End of Beginning of DAO

Transcript

[music] >> Okay. Um good. Okay. Sounds good. All right. Well, thank you so much for coming and I know that uh it's quite nice outside. So, I'll try to make it short and as some of you guys might know, I see a lot of familiar faces. I like to have discussion afterwards. And I like to kind of note that uh the point of DAO is quite complex and the point of this presentation is not to get a silver bullet, but to understand like why they're complex and what are some of the

ways to approach it. Because I think that people tend to have a way to think that there's one solution, which is not true. And to briefly introduce myself, uh my name is Duel. I lead partnerships at Compound Foundation. And previously I was contributing to Maker / Guy, although I like the name Maker better, uh for 7 years. And then I was also leading Stable Lab, which did a lot of different governance for many different protocols, including Uniswap and others. So, I think that I can just go ahead and start. Um by the way, disclaimer, um saying that this is my personal opinion.

So, if I say something dumb, it's not because the foundation, it's just because me, you know, it happens. Chill like. Um and then also like even if I say some protocols are doing this and that, like it's not saying that they're better others. Like they're all good friends and you know, others, right? So, don't take it personally. If you take it personally, we can have a wine. It'll be on me. Okay? All right. So, let's go. Like when we talk about DAO especially, I think there's this expectation and especially when I I was at Stable Lab, which was doing a lot of this DAO consultation, a lot of founders would come to me and say, "Okay, I want to be a DAO." And I think in their mind they were thinking that a lot of problems they have, whether that's a price or aspect of

decentralization or many different problems, right? They're like, "Okay, having DAO can solve it." Um so, I usually had two questions when I asked them. The first question was, "Are you sure you want to be a DAO?" Second question is, "Are you sure about your first answer?" Because usually they'll say yes and I'm like, "Well, are you sure about it?" Because reality is it's pretty quite quite complex. Uh thanks to AI, I made into cons. So, it is quite nice. And as you can imagine, DAO is not something that's like solution to everything. So, let's kind of look at the space. And this one, by the way, was uh done in 2022. So, it's quite outdated. So, some of those DAOs, so-called, they either shut down and there are also a lot of new ones. But it is kind of true that at least how we think about DAOs, there are

quite a lot of different DAOs in the space. However, we also then kind of wonder like, "Okay, what are the DAOs and what happened to them, right?" But we're not going to go into like specific DAOs because they will require many hours, right? But the idea is like you can see that there are many different DAOs in the space. Now then, but what do people think about DAOs, right? And then I think that a lot of different partners or others, they talk about DAOs and they tend to kind of focus on the how dysfunctional it is, right? They talk about the drama. They say they don't need to subscribe to Netflix anymore because they get the DAO drama all day. And you can just access from Twitter or X, which is kind of true, right? And then and then we hear about even the best protocols. Like I

think that um of course there are um you know, Arbitrum as well. And then as you probably heard about recently, there was a big um struggle there as well. And this is same for many others as well, right? And then not only dysfunctional, we actually saw that sometimes DAOs and governance have become attack vectors themselves right? Basically, we have seen cases where they were uh either uh due to um uh some of the other aspects or you know, it's also possible that a lot of the governance security is pretty difficult, especially in the long term. And we have seen that there are quite a lot of protocols that has certain aspects. And um I would say the Compound protocol itself also has some of the risk that was uh highlighted. So, it's not just unique to um certain protocols.

Now, unfortunately, a lot of different services, as we saw recently, that has been focusing a lot of DAOs have been shutting down. So, on the top is the Gitcoin's uh grants aspect. Gitcoin itself is still there, of course. And Tally, which was the most popular infrastructure for a lot of the governance and DAOs, they also ended. Um and then Stable Lab, which was the company I founded, unfortunately, we also had to shut down as well. It was of course quite painful. However, at the same time, it also kind of helped to reflect the industry as well as DAO space is changing very fast, which is why this presentation will be quite interesting. Because a lot of I think criticism regarding DAOs have been come up as well, especially they're very slow

