Unwrapping the DAO: Taking Decentralization Back to First Principles

how's it going everyone uh I love to see the enthusiasm every time uh lawyers are introduced so um I'm Steph unal I'm a blockchain lawyer and a builder in the space I'm heor valz uh yeah I'm a lawyer been in the space for a while now I've seen a couple cycles and uh yeah see a whole bunch of new people come in every every time and you know different different ways of thinking different values come in and uh love to see the whole industry progress and evolve yeah um my name is Jonathan Hernandez same also a blockchain lawyer um yeah we you know we we've all kind of had the privilege of over the past couple years being able to do this full-time and we s dedicate all our time to blockchain clients which you know um I think most lawyers aren't able to do something they're passionate about so I think I could speak for all of us that we feel very lucky and privileged to be able to do what we do yeah absolutely um so collectively we've worked in we've worked in the blockchain space as lawyers for quite a long time we've had the privilege of of structuring and launching um a lot of the world's leading Dows and projects and so we've had a lot of time to think about um room for improvement before we talk about that I I do want to set the stage a little bit about the ethos of blockchain and and sort of how we got to where we are today so before I got into blockchain as a lawyer I actually was involved um in in privacy in the open source movement going back uh 10 or 12 years ago before privacy was even a thing and um I want to tell you a quick little story to sort of set up the ethos here um in 1991 here in Colorado um Phil Zimmerman released the op open sourced his his code for pgp pretty good privacy which became the world's um most widely used encryption s software for email and um he really sort of set the stage in what had what had been a growing movement in the open source software movement now Phil like a lot of other people in the space really believed in the importance of encrypted information transfer um and and and this is the reason why he he released pgp eventually what happened is the federal government launched an investigation into pgp and the release of of this very at at the time was a very strong encryption uh under the arms export Control Act which was actually used to prosecute people who were weapons traffickers so people who are exporting missiles or other sorts of weapons and as applied to Phil's open source software code and that amongst other things really propelled us us you know us in the community um into into into a moment of of really trying to understand what it is that we were actually trying to do with respect respect to to privacy so when people ask me you know how how long have you been in in blockchain I I like to say quite a long time 10 or 12 years because it's that same privacy ethos that Phil was fighting for that uh lonus was fighting for when he when he wrote the uh original Linux kernel uh what Richard stalman was trying to do in the late 70s and early 80s with ganu we actually all doing the same thing here with blockchain and in web 3 as stallman likes to say the free in in free software is not free as in free beer but it's free as in free Dum and blockchain in many respects like in like in the Privacy movement is really about securing encrypted information transfer whether they happen to be uh moving value around or other other information around so I want to set the stage there with that let's talk a little bit about Dows and what exactly it is that we're trying to do here when we talk about building Dows and building community and one quick note although we're lawyers we're really speaking to here as community members don't take anything we say as legal advice and we also don't know it all we're all just like you we're we're members of the community trying to build this thing together and trying to iterate on ideas yeah um I can go so I think you know um when it comes to Dows um two of sort of the there's different sort of of reasons that people build these Dows and structure the Dows um the way they do I think unfortunately there's um it we've come to the point in the space where there are there are Dows that are large enough that other other communities feel the any need or or feel like the right thing to do is just kind of copy and paste what what they've done um but if we take it back to like you know sort of the the original ethos and principles of of decentralization um and and and the original sort of reasons for building these Dows um we kind of break it down to two things right the first is being able to bring out that that ethos of Open Source software um where a lot of the the work that's being done is um is is initially done by you know someone with an idea or a group of people with an idea but they they are able to to share that idea with a group of of community members that have a similar mindset for example and then they're able to um give these people who are building on on on this base layer the confidence that this base layer is something that they can dedicate time and effort to um and it won't change it won't take away their ability to use the tools that they build on it um unless the community as a whole um comes to consensus and says hey this is how this base layer should evolve so I think that's like one of the principles behind building DS the other is of course um legal risk mitigation which is generally what what people come to us about um but you know high level clients are always concerned about you know Securities risk regulatory risk tax risk um the reality is that if you focus on the first principle which is decentralization building a community then the rest of it follows right like what you come to us generally about are and what we're going to tell you are things that come organically when you have a community that's built out and that