Dark Governance in the Era of Private DAOs - Silke Elrifai and Fatemeh Fannizadeh

hello everyone you hear me well on the back yay thank you all for being here very excited to give this talk today um it's part of the series called crypto lawyers on the loose the first talk we gave in this series was at 8cc last year go check it out there we dumped a lot of crypto law non-advice and non-advice yeah um here it's gonna be more about policies and um ways kind of to design the space forward um yeah and the disclaimer here this is not legal advice but you know it so we're gonna first start by talking about the potential of privacy for the space why it is is it important to have more private enclosures i'm going to give some creative paths forward for you to explore uh in our search for more privacy and silky is gonna give you some more practical uh insights on what this all means for daos so privacy privacy what does it do so i broke it down in two main um kind of positive points why privacy is desirable the first one is because it increases the realm of possibilities and a good illustration for this is for instance when you talk to your lawyer you want this talk to be private and confidential so it enables you to talk more freely and brainstorm various strategies that can be mutually exclusive or self-defeating and you want this brainstorm to be private right and you want then the path that you follow the strategy that you follow um to be kind of unpolluted with the other past that you observed or discussed so this is on a personal level but it can be also applied to organizations and we're going to give more details on what it means for daos more specifically later privacy is also a protection against cancellations and cancellations here have has to be understood in a very broad sense so you can be canceled from communities and we saw that um happening very recently in crypto can be cancelled from crypto twitter you can be cancelled from your communities families um religious communities you can be cancelled from your work which means being fired for instance or promoted or demoted for instance depending on your gender and um you can also be cancelled by state agents and in the worst case it means being imprisoned i'm not talking about whether or not cancellation is warranted or is the just path forward but nonetheless having one reputation in one single identity does provide a lot of surface for cancellation to happen and here i just word reputation shouldn't be portable by default and right now the case is that we are born with one single identity that is given to us and it's extremely difficult to move away from that identity so our reputation sticks with us our entire lives although by definition we change and evolve but things from the past can come back and haunt us here is some examples of cancellations that can happen this is a news article title that i saw yesterday and it fits within what's happening right now in canada and how political activists are cancelled from the financial system through the banks that are forced to freeze assets these assets um and this will bleed into crypto through centralized exchanges and once the cancelled pool is broadened up and it's not only political activists for one specific cause then i mean we can easily imagine a very dystopian future another example of cancellation is here is i'm talking about untargeted economic sanctions and this is also something that the space is very much concerned about and here i listed how economic sanctions can bleed through our lives through different kind of normative frameworks so national laws enact sanctions um and punishments for breach of sanctions they can be international sanctions so through treaties through international bodies but also um through for example the fatf or other kind of organization that have international influence their self-cancellation through peer pressure self-censorship i won't disclose where i'm from for for instance or you use some things you say or you don't say in order not to be cancelled but it's a form of self-censorship there is cancellation through propaganda and cancellation through deterrence which is what we've observed recently happening in the space and if you follow my twitter i've been written i wrote a lot about this organizations or people who are afraid of the consequences of a potential hypothetical breach of sanctions and because of this they would preemptively cancel populations or languages and so on to avoid this which is in my personal opinion quite unfortunate if it means hyper-compliant so being going beyond what you're obliged to do just to protect yourself so what can we do we can be creative with um and in order to kind of increase the surface in which we can maneuver so we can be creative with our identities we can play with being anonymous having multiple identities for multiple purposes and we should encourage more anonymous contributions in the space try to move away from the need of knowing who does what only the result matters who can be creative with the laws and this is a obviously something i'm really interested in and it doesn't mean breaching laws at all it means knowing what laws apply to you what they mean how you can navigate within these normative frameworks and um knowing that there are different frameworks that apply and you can opt in and out as well of these frameworks and i put this here part of a code from agamben play with lord just as children play with disused objects i encourage you to read further on this but um um look into regulatory arbitrage look into kind of loopholes that you can find for instance putting a talk on youtube everyone has access to it giving a talk specifically targeted to certain people might be problematic so there are always ways you can kind of structure yourself in order to be compliant while furthering your own agenda and the most important part be creative with the designs you're coming up when you're building and here i i put this slide i found on twitter i haven't double checked it with ibm but this is no news basically already in 1979 a computer cannot be held accountable who can be held accountable is people behind it and why and when can be they be held accountable when there is a centralized point um within their persona and what we could do with the designs were coming up is further privacy in the designs and make sure that the centralized points are limited to a maximum and here you can see i made this up but the more trust is required by our