Written By: Isha Goel | July 15 2021
In recent efforts to becoming a more crypto-friendly place to live, Wyoming has officially become the first U.S state to recognize a Decentralized Autonomous Organization (DAO) called the American CryptoFed DAO.
What exactly is a DAO?
An example from Cointelegraph paints the picture quite well. ‘Imagine a vending machine that not only takes money from you and gives you a snack in return but also uses that money to automatically re-order the goods. This machine also orders cleaning services and pays its rent all by itself. Moreover, as you put money into that machine, you and its other users have a say in what snacks it will order and how often should it be cleaned. It has no managers, all of those processes were pre-written into code.’ This management model originated when financial transactions with Bitcoin had no need for a middleman. In the same way, the fundamentals of DAO are based on developing a company or organization where there is no sense of hierarchy even when fully functional.
In order for a DAO to be operational once it is fully established, a set of rules must be put into place. Those rules are encoded as a smart contract, a computer program that autonomously exists on the internet while still requiring people to perform the tasks that it cannot complete by itself. Funding the DAO is the next step and this is important for two reasons. The first is that it is necessary for the DAO to have some internal property in the form of tokens to be spent by the organization and the second is that users that invest in the DAO get voting rights to influence how it operates. Once that is taken care of, the DAO becomes fully autonomous and independent from its creators. The key here is that the open-source nature and blockchain transaction record management system make DAOs fully transparent, immutable, and incorruptible. Decisions on spending the funds are made by everyone who bought a stake in the organization reaching a consensus. They also have the option to send in potential opportunities through proposals, possibly requiring a monetary deposit to avoid spamming. Those proposals are then voted on and require majority support to be enacted (the percentage is specified in the code itself). Essentially, ‘DAOs enable people to exchange its funds with anyone in the world. This can be done in the form of an investment, a charitable donation, money raising, borrowing and so on, all without an intermediary.’
The Benefits for Wyoming
The state of Wyoming has recognized an opportunity to stream in more revenue. In fact, it has been writing new legislation to become more attractive and it worked. Crypto companies Ripple and Kraken both set up shops there alongside about 50 smaller LLCs with ‘bitcoin’ in their name. Earlier this year, Wyoming Senator Cynthia Lummis even temporarily added laser eyes to her Twitter profile picture. This trend on the internet was spread by investors who supported and favored the crypto market. As the top coal-producing state, Wyoming is using this as an opportunity to improve revenue generation and jobs. Marian Orr, CEO of the American CryptoFed DAO, stated that ‘Wyoming is the leading digital assets jurisdiction in the USA, and now with this DAO law, Wyoming is arguably the top blockchain jurisdiction in the world. What this means is that creating a true digital currency with mass acceptance is now possible.’
The Merchant Advisory Group (MAG) supported the filing as well and has always advocated for more competition in the payment acceptance space as it represents 165 of the largest merchants in the U.S. Mobile banking solutions provider mSHIFT was the company that established the American CryptoFed DAO with the mission as ‘promoting a two-token economy that is immune from inflationary or deflationary influences.’ The Ducat is the DAO’s native algorithmic stable token that facilitates fee-free transactions and is based on the delegated-proof-of-stake EOS to achieve high-speed transactions at the expense of decentralization. The interest paid to Ducat holders and rewards given to the network’s users allow for more tokens to be issued. Additionally, ‘Ducat rewards and interest rates are adjusted dynamically by machine learning, with the Ducat intended to appreciate against the U.S. dollar by the amount of inflation the dollar experiences’ and is stabilized by the governance token Locke.
Cointelegraph. “What Is DAO and How It Works.” Cointelegraph, Cointelegraph, 13 Feb. 2018, cointelegraph.com/ethereum-for-beginners/what-is-dao.
Crowley, James. “Why Are Bitcoin Supporters Giving Themselves Laser Eyes? Wyoming Senator Joins Trend.” Newsweek, Newsweek, 19 Feb. 2021, www.newsweek.com/bitcoin-laser-eyes-senator-cynthia-lummis-1570644.
McIntosh, Rachel. “Wyoming Grants Legal Status to a DAO for the First Time in US History: Finance Magnates.” Finance Magnates | Financial and Business News, Finance Magnates, 5 July 2021, www.financemagnates.com/cryptocurrency/news/wyoming-grants-legal-status-to-a-dao-for-the-first-time-in-us-history/.
Wilde, Jamie. “Crypto-Friendly Wyoming Officially Recognizes a DAO.” Morning Brew, Morning Brew, 9 July 2021, www.morningbrew.com/daily/stories/2021/07/09/cryptofriendly-wyoming-officially-recognizes-dao.
Young, Martin. “Wyoming Legally Recognizes First DAO in the United States.” Cointelegraph, Cointelegraph, 5 July 2021, cointelegraph.com/news/wyoming-legally-recognizes-first-dao-in-the-united-states.