Scaling DAOs Faster with Collective R&D

[Music] [Applause] [Music] and i'm super excited to welcome connor for our next uh presentation and connor is going to be talking about how to scale dials faster with collective r d so connor welcome on stage and i'll let you uh present thanks cardik much appreciated all right i'll get this screen share going okay great so i assume everyone's looking at the right thing here um and that'll be pinged if not okay awesome well hello everyone thanks cardiff for that nice introduction and thanks to all the panelists who were right before me uh that was fantastic so if you're here today um i'm assuming i assume you're either participating in a dow or you want to start a dow or you want to start working for a dao which is really great because there is a ton of stuff to be doing so i'm glad you're all here i'm going to discuss today how we can come together as a community to help accelerate the pace at which taos can scale so what i'm going to discuss first is the opportunities and logistics around open sourcing relevant dao research and then i'm going to dive into the biggest challenges for daos and these are going to be non-technical challenges i'm sure there are also a ton of technical challenges and discuss some of the research that we're doing and other folks are doing to try and overcome some of those challenges so hopefully in the next 25 minutes i can help you understand one how to better accelerate the pace of development of your dao into you know help the whole community three if you're not already working for dao maybe i can help you plug in by giving some tips about things you should start looking into because there's a lot that daos are going to need so diving into it what is the problem with dow scaling so as i'm sure many of you experience there's a lack of operational clarity when it comes to the development of dows and that really slows down the industry as a whole and endowed specifically as you of course know dows are cutting edge organizational structures so there's not a lot of precedent that operators and founders can look to when they're spinning up a dow they have to shoot from the hip a lot there is some precedent which i'll dive into but obviously these are pretty novel structures these organizations daos of course are now starting to their research more things like legal like governance diversity treasury management taxation a lot of very key issues to the future of the daos but much of that foundational learning and research is currently being siloed within those communities we believe the best way to accelerate the development of daos and their functionality is for daos and those who are working for them to share that foundational knowledge at a really early stage and help the whole industry reach greater heights more quickly so let's jump into a bit of an easy example so say for example uniswap compound maker curve any number of dows want to come together um because or maybe you start with they all have the same problem the problem is that they want to know how to hire contractors legally and i don't know how these entities are organized but a lot of dows don't have structures or former entities tied to them so it's very difficult for them to figure out okay how do we actually pay a worker or sign a contract for many of these dows the initial problems they're dealing with are going to be the same they're you know very novel issues but they're also issues that other dows are having so at an early stage it makes much more sense for that research to come from a single source you know vetted potentially by several professionals researchers etc but a single source rather than having those dowels go to say five different law firms and paying those five law firms to draft a memo on different entities structures or different ways in which uh contractors could be hired by an associate so an unassociated organization this would decrease obviously the cost of that research substantially and there's obviously the cost in uh you know dollar value but there's also the cost in time because time is very precious to doubt founders of their operators as i'm sure you know there seem to be very few folks in in the world really who can help run these organizations and so the core team often ends up being responsible for a lot of work and they i'm sure would much rather not have to deal with these lawyers so diving more deeply the problems broadly um think about the research the things that you should be researching right um now i'm going to go into those issues i think that would be really valuable um for for dows to know more about and potentially for you to dive into and start maybe establishing your brand if you're not already in the dow world in order to figure out those problems you know the most pressing for dows we gathered together a lot of the leaders um like from leading operators to founders to investors at an event called the dao summit in june which we hosted with bank list and the ef and uh and stanford as well and we also separately interviewed more than 20 other brilliant dow stakeholders asking all of them you know what it was that they needed most and we came up with a list of the five most pressing issues uh as described by them for dows now at the dao research collaboration at the dow research collective we're taking it a step further in that we are not just getting in touch with the dows and bringing them together on a one-off basis but we're raising capital as an organization specifically for purposes of identifying the biggest challenges and then funding and opening and open sourcing rather r d that responds to those most pressing issues we're supported right now by the grants programs of ave compound and unispot as