David Graeber's anarchist collective faced a legal crisis when someone donated a car: with no formal structure, nobody could legally own it. The group had to choose between incorporating as a nonprofit, which meant adding hierarchy, or leaving the car unregistered and risking liability. The problem still haunts decentralized organizations today.
So David Graeber was an activist. He was involved in the Occupy movement. And then before that, in the early 2000s, he was part of a social justice movement in the United States that was called the Direct Action Network. And he's telling an anecdote about his friends as part of this movement. They were organizing protests and all sorts of things in the big cities in the United States. And then Trying to get donations to fund their movement. So it was very much an anarchist experiment. He's defining himself as an anarchist. So there was no leader, there was no managers, there was no boss making the decisions on behalf of the group. They were collectively making decisions as democratically as they could. And that was working really, really well until one day somebody had the terrible idea of donating not cash to the organization, but a car. And then they were confronted with a very frustrating issue, which is that they couldn't decide who was the owner of the car. And they realized that a decentralized network cannot legally own a car. You have to be an individual to be the legal owner of a car. You have to be a corporation, you have to be incorporated. But the fact that a car was donated to a decentralized network of activists just didn't fit with any of the legal frameworks. And the car became a burden because they had to decide what to do with it and they disagreed and didn't have the legal tools to manage this particular situation. And so this question of like, can a decentralized network control assets? It's a big question today in the DAO communities, right? It's an old question. It's an old question that has been addressed in different ways, experienced in different ways by cooperatives in the past. Which in many ways are just a synonym for DAOs today in a lot of contexts. And one thing they could have done is they could have created a, they could have incorporated their activist network as a nonprofit, but then that would've come with a whole bunch of red tape, a whole bunch of paperwork, legal fees. They would've had to have a lawyer to do that, right? So you would've created additional complexity. And then if you become the owner of a car, of a tangible asset, you also gain exposure to additional issues. Let's say you are protesting some government policy and the government doesn't like you and they wanna give you trouble. Well, they know you own a car. Great. So now they can come, they can send like a, they can send somebody who works for the car regulator or the vehicle authority of the state and they can inspect your car and find that maybe it's not up to code. They like the, maybe the headlights are not up to code or maybe the tire is not like, good enough to be on the road and they can give you a fine or they can force you to upgrade the car if you wanna be able to use it. So they can create additional trouble for you, right? And so this experience of like not being able to own tangible assets as a decentralized network, I think is an interesting thing to think about because it's a use case that needs to be one way or another, if you're gonna make DAOs work, we need to find easy ways for DAOs to own tangible assets, not just tokens, but tangible assets. How is it gonna work? How are we going to organize that effectively? With what legal framework? I think this is a huge question. And if the answer is like, well, we're just gonna incorporate the DAO, then what you've done is just create a traditional corporation. You call it DAO on Discord or on Twitter, and that's great, but basically you've created a corporation. And then what's different from what we already know? It's unclear.
And from the regulator's perspective, what's the downside of having like, Why was there in the first place no rule for a decentralized entity to own something? Like what's going on from their point of view?
Well, to be the legal owner of a car, you need to have legal personhood. And to have legal personhood, you have to either be an individual, a person, a physical person, or you have to be a corporate person and there's no other way.
But the question is, is that something deliberate or is that just, it falls slightly outside of what they considered?
Absolutely. I think it just falls out. It was like the law was written at the time where this question of decentralized networks was not really a thing. Whether the decentralized network is just a bunch of people, you know, meeting in a basement to discuss, or whether there's like an instantiation of it on a digital platform, a blockchain platform, doesn't really fundamentally change the story. It's still a decentralized network. It's not incorporated and it's just not one person. There's no boss, right? So if you're gonna have ownership of a tangible asset, regulators, governments will want to have accountability, right? What if your car explodes and kills people? Who's responsible?
Right.
Who is the victim gonna sue? Who are they gonna get, trying to get insurance money from? Right? So this idea of saying, well, it belongs to a decentralized network, it's a bit tricky.
For accountability mainly. That's the key.
For accountability, for tax purposes, for all sorts of reasons that, you know, make sense from a legal perspective, but can also be used by governments to prevent new forms of organizing. So this is where regulators have a strategic role to play because I think regulators fundamentally want to see these new forms of organizing create value in society. But they also need to be careful so that it doesn't create this, you know, massive amount of liability and damages for people.
