What are DAO's really Liz Lopatto mod; Erich Dylus API3; Miguel Piedrafita ConstitutionDAO

hi so i think just to begin this discussion and sort of set the terms uh i'm going to ask you both what is a dao eric why don't you start sure so uh can everyone hear me yeah i think so so you know it's in the name it's a decentralized autonomous organization everybody has their own definition of the definition of each of those words right um but at its core it's really a permissionless tool to coordinate or to allocate and to me part of the definition is the uncensorability the permissionlessness of using it to of interacting of achieving the mission that it sets out to to do yeah can you hear me there you go okay i think for me it's yeah it's weird it's very low hello okay we can do this i guess sorry i think for me it's part of we took one of the original companies that we've been working for for years and we kind of stripped it down got rid of all the procedures and we're trying to figure out what is actually needed and what we just like added over the years and we don't anymore so it's kind of a way to reinvent and explore and iterate faster on this whole organizational model and figure out with all the new tools that we have now in the online age with all the communities and all the ways that we have to interact with each other and work together what are the things that are actually core to the idea of an organization or of a dao and what are the things that we can just like get rid of so just to like press on this a little um what separates a dao from like a group chat with a bank account yeah so i think there are a lot of a lot of those out there that do call themselves dao's and there is a spectrum of of each component of a dow but again to me if you can't affect the core purpose that a dow is organized for uh permissionlessly and regardless of what happens in you know human meat space uh then i i'm not sure it would really reflect what a dallas purpose is you know um a group chat with a bank account is known as a general partnership so uh you know many dows might be classified as that absent some other legal entity too but um the difference is in again regardless of what happens legally or in the real world the the the contract persists and uh the ability to act as a dow persists as well i think the legal definitions aside for me the difference is where um the organization has a clarified mission or if it's just like oh we have a bunch of money let's do something with it if it's uh like we're trying to buy something or we're trying to build something it then it's a doubt and if it's just yeah we have a bunch of money we raise a bunch of money or we are trying to figure out what to do then it's just a group chat so in terms of governance models what does that mean like how do you think about governing a dao how do you make it leaderless how do you make it decentralized so that it sort of meets the definition you're talking about governance is another complicated term that humans have literally never figured out in history so we should probably start with some humility that we're not going to figure it out now but the nice thing about dao governance is it's very programmatic and it's very transparent so you know what you're getting you can you can code in quorums you can code in uh required thresholds for for uh you know proposals to pass and actions to then automatically execute uh but at the same time there's necessarily some subjective concepts that that come out of dow governance that you know fall victim to some of the the the other governance issues of our time whether that's uh influenced by those with larger pockets or you know some some other social pressures whatever they may be but the again the the great thing about dallas is you can really make the governance and the um the consequences deterministic and you know foreseeable more foreseeable i guess i think it's a trend with crypto of just like taking something that already exists kind of capitalism for example and just like making it much more transparent and much more programmable so you can see how how it's working better iterate change things see what happens those in my view do kind of the same thing with social structures where we have all these as you were saying governance is kind of a thing that has been going towards all of human history and now we have that in a really visible way you can see who actually has the power to do things how things are moving transparently from both inside and outside the dial and you can just like tweak little things see what happens if we add more people what happens if we open voting to everyone and yes yeah it's kind of like an experiment where you can see what happens what works better and then decide what to adopt are there specific models that you're thinking of things that predate dows that like might be influential or like co-ops for instance or decentralized communities like wikipedia yeah absolutely and co-ops are a great example there have been several panels uh about colorado's limited cooperative organization and and the fact that a an existing legal entity fits so well for some dow patterns is is kind of a pointer that there's a lot of these structures that have been honed and and sort of uh you know made to be efficient and directed towards their end goal throughout throughout history in some ways so cooperatives are one that where you you have uh members that are are undertaking some patronage to you know affect an end and they they have an ownership stake in what they're doing there are a lot of unincorporated non-profit association wrappers that are used with dals where a dow that doesn't necessarily have a profit seeking motive is is still affecting the same end and would like a coordination mechanism and some some coded parameters to it and then you know you also have the for-profit uh the the aims that that have any bevy of of organizations but um you know from there you can kind of get even more specific if there's a within for-profit dallas you could have investment clubs you could have service entities you could have um other different types of organizations that often do have some legal structures to them that can be reflected well or at least referenced well um and within the the non-profits you know you have education purposes you have uh in you know open source infrastructure building that sort of thing and and so there's there's like a whole tree possibilities miguel i'm curious um constitution dow if i understand right kind of did an organizational speed run how did that form what was that like and what did you learn from it yeah so for context we just saw an article saying the constitution went for sale in like seven days and we rushed to organize a dow to actually raise a significant amount of money to to place a bid on it which we ended up getting around 42 million in four days and actually like try to interface with real life organizations as adults and it was really wild i