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Honest question, is this satire?

The only hint is their mention of "KYC processes."

As an investor, I am confused who would agree to this. I would like to hear from someone who has done this.

Is there any binding legal action you could take if there is fraud? It says blended teams of anonymous and identified people but then you are just investing in the identified people and will have to go after them.

One only has to look at the history of the Silk Road to see how this goes. There was repeatedly tons of "reliable" pseudonymous sellers there who would maintain their reputation until they took a bunch of orders and pulled the rug. Over and over.

Upon further research - this was written by a general partner at https://volt.capital.

I assume they are trying to say it is possible to invest in decentralized companies with anonymous founders by their tokens and protocols. Like many do with bitcoin.

Moxie Marlinspike is a pseudonym. He co-founded of Signal Foundation.

As the article says, pseudonymous does not mean anonymous. The real identity of the person is in the legal documents and known by everybody how needs to know. The fame and credibility the person has acquired has been done using pseudonym.

And this is strange, since what they are talking about is obviously "anonymity".

Clearly they are not.

The most extreme case they mention is:

> .. Assumes team is pre-product and does not want to reveal their identities to investors. However, there are teams that choose to only reveal their identities to stakeholders for legal and financial purposes.

the footnote says that sometimes identities are revealed to stakeholders.


This is exciting. There could be a way to prove your identity without revealing it using zero knowledge proof on the contracts.

I'm seeing some of these pseudonymous companies take the form of a DAO with DAO members having say in how the tokens (funding) is distributed so the founder doesn't control 100% of it.

The investors would also be part of the DAO and can vote on proposals. Distribution of funds can be controlled through smart contracts.

It will make the landscape diverse too. There will be less biases for investors when they can't know the identity of the founder. This is making the place more inclusive.

Also, I think Sam Altman wanted to do something similar which he started with the community.


I don't think it's satire, but I do think it's one of the dumber ideas I've heard.

My best guess would be it's a planted article to try and con someone into anonymously investing in a promising young DAO.

There are some pseudonyms that have built up large social audiences and are active investors in many projects that I have crossed paths with. At least one is a founder as well as an investor, etc.

Check out @boredelonmusk as an example.

Not knowing where the money comes from is pretty normal. Not knowing where the money is going is generally a bad sign.

A nominated founder promises you, investor, they have a miraculous lab machine and take a billion dollars. Turns out they defrauded you.

With all the pile of legal papers you have, what can you do to take your money back?

I have been in two lawsuits related to my startups. Your legal options depend on the country the company is operating in and the home of the person you are dealing with. You can't serve them papers without knowing their identity. Not knowing their citizenship adds additional flight risk.

A court can garnish wages and send someone to jail. Most lawsuits end in reconciliation before it goes to court because of the potential costs. Both of mine did.

This is why investors prefer to deal with American C corps above all else. This is also why foreign investors want to deal with a Hong Kong subsidiaries with Mainland Chinese companies.

I think you missed the Theranos joke. His point is that it doesn’t matter if the company is a C corp or some blockchain org, you can’t get your money back once it’s been spent by the company.

If the money is irretrievable, at least identified people can be sent to jail.

Look at https://www.deso.org/ and how Nader raised back when he was just “diamondhands”

> Is there any binding legal action you could take if there is fraud? It says blended teams of anonymous and identified people but then you are just investing in the identified people and will have to go after them.

You can simply encode the full financing agreement (along with all relevant agreements, articles and by-laws) as smart contracts, and perform all company operations exclusively on the blockchain.

"Simply" is carrying a lot of weight there.

If you compare to the weight it carries in the traditional legal and financial markets, I'd say it's pretty balanced, or even in favor of blockchain.

Fully intended as a joke :)

Do you have an example of how you might do this?

Can you encode "and we have recourse to the Delaware courts" into a smart contract? I thought you could only encode statements about things that happen on the smart contract's blockchain, but I'm not very knowledgeable about this.

If you do not have access to real-world courts, in the case of fraud, how do you recover your money? That is, suppose that investor A invests a bunch of cryptocurrency in pseudonymous founder B according to a smart contract, for a certain project, and B uses the funding to hire engineer C to help with the work. However, B and C are actually the same entity, who had no intention of doing any work at all, and B pays a generous "salary" to C and then comes back to A a few years later and says "Yeah we ran out of runway, we're gonna shut down, sorry" and A says "Yeah it happens to the majority of startups, it's fine." Then A hears a rumor about what really happened. How does A go about substantiating that rumor and getting their money back?