has the ability to um really continue the principles that that they believe on uh they believe in and so I think something that we wanted to sort of come up here and and and discuss a little bit is that we've seen in the space like Stefan said we've sort of been involved with you know collect ly like hundreds of of of token launches and and DOW setups and we've seen a sort of a a a lean more towards um prioritizing the the legal structure and and and the the wanting to mitigate the legal risk and what we love is for you know the the principles the ethos that originally um brought these things to life to not be left behind when we're when we're thinking about how to build them and and like I said if you do focus on that um community building and decentralization the rest of it just kind of follows naturally and organically and so you don't have to sort of um you know fit fit a square peg in a round hole like you you you don't have to create things for for no reason there's no need to over engineer and over structure these Dow um these Dows because it'll come organically as as long as you have a group of loyal followers that believe in your product and want to keep building yeah and I guess just adding a little bit there about you know the values like we I think we always have to kind of step back and and uh and think about what we're doing like why are we doing this sty and why are we creating why is this decentralization important I'm sure a lot of people have talked about that throughout this throughout this conference and you hear about it all the time but it's something to constantly look at and think about and seeing if you know if we if we can maintain those principles that you know that Jonathan just just talked about and uh and and more like um so like we're not doing this like I I think we we can all agree like this you know if you set up a DI you're you're probably not doing it to be super efficient like it's it's it's it's it can be clunky it's a little awkward uh you know proposals and voting and and uh trying to get things done can can kind of be difficult sometimes especially with with with politics and and uh you know disagreements in within the da uh but but the reason I I think a lot of us are drawn to this is because it it it goes back to you know both these guys were saying but you know being able to uh you know be in a fair a more fair environment and be in a in a place where uh you know it there's a a level of democratization of of uh everybody can participate everybody can can drive the development of the application everybody can can uh you know the economy is driven by the by the by the by the by the people and and we we you know the the people are are outside the the hold of you know a sovereign or or you know the overlord person who's controlling the system and so you know keeping keeping those ideas in mind and you know those were the ideas of of you know that's generally the the blockchain ethos and as as we see more people coming into the space we we see different values uh get combined with that and and often times even forgotten even those those original values are often forgotten uh and whether that's that should be the way or or shouldn't be the way you know that that's you know that's still to be found out we'll see how how Dows look like in 10 15 years from now uh but but it's important to i i i from my own personal perspective I think it's important to try to hold on to those values as much as possible yeah I'm going to say something that might sound a little silly or or obvious um you know I think when people talk about decentralization which feeds feeds directly often directly into Dao there is an overemphasis and over prioritization of technical decent calization in other words um when you look at a project and you ask whether or not it's decentralized or whether it's sufficiently decentralized the focus the sole Focus typically tends to be on the technical stack right so I mean if you're running hot wire in the early ODS like you're running a centralized entity no one would say that that's a decentralized system fine um but the merits of decentralization don't don't live and die by whether or not it's just a technical stack because decentralization is more than just a technical stack so there is an over priorization over focus on Technical decentralization and not enough on what I would call ideological or philosophical decentralization that to me is really the core of what decentralization and what web 3 is really about and what that's about is not about the technical infrastructure but it's actually about the community community TOS really is a group of people who have a commitment to a shared value I mean this is the reason why Linux going back to the open source movement this is the reason why Linux got off the ground amongst other reasons there were really no Alternatives at the time it forced people into position they decided to go out and build something but you wouldn't have got that that level of collaboration had there not been shared value amongst those group of people um and so I think the over focus on technical decentralization really leads to a lot of poor design choices when projects get to the stage where they're like okay now we're ready to put together a dow now we want to of course we want to we want to build in some some legal risk mitigation which which is fine and appropriate um but the emphasis shouldn't be the the the first the the the first starting point the first building block shouldn't be well let's get a dow up and running because we want to mitigate legal risk it really needs to be built behind and around a community first um and that really needs to that really needs to um take priority and I'll give you a real world example I mean there's there's thousands of them but we're sitting in one right now which is ethereum I mean ethereum is an open- source open- source software but what makes ethereum ethereum