well as the ethereum foundation now for anyone listening here today who is themselves representing a large tao we would really encourage you to think about sharing as much knowledge and best practices as you can with the crypto community so we can all just keep growing and improving together for those of you who are free agents who are working potentially with a number of different dows or who are simply looking to figure out how to best start with daos we really encourage you to think about how much of a greater impact you could have if you open sourced your work and into doing in a way we're working for many dows and so you could ask yourself how can i open source my work and still get paid which is an important question the obvious answer is that you could uh you know if you're already doing work for dows it could be depending on your agreement with that dao you know available for you to open source to the community more broadly upon completion um but there are also groups like ours the dow research collective this is where we come in we're built specifically to fund and open source crypto research related to daos and if we're not the right fit for you there are a ton of other great organizations that are doing the same thing maybe not all dao specific or with our specific focus but you can think of organizations like git coin the smart contract research forum of course the ethereum foundation grants programs through compound you swap ave etc a lot of different places you can go to start your research so diving in to the biggest issues for dows the first one the top most pressing issue which we you know we heard over and over again is uh how do daos obtain legal clarity for themselves so um this was this was almost unanimously described to us as the most important issue and it may not be too surprising because of how much flood is in the space especially recently particularly given what we're hearing from the sec and others there are many specific legal questions which lawyers might address but then there are really broader outstanding legal queries related to things like operations treasury management taxation and other areas that do require new policy or new regulation and so in thinking about that as a founder right when you go to a lawyer what the lawyer does is look to existing policy or existing regulation or existing case law like when a case is decided the lawyer can look to that case say okay this is how the regulator is going to treat this particular circumstance if there isn't any policy or regulation or case law then there's not very much the lawyers can do for you other than speculate pretty wildly and sometimes they'll take your money to do that but it's not always the best course of action or use of your money the other piece right is advocating for better policy so that policymakers politicians and regulators make it more clear as to what it is that you can and can't do um and help to relieve some of the fud that currently exists in the crypto industry now given this is the most significant for issue for dows among all the issues that we found i'm going to spend a little bit more time here and i'm going to give everyone a kind of psa about the importance of advocacy because it's something that a lot of folks aren't familiar with you may have heard a little bit about it from coin center or from ryan selkis or from the guys at bankless but the stakes are truly very high and this is only going to be something that we can really tackle effectively if we work together as a community so when looking at the problem smart contracts may be unstoppable but the crypto industry is not government blessing has been crucial to every 20th century information empire to date so just letting those two ideas sink in right while governments have no master keys that can shut crypto down they can make it so expensive and so high risk for users to interact with crypto that the vast majority of their populations and all of their institutions will simply abandon use of crypto this is particularly true in countries like the us where the government has a very robust enforcement arm the implications of anti-crypto policy would be much much worse than your portfolio going through the floor it could really threaten the existence of the industry that we've been creating over several years now really important here not to let the fact that there's been very limited government intervention to date lull you into a full a false sense of security rather you know good actors in general in the crypto industry have had a great run with negligible antagonistic regulation from western governments but that appears to really be changing very quickly under this new the new u.s administration which is very hostile to crypto western governments generally are accelerating the pace of regulating crypto recent examples include as i'm sure you were made aware of recently the expansion of the definition of broker and the infrastructure bill which i believe is being voted on today in congress or potentially already has been the ratcheting up of enforcement efforts by u.s regulatory agencies targeting crypto industry you know we all heard recently about how someone was subpoenaed at missouri's mainnet event so that's the kind of tactics we're seeing employed at the moment and the development of things like the markets and crypto assets which is mica the mica proposal in the european union around regulating uh regulating crypto assets regulation is not in and of itself a problem governments do play a really important role in supporting and overseeing industry but and tag antagonistic regulations will slow the development of this industry or much worse it could just absolutely it on the other side clear and reasonable