DappCon 2023: All the ways we have fucked up governance - Eylon Aviv

Transcript

uh thank you everyone uh thank you philli for the nice talk and I think you just talked about um yeah okay yeah um so you just talked about you know Dows whove had who built a product but the treasury was larger than the uh than the value of the token I think Dix Dow experienced something similar and like just a few months ago basically uh decided to dissolve and SL self- implode uh kind of sad but it is is what it is right um so yeah all the ways we [ __ ] up governance I don't think we can cover all of the ways but I think we can try and cover the core uh reasons and uh yeah basically how to how

we can rethink it from the bottom up so uh a little bit about me uh I sort of joined the space because of the Dow hack in ethereum uh that sent me down the rabbit hole of Bitcoin and the separation of money in state and the Dows are like you know the separate the disruption of all power structures uh I was living living in China at the time uh I was uh advising a few startups and then had a startup some of my own um closed that down uh and started advising a few startups in the space uh one of them was Dow stack uh which was one of the early um sort of a governance systems alongside Aragon and Colony um and when I did that uh I sort of created like a way to decentralize all hackathons in etherum was really really cool uh only then Co happened and no

more hackathons um I was in the formation of DX da for those here who knows who know I just mentioned it which is uh collaboration between Dow stenosis and nowadays I most of my time or all of my time since D is dead uh is in collider which is a venture fund out of Israel uh uh and yeah I like the Dow space and I think it's core to sort of like what we do and how this ecosystem is going to grow so what are we going to go over um first we'll do a quick kyc uh I don't want your documents we just going to going to do a little show of hands of uh uh the crowd here um we'll break down Dows to First principles like core value propositions Advantage stuff like that uh where we went wrong uh

different aspects structural technological and Theological and how do we build back better um and sorry if anyone is cringing from World economic Forum memes um and yeah uh what we need to change and a proposed framework on how we can do that so okay a few core statements with a show of hands um who thinks uh current dowo and governance structures are broken yes okay uh who thinks we sort of I call it we took too many turns to chasing Utopia and we want decentralization and instead we got bureaucracy in middle management yes I see your face you're like oh yes this this hits right in the stomach uh and then I take it as you

know things worked briefly in the bull market because everybody was making money so no one cared right show of hands yes so people are like no yeah you're right and 99% of dows will dissolve over the next two years yes yeah less yeah see less show of hands all right um who's an active Dow contributor okay nice uh who is happy with the performance of their da yeah Luke all right right we're going to we're going to ask you about this in a bit um and who has ideas on how to change how Dows work all right cool so we can have a discussion all right um

anyone wants to who raised your you an idea on how to improve Dow governance agreed we'll talk about that anyone else yeah Tok vested token yeah okay yeah what sorry to make money that needs to to make money to generate Revenue okay yeah new core contributor Frameworks okay interesting all right so I think we'll touch on most of these things um

so let's talk about the fundamentals what are Dows good for right um what do they enable and unlock what can they do that you know Legacy systems cannot right anyone H yeah he knows no but he knows he saw my presentation so anyone else yeah theoretically decentralized coordination okay anyone else what are that was good for what you know traditional organizations do uh that you know Dows can enable that the traditional organizations can't sorry yeah okay low personal boarding costs

okay all right so we'll go into the first one I think as uh uh I mean he saw my presentation yesterday so uh so legal Arbitrage right that's kind of the first thing that we can do right and it's I'm not saying this is in a bad way I think legal Arbitrage is necessary and my take and you know some people heard this before but uh decentral uh sorry Innovation and regulation are two ends of the same spect if there is regulation Innovation cannot happen it sort of stops um and it's sort of like a it's it's really needed uh to actually do legal Arbitrage and do things that are outside the law and innovate and that's how Innovation happens and you know the photo here on the bottom right is is a uh uh referring

to the how test right a guy growing a Grove of oranges and selling those oranges and that's considered a security so um yeah another thing right transparency right right all Dow all these governance tools are inherently transparent um and since they're inherently transparent like you can see what happens you can uh with the next point which is programmability you can program kpis okrs you can program if something if this happens then that happens if a contributor does something you know he will receive the reward and that that creates like a very interesting design space it's very complicated and especially like once you design something it's you know people will do exactly the thing to uh sort of like game the system but it's still like

