How to DAO

Transcript

hello everyone thanks for taking the time of this afternoon and sticking with us till the end um I'm gonna give some ideas of answering a question that clearly nobody has the answer to at least yet uh so um yeah let's talk about how to dial we already spoke about forks and doubt drama and you know we covered some of the cool use cases so um who's Aragon and what are we going to talk about today um argon has been building Dao infrastructure since 2016 some of the biggest projects in the space are using our stack including um Lido the Central and curve for example uh just this year we relaunched our

entire stack so we have a new Protocol New SDK and a new app and we've also made some meaningful steps towards becoming ourselves um so I'll talk about you know why are people building the house um you know what are some of the trade-offs that you would face when going through those steps and then you know also I'll be touching on like what we've seen ourselves and what we've seen play out into the ecosystem as a whole so what is a Dao um a very loaded question uh and you know there are like Myriad of different definitions uh that circulate around the space uh this is the one we

sort of feel most closely uh connected with so a doubt is an organization run by smart contracts on a public blockchain so it's decentralized because it's because of the network it's built on so it's built on trustless permissionless blockchain like the ethereum network and like you know polygon and like a bunch of other scaling Solutions around ethereum it's autonomous because permissions and roles within that uh structure are granted through smart contracts there isn't an admin saying who does what or there might be like it's a it's it's an option the point is the rules are encoded in in smart contracts and it's an organization meaning a group of Agents

so far we've mostly seen people and businesses but hopefully soon AI uh so it's a group of Asians that coordinates towards the shared objective um so with that definition in mind you know let's look at what's been happening in Dallas over the past you know six seven years um it all started with an idea that vitalik shared in one of his uh blog articles around thousand ducks so this is autonomous organizations and these autonomous corporations uh in 2014 then just a year later started talking about creating maker

which is technically the oldest Dow that still exists um you know it was like off to a great start and then 2016 comes across the entire ecosystem is very excited to create this like joint fund to to fund development on top of ethereum called the Dao that notoriously got hacked uh and then you know nobody wanted to talk about those for a very long time except us so so this is uh jorgin Lewis who are the founders of our project came together in 2016 and started building the governance infrastructure that you know products like lighter and curve we're using today uh 2019 another very important year for Dallas the molok uh

governance framework was born with uh the very important feature of Rage quitting uh which allows you know minority token holders to exit if they don't agree with the majority decision like philosophically a very important mechanism um moving on 2020 compound uh becomes like the largest Dao uh through their liquidity incentive program since then we've seen a lot of protocols doubtify you know uni swap ens most recently arbitrary and optimism um we've also seen mainstream media pay attention to those uh because of more like memetic use cases like Constitution

we've seen a lot of scaling of chain and we also seen the emergence of nouns which is one of the more interesting experiments in collective decision making and coordination um we're collectively writing history so we don't know what's next um but I'll try to provide a a few thoughts around how you can think of structuring a Dao and like why would you do it so why are people people building doubts today uh the first group I would say is protocols and products so a lot of the large um successful projects in the space for

in that category to make our ens optimism and and a lot of others uh and the idea there is the Dow controls yes a treasury but it also controls an underlying protocol that creates some sort of value uh and brings it into the world uh we have work collectives which are like gaming guilds like yield Guild as well as service provider collectives uh the work and India now being two of the more well uh no names uh Capital collectives is probably the most prolific use case for daos so it's

um you know let's pull our financial Capital together and figure out what to do with it you know we have like philanthropy cases like Unchained fund uh as well as just pure investment uh cases like Hydro Ventures and Flamingo uh no name but the cool logo so you can figure out what it is um one of the more interesting things that became like came into existence during the the euphoric bull market was what I like to call clubs and Cults um those are Dows that are usually congregated around a Persona an idea or

