What DAOs are Getting Very Wrong w/ Michael Marcantonio
Feb 15, 2024
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Legal issues with NFTs and DAOs discussed with Michael Marcantonio. Topics include smart contracts, NFT licensing, tokenization, bankruptcies in crypto, and the future of blockchains in the legal industry.
The issue of NFT licensing and the lack of tangible ownership of intellectual property (IP) conveyed by many NFT projects needs to be addressed.
DAOs must incorporate and properly address liability issues to attract institutional capital and foster innovation in the decentralized governance space.
Open source development in the crypto space allows for rapid iteration, improvement, and disruption of traditional systems and organizations.
Deep dives
NFT Licensing and Tangible Ownership of IP
The podcast episode discusses the issue of NFT licensing and the lack of tangible ownership of intellectual property (IP) conveyed by many NFT projects. The hosts argue that the majority of NFT licenses do not actually grant any tangible rights to the holders, and some projects even fraudulently claim to provide legal IP ownership. They highlight the missed opportunity for honest actors to convey true IP rights or potentially defraud their customers. The conversation emphasizes the need for tangible ownership of IP in the NFT space and the importance of accurately conveying these rights to the token holders.
Liability and Decentralized Autonomous Organizations (DAOs)
The podcast delves into the issue of liability in DAOs and the joint and several liability faced by all members of a DAO. They discuss the potential legal consequences of being jointly and severally liable for the actions of the DAO, highlighting the lack of defense and default judgments faced by DAOs in court cases. The conversation stresses the necessity for DAOs to incorporate and properly address liability issues in order to attract institutional capital and foster innovation in the decentralized governance space. They also explore the potential of DAOs to overtake traditional corporations with their unique advantages and the need to fix the liability problem to enable this growth.
Open Source Innovation and the Rapid Iteration Cycle
The podcast explores the concept of open source innovation in the crypto space and its potential for rapid iteration and improvement. They discuss how open source development allows for quick fixes and improvements in smart contracts, leading to more secure protocols and decentralized finance applications. The conversation highlights how the open and transparent nature of blockchain technology enables bug bounties and peer review, helping to identify and resolve vulnerabilities in code. They also touch on the significance of open source software in driving innovation and its potential to disrupt traditional systems and organizations.
The Potential Power of NFTs for Conveying Rights and IP Trading
NFTs have unique properties that make them suitable for conveying rights and trading intellectual property (IP). By embedding a contract into the smart contract of an NFT, the original issuer of the contract can maintain contractual privity with subsequent token holders. This allows for the creation of a freely tradable market for IP rights. Additionally, the ability to tokenize various assets, including property, real estate, equities, bonds, and interests, can revolutionize financial markets by enabling more efficient and transparent trading.
Decentralized Autonomous Organizations (DAOs) and Incorporation
DAOs present a novel governance and legal concept, but the question arises as to whether they should be incorporated. Incorporation provides liability protection, but it may also be seen as a centralization vector, raising concerns about decentralization. Some argue that not incorporating can help DAOs assert their decentralization, but this approach has risks. Furthermore, in bankruptcy cases involving crypto companies, a unique dynamic arises. Many creditors are retail investors, and the lack of sophisticated creditors can lead to delayed processes and prolonged distribution of assets. Looking ahead, the future of blockchains lies in tokenizing all securities and assets, leading to increased efficiency, standardization, and the obviation of traditional legal contracts.
Alex talks with Michael Marcantonio (Galaxy) about the legal issues with NFTs, DAOs, and more. Alex also talks with Beimnet Abebe (Galaxy Trading) about markets.
This episode was recorded on Monday, February 14, 2024.
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Follow us on Twitter, @glxyresearch, and read our research at www.galaxy.com/research/ to learn more! This podcast, and the information contained herein, has been provided to you by Galaxy Digital Holdings LP and its affiliates (“Galaxy Digital”) solely for informational purposes. View the full disclaimer at www.galaxy.com/disclaimer-galaxy-brains-podcast/
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