The Secret Behind ENS DAO's Success | Nick Johnson

Transcript

all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-hosts today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode all right everyone before we jump into this episode super excited about our newest sponsor Reserve big shout out to reserve they are the easiest way to design deploy and govern stable coins backed by a diverse set of assets with access to defy yield and insurance if you don't know Reserve we're super

excited about them here at bell curve you'll hear more about them later in the show we didn't really have a need to raise funds and I mean we didn't have to compromise on the core goals of ignis and being non-profit and decentralized and and at public good um and so the Dow came as a natural evolution in our governance story rather than a need for survival all right everyone welcome back to another episode of bell curve you got the last episode of the Season here uh super exciting guest we got Nick Johnson founder and Lead Dev of ens I have to tell you the title now because you'll hear in the episode I completely botched the intro so uh yeah Mike what do you think of this one I thought it was great the reason why we wanted to have Nikon is you know one of the themes that maybe

some of you sense if you've been following along with us throughout the entire season is sort of the site idea you know of well where can we borrow lessons from corporate governance and Implement them in in Dao land and I think there's sort of another you know I think Jason and I are pretty sympathetic to some of those arguments especially when it comes down to optimizing for for good and efficient decision making but we wanted to have someone who represented not the other side of that argument but just a different and distinct perspective for what Dao's could be and that's sort of within the community of people who are dedicated towards building public goods which Nick was like very firmly in that camp and he's also the you know the founder and in sort of maybe Shepherd of one of the most successful Dallas I think out there

today so we wanted to get his perspective and honestly I came away kind of like really seeing a perspective that I hadn't necessarily thought deeply about but it was a it was a fascinating conversation he had some very concrete very interesting ideas about how dabs are likely to evolve from here so I thought it was a great conversation yeah I did too let's get into it we'll see you guys on the other side awesome everyone welcome back to uh the season finale of bell curve actually it's been an awesome uh season chatting with folks like uh hope you guys enjoyed last week's episode with Chris bernitski and Fernando um yeah really excited to bring the season to a close and we've uh none other than nick uh from ens lead developer and oh my God Nick just told me how he wanted to get introduced here

and I completely botched already lead developer VNS so that's that's what I'm going with Nick but how did I do there that's all good closer now like two seconds before we launched the recording yeah what is the title uh and uh Jason we got 50 of the way there but uh you'd think I would be able to memorize like two two things there so but I couldn't um so Nick I think it'd be really helpful there's a lot of uh I guess more specific questions I have about like running ens and just operating inside of the Dow there and kicking it off but I think it would be really helpful to take us actually back to the early days because when I think about how people launch Dows today they're like they launched with a token and this huge fundraise and you guys did it in a more

like bootstrapped way which is actually very similar to how like when I think of the blockwork story like yeah yeah near and dear to our hearts and like um very kind of similar story so I'd love to for you to take us back maybe five years six years um yeah absolutely I mean I guess the Pepsi key difference is that our goal from the start was never specifically to launch a dow it was sort of Maximum maximal achievable dent decentralization and back in the day it wasn't clear that you know the structure of dows was what was going to survive uh you know at the time when we launched DNS the only example we had to go on was the DOW and needless to

say it wasn't a glowing endorsement of the the structure uh at the time so you know we started off very cautiously with uh control over Eunice's essential you know buttons and levers being uh controlled by a multi-sig of not and like most teams not of team members but of independent individuals in the community and we moved on from that you know progressively as we became confident that the uh you know the growing ecosystem and that the technology could support you know increased decentralization and so we worked to remove the powers of the key holders you know just remove human control entirely and then to move what

remained over to the Dow and so we sort of launched the Dow you know purely definitely as a governance mechanism because there are some things in EMS that have to be upgradable and have to be manageable and so on and then there's the question of what to do with the funds raised from registration fees and we thought the community deserved and put in all of that when you think about why you guys when you think about why you actually turned into the Dow I I know you were kind of alluding to that but why I mean a lot of companies back then they decided to run as the centralized entities and they raise some money and they got some revenue and they just kind of kept building and maybe they raised a series A and A series B you guys took a different approach what

