The Two-Way Mirror: What DAOs and TradFi Can Learn from Each Other

Transcript

Next, we'd like to invite our speaker, Mr. Lam Chen. Mr. Chen, the floor is yours. Hello everyone. Pleasure to be here today. Uh well before we begin I think I want to talk about interesting topic from two completely separate and different worlds here financial world. I just want to curious how many people actually work in charty uh raise your hand or web two in the past. Okay. How many people work in web three or represent the DAO? Yeah. All right. All

right. All right. So pretty good balance. All right. So basically you got two completely different uh financial universe right? We have the chatfi suits and tie hierarchy and then we have the new kids on the block DAO represent by our web three right and then but today I want to show uh showing the line on what can DAO and what chart learn from each other. So what can Dows learn from charty in general I think there's three points here I'm going to tackle on one is treasury diversification uh second is risk management best practices and third is operational chaos versus established standards. I'm going to go deep into each of these boy in the following uh slides here. So first let's talk about chart for treasury is strong right and

we I don't think we give you enough praise for it. If you look at this picture here what can you see? Then you can see that there's commodities, there's gold, there's real estate, stocks, bonds, forex, so many different diversified investment options actually that's actually available right uh from that people can trade and trafy company can actually have access on and also good to know that this it's actually come with much higher liquidity in traditional markets like for example if you let's say if Apple or Microsoft one of the fan company were to sell their bonds for $1 billion I think the market can actually absorb it that's a huge size but let's say even 1% of that like$10 million US were to be sold in a Dow Treasury token that basically that

would probably tank the price of the Dow Jes token significantly and also the third point here is that the professional treasury management capability uh from the charty company is actually quite strong they can have rebalancing discipline and proper risk management and scenario analysis uh so I want to explain why DA need to have treasury diversification. uh one is that so the majority of the Dows their own token is actually in their own token but if you actually think about this most businesses trfy treasury they don't they do not list their own stock as an asset on their balance sheet but DAO somehow actually list their governance token on their

treasury and then due to this right but I think this actually should be discounted because uh that DA token is not the same as like a stocks and the second point third is kind of linked together but the there's huge volatility in the crypto market and you know during the bare market most token usually go down uh 70s 80% right and then they heavily correlated with the blue chip ethereum or bitcoin so then when the crypto crashes everything go down and this create a liquidity crunch so further on here is a slide here this is dowo treasuries this data was actually compiled from deep dow in early September 2025 so if you look at The blue colors the blue color represent the

own native token right what can you see here the majority is blue so the median line these are by the way these are the top 10s by the size of the treasury so um the median is about 98% which mean that the majority of the treasury is actually in their own token but what does this mean though this mean that if there's a significant liquidity or market bear event then going to take the majority of the heat right and even the outlier here if we look at like sky they still have major majority but like 57% is still in their own uh native token and then let's look at another picture here to illustrate the point. This is also from deep dow. Uh so on this graph here we I've already excluded the native assets. So here we only looking at the

non-native assets. The yaxis is in millions US dollars. So if you look at even the most more diversified one like mantto sky enso what what do they invest in? the the smart one invest in stable coin, blue chip, ethereum, BTC and then liquid staking and you these are actually the one that will be able to save you or rescue because basically if you think about a traditional chart company right you need cash in an event like in a black swan event like a corona covid that happened right you do so that was the same thing you also need to pay for your working groups pay for delegate pay for programs pay for things to run right so even for the top out of the five in the top 10 here they actually only have about like 2 million on

non-native assets. This is a potentially a big risk in when it come to a bare market, right? Because a market will will be very uh will not be forgiving. And then let's look at the side of the risk management here. This is um bintock is a decentralized credit based stable coin protocol. So back in 2022, okay. And um they they they were already decentralized the whole governance the process but unfortunately the the code was working properly right they professionally audited by smart contract firm but unfortunately one of the hacker use a flash loan attack. What is a flash loan? Flash loan is a transaction where the attack um borrow and then repay in

the same transaction in the flash of a of a finger. Right? That's why it's called a flash loan. So in this case they basically they were able to borrow a billion dollars and then from there they buy the beans token which is a governance token and so with the 1 billion they were able to borrow they use it to buy the bean token and then since now they own the majority of token according to the governance rule they only need to have twothirds of the governance token in order to create an emergency proposal. an emergency proposal mean that they can just create it and execute right away and that's exactly what they did. They create a malicious proposal right at that moment and then from there they were able to drain the treasury asset taking away 77 million in non-bein stock assets so

