DXdao - A digitally native collective building DeFi products on Ethereum

Transcript

sake is better than sushi all right guys we are here with john

kelleher of dx doubt john thank you for coming on uh the meet the nation and i'm super excited to get the dx dow introduced to the nation hi david thanks for having me very excited to be here so dx dial is something that's pretty interesting to me and i think uh getting someone to understand what dx dow is is initially kind of hard but then once once you kind of figure it out it makes a ton of sense right uh and so maybe to get people grounded could you explain what dx dow is in just a quick one one two sentence sure yeah i guess in a sentence i would say like dxdow is an organization for decentralization maximalists that uses reputation-based governance

to build launch maintain a whole suite of d5 products right okay so in in my mind the way i think of it is like a it's a a a new age uh business like it's a new age company right it's a company but instead of a company that's registered an llc or a c corp or an s corp it's built a suite of contracts on ethereum right and that's right and that's what that's what a dao is it's a dao it's it's a it's an organization but now it's on ethereum right and the genesis of dx dao is also really important can you kind of explain how dx dow came to be sure yes it's actually been around for a little bit um there's actually a

collaboration between gnosis and dow stack that launched dx style they had been working on it kind of late 2018 early 2019 and then in may and june of 2019 there was what they called an initial staking period and that's when um just anybody could come in and there are a few options to get an initial amount of rap or reputation which in dow stack is kind of the governance power so people could stick each or a white list of tokens or they could use the dutch exchange which was a product that gnosis had built and it was given to the dx dow basically so doing a few one of these few things you could earn reputation and then

that's uh how it launched there was almost a million reputation given out uh this was in june 2019 and but after that it kind of got really quiet the industrial exchange didn't get used there wasn't much capital in the dow there was some gen token but uh really that's just kind of important for the doustec voting but uh it was only you know a few thousand dollars so uh there really wasn't much going on but there were a handful of people that were still interested in pushing the dow forward and um and i think it's important to note here too that gnosis completely stepped back right after the launch they just had nothing

uh to do with it so they sort of like laid out the firewood and put the matches there and they kind of left you know and uh and so it was quiet for a bit but um the people that were involved knew that okay we needed to raise some capital to do anything and that's where this kind of bonding curve fundraiser kind of got started in the fall last year and then that finally launched um in may of this year uh and i can talk more about that in the first few products but that's kind of like the the genesis and gnosis is a role right so and i definitely want to get into the bonding curve fundraiser because i actually find that extremely fascinating um however i do want to kind of stick around at the early genesis history so

how was like so and and something i've been preaching in the bankless nation and something i say a lot is that any time there is a protocol there is code and anytime there is code there is also therefore a social contract around that code right like there the there are inextricable so how how would you say the social contract of dx dao came about in the early days and and you mentioned like the the token of rep uh and and uh that that is how you guys govern the system and it is distinct from the actual equity over or the rights of cash flow over the system right which makes the social contract of dxdow largely a meritocracy talk about the social contract of dxdow

and kind of how it was formulated sure i guess dx now at the beginning was kind of framed uh somewhat ambiguously right it was like a dow that could do anything right and and uh indeed i think d5 down may have actually been one of the names that was being considered but yeah i think gnosis's idea was to try to seed a decentralized organization organization kind of start with the decentralization and they did give the dutch exchange but there was an unproven product that turned out to not get much traction but uh so you know right off the beginning right off the bat there was uh 400 or so addresses that had reputation in the dx

staff and so they were given governance power over over this tao and kind of left to it so i guess that the social contract wasn't that specific you could say early on like other than here's a large group of people pseudonymous maybe some are known all over the world that have governance power in this doubt stack based out of x the the governance framework and uh and that was kind of it you know and so i guess in some ways the social contract or kind of like mission uh culture of the dow now has formed kind of