what can you dig deeper into that decision yeah so so enes is very much a public good and you know its goal is not to make a return for any shareholders we don't have any its goal isn't to extract maximum value in fact it's its goal is to leave as much value behind as possible for the people using it you know and so we were fortunate enough to start off with a very generous Grant from the ethereum foundation um which kept us going initially um and then you know very fortunate that the registration fees and the premiums and so on that are necessary to make EMS work well you know to have a system where a few early birds don't get all the worms so to speak um we're also sufficient more than

sufficient to support us in our ongoing operations so we didn't really have a need to raise funds and that meant we didn't have to compromise on the core goals of ens and and being non-profit and decentralized and and their public good um and so the Dow came as an international evolution in our governance story rather than a need for survival I've got a question for you there I'd be very curious because we've talked a little bit about public goods throughout this season what was the is the desire to be a public good as opposed to uh like a protocol or an entity or whatever that sort of maximizes profit can you just walk us through like what the uh like how you conceptualize the public goods overall and then why you decided that to be the mission I mean I you mentioned protocols and I think protocols should all be

public goods too you know they you know a protocol shouldn't have a treasury it shouldn't have you know as much as possible it shouldn't have governance but sometimes that's inevitable um and I guess to me like I grew up in the the 80s and 90s like you know as the internet was sort of became a thing that consumers could access and I was fascinated with how it worked and and how the whole governance of it was open through the ietf and rfcs that I could just download and read and learn how the internet works and that whole um you know openness and that whole you know to treatment of all of this as a public good and as a thing that everyone

should build and improve on made a huge impression on me and I think it's a very large part of why the internet succeeded as it did you know they basically making things for profit necessarily erect barriers to to entry you know in order to make a profit you have to extract some value and I'm not rubbishing making profits like you know private Enterprise obviously makes a great deal of sense but when it comes to our basic protocols and infrastructure I I really believe they should be operated uh as something that you know is a benefit to all and that makes it far more uh practical to innovate on top of it why why is that Nick how how come like what's the downside of you guys if you

guys hadn't gone down this route back in the day there was like AOL and and the internet and AOL had like very much the permissioned Walled Garden approach to things and it didn't succeed in large part because everyone had to buy into it you know in order to use it they had all of this additional friction set up and that can you can kind of make that work if you've got an effective Monopoly um you know like for instance Apple does with the i phone um but anything short of that you don't and the even if you make it work all of the the value you're extracting is is value that doesn't get sort of reinvested into improving the ecosystem you know I think the internet is the

thriving thing it is today because nobody had to ask anyone else's permission to like invent Netflix or something you know whereas if we had a permission Network like the ones before then Innovation is as slow as the slowest regulator basically um okay I've got a I've got a question for either because you you you mentioned that public all protocols that are part of the core infrastructure layer of crypto should be public goods so I'd be very curious to to understand like where you how you determine what kind of falls into which protocols fall into sort of the core infrastructure layer and then what should be more consumer-facing applications

I I mean I guess it's a maybe it's a fundamentalist position but I guess anything that is infrastructure for other projects just about uh you know and and it's I guess it's a it's kind of a Know It When You See It distinction you know I I really think that for instance ethereum should be a public good I think that uh l2s should be public goods um I don't necessarily think that like just because you provide an API that's consumed by other people you need to be a public good you know it sort of depends what you're bringing to the the table effectively but I I really think that basically if you're encouraging people to innovate on top of your platform then your platform should be

open uh and most of the time that means it should be a public good as well what about what about protocols that maybe set one layer up up there like uh like the unit swaps aves I'd call them like the blue chips of D5 maker uniswap Ave those folks I I guess uh maybe it may be a bit of Distinction to draw here is the the anti-competitive nature of some layers of the platform of the protocol you know so we can reasonably expect there to be one or a few large chains going forward and entry to that ecosystem is really difficult and they're naturally sort of exclusionary and that's why I believe they should be public goods when you