and they're very hard to scale. And especially like right now, a lot of the different protocols have become more entity-driven. And entity meaning that um like whatever that let's say group or uh be, right? So, I think that recently we even saw, for example, Cross that decided to move from token into equity, um which I was quite of course surprised to see it. And then at least from the market, they were quite liked it. Uh and then the one on the right with the fire, that's actually a unification proposal, which is by Uniswap um side, where they combined the Uniswap Foundation into Uniswap Labs. And Hayden, who for a long time was not so at least active in public, uh he became very active and he also became more hipster. So, good for

him, too, right? So, but as you can imagine, like we're seeing a lot of those founders um kind of coming out. And this was the same for Arbitrum as well, right? Like, you know, Stani. Al- Although I must admit that he was more active before as well, but you know, like we've seen a lot of those protocols become more uh as the founders or others come back and driven by it. And then but at the same time, then the question becomes, "Okay, well, a lot of the DAOs have become minimized." Uh I wouldn't really say DAOs have shut down per se, but do they like do they good do a good job of defending it? And I think that recently there have been a lot of controversy and discussion that maybe they don't do a really good job at it.

Ironically, if you check a lot of the shut down announcements for a lot of protocols, a lot of times they end with, "However, you're in the good hands because now it's in the DAO's decision." And I'm like, "What? Why?" Right? But it is kind of true that like for example, FriendTech also did the same thing, right? Where they're like, "Okay, we're shutting down. Now it's up to the DAO." But what is the DAO, right? Or for example, when there is a situation where some of the different let's say a projects or companies decide to acquire, whether that's talent or IP or others, and then they're asking like, "Okay, well, it's great that you guys acquire some of it or we decide to merge it, but what happens to token holders?" And usually token holders, even if they are some kind of protection, it's not I would say like broad or it like even

if that's the case, it's very limited, right? So, then we get a lot of the aspect that, "Okay, those minimized DAOs haven't been really doing the best to defend it." Okay. And then we also saw that like if we really go back to the old model where like, "Okay, we don't have DAO at all." and then just have the centralized, then we have we saw many cases where that became a problem, right? And then we saw that a lot of lack of transparency as well as accountability has come to that. So, then this is why I like it's time to really go back to the drawing board. Because how the a lot of the governance aspects, at least how I would say a lot of the DAO service providers and others thought about, was kind of this theory and practice. And the reason why I say

used to be is because the industry and the DAO space has changed so much. It used to be that we used to like see and then like inspect what are some of the successful DAOs and then trying to abstract as much success points as much as possible and then trying to experiment. But we're living in a space where it's really hard to define what is a successful or mature DAO. And then it's also really big difficult to experiment because A, a lot of I think industry has been moving much faster. And two is like a lot of them are also running out of money and you cannot really do experiment without money, either, right? So, it has become a situation where how do you then do the best within the system? And for me it's like I'm not trying to say here's the one like silver bullet, but it is us to

kind of think about, "Okay, what are the some aspects that within the limitations we have that we can think about?" And for me, especially personally, I always thought that governance is about balance. Now, of course, maybe you disagree and that's fine. You know, we can agree to disagree or disagree to agree, whatever that is. But as you can imagine that um similar to a lot of the things that we consider as good, there could be a bit excessive, right? Because I know it's a bit counterintuitive and people usually have a lot of example like, "Yeah, we need the checks and balances. We need more participation. We need more transparency." However, if you have also too much of it, it can cause different issues. Now, for the too little part, I'm not going to go into too details because I think those are a bit more intuitive, but I had I have

heard a lot of people that say too much power is a bit difficult to understand. So, I'm just going to go through that part and then we're going to if we have some time, going to go back to talking about some of the discussion points as well. So, let's talk about the checks and balances. Now, for checks and balances, of course, it sounds good. I think that especially in a lot of politics aspects, like if you study it, you say it's the checks and balances were needed. And by the same time, if we define as checks and balances as basically checking every work, they can get really really slow. And I personally witnessed this, especially back at the Maker DAO days, where for example, for real asset, it was actually very difficult to get anything through because there were just too many people need to check it. And in

order to, for example, be a real asset at Maker back then, you need to go through all these steps. And even then, like there were basically people like uh trying to check each other, right? In a way. And then it was very difficult, which is why eventually they moved to a different model. But also another question becomes then who watches the you know, kind of watchers, right? You know, that kind of question always arise. Like even if you have council that watches over the council, then who watches the council that watches the council? And then there's turtles all the the down there, right? Like it becomes very very difficult and I think that we see some of the cases recently with like, "Oh, well, we need to have this to be watchable others." Like, I think there's a limit on okay, where does it like where is sufficient and

