people that work for startups, people that work in the government, all become members here. Just to be around other organizations that are interested in trying to figure out a better way to build a more equitable economy. We focus on that here, but we also have spaces at 100 locations around the world. Most major cities have an Impact Hub. And we have just opened this space about six months ago. So we're just growing it. And if you're interested in membership, I left some cards over by the name tags. And we can chat a little bit more about that. If you've got a startup that you think fits what we're trying to do here, we want you to be part of it. We're part of the community. And we're just growing it at this time. So we have this whole building. We've got a backyard space. So we want you to come join. And yeah, we're happy to have Tony here. We're happy to have this event here. And we'll be doing a lot more around this stuff in the coming year. So join us. If you have any questions, and you can talk to me. Thanks, guys. Yeah. This is the Impact Hub. This is an epic community and space. Next, I want to hand over to a legal hacker co-organizer who's all the way from Boston, who recently held this incredible event around AI and blockchain at the MIT Media Lab. Pulled together some incredible people. MIT is super interesting, obviously, because amazing people there. But they don't have a law school. So it's interesting when some of the stuff they're doing comes, you know, butts up against legal issues. And so we've got people like Dazza at MIT setting up some incredible called the MIT Legal Forum. We had our first meeting at MIT a couple of weeks back. And Dazza's going to tell us a little bit more about what's coming up with that very cool project. That's right. Yeah, thanks, man. Great. And my most proud affiliation, however, is co-chair of Massachusetts Legal Hackers, which is a place where we collaborate on hacking the law in many ways. And so the major thing that I was asked is there an announcement or update that would make sense to give tonight? I think it's something that hasn't been really publicly announced yet. I'm telling you that we cooked up at the MIT Legal Forum when a bunch of us got together and we did breakout groups and ideation a few iterations of people suggesting ideas to talk about and then forming new breakout groups in the afternoon and then the next day. So one of the things that popped out of that was a discussion group and a proposal from GE's counsel's office and Marcy Harris and legal hackers from all around to basically have an X prize of type for computational law and the idea is to work with the city that is willing to refactor like their charter or like their sovereign Magna Carta so that it's computational, it's algorithmic, and then to look at picking maybe an area of traditional municipal regulation and policy like traffic and parking, tax, schools, maybe that would be a big chunk. But and then see if that could be expressed or some aspect that could be expressed in a way that is data driven and computational by design and adaptive. And just to begin to get a sense of what would that kind of governance look like? What would the city council and the managers be? Is it like parameters and thresholds that they're setting at this point? Get some data through it by doing maybe a game like a simulation, perhaps incentivize people with tokens or something like that. So we can get some user data going and figure out the legal framework. The main thing is figure out what is the statistical model? What is the platform look like? What is the data driving? And how do we get that constitution or that like philosophy and kernel, whether it's utilitarian or happiness or economic development and then be able to pop in like modularly what the initiative kind of like codes literally would be and then kind of rock it out as like some rapid prototype experiments. So probably next step will be we'll invite our friends back to MIT Media Lab and do like a charrette design session with GE and Media Lab people, some law school people. We do seem to be shy one law school. So we've been reaching out lately to our friends and maybe there's a collaboration on the offer. Well, yeah. So first off, if you're interested at all in any of that stuff, then I encourage you to reach out to us at this charrette in January. It's going to be part of a course which is going to be available online as well. There's going to be contracts around the whole range of computational law issues, smart contracts, machine sort of readable regulation and then also computational regulation. Assets in particular like identification and tracking of intangible assets but that are digital assets. So we'll get personal data as a new asset class and some deep gap in IFRS tax treatment and some other stuff there. So it's going to be fun for everybody in this course. And yes, we're... Tax is fun. Tax is fun. And so the other piece that we're hacking together is this East-West Coast collaboration. So we're getting stuff going at Stanford Law School around blockchain as well. And so if you're interested and that's primarily going to be around looking at what the regulations are, how we help educate regulators, how we help educate council around blockchain and what potential there is. So come and talk to me about getting involved more locally as well. Down at Stanford, especially if you're coming more from the legal side of things or if you have particularly naughty legal issues that you want people helping out with. Oh, my legal issues. So we're going to be doing this computational law course in MIT. You can sign up at law.mit.edu forward slash learning and you can learn more and you can watch this in the future at mitlegalforum.org. So those of you that want to tweet out the thing that we're about to hear or let people hear what's already happened, it's mitlegalforum.org. And you scroll down, down, down and I just chuck the live stream embedded at the bottom of the page there. And then maybe a pop-up course if we're lucky at Stanford Law School, the Tony will be in charge of. So then we bring our denizens from the