look at an ecosystem like uh you know um dexes and so forth like uniswap those uh those uh factors still exist but to a much lesser degree you know a superior decks can survive and thrive on its merits um and and beat uniswap and you know that there's there's less of a sort of a you know they're not infrastructure their applications at least in my mind I've I've got it you know one of the and I'm probably at the risk of rehashing uh a in sort of an age-rel debate and one that I'm sure you're pretty familiar with I think the from a user perspective and kind of just like an overall human fairness sort of perspective I

under I think most people sort of intrinsically understand the argument for public goods right it's annoying to interact with the service where you're feeling you're just being extracted uh you know for to generate profits for some nameless faceless uh sort of corporation that has a lot of Leverage on the other hand that sort of mechanism that we have this sort of Friedman you know generate profits that's a that's a way of economizing or organizing activity right human activity that that market right kind of tells us where we should be spending our time and it helps allocate resources how how do we do that in the land of of public goods right because on the one hand we we want like an infrastructure layer that should power the whole next generation of you know economic XYZ that's built on top of

that infrastructure layer how can we ensure that we're getting proper talent to to build that layer it's it's definitely it's one of the biggest problems with anything that's built as a public good effectively and you know and traditionally the answer has been you know involvement from government in in building something you know like that um I think you know web3 has a unique opportunity to turn that round and and create self-funding public goods um and a lot of that ultimately relies on sort of maybe non-game theoretically optimal uh Behavior like you know giving back to the platforms that enable your application to work

um but it doesn't always have to be like that you know so in the case of ens we Levy registration fees in order for the system to work best you know because if we didn't every ens name that was the slice bit of Interest would already be snapped up on the secondary market and almost impossible to use um but a side effect is that we get ample funding to fund our ongoing existence in and also make grants to other uh public goods so I guess the to a large degree it hinges on people recognizing the value of having these things be public goods and be willing to to make contributions to make sure they continue to exist but there are some places and some people doing like token engineering Commons doing some really

exciting work around trying to make sure that these things are sustainable on their own without relying on people's Good Will necessarily Nick there's something that people don't talk about oftentimes with public goods which is I think the people who start public goods are maybe either I don't know how much like I don't know this is like too sensitive of a subject but like are already wealthy oftentimes because to start public goods like you're not chasing money and like maybe first-time entrepreneurs or second time entrepreneurs like or like honestly a lot of people who live in America like they want to go like build a company and raise money and then IPO or something like that and make money it's like very few and far between that you find people

who are like oh no actually I don't really care about the money hey can you just maybe tell me about like who just the makeup of the team that starts this or like the psychology of the team behind this um I mean I guess everyone on the team is is dedicated to the mission you know that we're building and the the idea that this is a public good but I also I feel like there's this pervasive attitude like not just in in web 3 but like The Wider ecosystem you know the world that in order to work at a a non-profit or a charity you have to be paid badly in sacrifice and you know I obviously I don't think we should lavishly reward you know people with like ridiculous salaries and so on but I think it's totally reasonable to pay

people to market right I don't think you should have to uh you know be you know self-abasing in order to build these things you know so the people who who work at ens labs are very much values aligned because that's what we hire on we want people who believe in our mission but they're not they're not doing so you know we haven't had to make them make that choice you know between doing what they love and doing what pays the bills just out of curiosity from uh like the standpoint of issuing a token right like generally when you issue I know there's a difference between equity and tokens but you know when you issue Equity that's like you're selling ownership and theoretically there's some claim on the

future cash flows are the right to influence the the governance of the the company and stuff like that you know says a token so just I'd be curious how you think about tokens in the land of in the land of public goods it's kind of an imperfect relationship you know in in the sense that they're the best tool we had available in our toolbox but they definitely have shortcomings and the sort of tendency towards plutocracy is very much one of those you know we explicitly launched the token as a governance token we didn't start or or provide liquidity to or or interact in any way with any of the markets that sprung up but of course it's inevitable that you launch something that some people have and other people want and

