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- Everyone thinks of Wyoming, it's the cowboy state,
so you think of open land, cattle and cowboys.
They want it to be open land, cattle,
cowboys and crypto.
- [Narrator] This 40-acre plot of land
in northwestern Wyoming has a new owner,
a group of around 6,000 crypto investors
whose goal is to build a city using the Ethereum blockchain.
- We're imagining this kind of future
where you see this beautiful parcel map
of all the different pieces of land.
In one click, basically you just buy this NFT
and you now have the right to use that land.
- [Narrator] This group of investors is called CityDAO
and it has no official leader.
Rather, it's owned and governed by its members.
- We are collectively governing this land,
so we're deciding what happens to the land.
If we're going to build things,
if we're gonna allow people to camp on the land.
- [Narrator] This type of organization
is known as a DAO.
There are about 200 tracked by the data service DeepDAO
and they all have different goals.
Like collectively owning an NBA team,
a rare copy of the US Constitution,
or a future blockchain-based city.
So how exactly do DAOs work?
Why have they become a part of Wyoming real estate?
And what risks come with investing in them?
- DAO stands for decentralized autonomous organization.
Think about a mutual fund,
which is an investment product created by a company,
the company maintains it,
the company is responsible for managing all the money,
for deciding what the mutual fund's purpose is,
what its goal is.
- [Narrator] But unlike a mutual fund,
DAOs don't have a company
or any leader to make these decisions.
Instead, members pool money together
and decide as a group
how they want to spend it.
Usually once members buy in,
they receive a token, which grants them voting rights.
All of the DAO's functions are also written
into code on the blockchain.
- Think about an investment vehicle
where all the components of the investment vehicle
are written into a piece of software and launched,
and nobody actually owns it
and it runs out on its own.
- [Narrator] Unlike a traditional corporate structure
where the company looks for investors to raise money,
DAOs let people find them through the internet.
- The real sort of ingenious idea behind this
isn't necessarily that you come up
with some new way to make money.
It's that you've come up with a new way
to find investors.
- [Narrator] CityDAO became the first DAO to own land
thanks to a new law in Wyoming
that went into effect last July.
The law recognizes DAOs as LLCs
and LLCs can own real estate.
- Wyoming passed this law
because Wyoming legislators a couple of years ago decided
that blockchain could give the state a competitive advantage
and they wanted to try
to attract blockchain-based businesses.
- [Narrator] Wyoming has passed a number of laws
to make it easier for blockchain-based companies
to operate out of the state,
one of which exempts cryptocurrency from state tax.
Inspired by the Wyoming DAO law,
Scott Fitsimones started CityDAO
in the hopes that eventually people
could buy land instantaneously
and those transactions would be transparent
for all to see on the blockchain.
- If you were to go want to buy
or build something on a piece of land in Wyoming right now,
you would have to go to LoopNet,
you'd have to go explore different pieces of land,
you'd have to go on Craigslist
and try to call people,
and work out a deal, sign some papers,
maybe mail something.
It would just be a very cumbersome, tiresome process.
- [Narrator] Fitsimones says CityDAO
has raised around $7 million
from its membership since it was founded last July.
Members include Brian Armstrong,
the co-founder of Coinbase,
and Vitalik Buterin, co-creator of the Ethereum network.
To join CityDAO,
you have to buy a citizen NFT,
which currently sells for about 0.4 Ethereum,
which is around $1,000.
Once you're a citizen,
you have the right to vote on proposals
and propose your own ideas.
- For example, we had citizens already pass a proposal
to get drone footage of the land.
- [Narrator] In January, CityDAO released a new batch
of NFTs for citizens to purchase.
Each one represents a lease
to a specific plot of land in Wyoming.
- So imagine CityDAO LLC owns this property
but we basically encode a lease as an NFT
and say you have the right to use this parcel,
build on this parcel.
- [Narrator] Fitsimones says they intend
to treat this parcel as a test run
and that they're already looking
at locations for their next purchase.
He says the next one will be in a less remote area,
so citizens can have the option
to build on the land.
- Perhaps there's some future
where we start living there, living close to each other,
building things on the land.
- [Narrator] He also says CityDAO
is looking into buying land outside Wyoming.
- We would still use the Wyoming LLC
and technically, Wyoming LLCs can own land anywhere
but there are certainly some nuances
to how that works.
- [Narrator] DAOs are still considered
an experimental business model,
even as awareness grows.
- I think DAOs are going to remain limited.
I think the idea is very intriguing.
I think you will see a lot of attempts at experimentation.
People are gonna try it out, see where it fits
but I think for the time being,
it's gonna be really hard to do one
of these on a very, very large scale.
- [Narrator] One DAO that made headlines
in November was ConstitutionDAO.
It tried to buy a rare first edition copy
of the US Constitution,
raising over $40 million in less than a week.
That's just one example of how DAOs
can raise a lot of capital very quickly.
But this also makes them a big target for hacking.
- When you're doing this,
ultimately, everything now becomes dependent
upon the software.
If it was not written well
and it collects a lot of money,
somebody's gonna figure out a way to hack it,
and get into it.
I mean, even well-written software programs
can be hacked.
- [Narrator] And because most DAOs communicate
through the messaging platform Discord,
security there is a growing area of concern as well.
On January 10th, someone hacked
into a CityDAO administrator's account on Discord
and scammed some members into sending them tens
of thousands of dollars.
Fitsimones said that after the incident,
CityDAO did a full review and increased security
on its server.
He added that this type of attack
has been happening to several DAO servers.
A spokeswoman from Discord says the company is working
to prevent scams by investing significant resources
in education and tools that protect its users.
The lack of a traditional corporate structure
could also make it harder
for individual investors to hold DAOs accountable
when it comes to fraud, scams and abuse.
- This is a very risky, very nascent space
and most of the people who are in it sort
of understand those risks and are willing to take them.
- [Narrator] The SEC says it wants
to bring the digital currency market
under its investor protection framework.
Meanwhile, DAO enthusiasts like Fitsimones
are hopeful that DAOs will improve and grow over time.
- Eventually, people will kind
of realize the existing system
of it takes a month to buy a piece of land or property,
that will seem really crazy.
And I definitely imagine more and more land
and assets coming onto the blockchain
and CityDAO being there when that happens
and helping make it all possible.
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