The only solution I can see involves B putting up collateral in the smart contract equal to the amount A invests in B, and that can only be released when some decision is made some years later that indeed B was non-fraudulent (let's imagine, for the sake of argument, there was a smart-contract court of chancery that could evaluate whether B was working in good faith and had subpoena powers, although I'm also curious about how that could work). That way, in the case of fraud, A could recover the amount they invested because exactly that much money is locked into the contract for this very purpose. But the market for venture capital where the founders already have as much money as they are raising, and are willing to lock up use of those funds while they work on their startup, is extremely small - such founders are necessarily capable of bootstrapping themselves.

So I'm genuinely trying to understand how it can be done or better yet whether anyone has done it. (Smart contracts are generally public, right? So if this has been done, it should be visible?)

A protocol / organization called Kleros is one attempt to solve this problem. A group of addresses that they attempt to verify as real people look at “evidence” and arbitrate disputes - those who vote in the minority lose money. Like most of these solutions (including escrow contracts) there’s a lot of uncertainty whether they will work in the long run. There was already a pretty bad case where Kleros ran some competition to “prove” their arbitration system worked and it arguably failed [1].

Your first scenario is definitely worrisome. I’m pretty sure it also happens all the time in the real world, just with the definition of “entity” being family or friend group.

[1] https://blog.kleros.io/kleros-vs-cat-in-the-snow-the-escrow-... - this is the Kleros side of the story, couldn’t find the claimant’s. But the reasoning shows that the jurors and Kleros have little to no training in legal interpretation

Wow, the substance of that dispute is... this is why people incorporate in Delaware. Nobody thinks the caselaw of Delaware is some sort of divinely ordained ideal corporate law. But it's predictable and thorough, which means you can write contracts in that framework and know what's going to happen. It seems theoretically possible to me that you could encode all of that in a smart contract library, but I am very curious to see if you actually could.

(One of the things you get in Delaware and many many other meatspace jurisdictions is the doctrine of contra proferentem, i.e., ambiguous clauses are read to the detriment of the person who wrote the contract and made the other person sign it. In this case, there is clearly an ambiguous clause, at least in the sense that the parties disagree on it, and clearly one party wrote it and the other party had no ability to negotiate it. This rule incentivizes people to a) write unambiguous contracts and b) not play stupid games where they try to invent interpretations of their own contract so they don't have to do the thing they said they would.)

Anyway, to the meta-level of the arbitration / escrow - if I'm reading right, the only reason it went to arbitration is Kleros voluntarily put up 50 ETH, the entire amount under dispute, into a new cryptographically-binding arbitration contract, and the two parties had a verbal agreement that the result of that arbitration would end their dispute?

Which is to say, if Kleros said "We're happy to go to arbitration but we're not going to lock up 50 ETH while it's being disputed," the process would be stuck? And especially if Kleros said "There's no reasonable argument here, we're right," arbitration wouldn't actually be binding on them? (It seems they only entertained the dispute to show off their arbitration product....)

And also, if it went to arbitration and the claimant lost, nothing would prevent the claimant from saying "I never agreed to this, and I still have a dispute with you"?

The whole arbitration was "on" Kleros - they set up the whole thing including the 50 ETH to test their system (Kleros vs. image-submitter, hosted on Kleros platform). The funds were always going to be sent, per the terms of the smart contract, to whoever the randomly selected jurors decided won. But the human interpretation part is where things got hairy, either the jurors didn't know how to read rules or they put their thumbs on the scale in favor of Kleros. This also happens in the real world sometimes, but they usually give much better instructions to the jury in the real world.

edit: I see what you're saying - why couldn't you sue Kleros Cooperative in France about this? The extent of how much "code is law" with smart contracts is a complex legal question. You don't have to accept or acknowledge anything saying that to use Ethereum or Kleros.

My comment was fully intended as a joke :)

I applaud those pushing the boundaries of what is possible with blockchains, smart contracts, etc. but I think fully encoding the ambiguity that the legal system continuously resolves is simply not possible. I'm surprised that my comment came off as something that people might say, but in retrospect, I suppose I shouldn't be; there are a lot of people that believe distributed consensus can solve all the things.

> Honest question, is this satire?

Tom Lehrer once said: "Political satire became obsolete when Henry Kissinger was awarded the Nobel peace prize."

I feel like with Bitcoin at $40-50k and Tesla at $1T we are in a similar place when it comes to investing.

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