they'll trade it for money you know um our goal though has been to keep it very much a governance token you know to the degree that's possible with a free market all around us um and you know the the part one of the tools towards that is we wrote the ens Constitution which was you know ratified overwhelmingly um you know when the airdrop happened um that explicitly States you know that the revenues ens gets will not be disbursed to token holders basically you know the money that comes in is not uh you know to be paid out as a dividend or whatever it's to be used to build and enhance the system and then to reinvest in other public goods

so that even that phrase uh Constitution that's a little bit of a funny phrase right to talk about sort of uh bylaws of an organization right if this was LLC to be talking about the Articles of Incorporation or the operating doc or whatever um I'd be curious like moving a little bit into what it's been like to run a Dao or you know or to start a Dao right and and kind of um uh you know Shepherd it from from its early days you know what did the beginnings of the Dow look like how you know how is that sort of scaling it down as opposed to a small company and and what does it kind of look like today what are the sort of key structures that people should understand in terms of how it works from a governance perspective can I just add

one one question to that too which is like when do you how do you know which is in there yeah yeah let me add like that question uh how do you know when is the right time because my if I'm trying to remember the early days of ens and I think it didn't launch as a Dao and then it like after you built you got product Market fit it became a dow so like maybe you take us back to like how do you know once something is ready to be coming out and then I think get into Mike's questions if that works yeah yeah uh yeah I'll answer the questions I can remember in the order that seems uh sensible to me uh so yeah enes didn't launch as Adele and there were a couple of main reasons for that one is that we felt the ecosystem was very unready uh

at the time you know like I said the the only Dao we had examples of was the Dao um the tooling wasn't there the community wasn't there the examples of good Dow governance weren't there and we kind of this is one area we didn't want to Pioneer when there was so much at risk um and the second reason is that there was still too much human control over essential areas of ens you know the one of our goals was in fact to to not just decentralize control but also to reduce it as much as possible while still making the system viable so you know the the things that changed were uh the development of things like uh the compound Governor uh contract and then

open Zeppelin subsequent release of a Rewritten version of that so A a demonstration of that working in real life you know we wanted we felt it was really important that it'd be actually decentralized and operate on chain and not be the Dallas is something and then the five people who actually control it agree to do that thing you know um and the other thing that changed was we were able to reduce some of the human control over ens so one of the prerequisites in my mind for moving over to a tower was that we flipped a switch that meant that even the Dow even the key holders you know there was no privileged entity who could replace the dot E3 distraua which means that once you've registered a DOT ethname for say

10 years no action that anyone can take and affect or revoke or transfer that registration the Dow or the originally the key holders and now the Dow can still change the registration and renewal rules but only with the waiting period And once you've registered your name it's yours it's safe and I thought that was a really important power to remove from anybody before we handed things over to the Dow so at least it makes the worst case less bad how has it been I mean just for me I mean even just talking to you you're clearly a you know very dedicated very competent individual right who you know we were talking sort of before we got on air it you think of yourself as an engineer but having to do like a little bit more of a traditional

sort of leadership management sort of role uh you know I'd be curious one of the it's like kind of the double-edged sword of Dallas right which is that there's less that's told totally dependent on you but on the other hand this is your baby you know you you help grow this thing and create it I mean how has it been to actually decentralize some of that decision making in practice uh frustrating at times uh you know worthwhile but um you know the further we get from the things that were clearly you know defined when we launched the Dow the more diversity of opinion you expect and you know at times when I feel like I have a Clear Vision for what the right thing for the dowrying is to do is and

other people have a very different Vision uh you know that can be quite frustrating uh to to to handle um but also you know it's essential because some of these times are when the you know the best unexpected input has come you know the stuff that's made us step back and go actually no that's a much better approach than what we were you know intending to do um and I guess the evolution of the governance of the Dow is a good example of that like we started off with uh you know a delegated voting system so we had delegates and delegates sort of tried to deal with everything directly and then that evolved into a system where we elect stewards for different working