then where does it lead to gridlock? Now, another part part like too much participation. And the thing is like it is true that most of the dials are very empty. And in fact, a lot of proposals by the time that you have a amazing, let's say, proposal, you post it, there's no comment. And then by the time that actually it goes to the voting, then they complain about it, right? And usually they don't or they just vote no. And then I like to say that like of course I want to say that my fiance might be watching this, so I say I love her. But it's like sometimes she's mad and I cannot know why, right? But she just wouldn't know. But but she doesn't tell, right? So, it's like kind of similar situation where like a lot of times like the governance doesn't really

get those feedback. However, even in rare cases where there's a feedback, it actually becomes uh heavily um you know, focusing on economic part, right? So, if you for example go through a lot of the different protocols, that do have some of those activity, all of them are about airdrops or grants. Like, I was just also going through optimism like recently as well and then like few other protocols. Like, it's usually about airdrops or like oh, they want to get a grant for this and that. So, in a way that because DAO and governance itself doesn't really have that much attention span and it really also reduce them more, right? So, in a way too much participation can be also a bad as well.

Now, too much transparency ironically can be bad as well. And this one sounds very counterintuitive, but especially when I was doing a lot of the BD aspect for for Maker, one of the key aspect came up is like, "How can you do a NDA when it's transparent?" You cannot be like, "Hey, we're going to sign the NDA." That's not the point of NDA, right? It's like, "Oh, we cannot disclose it." And also another aspect is that it can actually cause a lot of discontent. And this was something that we and then I personally witnessed at Maker as well, which was that So, for Maker, you could actually see how much people were getting paid. And you could see that how much for example people getting overpaid or underpaid. And then people have this tendency that you think you're very important, which is true.

Every one of them is very important. However, salary might be different, right? However, it also might be possible that people might say, "Hey, there's this team that's let's say doing this. We're also doing similar work, why are they getting paid more?" And then then they you know, go through the DAO and try to raise it. And then once you raise it, what happens? They're like, "Well, they raise it, but we're based in California, it's expensive, so we deserve more." And basically for Maker, there was a time that the expense kept going on and then income was going down, but it became very difficult to cut people because you know, like usually in traditional companies, when you want to lay off people, then HR will have a talk with you, which is not something that's pleasant. However, for DAO, if in order

to do that, they actually have to go through a voting. And a lot of times there's the kind of aspect that it's at least people that you kind of know and then you right now, not just like HR to deal with it. Now, you have to actually, you know, um try to lay off this team or this member through your own hand. And that is very difficult, right? Like, it's like trying to have this um I'll say a lot of decisions that you don't really feel feel comfortable making and they have to do it. So, that has been kind of one of the aspect like too much transparency itself also can be quite um you know, you know, uh detrimental. Now, in terms of the DAO itself, yeah, we talk about different models. And I will say that there's not really a right choice. And I have like

many different things to like there's many different way to interpret. The reason why I didn't put the title on each of them is because it depends how you think about it. Because DAO at the end of day is about decision-making. And decision-making can be done in different ways, right? So, first one I want to kind of talk about like okay, maybe the balanced one where it's especially it's very strict, right? You know, kind of driven by the constitution side. The second one is like you're maxing, you just kind of enjoy that people they're chilling and then just enjoy, right? And that's also possible way to do it. And then there's the people who are in suits and they're very serious and everything is um needs to go through a certain process. And then you have those more recent DAOs that have been driven a lot

by AI agents and those. Uh and then you have those that basically people just like the drama and just put on the inquisition and they like to you know, burn some witches and that happens. Um you know, it's always part of the I would say journey. Now, um for Compound, um we of course also took those pretty seriously. So, we've been uh having a lot of open communication through the community calls as well as, you know, establishing those rules. And then also the budgets approved by the DAOs. Uh and then also we've been um increasing the participation through the, you know, delegate race as well as the um for transparency, we have to report as well as the community calls. But once again, it's not saying that this is something that every other protocol needs to do.

