Did crypto just have its LLC moment?

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“The limited liability corporation is the greatest single discovery of modern times.”

— Nicholas Butler, Nobel Laureate

When the novel but seemingly innocuous idea of “limited liability” came before parliament in 1856, it proved surprisingly contentious.

It’s hard to fathom now, but before then, investors were typically on the hook for the debts incurred by the companies they invested in.

Imagine getting a bill in 2008 for your share of the $619 billion of debt that Lehman Brothers defaulted on, just because you bought the stock in 2007.

In the 1850s, though, many in the House of Lords thought that was exactly how investing should work.

Lord Monteagle, for example, warned that limited liability was a practice “of a most dangerous character” because it would “excite speculation and gambling.”

Lord Overstone agreed, predicting that limited liability would “stir up the terrible demon of speculation” and “make trade more like a vast lottery wheel than that field of steady honesty and cautious enterprise.”

Earl Grey even put down his cup of tea long enough to warn that speculators starting limited liability companies would recruit “dupes to join him in the most absurd projects.”

In the end, the Joint Stock Companies Act passed with relative ease, but the concept of limited liability made even the businessmen who stood to benefit uneasy.

Would creditors still lend if companies could simply walk away from their debts?

They would, as it turned out — and at a scale previously unimagined. 

Limited liability made it possible to raise giant pools of capital from thousands of small investors, who no longer had to fear putting their personal wealth at risk.

As corporations grew larger and more complex, however, so too did the problem of governance: Shareholders had no binding authority over those who managed the companies they nominally owned.

Fortunately, the mid-19th century also saw Acts of Parliament in the UK and general incorporation laws in the US that made it standard for shareholders to have a binding say in how companies were managed.

This marked a shift from shareholder input as a courtesy to shareholder power as law.

By the turn of the century, the combination of limited liability and shareholder governance had proven to be a genuine revolution.

“I weigh my words,” Nicholas Butler declared in 1911, “when I say that in my judgment the limited liability corporation is the greatest single discovery of modern times.”

“Even steam and electricity are far less important than the limited liability corporation,” he added, “and they would be reduced to comparative impotence without it.” 

But it wasn’t only big industrial corporations that stood to benefit from these ideas.

Decades later, the same principles of limited liability and shareholder governance were finally extended to small, closely held businesses.

Not in London, this time, but Wyoming.

In 1977, the sparsely populated Cowboy State became the first place to establish the limited liability company (LLC) — to not much reaction. Few knew what to make of this part-corporation, part-partnership hybrid entity at the time.  

LLCs only caught on in the 1990s after the IRS finally ruled on their tax treatment, and the other 49 states finally recognized them. 

With those hurdles cleared, LLCs proved wildly popular because they extended the liability protections and legal powers of a corporation to smaller, more flexible groups — without the formalities of corporate governance.

Now, LLCs outnumber corporations in the US by more than 10 to one.

In 2024, Wyoming made corporate history again by extending that same liability shield and legal recognition to decentralized crypto communities.

The Decentralized Unincorporated Nonprofit Association (DUNA) was created to give DAOs legal standing without forcing them to sacrifice decentralization.

A DUNA can do things that would normally require a hierarchy of executive decision makers — enter into contracts, appear in court, pay taxes —  but remain governed entirely by its community of token holders.

Importantly, DUNAs shield governance participants from personal liability for collective decisions.

They also make those decisions legally binding: DUNAs make onchain token holder votes enforceable off-chain, so insiders can’t ignore them.

Like previous innovations in governance, DUNAs have been slow to catch on. 

DAOs have so far preferred to incorporate in the Cayman Islands, become a Swiss foundation or just forgo legal existence entirely. 

This afternoon, however, the Uniswap Foundation proposed that UNI token holders adopt a Wyoming-registered DUNA, with the new entity to be known as “DUNI.”

DUNI, the proposal says, would be “purpose-built to preserve Uniswap’s decentralized governance structure, while enabling engagement with the offchain world.”

In other words, UNI token holders would continue to govern the protocol and the purpose of the DUNA would simply be to ensure that their decisions are executed.

The proposal offered some examples: “Governance can turn on the protocol fee, fund innovation, form partnerships and navigate legal obligations with confidence.”

That first of these — the protocol fee — will get the most attention.

But I don’t think it should, simply because the “N” in DUNA stands for non-profit.

That doesn’t mean DUNI will be a charity — DUNAs are permitted to earn and distribute revenue.

It does, however, mean that DUNI is intended for something other than maximizing profits for token holders.

Wyoming law puts “a ceiling on the value that a blockchain network can extract from users and compensate members with,” as Miles Jennings and David Kerr wrote in their intro explainer on DUNAs.

They note that some may “balk at hurdles to value extraction.” 

But that, presumably, is what the crypto-inspired law intended: Crypto was meant to be about creating value, not extracting it.

If DUNAs become as significant as LLCs, it will be because it also enabled new kinds of communities to operate in the legal and financial system without adopting its old hierarchies — but also because it gives legal standing to “open blockchain networks that function more like public infrastructure than proprietary technology,” as Jennings and Kerr write.

I’m not sure how popular that will prove — much of crypto may have gone too far toward the “speculation and gambling” that Lord Monteagle warned us about.

But if Uniswap token holders vote to become a Wyoming DUNA, it will at least make an alternative trail to decentralization plain for all to see.

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