Media Lab and our other community out here and participate in the course here. And then in some informal groovy self-organizing way together, we care. Yes, we care. Okay, thanks. Thank you. That's a good one. So the format of tonight is basically going to be, we're going to have about a 20 minute talk from Raphael initially going over this topic. He's going to tell us a bit more about trust token. And then it's pretty much going to be an open discussion where questions back and forth. We're going to go around, I think, or Raphael's going to go around and do a very quick survey of who we have in the room, what people are comfortable with. But I imagine this isn't going to be 101. We're going to kind of jump in fairly deep. But I imagine Raphael's good with questions being asked along the way as well. So with that, unless anybody else has something they want to add before we get going. And again, sorry, this is all being live streamed. So if you want a particular question that you don't want to ask as part of this, we'll shut this down at a certain point this evening and we can have sort of more off the record discussions if we want to do that. But unless there's anything else, I'm going to hand it over to Raphael, Raphael Puzzleman. Cool, I'm Raphael, great to meet you all. Pick backgrounds on me. I had the opportunity to learn how to program when I was very young in fourth grade on the TI-84 basic graphing calculator. Does anyone remember those graphic calculators? Then I went to Stanford to study computer science. I had the opportunity to work at Palantir doing AI and machine learning research, doing crime prediction and helping law enforcement agencies to allocate their resources. And then work at Google Brain, which is like Google's AI and machine learning research division. Then I left Google, me and a couple of friends had been running the blockchain. We spent some time just hacking on projects, traveling around the world, and then ended up working on this project, Trust Token, which I'll tell you about tonight. And we are very much focused on solving the problem of real world asset tokenization. So just to get a sense of what everyone's backgrounds are and how deep we should go, I don't want to go too fast or too slow. Can I get a sense of who owns Bitcoin, Ethereum, or another cryptocurrency? Okay, almost everyone. Who has written a smart contract, built a blockchain, works at a blockchain company? Wow, all right, a lot, like half. And who has a background in law? Or is an attorney, was an attorney? Cool, okay, so it seems like about half blockchain people, half law people, some overlap there. That's great, all right. So I'm gonna try to make this pretty relevant to everyone in the room. Let me know if I'm going too slow or too fast. You can definitely jump in with questions at any time. Cool, so this presentation is gonna have three main sections. First is what is asset tokenization? Second one is a key study of how not to do asset tokenization with a real-life example that we're seeing right now. And the third one is how to actually legally do asset tokenization. So, what is asset tokenization? Who's familiar with the concept of real-world asset tokenization so far? Cool, maybe Noah, can you tell me what, can you define real-world asset tokenization? Is there a specific way to define a real-world token that exists on a chain and derive your value just from punching into transactions? A token that's an asset that refers to some value that's in the real-world, right? That's the property, right, quantity or something like that. And there's this annual succession of the on-chain token on-chain. Excription, yes. Can you say that your token is a bit of a problem with the people at the board? Could you say you're tokenizing, and what's your name, by the way? Misha, by the way, when you say a question, feel free to say your name, we'd like to get to know you. So, Misha asked, could you say you're tokenizing electrical power via Bitcoin? Good question. You could, but not in a very useful way, because it's not like I can take a Bitcoin and say, hey, give me back my electrical power, right? So, as Noah said, Noah used the phrase tentative connection between the token and the real-world asset. Yes. So, Noah used the phrase tentative connection between the token and the real-world asset, and that is exactly what we're gonna talk about today, is can you have a solid connection between tokens and real-world assets? So, in general, tokenization of assets is when you issue a cryptocurrency that corresponds to fractional ownership of a real-world asset. So, for example, if you have rental property, you might issue like rental property coin. And you can say you have 100 of those, each one corresponds to ownership of 1% of the rental property, and might give its owner 1% of the rental income. Does that make sense so far? Cool. So, why is this useful? The three main reasons. One is you can capture liquidity premiums on otherwise illiquid assets. So, real estate, for example, there's $217 trillion of real estate, it's the single largest real asset class in the world, and it's almost completely illiquid. Right now, as an investor, to get access to it, you gotta buy an entire piece of real estate, and then you get all the rental income, right? It's very difficult to have a liquid exchange where I can buy 1% of this rental property on the West Coast, 2% of this one on the East Coast, 3% of this rental property in Paris. Very difficult to do today. What's up? Is it Jim? It's what? It really had the exact... You buy your own portfolio. Exactly. Great point, Jim. Great point. So, there are things like REITs. Who's familiar with REITs? Real estate investment trusts. So, REITs became legal and I think what Jim's talking about, REITs became legal in 1960. President signed a law allowing for REITs. They're basically these big companies that own tons of real estate, they can get publicly listed, and they allow you as an investor to get exposure to a tiny fraction of thousands and thousands of properties. REITs are very difficult to set up. They have a lot of management costs. A REIT has to be huge if it's gonna