 Hi, I'm Dazza Greenwood, and this podcast is a production of law.mit.edu. And we're going to explore the concept and the emerging practice, at last, of automated and autonomous legal entities. This has been a key research priority at law.mit.edu for some time. And finally, at last, some thought leaders from across the country have come together and actually created something. And so I'd like to introduce you in turn, but Ory, I think you're going to go first and if you could introduce yourself and a little bit about your background and what it is that brought you to this question and what it is that you've created. Sure. I'm Ory Shimoni and I work with Dorg, which is the group we'll be talking about today. And so I'm a technical researcher in the blockchain space, specifically dealing with decentralized autonomous organizations, or DAOs. And I'm with a group called Dorg that is building tooling for DAOS. So it's very early in the DAOS space. And the software is really hard to use and it's really hard to develop with. It's not like being a web developer and being able to spin up a web app. The process of making a DAO is still very complicated and requires a lot of background knowledge. So our group is essentially a group of freelancers who work together on projects with clients and different partners in the crypto ecosystem to build out the tooling that's kind of missing from the DAO space. And so as you've been looking at the legal dimension of building out an automated business entity, how are you looking at filling that gap or meeting those requirements? And as I understand it, you found some hope, a ray of potential solution in the state of Vermont. Yeah, that's right. So as our group was becoming more of a company than just a group of friends working on side projects together, we realized that we needed to incorporate, you know, just like any venture that becomes serious and involves kind of moving of money around and working with customers. So we said, OK, we're building tools for DAOs, so we want to run ourselves as a DAO. We want to run ourselves as essentially a series of self-executing software agreements that manages the decisions of our company and the rewards that people get, the compensation that people get for working for the company. And we wanted to do that kind of end-to-end, fully decentralized in keeping with the actual tooling that we're building. So we started looking around at the different options, like the C-corp structure, LLC structure and looked in different states at the variations. And what we found is that basically for any legal entity, most of the legal entities that exist, a lot of the language in the law kind of ends up short-circuiting what the DAO or what the blockchain-based part of it would do. And we wanted really the blockchain piece of it to be the source of truth, the source of governance for the company. And we didn't want there to be some sort of board of directors or manager or secretary who could kind of undermine the decision-making engine that the DAO relies on. So to backtrack a bit, the DAO space has been kind of growing and proliferating over the past couple of years as like blockchain tech has advanced. And this kind of legal question has been left open of how do you, you know, if a bunch of people are collaborating and, you know, moving money around, then it's by the law actually considered a general partnership if you don't incorporate. And the problem with a general partnership is that every member of the partnership is joint and severally liable for the actions of all other members. There's unlimited liabilities for the entity's debts for all the members. And then also the entity doesn't, and so the entity doesn't have the ability to kind of like enter into legal agreements as one unit, you know, if it's not incorporated. So we saw this and decided that we needed a legal entity and that's when we stumbled upon the Vermont statute that creates the BBLLC entity that I think Oliver could talk about better than I could. Very good. Yes. So BBLLC, blockchain-based, limited liability company, Hallelujah, so Oliver, good enough, is a longtime collaborator and friend with a research group at the MIT Media Lab and a collaborator with a professor, Sandy Pentland, and a professor of law in Vermont and a real innovator of technology's edge in the law for, well, a long time. And so Oliver, can you introduce yourself a little bit more and talk about what is this legal innovation with LLCs that you've created in the state of Vermont? Well I'm, as you've said, a professor at the Vermont Law School. I'm a research professor there. I'm also of counsel, a special counsel at the law firm of Gravel and Shea in Burlington, Vermont, where we've done the legal work that we're going to talk about. A couple years ago with my professor and research hat on, I had come to the same conclusions that Oria just described about the fact that these DAOs, or indeed blockchain, the chains themselves with their miners and nodes, were at risk of being categorized as partnerships in the U.S. and other ways around the world that would lead to results that they didn't want. There was, as we well know, an initial thought in the blockchain community that they could essentially transcend the legacy legal system and just have a set of new organizations that would somehow emerge and be independent. I think that as Oria pointed out, it became clear, it has become clear that if