Thread by @awrigh01

1/There's been quite a bit of discussion around personal tokens over the past couple of days. I thought I'd weigh in here.

Buckle up (jking -- but it's prob worth a read if you're a crypto dork)👇

For those that don't know, personal tokens are being created by a variety of folks for a variety of different reasons: lawyers in exchange for services and entrepreneurs in exchange for nothing in particular.

3/All of these build on the work of OG's like "Tatiana Coin" and "GavCoin"--created by @gavofyork in the early days of Ethereum.

@gavofyork 4/Many crypto lawyers have naturally decreed that *all* personal tokens are securities.

@gavofyork 5/These commentators have a point. Many of the arrangements for personal tokens likely will be deemed securities, especially if they have overt promises attached to them for a share of the person's income or other promises of profit.

@gavofyork 6/These seem like ISAs and that's well-settled ground. However, I'm not yet convinced that all personal tokens will be securities.

@gavofyork 7/Some personal tokens (and potentially the most interesting and widespread personal tokens) as noted by @danfinlay will be "deliberately unenforceable." They will make no promises about the way the token will be used.

@gavofyork @danfinlay 8/They are just meaningful between the parties in a purposefully amorphous way. One example here is the $Alex token by @AlexMasmej.

@gavofyork @danfinlay @AlexMasmej 9/This naturally raises a question: Why would someone create such a token? Why wouldn't they go through the process of clearly defining what you get for a personal token?

@gavofyork @danfinlay @AlexMasmej 10/Legal theory provide a partial answer. Many contracts are "relational" in nature. These contracts serve as a sort of pointer between parties enriched over time by implicit terms that orient the parties' behavior.

@gavofyork @danfinlay @AlexMasmej 11/There is a long history of legal theory describing contracts, or a portion of contracts, as relational in nature. If you're interested check out the work Ian Roderick Macneil and Stewart Macaulay.

@gavofyork @danfinlay @AlexMasmej 12/Some scholars have argued that smart contracts are ill-suited for relational contracts. Most notably Karen Levy in this thought-provoking work: researchgate.net/publication/31…

@gavofyork @danfinlay @AlexMasmej 13/These "deliberately unenforceable" personal tokens, however, suggest that these early analyses may have rushed to judgment too fast. Smart contracts, like other forms of contracts (and yes they can be contracts) can be relational in nature too!

@gavofyork @danfinlay @AlexMasmej 14/With personal tokens, there may be no express promises--indeed there are no defined terms outside of the basic smart contract code creating the token.

@gavofyork @danfinlay @AlexMasmej 15/They are just a sort of loose agreement between two folks to be within each other's orbit in a purposefully undefined way. An agreement to (maybe) do things together.

@gavofyork @danfinlay @AlexMasmej 16/What's interesting about these types of personal tokens is that they serve as a sort of way to organize and incentivize a network around an individual, brand, group, etc.

@gavofyork @danfinlay @AlexMasmej 17/ People are binding themselves together for a variety of purposes--to work together or support one another. As a result, with person tokens, people’s network, brands, and even virtualized objects can be turned into markets.

@gavofyork @danfinlay @AlexMasmej 18/That could prove widely useful for influencers, musicians, athletes, consumer brands, and even entrepreneurs. It creates a way to build a "tribe" and potentially build a bigger one, with folks that join earlier being compensated …

@gavofyork @danfinlay @AlexMasmej 19/ ... for spotting genius before others (due to the scarce nature of the token). Good will, fan communities, etc. can be monetized.

@gavofyork @danfinlay @AlexMasmej 20/Many of these tokens likely will make no express promise of a future profit--and in fact they often may not be *any* specific promises related to their creation or distribution.

@gavofyork @danfinlay @AlexMasmej 21/But since they could appreciate in value (and I suspect that many may appreciate rapidly) there may be a potential for profit.

@gavofyork @danfinlay @AlexMasmej 22/Will that make all "deliberately unenforceable" personal tokens securities? Maybe not. It's likely going to depend on the relationship between the person creating a personal token and the reasons why people are purchasing them.

@gavofyork @danfinlay @AlexMasmej 23/Assuming there are no express terms, these "relational" smart contracts will raise questions as to each purchaser's intent: Are folks purchasing them because of love, adulation, fandom, or support?

@gavofyork @danfinlay @AlexMasmej 24/Or are they purchasing them for profit? Is there an expectation of profit if the person creating the token is unknown and there is no objective reason to acquire or purchase them (i.e., no existing market)

@gavofyork @danfinlay @AlexMasmej 25/What's interesting is that these tokens may be the converse of the tokens issued by many "ICO"--where folks have argued that many utility tokens look like securities in the beginning but evolve into commodities.

@gavofyork @danfinlay @AlexMasmej 26/With personal tokens, they may start their life as commodities but may be deemed to morph into securities as markets develop around them.

27/People purchase these "deliberately unenforceable" personal tokens at the beginning with no reasonable expectation of profit, but that may change over time or may change depending on the statements made by the person or party creating the token.

28/Only time will tell. But, four things are clear (to me at least):

- the platforms that enable folks to create and distribute personal tokens will have a heavy role in shaping this nascent ecosystem and shaping the expectations of people acquiring them.

29/- the more deliberately unambiguous the person tokens are the trickier the legal questions.

30/

- assuming these forms of "relational smart contracts" continue to grow and flourish securities lawyers will pollute your twitter feed with arguments about the above. You've been warned.

31/

-At next year's 2021 Consensus and Ethereal events, we'll likely see a panel on the legal questions of personal tokens.

32/ Correction: the $Alex token contained with it some express promises, so the above analysis wouldn't hold in that example. Wish Twitter would let me edit, but alas. Thanks @danfinlay and @lex_node for flagging!