organically over the past year and a lot of it i would say is still emergent like there's a lot of things that are forming structure that's forming products are evolving etc um i don't know if that answers your question yeah yeah it does and the two key characteristics that i've i've got out of dx dao is is the social contract is one part meritocracy and and i really want to talk about um the separation of the rep token from the dxd token the rep token is the governance token where if you have this token you can vote and then the dxd token is the value capture token where you capture the upside exposure of the governance decisions and the products and services of the dx dow

did i frame all that correctly yes that's right yes and that that is what i would kind of like the current social contract that sort of has emerged from the early state like prep was there from the beginning txt as a financial uh right to that the revenues of the dx now was introduced afterwards more this spring right and so and now you kind of have this dichotomy this type 2 token system although i don't know if i would even call rap a token because it's non-transferable um but yeah people also like to say that rep is earned right and dxd is bought right and this really fascinates me because when we had andre of wiring on on the podcast he talked about how he was really frustrated about what

ended up happening with with the wifey token where the wifey token was supposed to be just this token that was supposed to manage the urine system the urine products and then it turned out to have this like this massive massive premium because what he didn't do or didn't realize that he could do was he could do what dx dow did where he separated the governance and the upside token right uh but since there was just one token just the one yfi token he combined them in together and then got frustrated that like the governors and the upside profit maximalists were actually supposed to be grouped into the same people uh so talk about how like how this has uh i would imagine one of the strategies is that with this separated governance token that the the

up the bullish case for that is that governance over dx gal can be more nimble right it can move faster maybe governance is more centralized uh in a fewer people that can understand these things better like how has that decision kind of played out in the evolution of dx dao sure absolutely and i guess i listened to that podcast with andre and it's almost like oh man i wish he had talked to the excel obviously he was busy building wire and it's an awesome product but yeah i think any time you know he talked about you know issuing that token basically to give governance to the stakeholders in the system right the people who had been yield farming early on and i guess initially that probably was the case but of course anytime you put a transferable token on the market

with a great product behind it and all that and a slightly bullish smart area that's gonna turn into speculation and i think specul speculators are not maybe even interested in governance right so when you look at how dx dow works um it's a rep it's it's uh it's non-transferable right so in a way uh so it's kind of more static it's people earn it these days and initially there was the initial staking period and a lot of that was not dissimilar to yield farming like a lot of it was kind of air dropped but uh it's inflated about 30 cents and almost all of that has been earned through some kind of value add to the excel whether it's you know doing development work like if andre was part

of the extent now he'd be earning a lot of rep building all these awesome products and and then that builds up your governance power so in a way it's giving the the voting rights and the governance power to the most dedicated the most involved and the most capable um you mentioned that it's maybe a little more centralized um i it's i guess it doesn't distribute as quickly as you know selling an erc20 so in a way it's hard to get it into more people's hands if it's earned but on the other hand you can actually see the district some sense that rights is accumulating

wi-fi or not right like you could they could have bought a huge portion of it um and you really just have no idea um so yeah i don't want to oversell how decentralized dx dollars but in my mind it's the most earnest attempt at like really being decentralized and i think at the moment it's something like 10 addresses can get over 50 so it's still got a long ways to go it is a little bit it's top heavy right but one of the things that uh the community you know this is one of the emerging kind of social contract ideas is to cap that uh reputation at four percent that's the current cap so if you already have more than that you are actually not able to like get more uh for the time being

and that's just to kind of help push it towards being more distributed and more decentralized and and that actually is really meaningful because you can't transfer uh the governor so you can't transfer the rep you can the reputation so you actually can't like it's not on uniswap you can't purchase it like you can only earn it but somebody could just spin up a secondary wallet uh and earn it from that wallet but i guess this is this is i'm going to go ahead and guess that the contributors of dxdow are largely like known right rather than rather than pseudo-anonymous or anonymous yeah i think most of the contributors are known to some degree and maybe you don't even see their face in public or know where they live or something but you'll

