By this line of reasoning wouldn’t Ethereum miners be liable too? (assuming this was all implemented on ethereum)

I believe miners wouldn't, because while they might technically coordinate their efforts in deciding which version of a cryptocurrency to mine, they aren't pooling their resources and representing themselves as a single entity.

That's partly what makes these individuals an unincorporated organization.

They don't cooperate for profit, they compete with eachother.

Everyone in a mining (or staking) pool seems more likely to count as a general partnership.

ETH no longer has miners since the switch to PoS. There are now stakers, validators, liquid staking tokens, block builders, ... it has gotten a lot more complex than it was before.

What? Why would they be liable? The whole point is the liability in a partnership is shared between the partners: that is the entities that own the partnership.

Miners (staker?) aren't partners in the DAO: being a miner doesn't make you an owner of anything, anymore than being an employee or contractor to a partnership in the real world would make you liable for the actions of your employer/client.

Many of them don't even coordinate their activities via blockchain because it's too slow and expensive[1].

[1] https://www.banklesstimes.com/news/2023/03/08/off-chain-gove...

Governance activities are talked about on forums and chatrooms. Governance is voted on on-chain

Except when it's not: https://docs.decentraland.org/player/general/dao/overview/ho...

> To circumvent the very high gas fees associated with full on-chain governance, Decentraland’s DAO uses a combination of free, off-chain voting for the community and a multi-sig wallet controlled by a “DAO Committee” to enact those off-chain decisions on the Ethereum blockchain.

I'm not a huge follower of the crypto ecosystem and DAOs, but this kind of thing seems like it's pretty common.

This is actually very common for the allegedly decentralized apps. A centralized service controls the actual application while some resulting data is recorded to the blockchain. Decentralized in name only, but most users don't know and those who understand are only happy to oblige the hype.

Slightly off topic, but I quite like this video over Decentraland/the metaverse: https://www.youtube.com/watch?v=EiZhdpLXZ8Q

It's an in depth look/critique.

There are all kinds of governance models, as there should be.

> a multi-sig wallet controlled by a “DAO Committee” to enact those off-chain decisions

DAOs may empower a multi-sig with certain allocated funds to spend according to a mandate. This is ok. It's like saying America is not a democracy because regulators can make new rules that congress is not voting on.

It also possible to have off-chain voting, but still enforce those results on-chain using a fraud-proof like system, and some do this. Lots of design space to play with.

How do you guarantee the off-chain votes haven't been tampered with during the initial off-chain step?

>It's like saying America is not a democracy because regulators can make new rules that congress is not voting on.

That actually does appear to be the opinion of the current supreme court, and you can expect further rulings counter to historical precedence WRT chevron deference.

Depends on the chain. Lots of "better" chains than Ethereum. Some are even integrating EVM and Solidity.

For a rather hilarious example of this, PeopleDAO's "autonomy" turned out to be a few guys with a Google Sheet. They accidentally shared the link and someone added themselves to the payout list, to the tune of $120k.

https://www.theblock.co/post/219214/peopledao-hacked-via-goo...

Why would it be difficult to enforce individual liability? The DAO needs to interact with the outside world somehow, pay bills and get paid etc, and distribute income to members, so you can just follow the money, can't you?

Jurisdiction of the enforcing party must have overlap with the individual members targeted. In practice I would expect any member under that jurisdiction would bear full responsibility of the actions of any of the collective members.

If you assume a DAO is de facto a corporation/partnership (as this court decision suggests), most US States (including California, which is relevant to this specific case) and many countries start from an unlimited, collective liability default for corporations/partnerships and limited liability is the properly registered (and taxed!) opt-in. (The article also points to states that are not California that realize this and have started to offer easy LLC opt-in for DAOs. Presumably in part because it is a potential tax revenue source.) [IANAL, but this is fascinating.]

It is an organization, there is no question there.

The question is whether it is a general partnership or not, and by the rules listed it would appear to be.

Collective ownership implying collective liability is not novel or new, and existed long before LLCs and LLPs did. Legislation allowing those is relatively recent because it has obvious benefits, but comes at the cost of some degree of regulation. In the true crypto spirit of "regulation == bad" this DAO took the path of not making itself an LLC or LLP (and in fact explicitly terminated the LLC), which means it seems fairly obvious that it's a general (e.g. unlimited liability) partnership as the court appears to be concluding.

Sometimes you can't follow the money, because the DAO members can use privacy tools to hide the coins, similar to what Tornado Cash allowed you to do.

Whenever an organization does something, someone or something has liability. If you don't go through the process to create an LLC, that someone is the members of the organization. Liability doesn't go away just because you organize via a blockchain.