be able to actually be listed on an exchange, like the New York Stock Exchange. So... And you can do a private partnership. And you can do private partnership. So, there are other ways of doing it. That's a great point. And we'll get in a couple of slides and get to what exactly? Why exactly is the blockchain helpful here? So, second reason tokenization is interesting is because of network effects. So, assets like the royalties from songs, movies, TV shows, books are interesting to tokenize because you can imagine, like, Tony, if you owned 1% of your favorite artist's song, right? Or Brian, if you owned 2% of the next Star Wars movie. All of a sudden, you, as a Star Wars fan, are incentivized to go and, like, tweet about it, blog about it, write a Facebook post, get your friends more invested in it, right? And so, certain assets can capture network effects because they're inherently viral and if people own a fraction of that asset, then they can benefit from increasing the value of that asset. Final reason is that it allows for global access, both the capital and to investment opportunities. So, right now, living in the United States, it's very easy to lose track of the fact that we have the best access to capital, especially here in the Silicon Valley, best access to capital in almost the entire world and some of the highest quality investment opportunities. I've had friends from India say, hey, could you help me buy Tesla stock? Because it's difficult to buy Tesla stock if you live in India. One thing we don't realize is just how difficult it actually is to get access to capital and investment opportunities around the world. So, those are three large reasons for why tokenization is powerful. Oh, don't install, cool. So, I think we've touched on a couple of assets that benefit from tokenization. Can anyone shout out a couple more? I think we've touched on real estate, gold, what else? Your time, like your future income, that's a tokenizable asset, great point. Startup stocks. Startup stocks, extremely illiquid, right? Energy. Municipal bonds. Municipal bonds, yeah. I'm actually talking with the CEO of Naverly and you work on it, you work for it, right, cool. So, any other assets? IP Arts. IP Arts, great, great. Okay, so those are some of the applications of why this could be interesting. Now, one question that Jim brought up is why is the blockchain necessary? Because you could already do these things before blockchain, like 10 years ago, with the internet, but without the blockchain. Five years ago, you could have easily tokenized a bunch of these assets, right? And there are actually startups that are doing this, like point.com and a couple of others. So, what specifically does the blockchain bring that unlocks this potential? So, it's two main things. One is access to investors. So, if you are making a, let's imagine you were trying to make a startup which tokenizes real estate. For example, it's like you're gonna buy properties, they're gonna be on your platform and then investors can invest in them and trade them, right? What's the problem? What you want is to offer liquidity premiums. You wanna buy a $100,000 house, sell it to investors for $120,000 because it's worth more to them if it's liquid, right? But you can't do that until you have a lot of investors. And so, friends that I've talked to at companies like AngelList, Republic, Funders Club, et cetera, they have exactly this two-sided marketplace problem. The assets that they're investing via real estate or startups, then there are the actual investors. And you don't have significant liquidity until you have tens of thousands or hundreds of thousands of investors on your platform. And so, that's a very difficult hurdle to overcome before you can actually offer any liquidity premiums for the underlying assets. Second major thing that Blockchain, and Blockchain largely solves that just because there already are a huge pool of investors that are trading digital assets of these kinds and anyone can plug in a new asset, right? These standards like ERC-20 are a completely open source. So, anyone could create an ERC-20 token, list it on a variety of exchanges, and investors could start trading it tomorrow. So, second thing that Blockchains provide is a lot of infrastructure that you need to have a high-quality liquid market. This includes exchanges, high-frequency traders, algorithmic market makers, and much more. And if I as a trader come onto your privatized platform where you're tokenizing real estate, I'll say, hey, well, where's my market depth charts, where are the hundreds of other traders? Where's the deep order buckle? I need all of this infrastructure to actually be able to come and trade those assets. And that is already created for the Blockchain because it's an open source financial platform that anyone can plug and exchange into. Anyone can high-frequency trade. And so, you already have a whole bunch of infrastructure that's been built out for trading digital assets. Cool, so that is the section on what tokenization, what asset tokenization is. Any questions or thoughts on that? Yes? Can you describe the network effects? Absolutely, Terence. Can I describe the network effects example? So, let's give a very specific example. What's your favorite song, Terence? I did it my way. I did it my way. I did it my way. Okay, so let's say you owned 1% of I did it my way. 1% of I did it my way. And let's say you have a big following on Twitter. Now, maybe that asset was worth $100,000. Maybe it's worth a million dollars. Let's say you have a big following on Twitter. You buy 1% of that song. You tweet out to your followers, hey, everybody, I love this song. You all should listen to it. They also go start listening on Spotify, sharing with their followers, and so on. The song, the asset itself, becomes more valuable. Maybe it becomes $100,000 more valuable. And you, because you own 1% of it, have now captured $1,000 of that value. So you've captured a fraction of the actual value that you've created for the asset. Does that make sense? Yeah, cool. You're basically seeing more usage that's worth the song's worth. Exactly, exactly. You're