groups um and those stewards are responsible for day-to-day operations and have access to budget that doesn't require like Dow approval for every single you know 500 Grant or whatever um and then that evolved into having a lead Steward whose job it is to sort of Shepherd the Dow as a whole and make sure that everybody's at least sort of facing the same direction even if they don't agree on where we should be going Nick how do you think about like let's say someone's listening to this and they maybe don't spend much time in in Dow land and they're what what they probably just heard is like um okay Nick well what I'm hearing is you gotta you've got a CEO and you got a bunch of you got a VP of sales you got a VP of marketing you've got a VP of engineering and

they've got these teams and you do a budget at the beginning of the year and uh you you meet quarterly to review the goals so you're in your like what is the difference in your mind uh I mean I think the crucial difference is that it is all governed ultimately by the token holders who you know represent the people who who have a voice in the Dow and there are a lot of parallels to corporate governance The crucial difference is that the people governing it are shareholders are there to sort of you know further the Dow and so on and it's it's built more like a co-op than it is like a for-profit company um I think the people mistake uh I I have a couple of pit beaves here one is

people think that decentralization means every single person giving their full attention to every single decision but delegation is both necessary and and useful you know like it's unreasonable for instance to expect that every voter in the Dow or even every delegate read the entirety of all of the endowment proposals that were submitted there was like eight of them in excruciating detail to develop a comprehensive of position and so I think it was reasonable that you delegate that responsibility to someone to summarize so you can make a decision on that basis and if somebody isn't upholding their position The crucial thing is of course they can be replaced you know they at the next election or or earlier if need

be um I think the fact that we're decentralized shouldn't stop us from borrowing the sensible things from corporate structure where they help us you know build a system that actually works and doesn't just get caught up in bike shedding the whole time I'm not hypothetical here by you I think you so the main value prop that you said was um you know you've got the main difference in that system versus maybe the corporate system is that you have all these like individual stakeholders and at the end of the day yeah maybe you have like you do these things that look like corporate governance but really you have all these individual token holders who who manage the thing let's say there's a let's say in 2023 couple of big funds come along and they're like man ens looks like a

screaming buy we're going to load up on ens right now and they and there's and the token holders like huh interesting I'm really behind this Mission but also bear Market would love to make some money and they sell to these VCS and now you have three VCS who own the majority of the tokens how does that how like how do you think about that situation it's it's probably my biggest hesitation and risk over um you know over decentralizing into a dow that's token driven in the first place um and the defense is against it I think are mostly uh partly social and partly financial and so from the social point of view you know the the tokens were given out you know 25 to

people who had participated in the ecosystem and we tried to weight that towards people who had been involved for longer and who showed longer-term commitment to ens which you know hopefully means some dedication to seeing that it continues to work and 25 to the people who have helped build the system which means you know myself and the team and other external contributors uh have a you know a significant interest in in seeing it continues to function and so from a social point of view you know I certainly hope that in a situation like that there will be enough holdouts who who resist the profit motive in order to help ensure that this continues well into the future and you know the the Constitution also helps act as a friction mechanism against doing

that from the financial point of view um I hope that it you know the goal is that it continues to be cost and effective to buy up enough tokens to extract value from the treasury you know you would have to pay more to take over again yes than you could possibly gain through doing so and you know part of the way we can continue to ensure that's the case is to continue to put those funds to good use on public goods and other ecosystem initiatives so that we don't have this massive war chest just acting like a big you know come get me signed to anyone any corporate Raiders I had I have to admit Nick you you had to make me look up the term bike shutting I know I've heard that before yeah yeah but there is an end joke in the

team that I use like neologisms all the time uh and that you know every day there's like some word or phrase that they've never heard before and every so often one will be like no there's no way that's a real thing you're having it on this time and they'll look it up and and know it's a real thing you know and then the Jokers that eventually I'll just start dropping nonsense words in there and nobody will call me on it do you just love vocab Nick what's this like do you just I I guess so it's a combination of that and being a kiwi and therefore having a slightly different dialect and all of our own slaying and stuff uh and having like I've lived in New Zealand Ireland Australia and the UK so I guess I've picked up some of that