one of the core inherent features of dows right so all right what are some of the problems that we have today uh you know structural technological ideological maybe we touched on this uh so I can just continue so um this who knows what this is oh no okay what what is thisy yeah from within right and so you can see sort of like the highlights you know talk as frequently as possible and it great clanks bring up IR relevant issues as frequently as possible haggle over precise wordings refer back to matters that were decided uh be word the propriety of any decision right this is Dows guys this is how Dows function

today um if you've been in any Forum you know there's just like super long post people are debating endlessly on things that don't really matter um so uh something to keep in mind who knows who this is yeah huh it's Brian and what what is this referring to exactly so you know it's kind of like this thing of uh you're looking for leaders as you know it's you know the what do you call it like the a summary of what religion is right like looking

for leaders Looking For Something to Believe In And I think that like the point that I'm trying to make here is that you know PE people don't follow ideas they follow people like you need someone and so one of sort of the ideological mistakes I think we've made in Dows and governance is we said okay Kumbaya everybody votes on everything no one is responsible there's no accountability there's no leader there's no someone you know at the helm saying where we're going to go and it just breaks down right so the next point is I think you touched on this like token holders right it's essentially plutocracy and plutocracy is just creates you know broken human behavior and the meme here is you know we were promise the ownership economy right we're all happy yes we're going to own everything blah blah blah and then you

look at the um at the voting power distribution and it's like okay six entities that are is um uh the VCS that invested in compound and Robert Lesner who control you know 50% of the voting power so decentralization right um so the next point is like what do we vote on right like we vote on everything and this is referring to vitalik's paper on convex versus concave decisions right uh the question is like if we have $1,000 and we need to divide them by uh 10 people then uh a DA could make that decision right and allocate different amounts to different people but I think the example vital gave is like if you're a military strategist and you can attack point a or point B like you don't want

to send half your half your troops to point a and point half your troops to point B because you're going to lose both both uh sort of like points um and as I said like everybody votes on everything and the result is like these do two donkeys who are tied in a rope and they cannot eat eat from the uh bail of hay right because um yeah they're each pulling in a different direction and nothing really gets done and another thing is what I call sort of like make make belief governance right we have three out of five multi we have five uh entities with 50% of the voting power and here you see like the you know the dean Spartan joke about you know the making it like as cynical as possible right uh what color lber should have

founder by you know everybody says he should buy black and then he decides no no no no no I'm going to vote with all my power and it's yellow um and uh uh also the result of the Sam casman manian um uh tweet storm about how uh the Fay protocol uh got hacked uh the fracks uh and tribe sort of uh uh Camp was supposed to get like about $80 million back a proposal was passed to reimburse them and then that proposal never got executed ah such governance much WoW right um and yeah later on they made a proposal to veto that previous proposal so not very much decentralized right so a quick recap right everybody votes on

everything nothing gets done it's the donkeys right we have a single stakeholders which is uh token holds and their only incentive is to maximize token value uh right right uh we have governance the as we just saw and the bottom line is that you know running any organization without a leading figure is going to fail so just one word about the tech stack uh we started with like Dow stack Aragon and colony which is like massive beasts right you could um you could build like everything that you wanted within a single framework and the result is is is that it was just way too complicated and no one actually used any of these systems in a scalable way uh and then what happened in V2 which is sort of like the state that we're in

right now is the complete fragmentation right the Dow treasury went to save the voting structure went to uh snapshot uh people uh sort of like compensated their employees using coordin tape they paid salaries with super fluid they used ens names to uh uh set um what do you call like roles inside uh organizations right and so like where we are right now is the age of composability right you can already connect safe and snapshot with reality. or with safe snap right you can um you can create uh I'm a bit chilling but you get like a um uh what do you call like delegation processes and figuring out like uh uh professional delegates using butter you can aggregate all these things using pal and and sort

of like there are more Dow tools that going to be weav and composed together uh and that's why I think like we'll see in a bit like how do we build back better right and sorry for the world econ economic Forum memes it's bit cringe but they have they have just have good like got to give it to them um so one thing that I think we've kind of Forgotten and it's kind of like the saying of throwing the baby with the bath water that's what we did in crypto right we're like yes Dows are decentralized organizations we're going to build everything from scratch like we're going to humans are going to behave completely different that they did in the past and everybody's going to vote on everything and all that stuff and it doesn't work so what if we take some of the um governance lessons from

