DAOs for Financial Services: Fantasy or Future? - TOKEN2049 Singapore 2022

good afternoon everyone or uh happy middle of the night if you're jet lag like me and didn't sleep uh for those of you who I haven't met my name is Nabil I work at a company called World pay from FIS I'm guessing most of you have never heard about world pay and probably all of you have never heard about FIS uh so for those of you that aren't familiar with the company uh we're the largest public company headquartered in Florida uh we have about 75 000 employees and what we do is we provide all of the back end infrastructure software business process Outsourcing and other services and products into the banking Capital markets and Merchant ecosystem so there's about 6 000 banks in the world that run on our software about 2 000 different Capital markets uh companies that use our trade execution software and about one and a half million Merchants that process about two trillion dollars annually that use our Fiat payment rails so you might think based on that I'm going to talk about payments or something to do with financial services but actually I talk about that all the time and that's really web 2 and really tradfy and this is a web 3 conference so what I thought I'd do is talk about something that I personally find interesting and that's kind of the future of governance uh for financial services in particular going forward and I find this interesting for a couple reasons one is I work at a very large often bureaucratic company and so the thought of like a better way to govern an institution like that is interesting the second is I'm a Libertarian at heart and so the thought of like decentralized governance and people doing things for themselves is also interesting and so what I want to kind of ground Us in is if you start from like the beginning of society humans have always looked for ways to organize themselves if you think about hunter-gatherers they organize themselves in tribes and the goal of that was survival if you think about governments they organize the people in the state to pursue national interests if you think about Executives at a company they organize workers and resources for monetary or non-monetary objectives now the reality is is that most of us we're not going to be CEOs we're not going to be presidents or politicians or whatever and so instead of being the organizer we're going to be the organized or instead of being the coordinator we're going to be the coordinated so I think a lot of people are like starting to realize this and starting to be a little bit dissatisfied with how institutions today are being run some people are dissatisfied with governments and we see that in like low approval ratings for most western democracies today some people are dissatisfied with the financial services ecosystem as an example and so I think Dows are really interesting because they give us a way to kind of rethink this and why are they interesting I think two reasons which are kind of self-explanatory in the uh not very attractive name one is they're decentralized so anybody can participate you don't need to be an elected politician you don't need to be wealthy you don't need to have a certain skill set uh and the second is they're autonomous right I think we're all pretty bullish on the future of smart contracts and this whole concept of code is law uh and so to the extent that we can automate away certain aspects of governance that suck a lot of bandwidth out of today's institutions that's really interesting and to be honest Dows aren't that new of a concept actually so when I was doing a little bit of research I found that the first mention of a Dao was actually in the 1990s around when the internet was taking off and it kind of died out you know no one really did anything with it and then of course vitalik brought it back in 2013 and if you fast forward to today there's quite a few Dows that probably you guys are familiar with there's uh Ave one of the large D5 protocols there's uni swap one of the world's largest decentralized exchanges but despite all this promise and some interesting use cases and the fact that a lot of people think governance systems of today are really ineffective Dallas haven't really taken off if you look at in the crypto ecosystem the percent of crypto assets that are controlled by Dows is less than one percent and if you talk about Dows outside of the crypto and web 3 ecosystem 99 of people are going to have no idea what you're talking about and I think there's a couple kind of key barriers or key challenges that exist in the world today that are really going to prevent Dallas from actually being successful in any kind of near or medium term future so one is probably not surprising to you regulatory so Dows as an organization are not really recognized in most Western countries as a form of Association I think there's like two U.S states that have said we recognize Dallas as something other than that pretty much nobody does now that doesn't sound like a big deal but if you want to go into a regulated industry like Financial Services if you're not a registered organization how are you going to sign up to pay taxes how are you going to sign up to give your employees benefits how are you going to get a bank account how are you going to nominate people who are going to be your kind of liable directors with Regulators so this whole concept of like Dao's not being a recognized legal entity is actually a pretty big barrier today and a lot of people would say you know there's a lot of similarities with corporations or Partnerships or whatever but I think if you talk to a true kind of Dow Enthusiast uh they would probably vomit at the thought of you classifying them as a corporation or a partnership and some people might say okay screw it I don't care if the government's gonna recognize me I'm just gonna go create my products whatever it is and it's going to be decentralized and we're going to be all over the world and we're going to offer it and they can't regulate us because we're Global distributed whatever uh there was a company that many of you guys might have heard of it's called b0x it's been in the news this week uh they said they were Unstoppable literally in their company description it says they're Unstoppable so they're a Dao and this week the U.S cftc fined them 250 000 and basically file the lawsuit against the two Founders and the lawsuit basically said we don't care that you're a decentralized or distributed Dao you're basically functioning as an unincorporated association and you the two Founders are personally responsible for what's going on with this company so 250 000 isn't a lot of money for most companies uh but this precedent of setting the