After setting up hundreds of legal entities for our clients by paper filing, we thought there had to be a better, cheaper and faster way to get incorporated. OtoCo is the result and our first product, a Delaware LLC, is now live on the Ethereum main net.
A Real-World Use Case for Ethereum
Many in the crypto community see getting to mainstream adoption as the real challenge for any blockchain project.
What’s still missing is an easier way to securely pull up private keys. And as a community we can do better on UX/UI, despite recent progress.
But we also need products that are useful for mainstream users.
Over the last couple of years, Otonomos has been helping many in the community set up their legal entities around the world.
We felt your pain! So our new product, OtoCo, wants to be your aspirin.
With OtoCo, the process of spinning up a new entity is instant and free (during launch, and the price of a cup of coffee afterwards).
As of today, using otoco.io lets you spin up instant and free limited liability wrappers, initially a Delaware LLC.
We hid the blockchain machinery that hums in the background as much as we could. There was also quite some legal engineering involved, which you can read all about in our documentation.
As a result, all the user sees are three simple steps towards company activation:
1. Name check
Start by opening otoco.io in a Web3 browser and enter the name you want for your company to check if it is available in the jurisdiction of your choice.
If it is, a next screen shows where your company will have its registered address and invites you to proceed.
2. Connect wallet
In a second step, you simply connect your wallet using Metamask or WalletConnect.
Make sure you are on main net because this is the real thing! Proceeding from here will make you, via the wallet you control, an initial Member of a real-world Delaware LLC.
To proceed, you simply sign a transaction with
otoco.eth, our company assembler smart contract.
You only pay the gas price for this one transaction: there are no other costs in setting up your new LLC.
3. Instant activation
Once your transaction confirms, your new company will be legally existent.
This typically takes around 5 seconds.
Welcome to the birth of flash companies!
A confirmation page shows the name of the entity and where it was set up, what address controls it (i.e. the wallet you chose), and at what address the contract that holds its Operating Agreement lives.
The Need for Instant Legal Wrappers
We believe instant legal wrappers are the equivalent of shipping containers: standardized, shippable boxes that can easily be loaded with value, hold assets and store property.
Shipping containers lead to an explosion in international trade over the last decades.
Likewise, instant companies will lead to a wave of entrepreneurship in a world lacking jobs for life in which value is increasingly moving online.
OtoCo’s flash LLCs can be used to hold a single asset, for instance a patent or trademark or a domain name.
It could even be wrapped around code and hold a single smart contract to protect its creators from the legal liabilities that may result from releasing unstoppable code into the world.
Eventually, as we manage to further hide blockchain and see mainstream adoption of wallets and keys, use cases will broaden.
We blogged earlier about how suitable LLCs are if you’re trading from outside the U.S. This opens the potential for flash LLCs to be used by the under-entrepreneured worldwide.
In Delaware alone, about half a million companies are formed every year, more than any other jurisdiction in the world. Some of America’s biggest and best-known companies are LLCs.
Another uses cases could be in Hollywood for instance, where we learned that every new production requires at least 7 new companies, from the actual movie funding vehicle to the entity that holds the distribution rights. All are typically LLCs.
The LLC is also the preferred vehicle for U.S. investors to ”feed” into a VC, PE or hedge fund. After onchain formation, you’ll be able to install a “fund OS” and start raising capital, without any of the birth pains of the analog world.
Towards a (d)Appstore for all your company needs
This leads us to where we plan to take OtoCo next.
In its launch version, OtoCo addresses the first-mile friction of onramping onchain organizations to the real-world legal layer.
Doers and investors alike have long wished for a “company at the push of a button”.
However, similar to the household robot we were promised decades ago that would take out our garbage and fold our shirts, digitalizing how we form, fund and govern companies has not materialized: We wanted flying cars, instead we got 140 characters…
But the wish is alive and the enabling technology is now here in the form of blockchains:
Our OtoCo product lets the Ethereum blockchain give birth to your company, whilst as your registered agent we make sure Registries such as Delaware or Wyoming officialize its existence, at zero cost and within 5 seconds.
This will get us from the analog legal ledger where companies are currently legally midwifed to where they’ll be born and live in the future: onchain, controlled by private keys, and with shares as tokens.
However, we come from the opposite side of the spectrum, starting with real-world entities whilst gradually adding functionality to eventually address every pain point in a company’s lifecycle.
Capital Formation and Governance
Once formed, a company’s biggest next paint points are capital formation and governance.
Both are considered “primitives” of the blockchain space: essential building blocks towards a new type of business organization, funded by the widest group of contributors and governed by all stakeholders.
To address these painpoints, we believe it is better left to the open source community to build products that meet user demand. Offering such open platform ultimately offers more value than building proprietary products that second-guess users’ needs.
The analogy here is WordPress, which lets users easily spin up a website and then purchase add-ons from its plug-in store, where developers can monetize their solutions.
At OtoCo, our roadmap is therefore to build the platform that lets third-party developers sell add-on “kits” to users who set up their company with us.
Such kits could for instance be a smart contract plugin that help users DOAfy their governance, or a module to tokenize their shares and raise capital in a compliant way.
Other kits may be less sexy apps that do not live on blockchain, e.g. an API module into fiat bank accounts, or an SEO optimizer.
It will be for the market to decide, whilst our mission is to build the enabling framework for people’s inventiveness and freedom to entrepreneur.
To make this happen, we are now weighing funding options, so expect an announcement soon.
Everything You Ever Wanted to Know about OtoCo (But Were Afraid to Ask)
Meantime, we’ve put together extensive documentation if you want to learn more about our research for OtoCo, how we decided on Delaware for our launch product and the smart contract and legal engineering behind our instant company assembler.
We also posted separately on how we will eat our own cake on governance and look to achieve radical decentralization, both onchain and offchain, in how OtoCo is managed as a platform. We hope it can act as a template for other projects.
Finally, we started to populate a FAQ section anticipating some of the questions users may have.
One question we expect to be asked is on pricing. We won’t promise OtoCo will be free forever, though we do want to keep the setup cost at around USD 5, the price of a cup of coffee, once the launch period expires on 1 September.
Ongoing maintenance too can be kept low, since only one annual franchise fee of USD 300 is due in Delaware across all OtoCo LLCs. So if we reach 60 LLCs, that would be only USD 5 per company.
Further add-ons will be priced at what the market is willing to pay for them.
I personally look forward to the road ahead and passing through the Stargate from offchain to onchain together!
Han, Founder and & CEO, Otonomos