protocol the more reputation is needed and important and it's very very important at least in my opinion that the trust is limited and designed in a way where we know exactly what kind of reputation we need and what has to be proven so that other things that we might have said or done that are irrelevant cannot pollute our activity so i'm going to speak a bit more about the context um everyone is talking about dallas dolls are basically everywhere i mean you know have a doubt to free raw soul bridge to have a doubt to get around licensing requirement for dex free assange have a doll raise money for children's orphanages haber dao russia invading ukraine have a dao so basically is everyone at the moment talk about it we know dao has become more and more important and they seem to be at the moment very much the wonder drug of the crypto community like everything is now um going to be solved through the dows um because we are going to have more doubts i think there is a need for having more considering more the privacy concerns that come with it so when you look at daos and how they compare to a legacy legal institutions and i'm now speaking mainly about on-chain instantiations of the dao what you see is that in legal legacy legal institutions like corporations or companies you have very little transparency and if there is transparency it's usually like enshrined in the lawyer you need to do financial state you need to submit financial statements but generally you have confidentiality of funds you have confidentiality of decisions yes some decisions need to be public um some are advertised by the company themselves you have confidentiality of relations to third party unless you want to disclose it that you had this new cool deal with the company and you have also to a certain extent confidentiality of participation it isn't that clear while usually in companies you know in inside the company you know the names of people sorry but it's very much inside the company and outside you mainly see the officers the directors that actually have fiduciary duties and now i mean what the dao landscape promises is hyper transparency and so basically coming back to brandeis sun sunlight is the best disinfectant and in line with solar pum punk ideology we have transparency of funds especially you can usually see anything on chain that the dow has you have transparency of decisions at least you know when the decisions are taken at the moment it's usually by way of proposal obviously you know a lot of the dollars right now the decisions are you know you have discussions in the back and there might be just a few people deciding them but you you have it there's transparency to this um you also have transparency for public written third-party relations because usually if you're a service provider to adult you make a proposal and most of this is public so people can know what you agree to what milestones you have and how you're going to whether you're going to meet it or not and there's transparency of participation and people tell me no that's not really true but even if you sue to anan all you're voting you're commenting whatever it's public um so in that way in terms of transparency daos are very different from legacy system institutions going forward i think there is a need to actually have some more bespoke privacy function you need darker dowels because there are some decisions you really do not want to have in the public as you have them at the moment so when i say this that we need to have some dark dolls or darker dust and usually what comes up is this paper from 2018 from diane and friends which basically talks about a danger of privacy anan daos so basically in relation to voting systems so what they've shown or what they've claimed is that when you have dark dao primitives like privacy modules and function you end up in a plutocracy like a voting system made like that will eventually end up in plutocracy this is a problem and we still have this problem but despite that we're not going to talk more about it i just wanted to make sure everyone knows we are aware of this but there are function in daos that actually need privacy and as fatima actually explained you have user participation actions when their votes are actually associated to some kind of long-standing identity you might in certain instances in you know more controversial matters really want to have privacy in legal disputes it doesn't make much sense for a law firm to put their strategy publicly before something has happened unless this is your strategy unless this is good for it generally attorney client privilege legally advised you'd lose that if you put all the communications as some dollars too in discourse obviously there are ways around already like some dolls what they do is they nominate a person to deal with the lawyers the person then deals with the lawyers and only writes in the forum or in the discord what is not prejudicial to the doubt to be disclosed at that moment in time but i think what needs to be built there we need to have tools or we have to use actually some tools already but we need to use those tools and think about much more about privacy in this matter then of course you know work like if you want to work in the stealth mode if you have comp your competition strategy and sometimes also your dow treasury i know this is actually quite hard to implement but basically in certain circumstances especially if you want to participate in an auction what we've seen in the past it's usually not very good um for dao so it's not beneficial to for dallas to participate in auctions unless you want a certain result where maybe you don't want to win the auction and then it's actually good to be a dow with public treasury and then generally also in voting if you have unconcealed voting and you can see it and before it's tallied this usually affects the result and i think we haven't thought enough about what this means for our space then also trade secrets and i think this is already it um this is just basically please build some please build um privacy tools for dows we need them in a modulated fashion not arguing for dark doubts but the the state at the moment is really people are disclosing a lot of things and i'm not sure it's a good idea thank you and let me say something else i wanted to add fatimi and i were wearing some sort of anti-surveillance crypto fashion today so if you want to know more about uli she's sitting in front here she's she's producing these wonderful jackets