incentivized to increase the value of the song or whatever the asset is. Cool, okay, so let's dive into how not to tokenize assets. So who's familiar with a cryptocurrency called Tether? Cool, okay. So Tether's been in the news a lot lately, just for background for people that haven't heard of Tether. Tether is the 20th largest cryptocurrency in the world. It has a market capitalization of $670 million as of today. It is tokenized USD. What does that mean? That means that Tether as a private company, they've got a bank account, and in that bank account, they've got some money, and they have tokens that are flying around in blockchain space, and those tokens, in theory, correspond to ownership, fractional ownership, of this bank account. One for one. One token, one dollar. Does that make sense so far? Cool, so what they promise is you can take a token, you can come to them, and they'll give you a dollar, or you can give them a dollar, and they'll mint a new token, and they'll give it to you. Yeah, what's up? They don't promise that. They don't actually promise that. They have a good point, and we'll get to that in just a minute. Cool. I've been in the news a lot recently. Recently they got hacked for 30 million Tethers, like 30 million of this, they have this token that they're minting, which corresponds to the money in their bank accounts. They had 30 million of those tokens stolen recently, which is pretty bad, because now it's a question like, oh, if those are in circulation, and someone can use those stolen tokens now redeem the actual money out of their bank accounts. They also have been in the news lately because their market capitalization is skyrocketing. So in the last 14 days, they printed 150 million new tokens, and each one of those tokens, in theory, corresponds to $1 in their bank account. So they claim that in the last 14 days, they've just got 150 million more dollars in their bank account. Now, the issue is, you don't actually know if they do, if they do. So they're supposed to have audits. The last time they had an audit was way back here when their market capitalization was $40 million, and they have an audit saying we have $40 million in our bank account. Now their bank account, now their bank account supposedly, has $670 million, but there have been zero audits since 40 to 670. So a lot of people are wondering, is the money actually there? So additionally, in their terms of service, they make it very clear there is no contractual agreement to actually redeem their tethers for US dollars. They so far have been doing that. They have been redeeming them, but there's no legal requirement for them to continue to do so. So if tomorrow, they said, hey, I'm sorry, we actually watched it with all the money, then you couldn't even sue them. They're completely within their legal rights to do that. Does the situation make sense so far? Yeah, what's up? Why are people complaining together? Great question, great question. Why are you giving, all right, so Simon, let me explain why. The reason why is because there's actually a huge market need for tethers, that's why. And the reason why is because if you are a trader, if you're a crypto trader, and let's say you're long on cryptocurrencies, maybe you're $100 million long on cryptocurrencies, and you think right now that crypto is gonna go down. Let's say this week you think it's gonna go down. So you want to not be long temporarily. So what do you do? It's difficult to turn your crypto back into fiat, right? That requires like getting into your bank account three to five days, wire transfers, it's difficult, right? But tether is a cryptocurrency. It's very easy to get your crypto out of Bitcoin, out of Ethereum, out of whatever it is, into tethers, right? As now you can pull $100 million into tethers, wait for the market to go down, and when you think it's gonna go back up again, then you can go back into crypto. So it's very useful for traders. But you can imagine it's not just useful for traders, it's useful for other things too, like if you wanted to make like a remittance application that uses cryptocurrency in the back end, you don't necessarily want the users of your remittance application to be exposed to the volatility of a Bitcoin, or Ethereum, or another cryptocurrency. You might wanna have a stable currency like something backed by a real world asset, like US dollars, that your remittance users can actually use. Does that make sense? I'm only gonna throw it like, come on, I'm gonna throw it, and I will throw it like, I'm gonna throw it. Right, right, question, great question. People are still holding tethers, even if it's just for short periods of time, because they might think, well, okay, it probably won't be today, like tether will crash. Or if it does, I'll get out quickly. I'll sell it fast enough, right? So that's the situation we're in right now. Yeah, what's up? So does this, don't we need to be a licensed money translator to move money? Great question, Dad. Don't we need to be a licensed money planner? We're just like a bank tip, right? Or Western Union, but it was painful to get that. Right, so when there's one-to-one relationship between the token and the dollar, that would be the money part, wouldn't it? Great question. Yeah, but they need to be called as the money part. So to be a licensed translator, don't we need a license? Do they have one? I think that they don't. I think that they don't. It isn't? That's the question I guess I'm asking. So I'm asserting it, it's the way to make me say why. No, they don't say which bank they're working at. Is that the best thing to do? Make up that number, then you can call one if you want to speak. Cool, okay. I'm bringing to my sources here, and it connects the positive and the negative together. All right, I think they can just check the public. Me, it's not clear. Could be the check to the public. Some people think Taiwan, it's not going to leak that. Cool, let's move on, but I'll take more questions at the end and we can definitely discuss afterwards. Okay, so that's the overall situation with Tether, it's the three primary issues that they face, one is it's