you want to actually do something in the physical world rather than all on chain, you need to be able to contract, you need to be worried about liability, you need to interface for taxes and other purposes. So there was this question of how could a legacy-style legal organization be made adaptable to the kinds of governance procedures that a DAO or a blockchain would want to implement? I was approached a few years back by the Vermont legislature to supervise the preparation of a report to the legislature on possible innovations around the blockchain space. Vermont has been one of those states in the U.S. that's been quite innovative in the blockchain area and they asked my senator at the Vermont law school to help with a report that would set out opportunities. And one of the key elements in this was this idea that we needed to focus in on a business organization that would sit comfortably with a DAO structure, making the on-chain procedures be the things which actually were the governance pieces rather than something just crafted on top of it. The legislature took that seriously, worked up a bill which led to the adoption of this procedure for setting up the BB LLC, the blockchain-based LLC, and its goal was to be very much what Ori has described. By the way, I should mention that one of the reasons why we looked at this in Vermont is that from these questions of business organization are fundamentally state law and unlike questions of securities regulation and often applicable in the crypto space, that's federal law. So the feds need to work on that. Vermont could work on this business organization piece and did. So they adopted this law just over a year ago that sets up this possibility for essentially very light paperwork to establish that most everything is going to be done in accordance with the software. And that's a permissible way to go about it. There are three or four things you have to mention in your paperwork, including what your security protocols are, where is the authority to change the algorithms, some basic things like that. But once those are listed and then the software is referenced, the software takes over from there. And that, again, I think is very much what Ori was describing was what we wished to see this law be able to do. And it was a great opportunity when with my law practice had on, Ori came to our firm and said, could we help them do this? Because this is exactly what the law was hopefully be able to do. Here, here, so, so very interesting and so timely as well. I'm struck, as you both speak about the relevance and the need for this innovation, in part by the, what maybe people that don't practice law are not so familiar with, but the contract overlay. So in order to have an enforceable contract that requires two or more parties that are well, legal entities, like a human is a legal entity, a corporation, a government. But, but otherwise, there's no one to enforce the contract against. And there's on the other side, there's no, you have no standing or capacity to enforce the contract. And so much of the concept or almost ideology behind the blockchain vision, if you go back to the core of it, assumes, you know, free people and free markets, you know, operating by contract and freedom of contract, that's great. But if you play it out, it in fact requires some interaction with the legal regime so that the contract is enforceable. And then a major part of that legal infrastructure is a legal entity or a way to represent a legal entity. And those seem to be the, you know, the perfect level of abstraction to kind of correlate to an entity. So looking, looking forward, what do you, what do you see as the usefulness or like the use cases or for the innovation that you've come up with? And can you talk a little bit about, you know, what, what's being publicly announced, you know, on Tuesday? Yeah, I can go ahead and talk about the usefulness. So, for example, with Dorg, we're specifically a collection, like I said, of technical freelancers who are often faced with the choice of do we go and work for a company with a CTO and a CEO and the board of directors and shareholders who kind of all influence the kind of work that we'd be doing? Or do we go out and be an independent freelancer and kind of handle things ourselves, do it yourself, and then sacrifice those kind of traditional support structures that you would get with like a bigger group? And so there are alternatives out there. And so, but the, the range of options kind of makes you sacrifice, you know, the, the, the scalability and kind of economic power that a, that a corporation could have when you, when you go out on your own or you do like a kind of like group or a collective of like hackers or what have you. So for us, it was really practical. It was very, we want to stay in this form. We want to have the developers, the people building the tools that were paid to build be deciding, making the decisions on what gets built, on which contracts are accepted, on which contributors get hired, on how much people are paid. So we want to all be deciding that and we don't want to be sacrificing that. Okay, Adele lets us do that perfectly. But we can't like get, we can't get customers. We can't hire contractors if we're just an amorphous group of individuals. So for us, it lets us kind of not set, not compromise on our, on our values and on the sort of work that we want to be doing, that sort of work we think is