hear their voice on calls and you'll see their work and they'll see them in the chat um i think like there's room for pseudonymous participation as long as you know there's a track record right like you could be more or less anonymous i think even like going back to looking at like other days of early days and make her doubt some of their depths were pretty much anonymous right but people knew like what their contributions were and like you know when the person came out causing that kind of thing yeah totally um okay so where did i want to go next one one thing that the the other the other half of the social contract is that you guys are like trustless and decentralized from genesis right like you aren't taking the like the ico route where like that team

builds out the product and then eventually turns it over to the hands of the community it's community from day one right uh right it it started with the decentralized structure that right that it has it probably you know will have for at least some time right uncompromising on decentralization and trust right trustless from day one which somebody who has a twitter handle of the trustless date i really appreciate that right and especially with the bankless nation uh it's it's skipping over that whole messy period of decentralization theater uh and for those that don't know decentralization theater is where you claim to be decentralized but you're actually not um like 98 of the space right yeah yeah and to to to their benefit like people who engage in

decentralization theater kind of have to because they're trying to bootstrap a network right and so they have to like kind of promote community engagement how has community engagement been like promoted or curated or grown over the the history of dxdow sure like during the initial staking period gnosis and dumpster you know promoted it and that's what helped get it off the ground and get 400 addresses involved um but you know since then it it's kind of emerging like um when the bonding curve launched in may you know there's like some development work but there really wasn't a focus on marketing or kind of socializing or doing this kind of thing getting on a podcast and i think this is actually kind of just picking up now and maybe

one of the weaknesses of dsl although i don't know if it's really a weakness is that it's been a little slow to kind of get into the marketing right i think if we were a company that had raised venture capital that would have been like built up and ready to like go like locked and loaded from day one and and in the case of the extao you know like as more capital has flowed in more people have gotten involved it's sort of been forming like there's now a biz dev call on every monday um you know there's more twitter like people responsible for the twitter and uh engaging in conversations like the one we're having today yeah and i probably also attribute that to the growth and rise of d5 right as people are are losing their 2018-2019

bearishness and skepticism and now starting to be like more optimistic and and looking to the future and want to like participate in this new world where like the the the cool thing is about dxdow is that it's not you you don't have to like buy it um it's not a an llc you don't have to like get your way in through uh um what's it called when you're when your parents give you the the role to their to their kid like this is all like an inherent or something right and so the meritocracy of the system just allows anyone to participate i would imagine a lot of the excitement around uh dx dao comes around uh the release of some of your guys's products and just as a reminder like guys dxdow

is a company except in this new digital form in this new digital world right and so it has products that it sells and then it generates revenue to go into the treasury of the doubt this is the the pattern that we've seen throughout um like the last two or three months like urine is this yams is this based is this dx dow did this earlier and and maybe with a little bit more intent than all these other experiments where this is much less an experiment it's an experiment in its own right because everything in these in this world is an experiment but this this this has generally more or less quote unquote had a business plan whereas yams just were yams right and so what tell us about the the products that dxdow offers to the world and and how some individuals might

use them sure there are two products live today that are owned and maintained by the external one is omen omen.ethe.link if you were to visit that and it's a prediction market platform and it's built you know so the kind of delineation here is dxdow is owning and maintaining the front end but it is leveraging the conditional token framework that was built by hypnosis and so there is some close synergy there um where gnosis is providing this platform and dx now is taking that and building a front end to it and so it's it's similar to auger but unlike agar you have uh automated market makers so uniswap balancer style

market making on uh on the platform as opposed to like the xerox order book approach of auger and it also supports multiple currencies and is oracle agnostic so in theory you could plug in any oracle provider um today it uses this platform called reality i o which is a very flexible article because anybody can kind of stake an answer and then if you think it's different somebody else comes on and just doubles the bond and you can kind of go in this game and if if at some point someone feels they're kind of being bullied around or they just disagree the way that then escalates even further is they call arbitration so