history we have 300 years plus of you know corporate governance we have the way you know the American and French Revolution structured government with three branches uh uh that sort of like uh uh create checks and balances um and why don't we take some of these Primitives that no work in uh human organization and apply them onto Dows right so who knows what this is yeah yeah so this is the optimism sort of like governance structure right they did two houses token house and citizen house one is transferable one is non transferable uh and sort of like these things operate uh together and you know there are decisions that each house makes alone and there are decisions that

um they make together right so this interesting primitive basically is what I want to double down on but instead of just two stakeholders we should have three and what I call them is you know you have the investor which is what we have right now with with the tokens and I think this relates to also what you said uh Phillip uh about you know separating the Govern from just the uh uh the return on capital or the investment right so you have the investor you have the Builder which essentially represents the team who are building the protocol and you have the adapter which is are the users who uh use the protocol and uh I think the main difference between web 2 and web 3 right is in web two um a company like Airbnb who had a lot of like people who hosted

houses who helped the platform grow who created a lot of things in it they were uh when A&B IPO they wanted to give these guys shares they actually managed to but it was like less than 0.1% of the host in United States in certain states that were able to participate in the IPO and those he did you know you know were very well off and what you know web 3 enables us is to have the traditional way of there's a team there's investors but also cut a slice of the pie uh for the adapters right so to recap this uh we're looking at leadership we're looking at sort of like at the V diverse set of stakeholders uh or constituents and we want to build a system with checks and balances and I have a quick

story about like myself in China uh right I was in a in a club like just with Chinese people I have no IDE no way to communicate with them we're playing this game I'm completely drunk obviously right playing this game there's like zero and five and two and like I'm doing a zero and he's doing a five and he's like I'm drinking he's like I'm really confused and I get back home and I wake up the next morning like what what what the [ __ ] we were playing and then okay wasn't zero five and two it was rock paper scissors right so it's Glo it's a global phenomena right so um a drinking game of Rocket Pap scissors um so the investor right let's look at each one of these these stakeholders like separately so their

voting power comes from like ve token right their motivation is to get future returns right uh you know they can trade it they can do Market uh making liquidity and Y yada also could be uh decide emissions if that's the protocol and this is how curve works right we have the Builder right these are people who work for the protocol it's sort of like the team the executive team the rest of the uh uh employees and you know their motivation is to uh is to capture market share right and create the best product there is um and then we have the adopter which you know they gain voting power through uh paying Fe oh important to say oh okay okay it doesn't show here but uh this voting power is non- transferable it's

separate from the token right also here um uh the adapter their motivation is to get value from the product for the cheapest price right uh and so like they get voting power through paying fees to the protocol and it's also non-transferable right and so the way this kind of looks like in theory right is that you can create two of these constituents and they decide on certain decisions right so maybe the investors this is take a company that is you know fully uh formulated and you know very successful like I don't know like a right the so the investors and the uh adopters could be able to decide on uh the executive team uh the builders and the uh investors will be able to uh approve grants programs and like this is

sort of how this could work in Synergy um and the nice thing about this is that you can use like uh existing primitive so you can elect representatives you can create sort of unions you can create associations of you know adapters who are all want to elect a certain unit that represent them and um and know stuff like that and another thing that is it's already emerging but it's the it's professional delegates right in Alva you have chaos Labs uh you have Gauntlet who are responsible for risk and they are delegates that are uh you know get that sort of that mandate from the da and why not have that for more things like you have karpaty who are doing treasury management you have um f other folks that are doing risk um and yeah just find I think I don't know I'm

from Israel like uh politics is completely broken but it was supposed to be that you know your finance ministry might have a background in like Finance in Israel it's completely not the case uh but you know that's kind of the goal like hire professionals to fill in those roles maybe even compensate them and stuff like that uh and so yeah like using snapshot using saves in in sort of like that weaving of uh the new Dao in the V3 uh era and then you know this is kind of like how it could look like obviously it's all orchestrated with safes uh you can have just like safe is doing with guardians um and yeah you can have like you can elect sort of like delegates with kpis uh and the result of this is something that we've known for I