going to be useful for our customers and for the ecosystem that we're working in and still have these traditional support structures of, of the traditional legal system. Now there's another, there's another perspective of this, of the, of the, the group of people to help, which is the many dapps and new dows that are being launched in the, in the crypto space. And even like Oliver said, the blockchains themselves, like the node operators, they're all at risk and exposed to these like liability laws or the lack thereof. And so for them, it provides like a firm place to stand from. And also the piece that we mentioned earlier, which is the capacity, legal capacity to enter into agreements. So to me, what, what this helps the most is the bridging between the blockchain world, which really exists in its own silo in a lot of ways, and the rest of the economy, which is orders of magnitude larger. And then you can take this further and also talk about the non-crypto, non-blockchain world, why they would want a dow, because you know, the world that's used to legal entities, the world that's used to LLCs and corporations and governments, you know, now they can have some of the advantages of these automated self executing agreements, you know, they don't have to be as scared of them anymore, you know, you can, you can have a dow as part of your company, or your doubt, your company be a dow. And so you get the advantages of, of dows such as self executing agreements, you know, not having to trust that some administrator in your bureaucracy sends the invoice to to Bob, or not having the decision making be opaque and happen in closed boardrooms, even though you say you're a democratically run organization. So it gives the opportunity to, you know, corporates to nonprofits to kind of explicitly encode their operational processes and in software, and then have that software be the underlying authority for the movement of value and the power distribution in the organization, but still be, you know, an organization that conveys taxes and can enter into agreements. Here, here. Sorry. Of course, the phone always rings. Shut Shut my automated robot off. And if I may talk a little bit about the future as well. I'd start off by, first of all, referencing the past. I think it's worth remembering that the traditional corporate form that we're, we're, we're, we think we take for granted now is really just over a hundred years old in its modern form and, and has evolved, continued to evolve over those hundred years of the LLC, which we again take for granted now is really only 30 or 40 years old at this point as a, as a, as an option. So, so we've seen significant change already in and in how we structure business or other collaborative human, human activities. And what I think we're going to see is, is we're just in the early stages now of the power of things like DAO's of blockchain assisted technology to open up a whole new explosion of possible forms that we're only beginning to anticipate, you know, the kind of a relatively firmly tightly wrapped up entity that, that a classic corporation is, the somewhat looser one that the LLC is, you know, those, those are, are, are not the end of the possibilities for how we might envision this. And if you put a technologically mediated layer in so that the, the institutional a certain, certitude is, is done through the technology, you know, I think you're going to see that there are many, many kinds of formats that we will explore and some that we will adopt. The nice thing about what Ori has done is he's really taken a first step of, of, of bringing that kind of, of creativity to the traditional legacy legal system and putting them together in a way that, that I think helps empower both. So again, this is a first step. I think it's a very important first step. But I, I think that will, it's a little bit like the Wright brothers flight in some way, you know, and it, it is, it is not the end of this story, hopefully by a long shot here. Here. Yeah. Thank you, Oliver. And yeah, by way of, I guess a little further context, at the last computational law and blockchain festival, the global legal hackathon that happens annually from or under the good offices of legal hackers in the New York node at Bushwick Generator, we had a whole track on automated legal entities. And I remember Ori, you had kindly presented your work at that point and got some feedback. We had some people come in internationally, silky and, and others. And it was it really, I think was the the single most engaging and sort of excitement building part of the event. It's the part that people were really a buzz about and were in state after to talk about, I think it's, it's an innovation that's clearly, you know, it's a, there's a problem for which a solution is needed. It's not a solution in search of a problem or put it like that. I wanted to just do one other bit of context setting here. Hold on a moment. Do you, did you, did you what button do you click to do screen share? I used to know it's this one. OK, here we go. Can you, can you guys see this web page? Yeah, great. So something that we're cooking up on a slower arc than your rapid pace of innovation is that aspect of an automated or autonomous legal entity that that that that that the let's say the function and the capability that causes it to become a legal entity with a jurisdiction. So the filing with the Secretary of State, for example. And this