[BUIDL Asia 2023] DAO’s Demystified: Things I Wish I Knew 18 Months Ago

Transcript

thank you Erica uh my name is Kent and today's talk is about doubt that was demystified lessons from 18 months on the Dow Frontier um quick show of hands who is currently involved in a dow right now okay cool wow this is actually a good crowd um who is uh maybe thinking about joining the Dow in some some way kind of vetting it out okay and who who's actually thinking about creating a dow themselves awesome well for everybody and then even if you're not too familiar with Dao's I'm hoping to add some value with this

talk um so let's we have a good amount of ground to cover so let's dig right in a little bit more about myself I started the ethereum Denver Community back in the day and I'm in East Denver steward I probably saw some of you at East Denver this February it's always a good time I used to be the head of r d at shapeshift um and I'm currently the tokenomics work stream leader at shapeshift down so a little quick context about shapeshift because we've had a very unique Journey uh shapeshift used to be a centralized crypto exchange but non-custodial so we didn't hold on to your funds and we had a hell of a product Market fit back in the Ico bubble people loved shapeshift

because they didn't have to uh kyc it was very frictionless however we had to abandon that business model for regulatory reasons the riding on the ball was pretty clear so um we got rid of that kind of independently from that we also decided to really truly embrace the crypto ethos we've always been very much about the cypherpunk values of crypto and actually become a dow this was about mid-2021 we shifted to being a dow uh so we've been on the front lines of you know building this stuff kind of making it up as we go along uh for the past year and a half or so I joined the Dow in um in late 2021.

um and that's kind of the uh the tldr on shapeshift so here's what today's talk is going to be about here's the premise basically incredible new superpowers have been unlocked by Dows however corresponding challenges arise from the use of those superpowers so the idea here is let's explore some of those real life lessons and how to address those challenges based on our learnings that we've had at shapeshift because again this is kind of the first iteration of daos and um I really hope that our lessons can maybe create an easier path for those that are building subsequently um so

one thing just before we get in this is really important it's extremely important that we get this right dowels offer a better path forward relative to to what we've had um when you think about our current centralized institutions they often have an incentive to to divide humans to to pit humans against one another in an artificial way um and this is just how things have been for a long time there's so many examples of this finally thanks to crypto we have Alternatives we don't need institutions for a trust layer and for a credibly neutral platform there's all these wonderful benefits Dows are a wonderful embodiment of that however it's very early on if we don't get this right then perhaps the full promise won't be

fulfilled but I firmly believe that a brighter more just more prosperous and more peaceful Humanity lies down our path or there's a better chance of it happening if we can get this right with dows so that said um why do it why doubt it this is a pretty sophisticated audience so I won't cover a ton of Basics here but you know like a high level um why are we doing this Dows hold incredible promise because they leverage the unique properties of blockchains to empower humans to to build collaborate and coordinate in ways that were up to this point impossible we're and we're only just beginning to understand the the um the potential of this new socio-economic primitive or

technology I asked chat GPT about some of the benefits of dows and it spat out this list which is actually pretty good um it's pretty comprehensive we're actually going to touch on on some of these shortly here um the reduced bureaucracy is actually something that's that's uh I think shape-shift has gotten right and I want to explain that briefly because we've done a good job with this I think some people get the the um the idea with Dows that uh it's just kind of Anarchy like okay you have a governance token people are voting on everything but it's like there's no leaders and it's kind of a mess in fact it doesn't have to be that way it's shapeshift we have a really effective

organizational structure where um workstream leaders are elected via community governance people vote on war extreme leaders I am more extreme leader for tokenomics there's marketing work stream leader engineering moderation and so on these people have the ability within the um the confines of their work stream to do a lot of things um you know like that manage the people under them and and do different things with the budget um so even though there's no like c-suite level CIA CEO CFO type thing there are people who are kind of like helping create more focus and this has been quite quite helpful um and yeah there's some other stuff here too of course I'm not here to tell you what you can learn on chat GPT I

want to I want to really explain kind of stuff we've we've learned from dealing with this stuff uh firsthand um just one more thing to really couch this and this is again this this is the what the Crux of it all this is why we do crypto guys the properties of decentralization let's just briefly talk about that permissionlessness anyone anywhere can build a dow and any token holder can participate in its governance transparency we're going to dig into this for sure um the entirety of Dallas finances and governance could be on chain for all to see um and final finally this beautiful censorship resistance no individual or institution can interfere with the Dallas on-chain operations these are incredibly powerful qualities to have