effectively killing the protocol overnight. So I mean obviously some of the lesson is that if there was some robust robust risk management practice and then also a security council or time delay approval then it could have prevented this from uh happening. So in in charty here's another thing I call this the anti-fragile approach that could be somewhat relevant for Dow trees in general for charty in general if you look at it I would say the majority like 70 80 or 90% would be in super safe low yield but uh low yield but also very safe u assets and then the minority maybe 10 or 20% in high-risisk tokens or

high-risisk assets. So DA can actually can also apply the same. And why why is this good? This is good because it actually limit your downside while retaining the upside potential. So you still have a bit of a risk like high yield to be able to earn some yield but then you don't actually like gamble the majority of the treasury away. Right? So this is um a a good effective way. And then the third problem that I mentioned earlier right have to do with the DAO operational challenge. If you look at this picture, what what what can you see from here? This is a very busy office, right? But I mean, if you look deeper into it, like it's who who's a boss, who's doing what? And it's it's actually very chaotic, right? And who

even knows what the what what's the other workers are doing, right? It's uh it's quite a big mess. But that's basically what's happening a lot in a lot of the DS now day. There's not a lot of standards like delegates are not really clear on what need to be done, right? The rows are somewhat fluid but also opaque. um it's there's need to be more standards for it. And then second part is about DA need accountability and responsibility. So let's say if you were a chart or company or a third party organization that want to deal or have contract with a DAO, whom whom do you deal with at the DAO, right? It's DAO is not like a legal entity per se. So it's not like a counterparty in TRFI. If you go talk to ABC or Sony corporation for

example then you know that there's compliance officers there's people there there's a faces right but then here you have to do the due diligence to be able to find out and the third problem is you have to do with I call it the principal agent problem in this case so the principal are the token holders right and then the agent are the delegates because a delegate the way it works in DA is that token holders they delegate one time their voting power to the delegates and then afterward the delegates control the vote but then they can vote however they like. Usually it's just a one time that's why it's a set and forget thing and it's this create a principle agent problem because they don't have the align incentive right it's not they vote but it's not really

based on measure performance or not KPI and that's can create trouble but it's not all well I think talk a lot about things that are troubling DA as well but I think now we can look on the other side of the mirror what are the things that could be troubling that charty could also learn from Dows as well right So these are the three key points I'm going to talk about. One is have to do with real-time transparency. Second is composability or modular execution and third is a global contribute contributor network with our legal entities. And what what does this mean? I will go deep into each of them again.

And for DAO, I think we we all know that DAO and crypto in general has real-time transparency. There's onchain KPI dashboard key performance indicators metrics for most Dows. You can actually see the contributor compensation, the governance participation rate, voting proposal, who who actually won the uh which which proposal actually got passed, which proposal was declined and then you can also view the treasury balances as well in real time. All of this can be actually viewed in real time and then this actually help for token holders and delegate can actually see the revenues and profits of of the of the DAO as well. So they know what's going on. I think this kind of transparency actually helped to build trust and then investor but this is

something that for up and cominging startups and chart usually faced with like we actually I think we've seen the case with the smoke and mirror startups. I think just two example here from Ward and Terranos right these are the companies that pretending to have product market fit but in the end they actually they don't have but if had there been some sort of an uh transparent KPI dashboard for this company then I believe that the fraud might have been prevented right and the next boy is if you look at this beautiful Lego tower I think people will probably realize this is Lego toy sets right and what's so nice about that you can use a different pieces of the Lego set to create whatever shape or whatever

building in structure and that's basically the the same for in in web3 world in the Dow world as well it's uh financial service is a basically different application I build like Lego blocks they can be composable pieces of code that anyone can mix and match to create new products from there and then this is actually in very contrast to charty where charty a lot of the services often exist in silos whereas as with like each bank or company with its own closed uh software requiring contracts and lengthy uh integration to work together. So um what TRFI can learn from here is that there's a lot of the plug-andplay governance modules available and different tools that can be just be adopted and play and there's

two of these uh readytouse DA framework that's quite common. Moolok Dow is is a open-source framework that's been actually used to the backbone of many of the Dows up until now. And then N builders is the tool that now DA which I will touch upon in a couple minutes. It's basically they allow other community to spin up similar Dows like now Dow in days. So let's talk a bit more about like the I would say this is one of the proven or the commonly used com governance stack for a lot of web3 dows and how they function and it's actually very effective. So on the top you would see there's blockchain platforms you have ethereum a lot of the layer twos and any

of the layer ones as well usually that's typically used where for the recording of transaction a proposal onchain right transparent and then in follow one step down you have the governance tool you have snapshot for offchain voting tally for onchain voting offchain meaning that there's no transaction being recorded onchain on the blockchain on chain it just mean it's recorded on blockchain and then is safe is a common multi uh wallet that's actually being used and then there's of course a various different collaboration tools for Dows and community that they use right discord for uh public community gathering town hall and discourse for usually for forum discussion and proposal posting notion for