regulations will significantly reduce fund and allow for much more innovation the industry truly is at an inflection point right now can go really one of two extreme ways these developments are very important in light of the new regulation we're seeing in influential jurisdictions as mentioned like the us and the eu because when when something like this comes down from the us or the eu it ends up being very influential to other jurisdictions that are just sort of around those two jurisdictions so if you think you're safe because you're in a jurisdiction that currently isn't actively pursuing crypto companies or because you could simply move to the cayman islands or some other tax haven think again the substantial regulation and enforcement in the west will most certainly impact your business and your legal expenses and trying to figure out how you stay out of the united states but it's also really going to impact the size and the trajectory of the entire crypto industry there is hope for the industry but in order for us to see that hope realized we need to take collective action so so by way of example like what are we doing about this at the dao research collective we have written a guide for crypto companies on why they should help with advocacy and how they can help with advocacy so they can look at it and they can easily plug in to what makes the most sense for them for them to contribute to really an initiative that's going to support the entire industry because knowing how to navigate washington for instance is not something that the average dev knows or is interested in knowing and that's totally fine but we should know as an industry what we have to do to make sure that we're successful and that we can work with government to improve the current state of our regulatory environment so we're gonna be releasing this um this guide is a three-part series with the defiant so we hope you all check it out and just you know start contributing start fighting for crypto's future in the united states and really the western western world the second issue is much more practical so what are the best practices for dows to maintain legally compliant relationships with the individuals and the organizations that work for them so dow operators and i'm sure many of you know this face this issue daily as the you know the organizations that try to enter into novel relationships with talent that don't necessarily have any legal precedent once again if you have no entity then it's very difficult to do things like enter into a contractual relationship with employees or contractors and all this is made much more difficult because typically you know where the organization is domiciled which informs in some respect what laws you have to be compliant with but in the case of dowse that's not totally clear particularly where they have no entity and it's also not totally clear what they do given that many of their employees or workers or talent or whatever you want to call them live in many other jurisdictions so that that adds like a big new complicating factor to the situation another more niche or more narrow i should say legal topic is what are best practices for limiting the liability of dow stakeholders including founders workers and token holders and just to clarify with one you know the issue is really broadly how do we make this space more um allow from allow for more regulatory clarity in the space number two and three are our more narrow questions related to that but these are these questions where i think that we can get some insight from lawyers on them so um with respect to the best practices for limiting liability potential liability of dow stakeholders was really unsurprisingly top of mind for many of the people that we interviewed and based on what we saw at the dow research or that the dao virtual summit crypto teams generally do have a high risk tolerance as i'm sure many of you are aware but given the breadth of legal uncertainty around dows they seem particularly eager to figure out how they can limit their personal liability one of the most obvious and direct paths to living liability is to incorporate legal enemies which type of entity and the scope of that entity's work are very much open questions but most teams that have actually started legal entities hope to dissolve them eventually anyways once it's more clear from the legal perspective that they can do that um you know and so with respect to this section this is kind of something that a lot of teams are reticent to do with good reasons some people think that you know speak it kind of speaks against the transparency that so many of us value uh in crypto but i can tell you that's not always the case there are some particularly novel unique and alternative entity structures that could be pretty effectively integrated into different dow structures they might not work for every doubt they might work for some another way of limiting liability for your doubt and this is something i'm starting to see some dow's implement is to form a mutual or an indemnity fund that protects organizations and their talent from the cost of legal action so think about this practically if you have a dow and you want to protect your workers i mean if you were a corporation you might be able to identify those workers directly and if they get sued for work done for you you might be able to cover them in this case what you might be able to do is form a is form a fund you know this could be a separate entity in your dow or it could be a fund that's formed between multiple dows to in a way insure those workers so that if they are sued for work done on your behalf they can be covered at least to some extent um and one thing i should have noted at the top is none