not legally enforceable. There's no actual legal connection between the tokens and the assets. Second is there's no audits, and third is that there's no insurance. And so as a token holder, you have very, very little trust that the assets are actually there and that you will actually be able to redeem them. Okay, so third part of this talk, how to legally tokenize assets. So my team is working on this problem and there are three things that we're focusing on. One is how to have a legally enforceable connection between the tokens and the assets. Second one is how to have a clean audit trail for everything that happens with the underlying assets. And third one is how to have insurance over the assets so that the token holders are not taking on the risk of someone misappropriating the assets. Cool, so the way we do this is with a special kind of legal entity called a smart trust. I'm pretty similar with a legal trust. Cool, so a trust is a legal contract between a rantor and a fiduciary, saying that the fiduciary, the trustee of the trust, they will manage the assets on the behalf of the beneficiaries. Well, so we have a couple of rules here. In this case, we're using a trust to represent the legal relationship between the token holders who are the beneficiaries of this trust. And the fiduciary, who's kind of like Tether, and they're the ones that are actually managing on owning the assets. So the smart trust is a special kind of trust which references, in its legal language, it references a smart contract and specifies that the trust of the trust is the smart contract is going to give more harm. Interesting. So, right, it's an idea. So, and you may have seen other projects where they're trying to kind of merge smart contracts and legal contracts. And this is a very specific case of that. So the purpose is that you could take an asset like a house, you could retitle it into a trust. The trust is connected to a smart contract, a smart contract can issue tokens which can trade it by token holders. And you could have rules like, for example, like when the rent property generates income, it will be sent to the smart contract and then distributed proportionately to the token holders. Or, for example, the token holders, you could say they might vote and if 70% of them vote to sell the underlying asset, then fiduciary will sell the underlying asset. Yeah, what's up? It's like a blockchain investment. It's like what? It's like a blockchain investment. It's basically the same, right? So it's like a, like what's your account which will go to the state assets, which are there just to see that I'm the only person who's going to buy it. And then just with the same, I just put on the blockchain, this one, I'm gonna take it with me. That's what I get. So it's kind of like a blockchain-based meet. That's the right idea. And what the blockchain provides is, one, it gives an easy way to have liquid trading of tokens. You know, investors exchange it, that's just, that's already built. Second thing is it provides this auditability, which is crucial. So let's say for example, in the example I just gave, let's say 70% of the token holders have a vote and they say, hey, we wanna sell this asset, right? Now the fiduciary legally has to actually follow that instruction and sell the asset. And if they don't, there's a public record that everyone can see which says, hey, they voted, the smart contract said to sell the asset, you didn't sell the asset and you can take them to court and you can say, hey, you violated the terms of this trust agreement because you didn't actually do what it said, right? And if you don't have a publicly verifiable proof that that instruction was issued, then you don't really necessarily have a case against the fiduciary distressed. What's up, Jim? Public, if you can find the party you're trying to seek through the court statements, it doesn't even follow them. If you can find the party you're trying to enforce against. So let's say, so what I'm seeing is essentially an electronic record. And I can imagine that the trust case, I can imagine the partnership case, I can imagine that the corporation, I mean, we start off as opposed to all the binders we end up with on our shelves, unit books and all that kind of stuff. So essentially an electronic record. That's right. The standard of using cryptographic proof that steps into things is that it's part of a false argument. But if you imagine the state of the situation of the startup, if you've got involved physical people, and soon they won't, then all you need is for that community to have access to the blockchain. That's a great point, yes. That's right. So you could imagine doing a similar thing on a private or permissioned blockchain as opposed to a public blockchain. And you would have the same standard proof on your own. And to the extent that you want it to work, and on your own, you'd have some of the conditions. When I have the awesome price. Right, that's exactly right. Cool. So the whole stack overall looks like this. You've got assets that are legally on by a trust. The trust is legally controlled by the smart contract. And the smart contract can actually issue tokens that are traded by token holders. And this gives you the fiduciary who is actually managing the assets. They can take instructions from the smart contract and also can upload any documentation to the blockchain saying, hey, here are the records showing that I'm managing the asset in a completely trustworthy way. But if any token holder or anyone who's thinking of buying a token knows what they're getting and they can trust that the assets are real and that they're being managed appropriately. Cool. Yeah, what's up? Sam. My question is, what happens? It just sounds great for the US where? That's a great question, Sam. So you can't, the US trusts can hold assets anywhere in the world, but there is a question of could you actually enforce that? And what you would need is to have, you need to have governments with extradition treaties to the US or use local trust law. But really the way that, that's right, there's another possibility. But a final way that you can have