Coming to you LIVE from the Penn Law School crypto law conference panel on blockchain shares. Updates on the progress of the Delaware Blockchain Initiative. Thread here.
"In DE, we succeeded in amending a boring, overlooked line in the law that changed everything about how a corporation could exist - the requirement that a corp keep a "stock ledger".
Now, corporations in DE (the majority of the fortune 500 and almost all of the tech unicorns over the last 10 yrs) don't need a "stock ledger" that's a book or an excel spreadsheet. It can just be a #blockchain . Crazy stuff.
The Delaware code has always been "Descriptive" not "Prescriptive". It's an *enabling* statute, so its object is to help people do business, not tell people how to do business.
The amendments uphold this tradition.
WOAH ok now deep into the good stuff. "Don't the amendments demand private or permissioned ledgers?" "How can a corporation possibly keep a stockholder list on an open ledger?" (like bitcoin or ethereum)
"The state's first consideration was really just permissioned ledgers" "Could we really tolerate a 51% attack?" "If you have a stock ledger, you want to control which parties are participating in a transaction"
We are talking about the "rust blades" case and I have no idea what's going on. Just being honest.
Oooo got us. It's an allegory about how a blockchain share can oh wait no we're still talking about rusty blades.
No, but really though, it's a story about how DE laws can be arcane and demanding. Blockchain-based shares could prevent a bevvy of complex issues like trying to unscramble eggs after a bad transaction like ...drumroll... over-issuing shares.
It sounds lame but it's an enormous (and enormously common) problem for corporations. Cap table errors are all too common and it once cost a company going public over a billion dollars in valuation.... woah.
Now going back to the public vs private chain debate - "couldn't you just write a correcting entry to a public chain?" "We fixed it with the DAO, we can fix it with Folgers or Nike!"
Response by the panel: "Dude that took weeks. No way that flies in the US capital markets"
"Also, you want different permissions for different parties" [editor's note: pretty sure you can do that all with open ledgers]
Lots of concerns around confidentiality, board committees and how this could all happen on public ledgers. Holy grail is for everything to be run through the platform - all data stored on-ledger" [hrm - is it?]
now @AndreaTinianow seeing sooth: How do we take the next step and be a decentralized corporation? other panelists, being curmudgeonly: "Corporations in DE must be run by the board! They cannot be decentralized."
Other panelist, an intellectual: "well, the LLC act allows the members themselves to control the corporation, effectively decentralizing it." "The LLC laws follow the Corp laws, so we can have decentralized LLCs using blockchian-based membership interests"
flexing brain muscles: So really we could have a Delaware DAO done right. It could even sell tokenized membership interests via ICO
Ah and now we have drifted into tokens as securities. Finally, my Delaware master plan is coming together.
Have to distinguish though: Mere investment contracts are not equity and cannot live under the DE amendments. Just passing the Howey test isnt't enough.
This is moving... very quickly. So many amazing thoughts and proposals here. I'm over the moon that these lawyers are NOT crypto-nerds. They're just possessed by the potential - passionate about the possibilities. Real, near term possibilities.
Now getting into blockchain dispute resolution. Paging @pamelawjd "The DE rapid arbitration act is a match made in heaven for crypto disputes."
Arbitrator has to resolve the issue in 120 days or his fee gets cut in half, by law. All confidential, all out-of-court. Crazy stuff. People should use this more often.
One problem with the DBI amendments: You can never force shareholders to give up their paper certificates. So how to get past the "muh certificates" holdouts and move to a blockchain?
...and now proposing some corporate reorganization geometry that I will not force upon you.
"corporations on a blockchain are inevitable" "corporate lawyers are the best mimics in the world - once we see people doing something that works we will copy it" Love it.
Callin me "Mr. Steal Yo Certificate"
The amendments are meant to "clarify" existing law and "confirm that the law can accommodate certificated ledger shares" ...So what's next from Delaware?
Ooh, a little uncomfortable now: "I think there was a pause" "a change in administration"
Some real talk from people in the know.
But now we are seeing an increase in momentum: "We're going to see momentum toward smart UCCs and entity (corp, LLC) management." No rollout "in the next week or two" but we are "back on track" "renewed focus and vigor"
"But in the news, we're seeing Nevada and Vermont and other states copying what Delaware introduced" but hasn't executed. "Does that have something to do with the state getting back on track?"
Other guy (i should have names, admittedly) "In DE we don't need to do it first, we need to do it right"
now on to audience questions. Questions about corporate governance and how it might work on a blockchain. Don't Gov problems go away? [oh man let me tell you tales of algorithmic governance wars. I will sing you the songs of my people]
And now a question from a regulator in the room! "What thought is being given to the concept of a "regulatory node" on a Delaware blockchain?" [so. much. thought. I think it would be pretty cool for permissioned ledgers]
AND THAT'S A WRAP. Hope you liked it. Please come again.