uh just as a brief aside um beware of what I like to call dinos so these are like Dows in name only or decentralized in name only so you see a lot of these these days and these are you know it's like any new technology some people are coming in leveraging this buzzword and see oh yeah we're we're a dow this is great um but in fact it's only like you know one or two people who are like calling all the shots and maybe like you know one or two people holding most of the governance tokens and they don't embody these crypto values at all sometimes it's just a straight up money grab other times some of these dinos they mean well but they need some some prodding in that direction towards decentralization they're maybe not quite getting it so whether you're looking at maybe joining

a Dao or you know getting involved some way I kind of keep an eye out for these dinos because they're out there and I think there's going to be even more of them as this technology spreads remember decentralization is the point so let's talk about superpowers borderless participation is a wonderful superpower so here's a cool story from from shapeshift uh during our centralized days this is back in 20 2017 2018 uh solidity developers were even harder to find than they are now like a True Unicorn so hard to find we actually found some I think it was two developers in France that were an amazing fit super talented people

um the problem is if anybody is familiar with French labor laws it's really higher it's really hard to hire people from France uh there's a lot of bureaucratic red tape and uh the real reason it's hard to hire is because it's extremely hard to fire somebody uh based on their laws if something goes wrong you know if it's not a good fit so it's a big disincentive not to go that route so we we couldn't we couldn't actually do that fast forward to the Dow it's a different type of setup it's a different type of Paradigm you know we're not having to worry about these sort of uh things because anybody can just self-select voluntarily join the Dow um and it's amazing actually we have contributors from Brazil Australia the

states Europe including France like we actually have a French developer and he's a complete rock star so what what a wonderful contrast to you know this this way of doing things before and that that is just one example of this nice um you know borderless participation it's uh it's quite powerful but there is kind of like a potential downside here sometimes you find yourself wishing that you actually had an HR department um so you know as nice as it is to not deal with corporate bureaucracy or um I think everybody's seen the movie Office Space you know everybody hates that you know HR but the thing is once in a while things can go wrong and you almost wish you had an HR department so here's what

happened at shapeshift the bear Market really hit you know was really taking hold last year and it became apparent some contributors weren't really pulling their weight they were not doing a good job not maybe not even not being present at the Dow not really showing up in some cases just kind of being being a jerk of being a bit trollish um so this became kind of an issue and uh I remember thinking multiple times as this whole thing unfolded dude if this was a centralized company these people would have been gone three months ago like this this is ridiculous um the problem was the Dow did not have a process for really dealing with with people that aren't aren't really contributing and and to be clear this

this is not like a common thing but I think with any organization you will have these these edge cases of people maybe just who aren't a good fit or aren't doing a good job so how we dealt with it and this is kind of the learning and this takes a bit of a page from just the centralized Playbook but like set clear success metrics for all leadership roles maybe contributed rules true but especially leadership roles there should be a very clear set of criteria that leader leaders are beholden to because that they really set the tone and tenor for the entire organization and its strategy and that way if they're not doing well if they're not actually doing what they said they they would then it's easy for the community to hold hold them accountable um another good thing on a related note

is to you use leadership and contributor terms of three to six months um I I've seen either work they can be pretty effective I would really hesitate to have terms for these um for these roles of more than six months like six months is like in crypto is like six years in real time you know six six months you go beyond that a lot could happen so much like you know elections in a democracy this is a regular touch point for the community to weigh in and see uh you know how is how is somebody doing um and this has been pretty effective for us finally you know there's always the last resort threat of you using um Community governance to actually vote somebody off the island so to speak and um it turns out we didn't really need

that usually the the sort of notion that this is possible will encourage somebody to either shape up or maybe voluntarily leave for another Direction but just knowing that that's kind of a an option is is pretty powerful in the case of shapeshift those contributors did find different paths and you know it was a good learning experience for us superpower number two ease of launch so um launching a dow is so much more frictionless than when you in many ways compared to uh its sort of traditional counterparts so you know you don't need tons of seed Capital you don't need to worry about maybe overhead um you're tapping into truly as we just saw like a global talent pool

um tokenomic incentives can kind of kind of give rise to interested business models so this is actually really interesting um as I mentioned shapeshift did have a bit of a um a unique experience in the sense that we actually started out centralized and then became centralized or decentralized but even then like we were able to take advantage of all these wonderful um you know tools that exist like things like Colony I know this has changed for payroll um uh oh snapshot for governance and other things and it really is quite easy so and you know we've seen this time and again where dowels will just pop up almost overnight for like different reasons and people flock to them and that's very nice