of this is legal advice if you need legal advice talk to a lawyer none of its investment advice etc i imagine they mentioned that at the very top but just in case always good to cover your bases on that front we haven't seen that much um on the front of how do you indemnify or insure gal workers but i think this is a really important subject matter and so if any of you want to start a new business in the space that's going to have a lot of customers think about how we can do insurance for dows now in response to these two issues to two and three these specific legal issues related to workers and liability what we've done at the research collective is we started to work with some of the leading law firms in the space and have them draft memos um for instance on how dows can work effectively with contractors how we should think about dows using entities or not how gaos can limit liability um how does can pay taxes so there are some areas in which we hope to be able to provide some clarity that we appreciate too to get that ultimate clarity we do need to be working with policymakers and regulators moving on to the next topic how do you develop an equitable scalable and decentralized governance system for dows so in this case interviewees really were wrestling with how to use mechanisms like proposals elections delegations and or delegation rather and voting thresholds to create ideal governance systems many dows simply mimic the system of their higher signal precedent for predecessors rather without assessing whether that strategy is optimal for their specific project and so you can think of easy examples here right like like unisop and compound come out and they are incredibly successful and folks think okay i'll just do what they did without thinking about the specifics that when the decisions made by uniswapper compound or whether that would really be appropriate at all for the project that that dao is running but really big question is still how do you develop a system that's both scalable and decentralized many of our interviewees observed that a dow could scale much more easily if it's centralized at least to some extent and wrapped itself in a legal entity or simply use the legal entity for some of its operations now this system might be flawed you know some legal entities were designed however at least in part to more efficiently coordinate decision making between different people with a shared financial interest so they were designed in part to fulfill some of the needs of dows though they certainly didn't contemplate the sort of technical innovation that allows for dows to be as amazing as they are interviewees which we spoke with suggested that they wanted to extract those good parts from legacy systems while omitting the bad parts by way of simple example of this most larger dows have done things like create work streams or committees and delegated decision making to some of the groups at lower levels so like they'll have a treasury management committee or guild they'll have a marketing committee a grants program there are like if you want to see this in action just jump into the discord of any dow bankless i think is does a really good job of this where you have guilds performing different functions and you can also see hierarchy where folks who have been contributing for a long time seem to be given different permissions on the discord channel and i'm sure in the back end they're you know they're kind of receiving different compensation etc for their contributions we're seeing these organizations form in a similar way to the way that you know we're seeing corporations and and other more centralized types of organizations delegate authority equitable dow govern equitable dow governance is another very important consideration here that needs to not be overlooked and it usually is at this stage um we're making decisions today about systems that could be precedents for how dows look going forward and if we bake in norms that are going to discriminate against certain types of people or that are going to effectively centralize power to a very small group of decision makers and whales we may very well fall into some of the same traps as the legacy corporate structures and web 2.0 and i mean this like so many things it's very hard to keep in touch with this issue at times because everyone's scrambling everyone's building the plane while they're flying it et cetera et cetera but this is really core to the success of dows in the long term is not being burdened right by the same traps of those legacy corporations not establishing themselves to be inequitable institutions um a few interviews we spoke with also made the point that dao's could benefit substantially from looking to pass precedence when it came to things like governance systems right this isn't too surprising this is an area with an extensive amount of scholarship that dows could apply when creating their systems and i can tell you at the dao research collective we're working with a number of different folks but easy example is a behavioral an organizational psychologist and an organizational psychologist think about this very thing how do you structure organizations uh to be most efficient to have most impact etc and this is a field of research that has existed for a long time the human condition hasn't changed so much you know so substantially that their research is irrelevant we can certainly apply it and think about what we need to do to organize dows and incentivize folks to work in the right way the very final issue so what are the best practices for hiring onboarding and managing talent at a doubt now previously we just talked about a legal question about how do you hire contractors but this is really a different