an activity so cross house uh they want to buy an NBA team the other indistinct picture is the Rihanna nft which is like yes they are some royalties related to you holding the nft but it also is an on-chain marker that can signal the boundaries of a community and then there is the the board Apes that you know I think following the clubs or Club Cults category but you know those are like top level markers of what is the general direction that we want to we want to take this community forward um a more interesting question is why

distribute ownership because Distributing the governance token is in essence Distributing ownership into a into a project so so we have uh origination which is we're gathered here today to build something awesome together right um and it's like a very like Grassroots way of thinking about those then we have crowdfunding which is 2017 2018 era a lot of icos it was like basically Kickstarter right it was like oh you know we built this cool thing give us money now and you can use it later um and funnily enough a lot of the projects raised a bunch of money and then they were like oh we're gonna go and acquire users so what happens uh in 2019 2020

uniswap comes and you know instead of raising money to acquire User it's like well you know we can shortcut this thing PayPal did it in the 2000s with like here's 10 bucks to use our product so units well did that retractive airdrop and you know revolutionized the growth hacking game in the industry um and like all those three types fall in the general category of aligning incentives between stakeholders which is honestly the main reason Dows are being created everybody's talking about the other one which is remove Central points of failure or like bring resilience to public infrastructure public digital infrastructure at this point um

honestly very few projects are either maturity where they need this but we keep talking about it all the time because it's like a cool one to talk about in reality very few projects actually launched out for that reason at this point probably at some point in the future it will be an important one so um you know we've had about six seven years of Dallas we're gonna look at what works uh huge shout out to Justine from the optimism Foundation she compiled this amazing database of the Dow governance library and if we look there most Dows have the following characteristics they use one token one

vote which is it has a lot of problems but it's the one thing that we've seen to kind of work they have some sort of Delegation layered on top of that they have a very empowered core team that drives the project forward um and you know honestly some of them are just a multistic they're not like a real Dao and it works for them at their current stage of development that's okay so how do we Dow um none of the stuff that's coming is clear-cut I'm going to be generalizing and like making a lot of simplification token distribution is the most important thing that someone creating a dial would do um a lot of the problems with what I'm

talking one vote can be fixed with like more thoughtful um token distribution I was so excited about this slide I I forgot to update the visual on the first one but like answering the question of why you are Distributing ownership is a very important consideration into Distributing that ownership right so why are we doing this and that's going to evolve over time right like if you're building meaningful public infrastructure that is gonna have a lot of more valuable stuff built on top of it like resilience would be important but like at your current stage why are you Distributing ownership um who are we which means um projects usually have this like

Community which is just like a blob of people but in in reality the community is a myriad of different stakeholders so it's it's important to figure out like who are our stakeholders that we want to distribute tokens to what are the sort of the actions that they've done in in the past and we expect them to do in the future and figure out like how many tokens we want to give them do we want to have them invested Etc et cetera uh and then talking about vesting Bitcoin took 14 years to distribute 90 of the supply most projects today distribute 90 in the first four um and that's a problem if you're building something that should last hundreds of years maybe

you don't want to give out all the the incentives in the first three months so those are like important considerations to to to go through governance um so so that you'll never do this right right like there's going to be someone who's going to be unhappy with the governance you have at any point in time until hopefully at some point in the future you have it right uh and with that in mind the other important constraint with governance is it should be functional right you can't you can't build like a governance that's very complex you know realize oh this doesn't work and then go back

um so probably you know start with a multi-sig or start with one token one vote and then like keep iterating add more complexity abstraction functional delegations etc etc like our entire new stack is built around the premise of organizations evolve and their governance should also evolve to meet their needs at that time uh this is a pro tip you most likely need an emergency multi-sake right like we talk about decentralization a lot ultimately most big projects where there is a lot of value at stake have some sort of emergency multisig that can more

often than not just like veto things right you see a malicious proposal like the one that tornadoes uh suffer from you know hopefully there is an emergency multistick that can veto this sort of effectivity um and like another example is like you have all your protocol liquidity on a Decks that Dex is getting hacked you don't want to have the withdrawal uh function tied to like a governance cycle that's multiple weeks long right you want to be able to like act fast for them to scope that emergency multi-seek like well so it doesn't become a capture uh vulnerability but it's it's very likely that you haven't thought through all the edge cases and