um however the related challenge with this superpower is um it's actually so easy that dowels often launch without thinking everything through they don't think through all the little details and this can lead to ambiguity confusion and maybe sub-optimal design choices around all sorts of stuff so we actually experienced this firsthand with shapeshift where um I mentioned our organizational structure where we had um we're extreme leaders that had the ability to do all sorts of things um so during during the bear Market as it hit some work stream leaders decided to make budget cuts because they had the ability to do that under their token almost or

under their their work stream whatever that work stream was however after they laid people off some members of the community pushed back and said wait a minute guys you don't actually have the the ability or the right to do this based on our our structure um we kind of went back and looked at the Dow's founding documents and those people were right like it was actually pretty ambiguous so we had a question of like do work stream leaders really have the ability to hire and fire however they see fit what do we do like a bit of a tough uh question there the way we solved it is uh we fixed it in governance we addressed it in governance so we had this wonderful open debate a contentious yet respectful

debate about how to how to solve this issue and um after a lot I think we talked about this for a good month or so you know it's a big important stuff big picture but in the end um the community decided to um vote in a proposal that clarified it and said that yes in fact more extreme leaders do have the autonomy to hire and fire anybody under their work stream as they they see fit so in this case we were able to clarify with governance but I think the lesson here especially for newer Dallas that haven't launched yet really take your time thinking about the the foundational stuff you know stuff like tokenomics governance uh the business model or whatever your mission is that's very

important but also think through like the little details think through the weird edge cases because these will arise and the more you you get this stuff taken care of at the beginning the less you have to worry about maybe addressing things down the road because problems will pop up uh in terms of governance you know shapeshift is pretty straightforward we have our off chain and on chain layer but one thing I think we get right that I would recommend certainly for other Dows is to always have constant communication about what's happening for governance so we have weekly governance chats at the Dow that are usually pretty well attended where we can talk about all these things um people talking through proposals or people have made a proposal can sort of bring that to the

community talk about why they're doing it we can have debates about it and that regular communication is a really nice thing to have and then of course there's the on-chain component your your snapshot or what have you um but governance of course is the lifeblood of of dows and ideally with a good token uh even token distribution um rather than concentrated in just a few people all right so this is one of my favorites [Music] um so I I don't know how this saying would translate into Korean necessarily maybe there's a similar saying but in English we say sunlight is the best disinfectant so in other words um you know there's a lot of stuff that can be hidden in the shadows but when

everything is open to the beautiful sunlight of transparency and for all to see you tend to have better outcomes um so this of course relates to the the on-chain um sort of transparency uh we actually just heard a little bit about this or a lot about it from marcho with uh with Masari and we're this is kind of this actually relates so well I was excited to see that presentation before um so uh transparency I think is one of the most important superpowers of daos this is actually very very near and dear to my heart um believe it or not but Bitcoin magazine used to not be a maximum publication they used to be very open-minded this is back before like

ethereum even launched but um back in like early 2014 I wrote this article called um or talking about real-time transparency talking basically about how things would really change once organizations and businesses were able to have the entirety of their finances and all their activity on chain in a way that was completely auditable and verifiable and on a block by block basis like what a stunning contrast to the way things have been done before in terms of you know having to wait for quarterly reports and even then you know there's all sorts of risk that might be hidden um hidden risk is is everywhere we we saw this of course this wasn't a surprise when everything blew up but we

saw this in the crypto space with FTX and um you know all the the centralized lending it was opaque it was not decentralized and what do you know it blew up but we've certainly seen plenty of this in the um in the Trad five space as well uh the arguably the 2008 financial crisis there was hidden risk everywhere in terms of uh you know mortgage-backed Securities it almost broke brought down the entire freaking world economy uh and of course the lack of transparency also presents problems uh with respect to corruption in politics uh non-profits suffered from a lack of this corporate world that's everywhere so it's it's really good stuff this this on-chain transparency

there is a bit of a downside though and that's the fact that um maximal transparency can be confusing or maybe even misleading if somebody wanted to play it that way what I mean is there's a ton of data out there and we again we saw that some of that in the Missouri presentation there's a lot going on and even though you can sort of you know if the a motivated person wants to see what's going on they can they can look on chain it becomes difficult sometimes with so much data what do you do with all this this stuff there's a saying like analysis paralysis like I'm just over well with all these numbers so at shape shift we we solve this with what I like to call a dashboard um and I I'm this was built by a amazing

