Good question. The bank would have to go through the courts, which would determine that the DAO LLC did in fact default and they would reassign the deed to the bank. They could only do this after showing all the paperwork (and likely referencing the proposal to approve borrowing in the smart contract) that the DAO LLC agreed to use the land as collateral.
This would be a positive recourse because it means lenders would have trust in lending. In fact, the collateral is way better because it is verifiable on chain
The on chain record defines who owns the LLC, which would still be the case. The LLC would no longer own the land - the source of record for that is the Wyoming courthouse. But yeah, the contract could have data in it that lists the properties owned and that data would then be wrong.
O gotcha, yeah this is a tricky problem to resolve onchain with irl (meat space)
It could be updated to reflect this, of course.
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