This is just like what we do. Like once again, this is just an example. Okay, and then more disclaimers. Um and then yeah, um I don't know how much time we have, but we can have some questions maybe or Yeah, we have time enough to do some questions. Okay, sounds good. Okay, remember, there's no dumb questions. There are wrong you know, questions, but it's okay. All right. Yes. Uh thank you for the talk. You're talking about a lot about governance. And since DAOs have been in a Hi. Since DAOs have been in a gray area legally um let's just I'm not going to go into Recital 22 because that's Europe-based, but what would you say is the best way for a DAO to acquire legal personhood in order to implement governance models that

allow for the decentralization to actually take place, at least nowadays? Yeah, so that's a good question. And I think the different DAOs have tried different ways. Um so, for example, there have been some cases where DAOs have been allocating certain amounts for legal resources. Uh I know for Maker that as well like um that was done as well. Now, in terms of how do they find it? I think that's a difficult question. Like, at least more common way is like DAOs are like, "Hey, we want to set aside, let's say, 4 or 5 million or 10 million for this kind of legal aspects or legal defense." Uh and then from there they then um have someone that's behalf be able to talk to the legal firm or others to do it. Um I also saw some cases where they

go through the potentially like um some of the entities in DC that can also talk with the I mean, because if you think about it, legal aspect is quite broad, right? There's like um I would say legal in terms of like laws, so kind of legal, but there's the legal in terms of like clarity. And I think that we saw both cases where for example, for Uniswap, they've been donating a lot of money to um especially for um DF, right? So, they've been also spending their money into helping with clarifying some of the legal for like DeFi for example. So, it can go both ways.

Okay. Uh I'm sorry. I have a question. Um I have been around since DeFi summer. I have been participating in several DAOs. And eventually what I see is that DAOs that become more centralized are the one that are having success and are may basically uh surviving from from that era to now. So, my point is um there is any chance for or any structure that you can think of that maybe can solve this issue because I I have seen it it's it's not what I would like to see, but it's what I I am over and over seeing. And

recently with Aave, we can clearly see that path. Yeah, so that's a good question. And I must admit that the answers can vary because once again, it depends on the protocol. I do think that some of the aspect that some of the protocols have been preparing is potentially separating. So, basically meaning that it's like like I I would say that a lot of DAOs don't generally shut down DAOs themselves, but you're right that a lot of DAOs have been reducing their role. But it's more common to have certain mandate that's given to it, right? So, I think Arbitrum is a good example where for example, for Arbitrum, they have a section for for example treasury management as well as security. And those are done by for example, people who in the vote through those process, right? So, there are still some of the

elements to it. Um but in terms of like is there I like other way also is to potentially have like a constitution way and that can be tied to budget. Uh so, one of the example is like for Sky. Um by the way, Sky constitution is very uh complex and my IQ is not high enough to understand all of it, even though I was there for a long time. However, it is one of those ways that like if you try to change it, it actually impacts the real legal that you cannot for example just try to remove DAO those kind of aspect because it's part of the I mean, Rune calls it Atlas. Uh or well, I should say Rune. Like the you know, they call it Atlas.

However, um at the same time like it's you know, basically it's the same for um you know, constitution for Sky. >> [clears throat] >> Um thanks for the talk. Um Do you think there's an opportunity for agents to scale human judgment in the context of uh governance like DAO governance, especially if participation is a problem to make on-chain democracy more feasible? So, I think that's an excellent question. And then I've been I would say hearing more and I've been exploring myself as well. Um I would say that it has pros and cons.