collaboration and then analytics right for doing analytics and ether scan and other software monitoring tools as well and then here the The third aspect from DAO which is I think this is one of the not only for DAO but also for crypto in general I think it's very striking aspect is how quickly new ideas uh develop and uh deploy often by you know even very little team so actually very small teams and individual right punching above their weight uh I think that's a nice thing because in in down web three that you know the fast moving culture there's very little gatekeeping process over there versus to in in chart five right if you want to access a new market it probably take you six 12 month

or even a couple years to set up a new markets as well. But then for DAO if they want to have new contributor you know you have seen many Dows that expand across borders and across region and hiring people from all over the world and having people to operate without any subsidiary or local offices and um I want to go over one example of a this is now DAO I think many people have might have seen this now Dowo is a community-owned brand that makes a positive impact by funding ideas and fostering collaboration So if you look on the uh diagram here, I want to explain it a bit. Each nouns down here is an NFT, right? And the NFT has a different uh pieces of it that

make it up. And every day on on the smart contract, it's written automatically so that every day there's an auction for a new piece of NFT, right? Or the non-funible token, the ad drawing here. And then the person who bought it, they can actually acquire well acquire the NFT, but they also acquire one vote. And that vote allows them to vote on a different proposal in the uh now down treasury. But also if you look on the lower side you see that the treasury would actually the funds the proceeds from the auction will go towards the treasury and then the treasury just keep growing every day right and then from this treasury and they they allow people to apply people from all over the world can apply for their global funding. I think right now

there's two programs applicable. One is like the small grants anywhere from 0.1 to 10 E. These are can be aimed for creators, developers or small artists, people who want to run any sort of events or small project, right? It doesn't even have to be web three project. It can also be web two. And then for proposals uh from anywhere from 10, they actually fund from 10 to 1,000 ETH. And I think that's quite a lot of money for to fund even big project as well. And you know of course the best thing is all of this proposal is open and onchain governance for people to vote on and people who can vote like I said earlier the people who are the holders of the now token. So this is how they allow you global contributor network to basically to contribute and

uh develop together. So let's well wrap it up here and then I think there's couple of the takeaway here is for Dows. I want to touch upon takeaway for Dows first. For Dows, it's very important that they have some sort of a treasury diversification plan or strategy so that that will help to sustain DAO in the long run, right? And through multiple crypto cycles because I'm I'm quite sure that most Dow they don't want to just be here for just one uh one market, one market cycle and then just be here like a tourist and then go.

So I don't think we have the right answer as to like what is the optimal composition yet of the Dow Treasury but I would probably summize to say that 40 to 60% of the native token is probably quite sufficient and then as as opposed to you know earlier when I said 80 98% of the native token was actually in in most of the even the major Dows right and then also they probably need to have a runway of 12 to 18 months in stable coin or liquid assets that will allow them to fund their programs, contributors and then when it come to risk management framework definitely need to have in place a best practice I would say time lock delay stage approval

or even a security council that will be there to intervene in case of some malicious hacker or exploiter come by and then when it comes to um token holder uh issue I think established operational standards would actually be very helpful for DA stakeholders holders like whose clear responsibility of who does what and also to I think this can also help for to address for the principal agent problem I talked about earlier I believe the pay for performance objective you know I usually if you accomplish this task accomplish this project then you will get paid I think that's probably the one of the best way and then for charty right what can chart learn I think well transparency is one but obviously they I

don't think this is going to happen from day one um I think charty I can begin with nonsensitive KPI but that I mean you have ESG scores supply chain metrics customer satisfaction these are the non-financial metrics that companies will probably be willing to share at first and then gradually they can expand and then include financial metrics as well to u show the world that you know they are doing properly think with in public dashboard of course and then the modular execution or composability I think charty and companies can also create plug and governance templates for new businesses, new acquisition when it comes to uh new businesses that they can just reuse and view internal APIs for compliance checks

that any division can access. I think that's pretty common in web3 nowadays that KYC is a thing and bring people onchain and last point about the global contributor network. I think the companies can create some sort of their own open innovation network. I think these are two example below here from cargo the machine learning you know competition community and X-prise and tackle like a lot of humanity these would be like good format to adopt right where company businesses use challenges to fix up and then basically to help to fix business problem and pro process problem as well and also at the same time increasing the contributor pool so I think that the organization that win in the next decade probably won't be just traditional or purely decentralized

probably be the one brave enough to uh somewhere that you know taking the best practice from both the charty and then the uh decentralized world as well and that's what I'm here to share about will this two will be a hybrid future uh to be honest I don't know I don't have the uh future for this but I think we can just wait and see thank you very