don't know at least 200 years is a board of directors like that's how it will look like it will be transparent it will be programmable like at any point you can remove these board of directors uh and they are no longer or you know the certain delegates they're no longer controlling uh or yeah and so that's kind of like how the full kind of meme Works um and yeah I think that's it yeah questions thoughts ideas yes thank you yeah I'm on time as well no questions question thanks for the talk L really cool

um totally in on on optimism governance do you have any other ideas than that because there must be more right what do you mean sorry is there other ways than the bamal optimism governance model isn't there something even weirder and crazier we could do going down the path of like more weird things like more sort of like crazy stuff it's I mean I I know perhaps this is like someone like I don't know Steve Jobs will come and see the future and see like how this is how humans can organize in a decentralized way but I think taking things that we know that work which is you know like checks and balancing systems of three different

entities that are you know putting each other in check like you know judicial uh executive and legislative branches of government um and applying them to something like this I think it makes more sense and then it's I guess it's tramal um I think doubling that down on you know Philip's uh uh notion um so so yeah I I I think I think we need to take existence systems apply them to what's working or like you know what's the value propositions or the unfair advantage that we have with you know programmable smart contracts uh and build on top of that um I don't know if there's some I don't know if italic hasn't written something like fully fledged on about this then who can yeah any more questions

hi great talk thank you um what do you think about implementing Dows not for protocol governance but for like general purpose organizations I mean like um I don't know maybe some kind of business or um a company yeah I I mean I'm in the camp that I mean it doesn't have to be like an on protocol right it doesn't have to be like fully decentralized but what this enables you it's kind of like that aspect of legal Arbitrage it allows you to do what securities do not allow you to do and it's to give shares to anyone from the first moment right so I think any platform any uh sort of like product that depends on user generated content

or like user contribution this could be like Airbnb like people hosting their houses Uber people driving other people could be social media it could be like anything that requires other people which I think is pretty much like most products right unless you're a consultancy um then like why not build it in like this type of way and I think over like we have a lot of like legal arity like water DS where they Incorporated all that stuff but I think just that is going to be very interesting in the future uh developing allowing like essentially any business to incorporate quote unquote like that uh giving the users their share uh and yeah this is just like an interesting anecdote I have a friend who's doing like all of these websites of um like top 10 uh like like

they have uh reviews of like headphones and like electronics and he's making a lot of money it's like one of the biggest companies in the world for this uh he's making a lot of money from the referrals to like Amazon he's like I'm completely bootstrapped I've never raised money and I want to figure out how to give the people who are buying using my network using my websites I want to give them back maybe some cash back and stuff like that and he said like he tried everything with you know like web 2 to do that but it's so complex and I told him this like there's an mvy P here that can be developed using like usdc in the back end and like you know you can accumulate points on the all and the on the website all all your websites and get some money back so

I think this decade is really going to uh just in general it's going to be focused on like more ownership to the people who are uh participating in uh whatever the company does or contributing to that so I think we'll see a lot more in the future thank you okay I'm sorry but we don't have oh we have okay yes we have so I think it's was a great talk um are there already projects that are implementing this uh type of to so I'm speaking to a few uh it's difficult it's difficult to do these things I think like the big ones that have already

structured something I think is I has done a very good job at like just like delegating a lot of stuff right there's not like many everybody votes on every everything you can argue that it has some uh positives and negatives and but yeah like so they're doing their own thing I am speaking to the folks at safe uh to figure out if this could be implemented into safe and safe already has created some of the Primitives for this like you know the delegation and um and the guardian system so maybe the delegates could only be Guardians to begin with to just like you know treaded this like very slowly yeah I'm very curious to to read more about the best practices yeah and um also from your side what do you think

are the biggest risk of this framework H I guess I mean I haven't defined at all the parameters right so you could say each house has 33% but is that right like when should the user like every company starts with just in like it starts with a team right and then investors join then when do the you know users join or the adapters join join and all of this is a question of like how do you allocate resources or voting power to each one and I have no idea how to do that like it's very very primitive and there needs to be experiment experimentation in this so and yeah I know wondering if this could do very quickly degreg to you know also like

bureaucracy and people stalling things just because they have power so yeah I see yeah okay thank you yeah yeah thank you very much I we don't have more time for question