think one of the key things is we just create a discord grid at twitter went to bed woke up with like thousands of people in there and we have to figure out how to organize people we ended up just like going with the most i think natural way of coordination which is just like making small working groups on the people that are the most involved and everyone else was kind of just like helping promote and helping but not that much involved in the general directions of the tao because otherwise you have the kind of too many cooks in the kitchen problem where you have a lot of people running around doing different things voting and everything and then you don't really get anything done it's like one of the things that i think i feel like learned from all of this is that in my view for those who actually work you cannot start as a fully decentralized organization you need to have someone that or like a group of people that actually goes and defines the mission and starts working on that and if you look at like all of the taos that are building something or most of the taos they all always have some kind of core theme even if it's like the uni swap actual company or um party though is another example that has like a bunch of engineers are actually building that are superseded by that one actually enforce what the dao chooses but there has to be some people are actually building because if everyone does yeah you cannot hear anything known and then you progressively decentralize out of that yeah that plays into another question i have because it seems like a big part of this has to do with community and communities are about trust and decentralization is about not trusting people and that seems like a central tension so i'm really curious like how do you create a a community in this decentralized way that that still functions yeah i that that does flow into miguel's comments which were great uh you know you can you can build a dow or a product or a community out of um you know whether it's a subjective type of mission or whether it's a deployed smart contract that's useful and and you can build from there and i think one of the the most interesting developments in coordination and uh or you know capitalistic organization in recent memory was was yearn and and how you start with a product with a so-called fair launch and it's it's it's strictly a a protocol that that does what it's coded to do you know there's some intent events maybe in the names of the functions or the comments or or commentary in the docs but at its core it is what it is it's a you know uncensorable contract and such a community has built from that built on top of it uh the ethos has grown from what was just a simple product and you know you you do have dowels that that grow from identified founders that have a mission that they've set out you know they've written in a white paper they they go on conference stages and talk about it and and then decentralize from there and sometimes you have dowels that grow out of a thing a thing that was where the founder could be anonymous the founder could be the protocol itself and and people have their own interpretations and and and then the the community is it's sort of self-sustaining sort of mutating organism from there yeah i mean i feel like you always have some trust in some way like somewhere if you don't have it codified in the social contract in the smart contract or in the actual structure you will just like have it socially somewhere even in communities that are created by anonymous people actually to trust those people even in periods that are completely decentralized they will always be like a spokesperson and like someone that if they decided oh i'm going to just like fork this and move over to another thing a bunch of people would follow them and i feel like it's important to recognize and as much as possible codify those uh patterns in the actual contract or in the actual structure so that they are at least more visible and recognized like pos uh potential points of failure and planned around um but yeah i feel that is as far as i know not a thing that you can not have yeah you just have to plan around it and make sure that it won't break your own thing if it ever were to happen i'm really glad that you brought up contracts um because i'm familiar with the old-fashioned kind of contracts that you like sign when you're selling your work um and i'm really curious about how smart contracts and the sort of more legal analog contracts let's call them interact like i know that a lot of people like to say code is law but i don't think you actually want most judges to decide uh whether your code actually is law so i'm really curious like how do you how do you create something that interacts with our existing legal framework yeah you you you can do a number of things you can create analog contracts that reflect the realities of what's happening in the technology and the code uh you can rely on implied contracts because you know in a lot of dows and a lot of the space in general even if you choose not to make a legal designation or election as to the status of something whether it's the entity or the service the protocol the law will make one for you in one way or another so you know you don't really scope you don't really escape law you don't really escape contracts um it's just a matter of whether you want to define it yourself or or let a judge do it often um but you know at smart contracts everyone goes on about how it's a inaccurate name for for what they are but they really are a means to an end they're more of a piece of an existing contract or a way that a contract is executed or or taken out than really its own uh closed system so they're sort of a an augmented experience for what was just an analog experience before i guess yeah i feel part of the key of that is just smart contracts are code and code can govern over other code maybe it can govern about structures that are built on code but code can not govern over people so you can have rules and you can have kind of loss in code over like who gets to change the deployed code who gets to i don't know submit a transaction but you can never like have a love like someone will not run away with the keys to the discord or something like that so for me the key is just like cody's law works for who can mutate or like you can change things in a protocol who can govern certain parameters maybe even like who can interact with like who can sell tokens maybe you have a rule that blocks someone from city tokens like usdc has but you can never have rules about the community or other people problem kind of i think that's really interesting because um you know one of the main financial not the main financial but a big financial innovation in the 1980s was the sort of corporate raider the carl icahn if you will who like buys up a bunch of company shares and then like tells the company what to do um how do you prevent that from happening in a dow like how do you