yes it's it's it's decentral decentralized qualities from a technical perspective but it's the community we're all here sitting together we're all here Building Together you have we have access to source code where um where it provides for near infinite customizability um and source code is not some abstract intangible thing it's a collection of human ideas it's about Community it's about us all being here together and I think that that's one of the things that often gets missed when when convers when projects reach the life cycle of saying okay now we're ready to build the Dow now we're ready to actually put this thing together um there there there there's there hasn't been a lot of the leadup or effort put into actually building a community that will self- select into it to do what it is that you're actually trying to do with a project yeah and I guess just a riff a bit on that um on the Linux example I mean I think you know you know you're probably like why why are three lawyers up here telling me not to over complicate things and uh and to to take a step back right um the the reality is that you know we like I said we're we have the privilege of seeing a ton of these things get get launched um all across the space and so as opposed to someone who is for example just that one project we kind of see a variety of different um Phil philosophies personalities you know whatever you want to call it across the space um but I think everyone generally has the the the same idea when they come into the space if they're here to stay of course and to keep building and you know a lot of a lot of what we see in the current structures [Music] are the the building of communities and trying to get people to come to your protocol and use your protocol by giving them what is essentially a what ends up being a an incentive tied to to a token right and so you know for example air drops and look I I love a good air drop same as much as the next guy but it it should it should be a tool that you use to to keep your your community engaged and to reward them for contri ution to to your project to the protocol it shouldn't be a way to get people to come in solely for that for that airdrop right so it should be a tool not the tool and sort of the the re the the reason for that is that we see it time and time again where you have you know for example airdrop Farmers right like they come in they they want to get the air drop those aren't sticky users for your protocol so you know back on that example that safon gave on on Linux what kept those people you know involved in Linux what made them volunteer their time their sweat their effort into building Linux and it's that they believed in the technology they they it was a technology that they wanted to keep building for their use and it wasn't tied to financial incentives in the form of you know I'm going to reward you immediately for your for your for you trading on um on on this Dex right like that doesn't at the end of the day when you bring users in for financial incentives you run into the situation where they're going to keep chasing the next financial incentive um and so like we mentioned we're kind of here and we're doing this we were all lawyers and you know other more traditional backgrounds you know a few years ago um and what brought us here is that we were users of of various protocols we were community members and you know at least speaking for myself I ended up being in a situation where I was you know engaging with a variety of protocols as much as I was like Billing at my you know traditional law firm and so we're here to not only um continue to help building the communities and in the protocols that that engage us but you know we're we're here to to kind of make like try to keep people honest with the philosophies because we're very involved in the in the sausage making right and so a lot of back to like one of my original points is a lot of there's a lot of like copy pasting for example in in the in the space and the reality is that a lot of you know the reasons that that some of these documents are are put together or some of these structures are put together for some of the larger Dows have a lot of implications that aren't um as clear to people that that weren't really in in in the you know in the initial stages of of setting it up so because it works for one Community doesn't mean it necessarily will work will work for another Community but you need to keep your your specific community in mind when you're thinking about how to build these systems um so I think you know a question is what what's something that we could do about it or yeah and uh just wrapping up here but I mean that's a question again it's a question we have to ask ourselves and what we can do is as you know members of of dows or just of the community of how we can actually make the decentralization word in in acronym Dow actually mean something and so there's a right now there's a lot of focus on like decentral decentralizing a protocol on L1 you know how many validators are there how many you know you know are there delegators are there you know nodes validator nodes and um you know the you know how many clients are there eth being on the on the on the more decentralized side just having a handful uh you know there's a ton of things that you can do to decentralize a protocol I think we need to focus on what we can do to decentralize a dial from the from within whether that's being making sure that people a wide variety of people get a hand of tokens and are able to participate in governance uh to to just making sure that you know uh you know just making sure that we can do what we can do to to make sure everything's decentralized and and you know that way we can push forward those those uh those ideas and uh keep the ethos within the space and I I'll leave you one last thought don't just build something great but build something real thanks very much guys thank you