omen is also arbitration agnostic and currently the only option though is claros so claro's court will decide uh the outcome if there's a dispute and there was actually one kind of um dispute that got a lot of it excitement and attention it was called cleros case 302 and uh it was pretty interesting it was pretty heated and uh got even emotional on the telegram chats but yeah so that's oman the prediction market platform and then the other product right before before you move on how does the x dow generate revenue from omen how does that make it into the treasury yes yes so so right now omen um is not generating revenue for the dx

data so the focus right now is on kind of building the product up building the market share up but there are like several ways you could potentially take fees out of ohm and just like any other exchange rate or or a prediction market platform but the strategy right now is the focus on growth as opposed to taking it but the social contract is that you know when omen generates revenue it's going to be routed into um the buyback reserve in the bonding curve which i think it will be the topic that we talked about last so uh for all the listeners stay tuned because that's gonna be i think my favorite part okay uh and then what what other products do you guys have yes the only other live product at the moment is mesa and mesa is a

front-running resistant decks and so it is similar to omen it's leveraging some gnosis smart contracts so you can see gnosis really teed things up for the dx style right so the gnosis protocol is kind of under the hood and mesa is the front end owned and operated by the bx now and uh the benefits of it are front-running resistance and so we've seen some traction with ido's so a couple of bigger ones were dmm d5 money market doing their ideo on mesa and then also m stable uh did theirs amstable was interesting as well because they initially had plans to use uh uniswap and i forget which was a uma that kind of got some negative pushback

because of the front running that was going on on unit swap and that's why they ended up choosing mesa which is front-running resistant um there's been some ui challenges that is there's a lot of gas costs and some ui that needs to be improved so there there have been some bumps in the road on the ideos but i think race is getting better and better and i think uh it's still popular popular choice among projects looking for a venue to do ideos can you explain what an ideo is i haven't heard that yeah you heard that before oh sorry um an initial dex offering ah ah okay so when you list a token through a dex okay cool through as opposed to yeah yes ieo i guess an

exchange offering which would imply a centralized exchange i guess i guess it's also an ieo i don't know how these things start we'll just like to come up with names but there will be a new three letter word to explain it in a couple months i'm sure yes okay so can you go into that mechanism how does it how is it front running resistant right so um gnosis protocol uses batch options so trades are not uh settled every block or kind of like you when you swap you usually trade it happens right away uh the trades are actually settled about every five minutes so the gnosis protocol basically hands this job off to solvers

kind of like independent parties running this service to try to come up with a solution that follows the rules of gnosis protocol and so it's basically trying to maximize what they call like trader welfare um you can think of it as basically like if i'm willing to buy something for ten dollars if they if if this protocol can hand it to me for nine it's like i got one dollar of welfare for each one of those that beat my the price i just wanted so it's basically trying to maximize that whatever people are the business offers are it's trying to find the settle price that kind of maximizes um the the difference between everybody's like what they had asked for and what they got and uh yeah so basically every five minutes

a batch will settle at a single price right so so front running doesn't really work in that right situation if you're front running you're you just end up being a part of the batches right yeah if you try to front run my order and you kind of got in with it we'd have the same price so good for you yeah good for you good for me and then uh how does how does that generate revenue or what what is the theorized revenue so again yes no no revenue at the moment so i think basic could introduce fees on the front end i think that's a little bit problematic given the all the gas costs already associated with the protocol like kind of loath the idea of adding more fees is kind of not a great one but

um gnosis protocol does generate revenue uh that goes to owl and so so one of the things that is in the works i i believe uh gnosis has kind of indicated that they're about to present something to the dx now where they would actually have provided center programs with which this gets kind of circuitous but gnosis would give gno to tx tao gno generates owl tokens which get burned by gnosis protocol so one path to revenue could be basically holding gno in the dx style treasury and basically making money off of how well nurse's protocol does uh burning fees

the other one would be just adding fees into the front end or taking uh some kind of a fee from uh you know ideo uh projects right so maybe they they list and pay some kind of fee or provide some kind of tokens again like the focus uh has been on market share and getting established it's only a few months old so uh there hasn't been any fees taken from the projects another uh yeah there's another idea that i think is kind of interesting but i'll hold off on that for now because it kind of involves uh leveraging integration with other potential dx style products right and that is like the bold case for dx dow is a you build your own products and and b they have uh basically no