prevent some whale from coming in and being like guess what you're gonna do what i want because i have a majority voting share that's a great question and it highlights some of the best uh to me some of the the really ideal things about dallas uh the the first obvious one is they have to conceivably buy 51 of tokens and i think some people would be very happy about that and they'll be especially happy when they take their open source protocol and fork their dow contract and say come do it again which is which is nice and and the the thing i always like to highlight to the uh say the legacy corporate attorneys is uh molochdale's rage quit function and how it's the best thing to happen to minority share interests in like any sort of corporate form in a long time and you can permissionlessly say i want my share and i'm out because if you have to do that in a traditional organization there's paperwork you have to pay attorneys which you know not cheap not no it's and it's a it's a kind of beautiful seamless thing so the combination of that sort of free entry and exit that uh and the incentive the sort of crypto economic incentive bouncing around and being able to fork uh to sort of persevere how the community so chooses is is great yeah i feel like it's kind of uh related to the whole of this local you were saying like if someone governance attacks a protocol it's really clear what they are doing and they just like buy 51 of the tokens you can just cash out fork the program and do it again before the hack and then some people will go on twitter and say like oh but like governance is working as expected or whatever and this is where where it was like really where i feel like the whole social aspect also matters because uh sure your protocol may be just like a dfa protocol with with you know the only intent of just like being a d5 protocol but you will also have some social structures that maybe not defined in individual contracts saying like oh it's like um johnson just like buys all the tokens and makes it so that the only thing that you can use your progress with his token you can just fork and leave hit that protocol with their thing move the domain and all the assets that you actually control to the other thing and that i don't think that's a failure of governance i feel like that's just like what people would expect to happen because it is a governance attack even if the systems the governance systems are in place and work because it is not fulfilling the implicit um purpose of that protocol so i feel like that's where it's really important the whole having social rules as i uh along the smart contract ones so i guess that brings me to my next question we've been talking a little bit abstractly about dows as entities but i guess i'm wondering what the best use cases are because if you want to get most people involved in this kind of thing you need to have like the equivalent of a killer app so i'm wondering like what is what is that for dows yeah so there are certainly a range of them uh but i i think the the most important use case is is something that uh you know takes away control or expenses from an intermediary in some aspect whatever that might be so it might be capital pooling and allocation permissionlessly and transfer transparently might be resource allocation it might be information allocation but it's a you know wherever you're able to remove uh information information asymmetry and then bad incentives from a system there's arguably a purpose there and so you see a lot of dowels that are based around uh you know services that would otherwise otherwise require a bank or would otherwise require some sort of intermediary that withholds information from the users that interact with it um and so you know i i went over a couple of different structures earlier and those structures also kind of lay out some of the the best i shouldn't say best but most common use cases for daos now and those often are uh you know community pooled and allocated funds for creating services creating software uh there's some investment clubs there's some social justice uh the types of dows where you know you're able to you're able to contribute and allocate and vote as you know a 0x address rather than a face or or someone in a given jurisdiction whatever it might be so you know i i have now sufficiently rambled i think but the point is that you know whenever you're able to do something directly in a sort of in a non-discriminatory way permissionlessly in and out uh you know the the use cases are kind of absurd when you really think about it so i think in general i mean we've seen that they are useful sometimes to just like raise funds and buy something something also if you're building something that's supposed to be decentralized or that you want people to collaborate on something that you would maybe do as an open source project a few years ago this is an opportunity to get like an incentive layer on top of that allow people to actually get something back from contributing and you know just like accelerate the network effects of something uh so yeah not that much to add to what you said just in general i feel like it's a more transparent way to build organizations that maybe don't need that much of a legal structure in the real world i guess i i the thing about transparency is that it cuts both ways like look i'm nosy i'm a reporter it's my job to be nosey and like one of the things that i like about blockchains is i can see what you're all doing with your money um and so you know when you're thinking about something like constitution dow it's very easy for someone to see how much money you've amassed and then go okay i'm going to bid one dollar more which is i think kind of what happened to you guys so i'm i'm really curious like what use cases don't work for dows and when does transparency work against you i mean i feel like in this case with the whole constitutional staff even if we had obfuscated the amount that we had raised um from like multiple other sources a little bit less transparently it would still haven't worked because we were against griefing which is has a bunch of millions to spare but even in that case um first to your point there are solutions being developed that actually do not allow you to see everyone that everything that is going on or do not allow you to like see the flow of money so that's in progress and at the same time i do feel like transparency in most cases is a good thing even if you're participating in auction if people are giving their money to you and kind of have to trust you in some way it's nice for them to actually see that their money got to you and that you are not just like running away with their money uh so i feel like uh that was still a good use case for all of these things even with the transference cabinets and there are like a kind of technical solution to solve that in my view the thing that they may not be great for is as i mentioned before if you want to do something that