A year and a half ago, Sam published “How to Put Physical Assets on the Blockchain.” The article announces Slow Ventures’ first real-world asset (RWA) project, The Montana Land sDAO (sDAO 1). Using a legally compliant structure, we coordinated capital on-chain to purchase a piece of land in Flathead County, Montana, and fractionalized ownership among investors.
We are excited to share that sDAO 1 is entering its next phase: liquidity.
sDAO investors now have full access to and autonomy over their tokens. In light of this significant milestone, we’d like to:
1) sDAO Tokens. If purchasing and fractionalizing land on-chain was the first step towards realizing liquid and accessible RWAs, then sDAO token issuance was the second. But for RWAs to benefit from crypto’s properties, ownership tokens must legally confer a right to the underlying. Otherwise, the token becomes a ‘deal toy’ requiring off-chain coordination, or simply a governance tool, rather than a bearer instrument that can be frictionlessly traded on crypto rails.
Granting tokens true ownership rights is challenging from a regulatory and legal perspective. The issuer must employ a framework that both meets the requirements of US governing bodies, and has a reasonable likelihood of being upheld in court.
With these complexities in mind, we worked with counsel to form and apply our sDAO structure (see here for more details), and have now issued each sDAO member their ownership token(s). In accordance with Reg D, after a mandatory one-year lock-up, these tokens—and their attendant ownership rights—can be freely traded among accredited investors (pending KYC/AML). They can also be used to vote on any sDAO proposal.
2) The RWA Thesis. As suggested above, we still believe that RWAs and crypto have deeply complementary characteristics. Instantiating RWAs on-chain could disintermediate fiat-to-crypto exchanges, and diversify on-chain cash flows—making crypto far less self-referential. Crypto, in turn, provides the infrastructure necessary for liquid and accessible RWAs.
Through our own efforts to purchase, own and govern property on-chain, we encountered many of the legal and technical challenges to actualizing this vision.
We’d first like to acknowledge the meaningful cost associated with developing the sDAO legal framework. This expense would be untenable for most young companies, and we hope to eventually open-source our docs to make asset issuance more accessible. Also, our legal structure is extremely conservative; as a result, the asset issuance flow is not entirely on-chain. As regulation adapts to technology, we expect to further streamline this structure.
From a technical perspective, we noticed a dearth of flexible tooling for organizing and running a DAO on Solana. One platform was unable to provide all the personalized products / services required by our DAO. At the time, USDC on SOL was only accessible through self-hosted wallets. Data (e.g., wallet addresses, emails) was stored and managed, and KYC / AML was completed, entirely off-chain. Communication primarily took place over email and Telegram. Project-specific tokens had to be issued and distributed based on off-chain ownership records, and “locked” tokens (for the hold period) were technically infeasible. We have worked with the Nation team to begin incorporating all the disparate elements of setting up and running a DAO into one easy flow / platform.
3) What’s Next. Looking forward, we’d like this structure to be applied to and tested by several different asset classes.
For example, we could conceive of a Timberland sDAO, an IP sDAO, or even a Dinosaur Bones sDAO.
We hope to gather learnings from each case study and use them to refine our template. Ultimately, our work should culminate in a turn-key, open-source framework for asset issuance.
If you are an accredited investor interested in staying in the loop about this (and other Slow Crypto) project(s), please fill out this form.
Or, if you have any ideas about future sDAOs for us to run / (even better) if you want to do one and would like our help with structure, please reach out to: [email protected]
In conclusion...
We are very excited about real world assets on-chain. From our perspective, crypto is obviously an ideal platform for unlocking enormous real-world value; it generates incremental liquidity for and provides access to real world assets that are currently hard to trade. For crypto generally, and things like defi specifically, to reach their full potential, REAL assets not speculation-driven NFTs … have to be online.
Life is long, if you want to join this journey please reach out –
Weekly explorations into emerging crypto trends and how to navigate 2023 from the Slow Crypto Team, Sam Lessin, Clay Robbins, and Caroline Cline.