If the actions are done by code or an AI, who is liable?

Whoever made the decision was it to implement them as an actor, most likely?

> Whoever made the decision was it to implement them as an actor, most likely?

Directly, the holders of the DAO tokens. That’s what this case is about. Those holders may have further claims against the people who implemented the code or AI. But the liability begins with the general partners, i.e. the holders of the governance tokens.

Will be interesting to see the first judgements enforced against holders of a DAO.

Yeah, booby traps are the first example I can think of illegal automation that comes to mind where the property owner is liable. Setting up something and not pulling the trigger yourself doesn't absolve you.

The people who own it.

Which, in this case, are the bag-holders. Looks like there are benefits to having a real corporation, instead of trying to re-invent corporate governance from scratch, without any input from the courts...

The last people with intent who touched it, usually, which may mean the developers. Certainly that's what happened to the TornadoCash developers.

You can't just wind up a toy with a bomb strapped to it, walk away, and disclaim the consequences; nor can you do that with code.

What if we can't tell who the last person was? Do we just go down the line until we find someone to blame? What if that person didn't add any of the menacing features of the code?

What if the last 'person' was gpt4? is openai responsible?

The person responsible will be whoever the courts think is responsible. Courts use case law and judicial precedent to determine responsibility for a wide variety of complicated legal situations.

Things do get murky when there isn't a lot of existing precedent. That's why it's risky to engage in activities that are, let's just say "legally innovative."

If they can't find the person solely responsible for something, then they got away.

If you make an AI that is hooked up to the internet and it does something criminal, you'd be liable. You can't just let your pitbull roam the streets and not be held liable when it bites someone.

What if I release the AI onto the internet, and then tragically die in a car accident? Who is responsible for the AI? What happens when the AI spawns more AI, who is responsible for that?

Yeah this reminds me of a thought experiment with Ethereum virtual machines. If someone writes and produces the code for tornado cash, publishes it on the internet as free speech but never deploys it obviously they are not at fault. So lets say they publish it and some anonymous person from Somalia publishes it to the Ethereum network and the nodes absorb the program.

When then is responsible for the tornado cash instance? The Ethereum VM node operators who have no idea they're even running it? An unknowable person from Somalia?

Most likely the node operators would be held to be liable if they're hosting illegal content and take no steps to prevent it.

Right now the node operators worldwide even to this day are running tornado cash on their EVM, including validating transactions to sanctioned contract addresses.

And keep in mind, the US Treasury has said that it would issue licenses to Americans who need to be able to withdraw their legitimate funds from Tornado cash. Some validator needs to be able to process those transactions, and would have no idea whether any particular TC withdrawal is licensed or not.

> Who is responsible for the AI?

A deceased person.

> What happens when the AI spawns more AI, who is responsible for that?

The creator of the first copy.

The owners.

For example: Imagine I have a cow, and the cow escapes and goes on a rampage. I didn't make the cow escape, I didn't tell it to go on a rampage, and cows think for themselves so are autonomous.

That doesn't mean I get to claim the cow is liable for the damage.

The entire purpose of an LLC is to limit personal exposure to such liabilities. I don't see how this won't just extend to something like DAOs.

I could see legal changes to bring in limited liability to DAOs, but I don't think DAO users will like the rest of what that entails, eg reporting and kyc requirements.

Thsoe will likely make daos more useful, but less differentiated from existing structures

How would it work for non-US DAOs?

If the DAO is very explicit about non-US residents, they should also be able to show that in court, and it could be determined that the US citizens who ignored that waived any protections the court would otherwise offer. Alternatively, it might instead be that the DAO should have done more to ~spy on~ "know" their customers so they could determine that they're not serving US citizens.

The US could still argue that there's a US nexus in that the tokens are converted to US dollars

> Enforcement will be the interesting part. If a DAO has anonymous members and no LLC or corporate structure associated with it, then a court can rule that the members are liable, but it could be very difficult to enforce that liability.

The default form of legal structure for a cooperating group of people is general partnership--unless you take specific legal steps to avoid forming a general partnership, that is how the courts will view the partnership. General partnerships means that all partners are jointly and severally liable.

In layman's terms, that means you just have to find one person involved in the DAO, and sue them, and then you get to collect the full judgement from that person (alone), and it's now their problem to get cooperation from the other partners for the liability.

(If this sounds like a terrible idea, it is. That's why there exists all sorts of fancy legal structures that avoid putting people in this position. But if you're not going to use any of them, you get the terrible idea instead!)

So a single individual who participated in the Bitcoin network would be viewed as ' jointly and severally liable' for the entire network?