trust in situations like that, like if I wanted to buy, let's say, 1% of a rental property in Uzbekistan, right? And there's some Uzbek fiduciary that is managing this property. My question is, how do I actually trust that there's a real property there and a real fiduciary? This thing isn't a scam, right? And the way that I would do that is partly just through insurance. So if an insurer on the blockchain, they're gonna actually tie up a certain amount of cryptocurrency. So you can see, it's lack of, it's a $100,000 house, I'm like $100,000 of insurance capital tied up on the blockchain and a third party mediator that if there are any issues with this asset or with this fiduciary, the third party mediator can take this money and give it to the token holders. And so as long as that mediator is trustworthy, then it's actually the insurer who's taking on the liability and not the token holders. Does that make sense? And so insurers are incentivized to vet the fiduciaries carefully and then, because they're the ones that are actually taking on the risk if the fiduciaries are dishonest. So part of the structure here is having a decentralized network of fiduciaries. Right now we're just working with fiduciaries in the U.S. but we'll be working eventually with fiduciaries worldwide. And a decentralized network of insurers to vet those fiduciaries and stake money on them on the blockchain. Perfect answer. But that raises another question that I think is, so it sounds great to give that fiduciaries a name for someone that's, I think they're pretended on their reputation or their trust to other names. But if it's some random dude who's going to vet your perspective and label things, I think that means I'm going to have to fix that. Like I'm going to have to be able to change that. But it's going to be complicated. So it's not going to be complicated. So you're going to have to come up with one variable that you can trust to the blockchain and you can't trust it because you just see it because it's on the chain. So it's not going to be complicated. So that dude is, like I said, would be putting on his own different things to vet his own. That's basically his own concern. But I think when they're specific, that's a criteria to put the question on the line around how you imagine selecting the network. He satisfies them all over the next few years. Great question. So right now we're only working with professional fiduciaries, like professional trust companies. Their full-time job is operating as the trustee for other people's trusts. They generally manage hundreds of millions to billions of dollars of other people's money. And they know how to do all of the accounting for trusts already. And they can take those accounting documents, put them on the blockchain, and token holders can see those. We may want to expand it beyond that, but certainly anyone who is managing these assets needs to be able to do thorough accounting. It needs to be very trustworthy. So it will ultimately be insured is that it will take on the liability if they don't do a good job. Let me go on and I'll take a few, I know a lot of questions. I'll take a few more questions at the end. So briefly I want to talk about tokenization and securities laws. So there are two main securities laws that you need to, two main securities laws that you can use when you're issuing tokens. Reg D and Reg CF. So who here has invested in an ICO at some point? A couple of us, all right. So you've probably seen some ICOs, they just put in a theory address and they say send money, right? Some ICOs, some ICOs like may have heard of Filecoin are using Reg D and Reg D is kind of an exception to the normal SEC securities process which says you don't have to do as much of kind of like the disclosure documentation around the asset if you are only selling to accredited investors. So those are people with a certain network that will make a certain amount of money and the other exception to the SEC rules is Reg CF. That's a recent crowdfunding rule that came out in 2016. And that one basically says as long as you're selling less than $1 million then you can sell to both accredited or on accredited investors. And those are the two main regulations that people are using right now to issue new cryptocurrencies. There's also Reg A, Reg A plus and Reg S which maybe use more in the future but are not used as much right now just because they oftentimes involve more documentation. So if you wanna dive into that there's a ton of legal stuff if I don't wanna know about there but that's basically the security situation around the stuff. Cool, so I'm gonna kind of wrap up. I know there are probably a lot of questions I'll take a couple and then we'll have time to discuss afterwards. But I guess a couple of closing thoughts. So one is the legal asset tokenization is possible today but it's still very, very new and requires new kinds of legal entities, new kinds of offerings that folks are necessarily very comfortable with yet. And so we may see over the next couple of years a lot more work in this area, a lot more offerings these type. Questions that I'd like folks to think about for the rest of the night and if we were to talk about these or what are the remaining issues economically, legally that around tokenizing real world assets and what are the societal impacts that we can expect to see if a significant fraction of our assets become tokenized over the next couple of years or a couple of decades. That's it, so I'd like to take a couple of questions. Feel free to come catch me afterwards, write to me, tweet at me. Let me know if it's a topic you're interested in if it's something that I'm really excited about my team is really excited about. Yeah, so let's take a couple of questions. Hey, Peter, so did I get it correctly that fly become a token? Exactly, you are a beneficiary of the trustee. So then what's interesting and potentially a legal challenge here is that I've seen some very nasty, bad distance, right, where you have money being made out of a dime, usually a lot of two, three margins that can get happy and stupid. So here, you're at least having the potential as