is a draft right now of a challenge that we're that we're putting together for later this year in in 2019 to seek sort of open source attempts at filling that gap as part of the overall system of the automated entity so they can form the company or the LLC can maintain it. There's usually, you know, annual filings, that kind of thing, some notices that go back and forth. So we do think, at least from the log of my perspective, that in the fullness of time, when you get from the Wright brothers, by plane or try plane to something more like, you know, modern aeronautics and beyond to spaceflight, something that encapsulates all of the functions of a legal entity is really needed. But as far as I can, as far as I've seen, especially with open source dimension of what you're doing, this is the single biggest step toward a completely automated legal entity that I've seen is very, very exciting, what you've been doing so far. And I can't wait to see how people use it. And and how it evolves going forward. Question, I'm sorry, Oliver, because I was just going to say thank you for for bringing that broader context up. I know that you and I have both been involved with work sponsored through the Kauffman Foundation. And I wanted just to mention that they have been very helpful in sponsoring certainly the work I've been doing in this along the line. And there is some a chapter on on some of these in a book that they brought out about five or six years ago that would be worth having a look at on this. They've been quite active and deserve some thanks for helping to spur some of this activity. Yeah, Kauffman is great. Could you could you share a link to that and and I'll include it in the show notes? Sure. Sure. I can share that it's available. The PDF of the whole book is available. It's called Rules for Growth and the chapter that I did on on in the first sort of first phase of thinking about this. Again, they were kind enough to support activity at that Harvard's Berkman Center Law Lab, which I was co-director of and that that led ultimately to the the Nevada Silver Flume Initiative as picked up the software we developed. But in that circumstance, what was interesting there was that the software developed in that project was all hard coded for a particular iteration of an LLC. And what we lacked was exactly what Ori is talking about, in which some of the the Dow software suppliers are beginning to provide, which is a flexible one where you can you can set up a variety of different voting rules and different distribution rules and really really have a tool kit that allows you to construct variations. Again, the Harvard project now seven or eight years ago, we had to hire coders who came in and basically hard coded a version of an operating agreement, which was successful and used by Nevada would success, but does not have any of the flexibility that the newer initiatives do. And so the ability to use that kind of software to set your own rules rather than just taking what was hard coded is a very big step. In fact, I think we're in where I use the right but it's an analogy, but I think that we are beyond that now with the kind of software that Ori is able to work with. Yeah, and speaking of which, I'm happy to kind of talk a little bit more about that software and even give it a demo so you can kind of get the broader context for how the vision that you're talking about Daza with the fully autonomous end to end process would look like with legal integration with alongside the smart contract. Smart contracts for the most part are already built the first versions of. Yes, so the answer is keenly interested in that. But I wonder just in the interest of time, could we could we do that one on one over the weekends and then we'll make that the sort of demo module of this? Yeah, absolutely. OK, that would be that would be great. Thanks, Ari. So there you have it. So before we wrap up, where can people learn more? You mentioned the name of the organization to start with Ori, but what web link would people go to if they wanted to go much deeper? Yes, you can share it in the show notes, but it's dorg.tech is our URL. And then most of our actual activity happens in our GitHub, which is github.com slash dorg tech. And then if you want to see the actual Dow in action, the decision making, the proposals, the work, the work orders, that's in our Dow interface, which is at alchemy.dowstack.io. And I should mention that the under the hood, the blockchain software we're using is the Dow stack protocol. And that's what the the door Dow currently sits on top of. And what our software that would create this Dow currently creates Dow's, but with that in the future, create Dow's legal standing, like the ones we just built would be like a Dow stack Dow link to a BB LLC is what we are now. So yeah, alchemy.dowstack.io for the Dow. And then dorg is at dorg.tech to learn more. Great. D-O-R-G. That's right. Dorg, Dorg, whatever you want. That's perfect. OK. Well, gentlemen, congratulations. You really earned a ginormous pat in the back, especially from all of those businesses of the future that, you know, for whom, you know, some of these administer things should be a lot easier so they can focus on what they're trying to accomplish as an entity. And so there you have it. That is law reimagined. So thank you very much, gentlemen, and best of luck as you as you go forward and keep iterating. Thank you so much. Thanks. Thanks.