from a bunch of places Nick you should try to drop a fake word into this conversation and see if we call you out for it and let us know okay yeah I'll do my videos yeah yeah all right yeah all right everyone brief break in the show here to talk about our newest sponsor Reserve so you know it's looking pretty bleak out there it's not looking that great we know the one thing there's no bear marketing stable coins Stables babies Stables we love those stable Coins app which is why we're excited to partner with Reserve protocol so let's just start with the basics what is reserve it's a self-service platform to build deploy and govern asset-backed stable coins uh which can be integrated with defy or within the real economy so the cool thing about Reserve is basically anyone out there permissionlessly can take any set of

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you're where you've basically been sitting there and said to yourself like oh my God I know we've got this Mission but my God I wish we just had a centralized company where I could make some decisions pretty quickly right now uh I mean the the fortunate thing is like we've got the Dow and we've got DNA slabs any slabs kind of is a centralized company in the sense that you know myself and Corey our executive director run it you know everyone's hired as a contractor for it and we get a budget from the Dow so we're still accountable to them but uh you know we're able to make our own decisions you know we don't have to be micromanaged by the Dow for um you know exactly how the design of the new manager should look or or stuff like that um so I feel like we've got a reasonable

trade-off there and I think the whole sort of development org thing as long as it can be meaningfully fired by the Dow if it turns out to just be a way to you know funnel cash to the the owners um is a is another good way to do this and in fact I kind of hope that we'll see other development orgs with parallel you know non-intercepting goals spring up and also be funded you know I would love to see other uh companies that are building ens in other ways you know also be just as essential to the Dow as we are today I have a I have a I have a couple questions around like voting and some of the mechanics around voting so so you know right now it seems like the pervasive method for voting in doubts like one-to-one token voting

um I'd be very curious about what you what you do you think that's the Final End state for how voting and decision making happens in doubt it's a it's a difficult problem because the alternative is all pretty much rely on some way to prove individual identity you know things like quadratic voting are really elegant but they only work if you could solve the Civil problem and you know that means being able to prove that somebody is an individual human so that you can't just spread your tokens around 10 different accounts that you claim are 10 different people and you know there's a bunch of systems that try and solve this they're pretty much all centralized so you're effectively giving a gatekeeper control over who can participate in governance

um and even if they weren't they have significant drawbacks like even if you imagine a perfect proof of identity system that can somehow just like tell who the individual humans are you know trustlessly and without you know zero knowledge um you could still just literally go out on the street and offer 50 bucks to anyone who lets you use their identity for something they don't care about and will never touch and probably about half the people you approach should be like yeah sure what's you know what's up to me um so it it has it really does have some significant drawbacks but I'm not aware of like I just haven't seen a system that seems robust enough to replace it I've got a there was a proposal a little

while ago I can't remember what it was for but I remember I think it was ARCA that opposed it but it was something to the effect of like a ve locking mechanism when it came to governance where you would take your tokens and you would lock you'd you know you'd stake them right and you'd say hey I like have these decisions about how I think the protocol should be run and I'm going to put my money where my mouth is and I'm going to stake this right for some period of time or put some up for uh you know that could I guess that wouldn't be getting slash but they'd be you know I'll put them at stake and I don't know I think it was there was a lot of pushback on it I personally thought it sounded super interesting I like as a as

someone who is founder like uh you know a small business and I can imagine what it would be like to have publicly circulating stock and you know you read that you listen to these things about Carl icon coming in and demanding that you need to stop doing what you're doing and sometimes I'm with Carl icon but sometimes I'm like come on dude yeah like let's let's be honest about what this is you got here yesterday you know uh and I do think that there's some interesting premium on being able to like put your money where your mouth is and lock up your tokens and uh get like outside boating because you're putting your economics at stake I don't know what you think about that yeah it's a it's a mechanism I've seen before but haven't really considered in detail for the Dow I do think it's a really interesting

