When you think about Tennessee, you’re more likely to be thinking country music, barbecue and bourbon than crypto, blockchain and Web3. The state legislature has plans to change that.
Tennessee just passed a bill that could help it become a leader in states providing a home to entrepreneurs who want to set up a unique kind of company that uses the blockchain to automate its decision-making. It’s called a DAO.
More of that in a moment. First, a few definitions.
The “blockchain” is a distributed database that is shared among the nodes of a computer network and stores its information in a digital format and in such a way that changes can be made only once approvals from multiple parties are made in “the chain”. The blockchain is the foundation for cryptocurrencies like bitcoin and ethereum, which use the unique identifiers of the blockchain to create their value. It’s all part of the new, distributed iteration of the internet, called web 3.0 or Web3.
DAOs are another thing that’s grown from all of this: A DAO, or decentralized autonomous organization, is formed on the blockchain by multiple parties and, like other blockchain transactions, requires all decisions to be authorized by those members before actions can be taken.
One example of a DAO is BeetsDAO, a company that aims to support projects in music, gaming and art. The organization pooled its members’ funds but, because it’s a DAO, no purchases can be made unless all the members democratically approve its transactions. A DAO has no leader. All of its moves are collective – and usually automated – driven by “smart” contracts that follow previously agreed-upon rules and are powered on the blockchain. Rules cannot be edited without people noticing – it’s transparent and public.
“The dream,” BeetsDAO founder Jordan Garbis said during a panel discussion last year, is to “create networks of communities that actually drive the value of artists.” Garbis’ company made a name for itself by plunking down $250,000 for a digital piece created by Snoop Dogg and Nyan Cat. Many other companies in the Web3 world have formed themselves as DAOs because they feel it’s a better and more equitable way to do business.
Now you may ask: what does all this have to do with Tennessee?
As mentioned above, earlier this month the Tennessee state legislature unanimously passed a new bill that formally recognizes the registration of DAOs. Believe it or not, the only state to do this so far is Wyoming. Why do these states, which aren’t usually considered hot tech spots, care about this? It’s simple: jobs.
“With this new business structure, Tennessee will a beacon for blockchain investment and new jobs,” state representative Jason Powell told the Nashville Scene. “Just as Delaware became a hub for traditional LLCs or South Dakota for credit card companies.”
So will crypto entrepreneurs be flocking to Tennessee to start up their DAOs? Powell – and many other of the state’s legislators – certainly hope so. And they have cause for optimism.
“Nashville is quickly becoming a hotbed for Web3 companies,” Mike Audi, a tech company founder and one of the first to become a legal DAO in the state told Decrypt, a news site that follows Web3 developments. “With supportive legislation expect to see more of it. Founders will flock here, build here and stay here.”
DAOs represent a new type of corporate structure based on a new type of business model. The blockchain is creating countless entrepreneurs making money from digital products and digital currencies. Some governments have been slow to recognize the significance of this growing trend. But others – even from unlikely places like Tennessee – get it. And they’re adapting their laws to make it easy for tomorrow’s crypto entrepreneurs to succeed. That kind of forward thinking can only benefit the taxpayers they represent in the years to come.