operational costs we'll get into that in a second uh and so they're only profit or only revenue generating right because like users pay for gas users use the product if the product gets used there's revenue revenue goes into the treasury profit right uh the cool thing about digital collectives digital corporations is that like they don't cost anything right and so like with some i'm sure there are some exceptions um but the yeah the the idea there is is that like any revenue is revenue it goes straight into the profit um so so that's pretty cool what's what what's next in the pipeline for dx dial what are the products that you guys are ideating about or or currently have in the pipeline yeah so there are there are several ideas but there are two products currently in active development and the

next one to probably launch will be rails.eth and what this is is a front end uh to loop ring layer two just uh uh kind of like a venmo basically on the loop frame layer to just allow payments uh so it'll be kind of a simple interface to you know basically have a wallet on a web browser to if we wanted to send you know tokens to each other we could do that without fees of course there's the cost of getting onto the layer 2 but after that you're kind of gas free so very excited about that especially with the gas costs being as high as they have been late lately um and very excited in general about like

loopering and what they're doing in the technology and so it's really cool to kind of have a front end that uh provides access to their layer too and and have that kind of tie in and then the other product uh has actually it's been in the works for a few months it's called dx swap and the idea there is it's a fork of uniswap which now is kind of like i guess all the rage but uh adding governance of the fees so right now unit swap has the ability to turn on the protocol fee it's you know of the liquidity provider fees student swap would get one-sixth of that when it's turned on uh or they would direct it wherever they want of course it's not turned on right now but so

with dx swap that protocol fee will be managed by the dx now and could be said higher set lower and i think what's even more exciting though is the ability to add governance to the individual pairs so that like uh if if you're like a liquidity provider for each guy governance could be added for the lp token holders like the liquidity providers for that specific pair to set the fee to whatever they think is optimal um you know i i had this conversation with hayden on twitter forever ago saying you know that you should just allow the lp token to be the governance token for the specific market because the lps are going to know what's best right like they're going and there's so many

different ways that you could turn like the fees of a uniform model into something a little bit more like quote unquote turing complete right like a little bit more flexible a little bit more adaptive a little bit more right for the protocol uh he didn't like it because he wanted it to be like robots robots first which you know fair governance reduction governance minimize but i still think there's plenty of room for something with governance to be to be baked into the token so i'm bullish on that for sure yeah exactly unit swap is kind of a governance minimized platform which what makes it very elegant and beautiful but the idea with dx dom and dx swap is to add governance and see what can be done with that yeah so um i i didn't do enough research to be able to get it just for this but

where does ipfs come into play with dxdow how does that work right yeah so i think this is kind of guess the decentralization maximalist aspect of the dx style so the way products are launched with the dx dial is they are they have to be deployed by somebody it could be an honest person could be an anonymous person who's a member of the community or not um they deploy the code to ethereum and the website to ipfs right so there's now a hash on uh that links to the ipfs um hosted deployment of the website and then that is put into a proposal to dx tao and the community votes on

whether to uh set the the content resolver on ems so like the dxo actually owns the domain names omen.ethe rails.eth mesa.eth or dxdow.edu so dxo owns all of those ens domains and with an ens domain ethereum name service you can set the content hash so the bx style actually has the capability through proposals to set the content hash uh on its domain names and so the way you know sites are launched by the dx dial is when a proposal is made to set the content resolver to the ipfs hash of

oh man the newest version of the newest version of mesa or whatever um from a decentralized first perspective a trustlessness first perspective i just think that's fantastic like ipfs is this fantastic resource to allow people to use something from anywhere in the world right and so starting with integrating ipfs natively in quote-unquote i guess that would be something part of the quote-unquote social contract i think that's fantastic so let's turn to the bonding curve because i think that's the most fascinating thing about the dx dow product and that's where the dxd token comes from and for those of you guys who a reminder like the rep token the reputation token is the governance over the dow but the dxd token is the token

