Web3 Lawyer: A detailed look at the new top Web3 brand DeSci: How to be both scientific and compliant?

Who is it that can make Web3 bigwigs like CZ and Vitalik support it? Who is it that can be publicly praised by the top international journal Nature? At the end of 2024, decentralized science (DeSci) has changed its previous low-key and mysterious style and is moving to the center of the Web3 stage as a new "top stream":

On November 6, 2024 , Binance Labs announced its investment in the DeSci project BIO Protocol (BIO);

On November 13, 2024 , at Binance's DeSci Day event in Bangkok, CZ and Vitalik discussed the development direction of DeSci together;

On December 11, 2024, Nature, one of the world’s most cited scientific journals, published an article introducing the DeSci protocol ResearchHub;

On December 19, 2024, Binance Alpha announced the third batch of 10 projects, two of which were MEME coins based on the DeSci concept;

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At the same time, the DeSci sector of the crypto market is rejuvenated. On December 26, according to SoSoValue data, the DeSci sector rose against the trend, and its performance was particularly outstanding in the crypto market that was in a correction. So, what kind of revolution is brewing in the DeSci track? What is the current development progress of the industry? Attorney Mankiw will tell you one by one from the perspective of compliance.

DeSci reshapes the scientific research model

DeSci, the full name of which is Decentralized Science, aims to build a decentralized platform through blockchain technology and smart contracts, and establish a decentralized model for fund raising, data sharing and results distribution for scientific research.

How to decentralize? DeSci relies on three key parts:

Token issuance. DeSci provides a global funding channel for scientific research projects through token issuance (such as MEME coins). Researchers no longer rely on government grants or large foundations, but can directly issue tokens or NFTs to global investors to raise research funds.

Data on-chain. DeSci uses blockchain to store research data on a distributed network, ensuring that the data is tamper-proof and traceable, and can confirm the ownership of research results, making the circulation and transaction of scientific research data and patents more transparent and compliant.

DAO governance. The DeSci project is managed by a DAO organization. Investors and researchers holding tokens can jointly decide where funds go, research directions, and resource allocation, thereby achieving community-driven governance and decision-making. This not only improves the transparency of decision-making, but also reduces the problem of interest bias in the scientific research process.

So, to put it simply and roughly, DeSci is a scientific research organization operated by DAO and financed by issuing tokens, and their results data will eventually be shared on the chain. The advantage of this model is that it breaks the limitations of high barriers to traditional scientific research financing, closed data and centralized decision-making, and provides a more open and flexible ecological environment for scientific research innovation.

In fact, DeSci is not a new concept. This track has existed for a long time. However, scientific research has not been able to be quickly commercialized. Therefore, all current DeSci projects are working silently without exception.

Inventory of DeSci projects

In 2024, the concept of DeSci became popular, and many previously dormant scientific research projects also came into the public eye.

ResearchHub: Web3 version of scientific research collaboration platform

ResearchHub is a DeSci project supported by Coinbase founder Brian Armstrong, dedicated to reshaping the collaboration and publishing process of scientific research. ResearchHub provides a new decentralized publishing and review path and introduces a reward mechanism. Researchers can submit papers and comment on research results through the platform, and obtain native tokens $RSC as incentives. This mechanism has successfully attracted a large number of researchers and review experts to participate in discussions and improve research results, and was therefore recognized by the journal Nature.

BIO Protocol: The Y Combinator of Science on the Blockchain

BIO Protocol focuses on the fields of biotechnology and pharmaceuticals and is known as the "on-chain science incubator". Through DAO governance and token incentive mechanisms, the project provides services such as fund management, experimental resource integration, and research results incubation for scientific research teams. It also puts research results on the chain and confirms rights through IP-NFT to promote the marketization and circulation of scientific research results.

It is worth mentioning that the popularity of BIO Protocol is partly attributed to the MEME coin $BIO it issued. The project used the market popularity and speculative sentiment of MEME coins to quickly complete financing, which not only broke the traditional scientific research funding barriers, but also provided a more flexible and efficient funding solution for decentralized science.

VitaDAO: Anti-aging research under DAO governance

VitaDAO is a decentralized scientific research project dedicated to anti-aging and extending human lifespan. It raises and manages research funds through the DAO governance model. Researchers can apply for funding directly from the community, and community members participate in decision-making by holding tokens $VITA to jointly promote project progress. This model not only lowers the threshold for scientific research financing, but also makes the flow of scientific research funds more transparent and controllable.