my legal mind is trying to spot just a couple of millions of people who can all try to create resources to trust by raising, no, threats of that gain that we've lost so much to. It's what I was interested in because that seems to be a challenge to, if you share, you can be very professional in a certain one to take on such a normal thing. Otherwise it has to be super. Yeah, great question, Peter. And so there's absolutely a questionnaire of now you have a trust with potentially tens of thousands, hundreds of thousands, even millions of beneficiaries, all the token holders, and each one of them has the right to bring a suit if they believe that the fiduciary is mismanaging the assets in any way. And so that's definitely a question of challenge. Yes. Yeah, it's really, it's really cool. Thank you. I mean, there's obviously seven potential use cases for this. Like Roy, you said, remember what you're saying, what you're seeing. Or do you think like the, who is most likely to drive which use cases come first? Is it all the trustees who want to tokenize? Is it on the demand side or is it coming from somewhere else? Good question, Rodrigo. So which, what's going to drive which assets come first? Right, exactly. You can tokenize this. Just from what you're saying. Great question. So from what we're seeing, there's a huge amount of demand right now for a better stable coin. And that could just be tokenized US dollars. It could be tokenized gold. It could be a basket of tokenized real estate, but any sort of stable currency to replace Tether, just because there's a tremendous amount of fear around Tether right now. And it's like, it has $670 million of market cash, right? And there's a, that means that there's a $670 million of market cap opportunity for anyone who can offer a better alternative right now. Right? So there are a variety of ways to create that, right? Like a basket of tokenized real estate, for example, would be a fairly stable cryptocurrency. I think that, I'd say that overall the two types of assets that benefit most are highly illiquid assets, like real estate, startup equity, and assets that have network effects. So things like songs, music, TV shows, and so on. Yes, Andrew? It would be crazy and ridiculous, okay? You are so corrupt, each has a different perspective on it. So what? Each has to find a reason to see it. It's fine. It's the size, basically the size of it. Equal. But when I talk about, you can sort of choose some power thread which is not new, which has a component to, it's about size. So, good question. So RegD and RegCF are ways of doing initial coin offerings. So maybe let's say, Andrew, you tokenize a rental property and you sell it to maybe like the 20, 30 people in this room, right? They could then, depending on exactly the type of offering, there may be a certain waiting period, like one year, but they could then later go and list those on exchanges and start trading. And so that's how you could do, you might do an initial coin offering to 20, 30, or 100, or 200 people, and then they might trade them and it might end up in the hands of thousands or tens of thousands of people. That's right. Oh, maybe some government guy would say. Oh, RegD and RegCF are actually types of public offerings. But after RegD and RegCF, then the tokens might be traded on exchange and could end up in the hands of many, many more people, then we're participating in the initial offering. I need to change my circumstances. I think these guys are going to share with you. They'll be back in a second. Yes, there are some nuances about the offerings. So for example, with RegCF, the tokens can't be resold to unaccredited investors within one year, but they can be resold to accredited investors within the first year. So there are some nuances of when they can be sold, but generally the answer is yes. Yeah. RegD and RegCF only applies to those tokens which qualify for securities, right? They don't really apply to something like that. That's right. And so you could even imagine, you could even imagine tokenizing real-world assets where the tokens are actually like utility tokens. Like for example, imagine if you had like a timeshare where like you can sell off tokens. The tokens can be like used to like reserve a month of this timeshare. So that might be classified as a utility token as opposed to a security token, in which case you could bypass RegD and RegCF offerings all together. And that would be very helpful. But many types of tokens would be securities. Otherwise just ban USAPs and do buy them. Not really. Not really. Because there are plenty of other countries with different securities laws that you need to take into account. No. So this question is about any nightmare situations that you see in the purchase of this contract? Good question. Nightmare situations, technically. Yeah. I would like downstream impacts on the way. Could you control the fiscal reality so that you can't really, like, part of the contract? Right. Part of the contract, part of the contract. Some of the contract bugs is a huge one. That's that, like if you had, like imagine a tokenized real estate and there was a bug in this right contract and some hackers could have complete control ownership over that, that's huge. Forking is a great question. Like if you did this on Ethereum and Ethereum were to fork, there's a question to take. Now you have two distinct sets of token holders and each could argue we are the real beneficiaries of this asset. And it might not be clear in the fork which one is the real one. So it might be safer to use something like Stellar, which has some properties that make it much more difficult to fork. What's up, Jake? As long as you're dealing with real people, you've got to trust me. Because what we're doing right now is incredibly trustee-made, by the trustee team, by the trustee submitting the speech to a lawsuit or something like that. So you'd have a patent or a call to action. Yes. I presume that, finally, there's a little document between the material and the leak and the coverage. The signed documents that put the asset on the blockchain and signed documents that the asset often