you need one don't fight it you need one um strategy so uh there are more than one way to boil an egg basically a lot of projects have this like Mission Vision Values thing and that's The Guiding Light of the project but what what we've seen in this space is that projects that are successful at shipping they have something more fleshed out some some form of strategy uh around okay how are we going to get there right um and one of the important elements there is you cannot have a point in time that sees all the future trade-offs so

instead of giving a recipe you would give a framework so you would provide guidance on how are we thinking about certain trade-offs and certain decisions and ideally as you decentralize further the community would be able to like follow and evolve that framework uh execution is King so um I can I can write the most beautiful and amazing strategy and then if the team that actually ships is not bought in it doesn't matter right it it just serves as like I told you so at some point down the line but like you need buy-in from the stakeholders that are expected to do the actual work

uh which also means I mean ultimately you rely on a team of sorts and then I love the picture on accountability because we're building in the open and a lot of us as kids you know took a lens and burned some ants um and you know that's one of the side effects of working in the open so it's important to provide accountability it's important to also demand it but at the same time you shouldn't um you shouldn't become like a help desk for a project to be successful at executing probably the teams that are doing the work have to have some some

degree of uh have to use some of the grifters from the from that community um managing the tensions when it comes to operation so we we had that we had the we had the 2021 2022 EPO of like oh it's a Dao why are you telling me what to do well so the thing is if you don't have structure like any organization that achieves anything has some sort of a structure right and and having That explicit is actually extremely helpful because when you have legitimized power that's tied either to a domain where you're empowered to make decisions or to your

token balance it closes the door for a lot of like political soft power games that are ultimately more corruptable so so having a structure doesn't doesn't fight with the idea of a Dao right like the ability to evolve that structure not having entrenched that's what should Aspire for but it should not be complete Anarchy in there right um compensated contribution it's important to have um some some level of continuity of effort but also just anyone can step in and contribute we saw that this doesn't work

right like it there were a lot of groups that were basically just going around organizations submitting proposals doing close to no work they were just very good at writing proposals and they exploited out so shortcut here have some sort of continuous payment streams to to the teams that are doing continuous work and then you know rfps and proposals for discretionary projects two minutes on the clock and it's time for Rapid Fire round okay so uh there are a few other topics that come up often when we talk with aspiring Dao's legal just go talk with a lawyer maybe two because some of them have like very extreme views

uh when it comes to tools you don't want to change your entire stack just yet a lot of infrastructure is not existent a lot of a lot of Doubt specific tools might over complicate your uh way of doing business uh the most important thing is just keep that door always opened again a small chill like that that premise of continuous evolution of the tools that a project uses is you know something that we have at the core of our new stack um on-chain versus off chain is a very important question as well that we get a lot putting things off chain uh sorry putting things on chain implies certain security guarantees and there is a cost

to it and like when I say there is a cost most people think like oh yeah you know like gas fees and no there is also cognitive cost because you have to think through the rules and boil them down into a simple enough logic that you can actually encode on chain and that's often very time consuming so like a mental model I use is like putting things on chain is kind of like insurance right like if if the thing is not valuable enough probably I don't want to pay for insurance like I'm not going to insure my lighter I'm going to insure my house right um so that's like a framework to to consider uh on versus off chain when it comes to community doing an

airdrop is not how you build a community you should have a community build around stakeholders that are relevant for whatever objective you're trying to achieve you know decentralizing governance and ownership is an amplifier but it's a way to build a community and lastly Treasury uh work with a professional or at least get get some advice from a professional this is another element where you'd always be wrong you would either have too much of your own native token in your treasury we saw a lot of projects go down during the correction or you have too little of your native token and like your treasure is going to be too big for for you to manage effectively thank you right on time

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