question entirely beyond that legal question there are also the practical questions regarding the best practices for onboarding hiring and managing a workforce given the novelty of dows it's difficult to find and really vet people to know whether they're going to be well suited for doubts not many of them have worked for dows before and working for a dao is a very self-directed and nebulous thing at times right everyone's sort of a builder and has to be responsible for themselves or it doesn't work too well at least at this stage once tired dao teams find it really time consuming to transfer knowledge to new workers so dow core teams often end up being responsible for the majority of their operations because they simply don't want to take the time to bring in anyone else given the transparency of dows this seems a bit counterintuitive but given the pace at which taos have evolved these organizations do have a really good or sorry a really hard time uh documenting internal operations making it even harder to onboard new workers and this is not an issue of course that's exclusive to dows this is an issue that traditional corporations face forever how many resources do you allocate to bring on new people versus just doing the job yourself but it's a bit of a novel circumstance of course with dao's once folks are on boarded dow core teams have to decide how they're gonna manage that talent which can be quite tricky given how flat tau structures typically are but as i'm mentioning we're seeing that evolve and different people take on different um different maybe levels of authority in the hierarchy of dows and take on different responsibilities and authorizations um that brings us to the very end of our challenges so i hope that was informative and helpful if you have any questions about those challenges or what we're looking to do to solve them or about the dow research collective generally or dowse generally very happy to respond to those questions my twitter handle's here at see underscores fallacy uh i don't know i'm not really sure if we have a minute now but if not or if you don't remember a question just feel free to ping me on twitter amazing uh thank you so much connor i think this is a this is an incredible presentation we're already seeing a pretty engaging chat on uh on the live stream about people just kind of walking through other models that they've explored um so maybe there's one request request is um if you can share these slides uh later on um you can send it to us over email or here we'll post that link for everybody to look at the other kind of question or the discussion that's happening is what are some of your thoughts on the downsides of the wyoming now model and sort of how do you think about what's happening jurisdictionally in different places so i mean covered some of these things directly or indirectly in your talk but how do you think about a decision-making framework as people are choosing how to tie a legal entity to their operations yeah i mean the wyoming the wyoming bill is interesting and it seems like in my mind it's a good start um it's a good approach to um to start and think critically about what we need to change to make dows you know useful or make legal structures useful for dows but um i just haven't kindly seen too much traction i haven't seen too many folks who are actually excited about organizing their dows using that structure what we're seeing more of um i think aaron wright's done some great writing on this on the idea of using um or different kinds of organizational structures like um unincorporated nonprofits there's some promise there as organizations that might be able to both um you know both exist within the philosophy of crypto from a decentralized and transparent perspective but may also be able to be able to do things that are going to be really important like pay taxes right which is not necessarily enabled at the moment with dows so we're going to see some writing on that and we've actually supported some some writing from the taxation perspective we're also supporting writing from one of the leading firms in colorado and colorado is you know colorado is the delaware of you know delaware is like the place to go right for corpora if you're going to incorporate but if you're going to a cooperative you go to colorado they have the best present best case law there and so we're working with the firm that spent a lot of their time looking into cooperatives and this is something if folks are interested in this i wrote a paper with jesse walden a little while ago on applying really the principles from cooperatives when scaling your crypto company and i think it applies to dows as well um but we want to go so much deeper into that and work with professionals whose career it's been so they can think critically about okay how can we use the cooperative structure which has things like you know members and doesn't have shareholders in the same way we would think about a traditional corporation and apply that knowledge pull from that precedent so like that's a really long answer but in short more stuff coming soon on this i don't think that there's a perfect structure yet um but maybe as an interesting thought exercise look at what flamingo dao is doing uh they have a really like very clear clear documentation on um what they're up to and i think that aaron wright's part of that as well um and i think it's like a kind of a cool a cool way to start exploring structures in dao awesome well thanks for that and uh if you have any other questions for connor you can ask them on the chat or hang in and follow him on twitter so uh thanks again connor and we are ready to move on to our next discussion thanks cardik thanks all [Music] [Applause]