And that's is partly because I mean, this is obviously the reason as why like would we eventually like even if you talk about the traditional field, would we eventually see a world where a lot of the let's say even judges or because um delegates and voting like voters can be put into I would say two big kind of category in terms of the mentally, right? There are people who are more like uh politicians, right? Like, they represent certain interests and they could vote. And then certain way they also act as almost like an advisor on the board, right? Basically to ensure that this entity is going the right path, whatever that path may be, right? However, for those you know, like in traditional side, like people don't feel comfortable letting the AI to decide it. However, they are okay with having AI to assist them to

the decision, right? And I think that that's the same thing that we're seeing is like, for example, some of the other protocols about some some of the other like service providers, for example, Tally as well as like Event Horizon, they've been experimenting a lot with this delegate AI. And then what they came to realization is that people think it's cool, but they don't really want to give them a lot of voting power because what they might think is right could be right, but could be different, right? Because once again, the idea of what is right and wrong, I'm not going to go into all the political aspect, but as you can imagine, it's not as straightforward. And then so a lot of times I think that people prefer alignment, and the alignment sometimes could be, at least from the AI side, is wrong, right? Because sometimes you

might need to make short-term sacrifices for it to And then so in terms of the AI, my end the making like, okay, well, from this one doesn't make sense. However, from human side, we might say, well, we're sacrificing for now for a greater good. And that is very difficult for AI to understand. If you had to choose a vehicle to wrap the DAO with today, you were talking about Arbitrum. I think they're based in They have a Cayman foundation, if I'm not mistaken. What would you say is your personally go-to vehicle today?

You know, I wish that we talk about vehicle. We just talk about other kind of like fun kind of vehicle, not kind of this kind of vehicle because, you know, this is very sensitive. Um I would Well, A is like I'm not a lawyer, and then I'm also not smart enough to do have a JD. Uh but I do think that it is very important to be strategic about it. And this is something that I at least like I I don't really give advice, but at least like when I hear about it is like especially there are still a lot of I would say countries that don't really understand DAO as much. And or they don't really even understand blockchain as much. And I think that that is very important for them to recognize. Like I Even at ECC, I actually heard a lot of

different partners that were or entities that were saying that they, for example, set up in this country or like, you know, certain countries, and then they realized they actually have to change it just because of right. So, but I will say that like once again, I I I'm not going to pinpoint the country. I'm just going to say that that matters. Thank you for your presentation, Hugo Weaire. So, like ultimately, are you arguing that DAOs would be better off if they approach a model similar to that of like public corporations? Ownership is decentralized in a public corporation.

People vote at least once a year or sometimes at most once a year. Like what What do you think we should go in that direction a little bit more? And for example, with the foundation at Compound, would that mean that people would approve the new mandate for the foundation as they did? And then you would have like 6 months or 1 year to go forward and have autonomy to introduce and manage and execute all the proposals within that uh mandate that was approved. Uh so, I'm not going to speak on behalf of the uh Compound Foundation, um but I I think that's uh I'm just going to talk about like in theory. I think that's a bit, you know, more comfortable for me to say. I will say that once again, that really depends on DAO, right? Because I think it also depends on what kind of

protocols they are. Because a lot of DAOs that we mentioned on here are mostly DeFi DAOs. But in reality, there is other DAOs that are not like that, right? Like could be focused on consumer aspects. It also could be like L1, L2s. So, I don't feel comfortable saying that they need to, for example, have a certain rules, and it has to be same for across DAOs. I think they can be flexible. And I think that this is also the same for if you look I mean, yes, it's true that for traditional companies, there are different ways for them There's a rule for them to do it. But at the end of day, like there are also many different ways that people can register their companies, right? So, I think that how I think about it is more like, well, I I don't necessarily think that DAO is like, okay, it needs to be,

let's say, this way and that. It's more like, well, similar to how in traditional world, there are different ways to register and have its own the structure, it is also similar to like you can have it many different structures that fit your um I'll say protocol better. So, but in terms of your political like a more philosophical question, I think that's um interesting aspect where do I think that eventually it will be more like people need to gather around and vote, and I think that it's more likely that we're going to see it become more like a console model or like advisor model as time goes because especially one thing that a lot of people have realized is that it's really difficult to try to get the whole consensus of all the different um you know, voters and participants. And a lot of those participants don't really

participate, right? So, it's then much better to be like, okay, similar to how in traditional politics, we have a congressman who represent the larger population, it's much better to have those like fewer members to be able to represent either their interest or able to advise. I think it's the path that might be more likely. However, once again, there's no right answer. And also, who knows like, you know, what happens in 2 years or 3 years or 5 years. But whatever it is, I enjoy coming here. This is my third time, and hopefully you guys call me again, and then we can talk about it next time. Thank you a lot. Uh see you soon.

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