kind of Founders or leaders of a Dao as responsible in the eyes of a major regulator for the activities of that Dao even though there was no entity registered in that country that's pretty significant that's a pretty significant statement from a regulator and you can bet that other Regulators around the world are watching so if you are thinking about starting a Dao and going down that path and just doing what you want I would uh encourage you to to think twice second is just general human bandwidth and capacity so It's Kind of a Funny situation we as humans we have more resources and Technology available to us than at any point in history pretty much but we're all still incredibly busy if you look at like the uh hours of work for most Western countries they started to decline during the Industrial Revolution but as we've gone into this internet age they've they've crept back up so we're actually like working more even though we have more resources at our disposal and so what this means to me is I don't think a lot of us really have time to participate in a Dao for a lot of the institutions or companies or whatever they might be that govern our life I actually have a question how many of you are part of like a homeowners association anybody I am yeah a few of you mantis yeah so think about this for most people the uh biggest asset or most important source of wealth you'll ever have is your home but how many of you who are in a homeowners association actually actively participate and pay attention to what the heck is going on in that Association I know I don't I basically ignore it so if I'm not even like paying attention to this Association where I'm like contributing to the management of my biggest asset How likely am I to participate in the active management of a dow for my health insurance company or my utility company or my sports club or whatever so this whole notion that like everybody wants to manage and have an input into every you know institution or company that they're interacting with is actually not really true and I think there's a lot of examples of that and personally I prefer to trust the experts on all those things they're not always going to get it right everybody knows that but uh if you're like a true kind of free market capitalist one of the founding theories or basic theories of that is that the economy is the best when everybody focuses at what's their most productive or passionate about so if you're a human you're trying to participate in managing or governing everything that's actually not productive for society as a whole the third is today's world is super complex uh you know it's very Global there's a lot of issues I don't think anybody would uh deny that and I think the the challenge I see and this isn't a criticism it's just where the industry is is most Dows are trying to apply really really simple governance structures and Frameworks and philosophy philosophies onto the association's other governing and that might work if you're doing something in a video game with a very narrow audience and a narrow use case and forgive this but not really practical consequences for anybody that's not true if you're trying to stand up a Dao to provide a regulated service or do something like uh money movement or health care or whatever right like the uh the consequences of misgoverning something complex like that are are pretty significant and I think most of these decisions that Dows are making they're often you know binary yes no votes or majority versus minority or you know best economic utility or whatever they might be but the reality is I think most of us would agree that in a complex Enterprise or in a government uh issues aren't really black and white like that they're Shades of Gray and today I don't really think a lot of the governance principles have the ability to capture that and finally I don't think anybody's come up with a good way to kind of solve the accountability issue that exists in Dao's so if you think about a person at work today you know if you make a bad decision or a series of bad decisions you might not get a bonus you might get fired you might not have a reference for your next job so there's like a lot of like powerful incentive structures that exist today to avoid bad decisions now what happens in a Dao if a Dao makes a series of bad decisions is it the fault of the person who put forth the proposals that were bad is it the fault of the majority who voted for those proposals is it the fault of the founders of the Dow the largest shareholders in the Dow I don't know and then what would you actually do to hold them accountable for those bad decisions assuming you could identify who they are would you take away economic utility would you diminish their future voting power would you diminish the ability for them to put for future proposals you could do many of those things but uh how do you get the balance of incentivizing particip participation without making them scared of getting it wrong or getting punished so I don't really think anyone solved it so are these few issues I've talked about solvable yeah of course it's it's 2022 like everyone's smart we can solve a lot of things but uh I don't I don't see us getting there in the nearer midterm I think Dallas could become a recognized form of Association like we've seen in a couple U.S states but my guess is that when a lot of countries do that they probably are going to be pretty similar to how they treat existing forms of associations today and could technology automate away a lot of the complexity and you know Define a million Shades of Gray in decision making yeah it maybe could and could we code around that complexity to automate a lot of the decision making such that humans could participate and not have it be a massive drain on our bandwidth yeah that's hypothetically possible uh and could we build an accountability mechanisms that balance you know the incentivizing of participation but also the holding accountable of those who are uh you know negatively impacting the Dow yes it's all possible but if you ask me I think we're a pretty long way away from any of that and I'm not convinced that when we do solve those this all those issues that that endpoint is going to look a lot different than the institutions and Enterprises and governance structures that we have in place today because the reality is a lot of those governance structures are built on a thousand plus years of you know Collective shared Human Experience so for my money I think Dallas for financial services right now are a fantasy but like I said at the beginning I'm a Libertarian and so if anybody feels differently I would absolutely love if you can come up to me afterwards and convince me otherwise thank you