Dow contributor named Darwin and I'm just so proud of what we have at the Dow here um so you know the naive and easy way to go about this is like Point somebody to your your main net treasury or wherever your most your finances or assets are and say yep there it is and that's that's cool but um in many cases for for daos um all sorts of different projects it's much more complex than that for instance at shape shift the Dow has positions in in defy and like LP tokens uh it has assets over on gnosis chain which is used to handle like payroll to contributors and it gets complex so the thought is wouldn't it be nice if you could just easily access all this

data in a nice easy to digest way and this is what these dashboards are about you can see the you know the current up-to-date um status of everything you can see where these assets are located verify that yourself there's also dashboards for revenue and expenses and things like that and this is really a great way of leveraging leveraging that that superpower I think because um it takes away that ambiguity we also maintain a Runway spreadsheet as with most startups you know our crypto projects there's a finite very finite Runway right now shapeshift has about eight to nine months of Runway it's been that way for a while but these uh again you know nobody should ever be wondering well like how much longer is this thing going to last like there should never

that's like one of the most important fundamental things and it should be very transparent and clear this is what we often talk about in tokenomics is just the status of the runway for all to see a really quick brief note uh the the usdc unpeg that was like an insane weekend I don't know if you guys remember but like one of these things that everybody took for granted the usdc holding its Peg all of a sudden it's like holy what do we do now um shapeshift actually held most of its uh treasury in usdc at the time and it was very much a wake-up call of like this is actually some risk we didn't even really count on here we didn't expect so in response to that the Dow has decided to

diversify into some of its treasury into both usdt and LUSD and this is a way to mitigate the threat and not to have the eggs all in one basket finally Relentless and Crystal Clear communication about about tokenomic stuff about about everything we just talked about uh I I lead a call every every week where we talk about all the details we talk about the little nuances people can ask questions there is not a stone left unturned everything is out in the open and every the whole Community can can weigh in and ask questions as opposed to some sort of um you know what a contrast to like the proverbial excuse me smoke-filled room where like a couple

you know c-level Executives were talking about this and it's Hush Hush it's like no way this is the opposite of of that approach it's all out in the open and it's beautiful so let's go back to chat WPT other challenges and these are you know we've seen a lot of these for sure um you know I'm not gonna any of these could be its own talk really and uh again I'm not here to just tell you stuff you can learn on chat GPT but there are quite a lot of other challenges um so one other one one big Point here is that Dows don't magically create a global Utopia like it's not like just taking a project and being a dow makes it successful there's a lot of hard work to be done so even though all these

superpowers are wonderful the onus is still on the people with the doubt to to build up excuse me awesome stuff um so a thriving and sustainable Community um that's a nice to have it sounds great but the reality is um you know if you're a dow people are often like maybe not quite sure about whether to join or um you know especially in a bear Market it's really tough out on the frontier in addition to creating a resource scarce environment um people are also just kind of down on crypto people who would otherwise join a dow or like ah well the media is telling

me crypto is a scam I mean they don't join so you don't necessarily have that critical mass we do have a wonderful community at shapeshift and I'm very proud of it but um it is a challenge like getting getting more people involved that's just how it is right now um another you know I ideally everybody kind of joins behind a shared Mission yes we're building this it's awesome and you do see this with like some D5 projects that have a really good you know um sort of uh they have a really good focus and they're successful as everybody rallies behind something and it's great but in reality decentralized consensus is hard and I I mean this in the sense of the off chain like the social layer of consensus not on-chain consensus but

at shape shift we're actually still fighting to find a good product Market fit we have to have very important conversations about strategy tactics things like that um and and there really isn't like a you know it's not like there's a CEO that's going to say hey this is what you should do so as we wrap up here um I think this is one of the most important things because uh you know the lifeblood of a Dao is is its decentralized community so what do you do how do you take advantage of that Embrace disagreement um always Foster civil discourse and respectful debate you want people to be having disagreements about stuff respectfully um if of course if people are getting very trollish yes that's bad but um you

want to create an environment where minority opinions are are encouraged to be spread um on a similar note group think can be deadly so if people are starting to become sort of like sheep and being like yes we're doing this and at the same time very dismissive of people that have other ideas that can be truly deadly to a project because some of those those minority opinions might be the ones that could really make a difference so always discourage group think finally better to deal with occasional borderline trolls than stifle minority opinion in other words uh if somebody's kind of a little bit of a jerk but they're raising good points perhaps they might want to um that might want to be encouraged um so that's it final note remember why

we're doing this centralized institutions are incentivized to divide humans against each other this is wrong decentralization crypto endows provide a path forward for us to build a more prosperous fairer and beautiful humanity and I look forward to building that alongside all of you in the Dallas space thank you very much [Music]