actually requires a lot of like real world regulation in my experience it it's really hard to interface um at the idea the organization that is a thing that we kind of just like made up in the few in the past few years with all the legal infrastructure that we have for years now even for actually like owning a uh physical item as a dow we had to do go through a bunch of steps and released an llc that was governed by adele and a bunch of other things so if you're doing things digitally that's great and luckily for us most of the things that we do today as companies are digitally if you're doing things that are more in the physical space or you want to i don't know launch rockets into space do things that require a lot of regulation maybe not for now yeah i i agree um i i think the things that substantially rely on off-chain legal relationships or that can't meaningfully be decentralized um and that's it sounds like a cop-out answer but it's it's meant to mean things that that are uh i use a popular word this weekend non-fungible so you know if there's a a small group of actors whose contributions aren't really fungible and you're relying upon their sort of uh you know unique skill set and their sort of managerial efforts if you want to get legal with it then it's really hard to say the the organization and motivation for these people is is be is able to be decentrally governed and transparently verified that sort of thing um and it you know i i am very pro dallas i think the world of api three down in lex dow and that's why i devote all my time to them but i'm at the same time as you i'm a huge skeptic of uh dows that that ostensibly have a transparent purpose but at the end of the day they don't have a substantial amount of open source code or uh you know ease of onboarding for people that that would be able to contribute uh there's sort of a sometimes there's a social or community gatekeeping function that is is kind of troublesome so that that can lead to the use case not being very dial friendly if that's if that's the case but um yeah i think we've got a little bit less than 10 minutes left and i'm willing to take questions from the audience if anybody has any so i'm going to repeat this so that everybody can hear it um and the question was how could a record label function as a dow so i i think uh some of the the ways that record labels um could be um transparent and and decentralized in in their sort of governance and allocation would be uh you know i this this this would be an instance of a good amount of off chain uh legal legwork with the licensing of of the the music the the sort of guarantees to the between the artist and the label itself but if you were to sort of dalify the label uh in some respect you know maybe not fully because there's some protected material that record labels would not necessarily want to make public but you could certainly democratize some of the allocation of resources by by vote of the dow members perhaps you could also use the dow to create maybe sub entities that that manage and house some of the other some of the ips some of the sensitive material but you you provide more clarity and transparency and operations on sort of the whole level and and um uh provide more sort of access to the interested community for that label i guess would be my thinking yeah my question is so say for example i wanted to start a community down say for example i wanted to start like a dallas safeword like the lgbtq community right and what would be like the best way to structure the token incentive for myself as somebody who puts in all the work you know creates the mission statement recruits people as what would be like a good fair allocation for somebody who puts in all the work okay i'm going to repeat this again because i think this is being live streamed um and i just want to make sure everybody gets a chance to hear you so if you create a community um for instance an lgbt focus dao um and you've put in a lot of work how do you create a token allocation structure that makes sense for the people who have sort of founded the thing but isn't unfair is that fair yes okay thank you so much okay so uh instead of recommending a specific framework because you know i'm an attorney and it would take me like an hour and it's like you're really annoying about it but i think that it's more important to think about the right questions to ask like what do you really want to decentralize uh conceivably this would be a non-profit ordeal um what what are the sort of deliverables and and how much of it could be transparent how much of it could be programmable in some respect maybe um and you know it at the end of the day it might come down to do you do you want it to be do you want to give up control um you know you mentioned you would be doing a lot of the work you'd be the founder you want to you know do do you actually want to give up control maybe not i mean i mean you know i i'm sure there's and it could be in a later stage that you know there there's some sort of uh broader mission that could benefit from uh external uh similarly interested persons um but you know often i i see people creating dows um with the best of intentions but maybe a bit too early or um with it with a sort of mismatch of uh sort of um apportioning like a public community benefit to what is necessarily a personal goal in the beginning at least so those are those are some kind of intro questions to ask but um this is certainly not to say it's it's a bad idea i think it's just um specifics are super important when you decide to say okay this isn't mine anymore it's everyone's yeah i was just going to say i feel like as i said it is important to i feel start um in a more centralized way at the start to actually get things done and then progressively decentralize once the mission and the how you're actually hoping to achieve that has been established so my only advice would be maybe do not think about the token location on day one maybe start thinking about like what can i do right now without raising funds without doing anything like who can i reach up to what can i do without even having a token and then once you actually have the reach and like the momentum to actually be able to do something with the fans that you want to race through that token then you can start to think like how do i distribute the value that i'm going to generate and probably most of it should go just to like a day of adult treasury some of it should go to you as the founder and the person that has put into motion and everyone has to help but the specifics i don't think really matters that much when you're thinking how do i start this they matter at that moment at that moment you can just like i don't know ask him for cons for an hour of his time and talk about it or something well i think that's a that's a good note for us to end on i want to thank you all so much for coming and thank you to my fellow panelists for bringing their expertise thank you thank you