Ricardian LLC: Limited Liability NFT
Ricardian == LLC Minting on Ethereum. Governed by a legal engineering DAO.
Money is coming online and frontier orgs are managing financial affairs entirely on blockchained code (“DAO”). Want to pool and pay contractors by the second? DAOs can vote to “smart contract” with those params — set and forget. Computers never sleep, after all.
Still, there is a hidden tax in uncertainty that escapes computing. The legal system provides a very real attack vector for DAO or similar tx signers who control smart contracts or engage services.
Thus, “legal wrappers” have emerged in “crypto law” to manage judiciable risks that leak from smart contracted arrangements, like litigation against identified DAO members for agreement defaults. (See the The LAO, MCV Delaware LLC-DAO setups tailored for investment clubs.)
Ricardian LLCs for All
“It is the policy of this chapter to give the maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements.” — §18–1101(b), Delaware LLC Act
To make LLC-DAO and related SPV tools more accessible, an efficient network to create these entities in the form of a Series LLC “ricardian contract” seems worth deploying as an Ethereum utility. In essence, 1-click LLC from a private key. To host a reasonable legal framework, Delaware law is well understood and can serve to root these “Ricardian LLCs” as a “Series” of entries on a smart contract-based Master LLC Agreement, giving them a unique legal personality to enter agreements and hold off-chain assets. This setup is not considered in a vacuum, but builds on public legal scholarship and the work of digital company formation projects like Otoco. To provide a gas-efficient, obvious and agnostic way to mark LLC accounts, the Master LLC Agreement is maintained in a “non-fungible” token (NFT) minter. For compliance and practical purposes (such as lost private keys), a DAO can incubate and govern this NFT ledger and related legal framework (enter, LexDAO, summon, Ricardian LLC).
Soft Launch
The soft launch docs for the Ricardian LLC project are here for review, but the dots are:
- Optimized: The Ethereum deployment costs of Ricardian LLC NFTs are optimized after extensive testing and this “gas” is all you pay to join the network. There are no legal fees or registered agent costs. A default template for DAO code-deference operating agreement is also embedded into each NFT. Altogether, the Ricardian LLC network is the cheapest and most crypto-native way to create an LLC-DAO or SPV for wallets today.
- Open: Any Ethereum account can make an entry as a Ricardian (Series) LLC by calling the ens domain
ricardianllc.ethor themintLLC()function. This will grant the network user an NFT and works as an acceptance of the Ricardian LLC Agreement Package (Note: Schedule B, Disclaimers!).
- Flexible: An entire batch of Series LLCs can be created for complex governance systems via
mintLLCBatch(). Individual NFTs can also hold other legal data, like agreements and LLC addendums, through owner-restricted calls toupdateTokenDetails(). - Legal-Engineered: LexDAO, through its own Series, will first govern this NFT ledger through a Gnosis Safe (2/4 signers). This governance includes the right to update the
masterOperatingAgreement(), the default NFT metadata, and the power to revoke a listing in the Ricardian LLC network. - Support: Tech support will be first routed through this Gitter chan for users who want to engage in the Ricardian LLC soft launch and provide feedback.
- SIMPLE RICARDIAN USE CASE == Hypo: Multi-sig managing a smart contract or deal flow wants a basic legal wrapper with low friction. The key signers vote to execute a call to
ricardianllc.eth, wrapping their multi-sig into an LLC in the Ricardian network.
In many ways, this is a warmup for a smart contract Secretary of State — to bootstrap, this Smart Secretary explores the permissibility of the Series LLC provisions and Delaware’s deference to private law.
Crypto Law Renaissance
Parallel to crypto lawyers developing best practices in this domain, such as the “code-deference” approach, the community has forged paths to make crypto digestible to judges and the legal-system-at-large by pushing for supportive legislation (To name a few milestones, the adoption of blockchain-related provisions into Delaware corporate law, the establishment of a Vermont sub-chapter for a Blockchain-based LLC, and the drafting of a Wyoming bill with LLC provisions tailored to DAOs).
Things are moving fast. Crypto law is in a period of wild experimentation with smart contracts and it’s exciting to see the melding of old and new instruments of power to make agreements more predictable. A crypto-governed, crypto-native approach to legal registration therefore seems ripe to hash out today.