As of 2024, VitaDAO has funded more than 20 early-stage research projects related to longevity and attracted cooperation and support from pharmaceutical giants such as Pfizer. The project also uses NFT to confirm the ownership of research results and promote the marketization of intellectual property rights. In the field of life sciences, which has high scientific research investment and long research cycles, VitaDAO provides a new research funding and results transformation path, becoming a landmark project in the DeSci track.

It is worth noting that some current DeSci projects, such as $URO and $RIF , have the distinct feature of issuing MEME coins. Through this path, such projects have completed rapid financing in a short period of time, demonstrating the breakthrough of this industry in fund raising and scientific research models under the decentralized approach.

DeSci's Compliance Challenges

The popularity of DeSci is due to its disruptive scientific research model and the financing effect driven by MEME coins. However, just like the "growing pains" that all Web3 tracks are experiencing, behind decentralization and open innovation, DeSci is also facing the dual challenges of compliance and security.

1. Regulatory challenges of MEME coin financing

Currently, DeSci projects generally rely on issuing MEME coins for early financing. Some analysis reports, such as the MV Global report, also suggest that the DeSci track can use MEME to achieve industry explosion. Although this method is feasible, the reality cannot be ignored: most of the MEME coins that were popular in 2024 have already "died", and how to ensure that MEME coins can be recognized in the long term is a key issue.

In addition, the compliance issue of coin issuance is always the sword of Damocles hanging over the heads of all Web3 projects. Not to mention the strong regulatory ban on coin issuance in countries such as China, coin issuance will inevitably touch the regulatory red line in pro-crypto countries such as the United States.

The current US FIT21 Act is promoting the establishment of a digital asset regulatory framework. Once the bill is passed and takes effect, it will provide clear compliance standards for tokens such as MEME coins. For example, the FIT21 Act clearly states that only tokens that meet certain conditions will not be identified as securities, thereby avoiding strict supervision by the SEC. This means that if the DeSci project wants to raise funds through MEME coins, it must strictly distinguish between "utility tokens" and "security tokens" to ensure that the token design meets the standard of "functional use first".

In addition, the EU's MiCA Act is about to be implemented, which will also impose strict supervision on the issuance and marketing of highly volatile assets such as MEME coins. This will also create certain obstacles for the DeSci project in Europe to issue coins for financing.

2. The legal gray area of DAO governance

The DeSci project widely adopts the DAO (decentralized autonomous organization) governance model to manage scientific research funds and decision-making processes in a community-driven manner. However, this "code is law" autonomous logic faces many compliance challenges in actual operation.

First, the positioning of DAO as a legal entity is still controversial. Although DAO emphasizes decentralization and member autonomy, its governance structure is not explicitly recognized under the current legal system. This leads to legal gaps in DAO's financial management, tax compliance, and contract performance. Although Wyoming, USA, was the first to recognize DAO as a special form of limited liability company (LLC), most countries in the world still lack similar legal frameworks, which makes DAO face uncertainty in cross-border jurisdiction in international business.

Secondly, the DAO's fund management model is prone to regulatory scrutiny. Most DAOs manage funds through smart contracts. Although this model improves transparency, it also increases the risk of fund abuse or money laundering. According to the latest guidance from the FATF (Financial Action Task Force), decentralized organizations still need to comply with anti-money laundering (AML) and know your customer (KYC) regulations if they are involved in fund flows. For the DeSci project, this means finding a balance between decentralization and compliance regulation.

Attorney Mankiw's Summary

From CZ and Vitalik’s support to Nature’s praise, DeSci has opened a new window for scientific research financing with MEME coins and DAO. However, scientific research is a long-term experiment. The next step for DeSci is not only to continue to tell the story of “decentralized scientific research”, but also to answer a realistic question: how long can the flame ignited by short-term speculation burn?

Whether exploring programmable financing mechanisms or promoting the establishment of DAO’s legal identity, the DeSci track must find a fulcrum between innovation and compliance. On this road, Mankiw will continue to pay attention to the progress of the DeSci industry and help scientific research innovation go further and stand firmer.