want to do that the way you think of this. Good question. It's not quite. What we have is like a legal entity, the trust, which is going to basically take ownership of the assets. And so from the perspective of the US government or from the perspective of the bank, the asset is just owned by the trust. And that's a completely normal thing legally. The trust is a little bit unusual in that it references a smart contract on the blockchain. Does that make sense? But it's got to deal with one of the accounts, right? It's actually the smart contract, which deals with those. So the trust just references a smart contract. No, thanks. And we'll say it's true. Or this is what happened when we had the plug. We've got that insurance policy that has to plug through to the investors. So there's nothing signed from the investors. Good question. There is nothing signed by the investors. The investors are just token holders. And the trust just references a smart contract and just says, hey, the token holders of that smart contract are the beneficiaries of this trust. And the fiduciary has the quality and instructions of that smart contract. There's just good question. Good question. Let's chat afterwards and go through some legal details. Well, I'm going to take this one more question. Yeah. Thank you. I have a question similar to what Jim was asking. So just put whatever level of trust you want to handle it. It seems like the major innovation here is utilizing fiduciaries. Now you've got the whole set of fiduciary duties and a great body of law and financial. You've got a lot of bullet points. You have fiduciaries that are holding the assets of all the instructions. And the part that the smart contract does seems to me is ensuring you've got a coherent, objective, and publicly verifiable methods and mechanisms to identify the instructions that fiduciary. So they don't have to wonder, is it this email or that? And they can maybe get out of the buzz saw some litigation. My question kind of related to exploring what the role and functions and then maybe the usability of fiduciaries in this role are. So someone asked, I used to like fiduciaries. You said, I guess, when five or eight hours they were in the US. But I was wondering, is there a political fiduciaries in fiduciary law in some decades since I had to do that? But it was kind of loose. There is not a single role in the United States where you're a fiduciary, you're not. There are some folks that are held to some sets of fiduciary duties, like federally chartered banks and credit unions, and lawyers have certain set and phrased differently. But how do you say even who is a fiduciary, isn't a fiduciary, for purposes of achieving the role and outcomes that you seek in this kind of niche context of following the instructions of token holders? Like you have like a list of fiduciaries where you just kind of just like figure it out on a case-by-case basis. Great question. Cool, so there are a couple of questions in there. So for starters, we're citicing these trusts in Nevada and South Dakota because those are the two jurisdictions in the United States with the friendliest laws for trusts of this type. They allow, for example, for dynasty trusts that can last like 365 years plus. Other states oftentimes apply, for example, that trusts can't outlive just like an individual person. So that's what we've chosen those two states. There are a bunch of reasons why they're the friendliest, Nevada, South Dakota. And so the folks that we are working with as fiduciaries right now for these trusts are just professional trust companies in those two states. And these are companies whose full-time job is just to act as the trustee for other people's trusts. And they have a lot of licensing and certification and have fiduciary duties because they are held to a higher standard by the law because they're expected to know how to be a really high-quality fiduciary. So if they mess up, it's very different than if you mess up because they're expected to be very much right. Does that make sense? I think so. So what I think you said is you're basically benchmarking to an existing subcluster of fiduciaries that are the ones that administer this exact type of state trust. And this is not coincidentally the type of state trust and the state's right here. But we're your love of trust law for this sum, for this novel business one. Is that kind of what you said? That's exactly right. That lines up perfectly. Thank you. That's what we're starting with. I hope to expand, Deanna. Cool. Okay, well, I want to wrap it up and give folks a chance to feel free to convers with each other about some of these questions, anything which is spurred, feel free to come and chat with me. But that's it. I just want to thank everyone for coming and for all of you and for using this great space. That's really great to have Dr. here. We have some additional meetups coming soon. What's the next one? The next one's next week. No, the 30th, it's on free law. So we've got Michael Lister, who has essentially been working for the last, I'd say decade or more, on basically liberating court records. Some of you may have heard of PASA, which is basically the U.S. court database for dockets essentially. And he's been able to liberate all of that because it's behind a payroll. And he'll talk about that next week. And then are we going to have another... We'll have some more exciting meetups coming up also. We've got some great things. We're not quite ready to announce, but it'll be very interesting. If any of you guys have also particular events, I mean, Rafael essentially came to us and said, I've got something cool I'd love to talk to and meet up about. So if you guys have, please reach out to Nero and myself. We'd be happy to make this venue and this forum available to all of you guys as well. What about bumper stickers? Is there San Francisco legal acts of bumper stickers? Are not yet. Not yet, Dazza. But you want to, you're volunteering. Thanks, Dazza. I work here on April 1st badge as long as you always give it to me. All right. There will be bumper stickers. All right. All right. Thank you everyone. Thank you.