that has access to the upside of the treasury right and you guys submitted this on a bonding curve which means and the way that a bonding curve works is that you can per end and correct me if i get any of this wrong john but like the dxd token is always purchasable right so there's technically no like cap to it but if you want to mint more you have to purchase them from the treasury from the bonding curve right and so there is a price in the same way that unit swap works where you go to unit swap and there's a price for something you can go to the dxd bonding curve and there's a price to purchase more dxd and as people purchase them the price goes up and so it's a relationship between the size of the treasury and then the number of dxd tokens there are outstanding and

so when john here's talking about all these different products that have some different path to revenue and again correct me if i'm wrong but the revenue goes right into that treasury and so it's as if if it's revenue from from omen or or any or any of these products from dxtau goes into the treasury it's as if somebody purchased them without actually purchasing them because the the size of the treasury goes up and the number of tokens stays the same therefore the price quoted by the treasury uh goes up right and so the theoretical price that you would see in your block folio or whatever goes up when revenue from dx dow comes in uh did i get all that right yeah that's almost exactly right the only thing i would um kind of correct is

that the treasury is actually separate from the bonding curve contracts but they are linked so when you when dxd is bought on the bonding curve 90 of it goes into the treasury and 10 is left in the bonding curve itself in what is called the buyback reserve and similarly with revenue when revenue goes into the bonding curve a percentage is routed to the buyback reserve and the rest is routed to the treasury right and so uh you were telling me before this that the there's been some debate as to what that bonding curve should actually look like right now that bonding curve is actually a linear line but i hear there is a a an interest in making that uh that line actually a curve meaning the more people go about

this route and the more treasure the more revenue that dx dow makes it will actually make the token price increase faster according to the the parabola of the curve yeah exactly so it is a line the curve is a line funny enough um and there's been a decent amount of debate uh raised by dxd holders and it makes sense right because they're interested in you know the performance and price of the pxt that they hold uh there's been a lot of attention kind of given to the curve like should it should it exist at all should it you have a linear shape and there's a forum post and something like 100 replies on it and it's been the subject of much kind of

attention and debate within the dxtel community and it gets to yeah the fact that it's a continuous raise and can always mint new dxd at ever increasing prices right but uh it causes inflation when uh people mint off of the curve it also raises money for the dow so it's there's also a useful aspect to it but there's now this debate of like well how much should be raised right should it should it be stopped or should it maybe have an exponential slope to it so is the dxd token also available on dexes like uniswap as well yeah exactly it's on unison balancer

blueprint um and many others and even some centralized exchanges so there's like two parallel markets right there's like the free market which is una swap balance where all the dexes and then there's the market where like if the token is ever priced on uniswap at a price that's quoted higher than uh the price of the of the bonding curve people are actually incentivized to go purchase from the bonding curve raise that price up there in order to sell it into uniswap to bring those things into equilibrium uh but there is an arbitrage opportunity and you can actually see i'm pretty sure that spots doing it because i've seen that kind of activity yeah interesting interesting yeah i think that's one of the most fascinating things and and the governance over the curve and the shape of the curve i think

is also going to be really fun to watch john thank you for coming on the bankless meet the nation and introducing the nation to dx dao if anyone in the nation is interested in becoming a dow member and helping out grow dx dao where should they go check out the website dxdow.eth.link the dot link is a service that kind of brings up the website but also if you have meta in your browser dx will work and on that site you can see the products the description of the dow and links to the community it's actually developer chat is actually not just for developers it's where the core discussion happens so click on that join the key base and introduce yourself and that's the best way to start getting

involved with the dx now fantastic you can also follow the dx dow twitter at dxdow underscore and then john you want to plug your twitter as well sure it's jpk which is my initials and then cambridge like the city jpk cambridge awesome john thank you for coming on to meet the nation