mechanism because yeah just to expand on what you're saying it uh it provides a way to to show that somebody is long-term committed to the organization and therefore you know get rewarded with a larger voice lock my tokens up for a year that implies at least that I'm not going to make any decisions that uh you know imperialism the next year because I have this strong vested incentive to to continue to be you know that it continue to be useful um I guess the there are always workarounds for this as one issue like you know if there's a mechanism by which you can short tokens then you could lock up the tokens and then you could short them and have a net neutral position but still get all the voting power benefits um

uh you know it's like likewise uh one of our divs has been working on a way to basically wrap the erc20 version token in an ERC um 1155 wrapper meaning that uh instead of so the current situation is an account delegates to another account so all the tokens you have are delegated to someone else if I send 10 of my tokens to you they're delegated to whoever you delegate to or nobody if you haven't done that uh the idea with this rapper is that you would have like a different type of token for each delegate and they'd all be interchangeable but I could send you some the kojo tokens or some GIF tokens or some vitalik tokens that are delegated to that person and

they would remain that way and the advantage here would be that often we see a lot of like gradual loss and voting power because people move tokens between accounts or they trade them or whatnot and they lose that Association of being delegated um but the problem is and so you can you could also incentivize this you know you can say you know if you uh you know you do this you can yeah like stake your tokens and so forth against uh somebody and you get rewarded proportional to how much they participate in governance you know because you want to encourage people to delegate to people who are active back like everything else this is so gamable you know you you can just imagine someone will set up a robot that uh you know like a contract that owns

tokens and votes no on every proposal uh regardless of what it is and therefore automatically gets 100 to the participation bonus and then they'll write a wrapper that wraps your like tokens in you know to delegate to this so they're once again just regular erc20s they work as before it only now we've got like an active disincentive to do the very thing we wanted to make people do you know it's so tough to design these token economic systems uh such that not even just they can't be games but so there's at least no incentive to game them you know I would be happy with like a zero incentive you can do this but you won't gain from it you know we posed this question in one of our one of our previous one of

our previous episodes and it's very easy for me to see kind of almost like the end state of what we are like the benefit I think of decentralized governance and what you're talking about here is resilience ultimately I think it's like pretty hard to make an efficiency argument but with the right sort of tranche of protocols ones that are sufficiently like necessary to the infrastructure of what we're trying to build in crypto I can see a huge premium for resiliency but a lot of the times what ends up happening in society is not even necessarily because there's like an Overton window that

shifts where people decide we want to Value this as a society and the example that we talked about in a previous episode was power companies they're natural monopolies they could charge infinite right they could try because we all need power and we'll pay whatever it was but we at some point as a society were like look we all want access to power here right so we will we're going to limit the return that these utility companies are allowed to uh you know realize on their their capex to what they invest in their business where that hasn't happened really is Financial infrastructure you know you could make we could sit here until we're blue in the face and talk about how it's great it's a it's a public good uh everyone should have access to their own

uh sort of you know Banking and Financial apparatus but it's clear that in Washington at least they do not believe that they just don't believe that that's the case so how would you respond to that like how do you respond to this guy do we need to wait for an Overton window to shift in society to care about this and our lawmakers and policy makers to care about what what do you think about that idea I I think yeah I think that waiting or pushing is just about the only approach really like I would I'm very far from a Libertarian myself and you know and so many of the the things that some of the crypto Community espouse I'm like kind of skeptical of but then you know there are other areas

in which I I can't help but agree and so things like Financial privacy you know the the general sort of rubbishing of the idea that you might actually want Financial privacy really bugs me you know and and the fact that it's just been normalized like all of these kyc measures which it's been demonstrated don't really effectively reduce money laundering but they do eliminate any hope of financial privacy um you know the fact that these just uncritically accepted as necessary to stop you know money laundering and terrorism financing and so on when the evidence is they do no such thing is is really depressing and you know the um you know the tornado cash thing is a great example of this um

a lot of people aren't aware that the tornado cash devs actually built in mechanisms for compliance you know basically you could if you saved the receipt from your tornado cash withdrawal you could generate a proof that you could provide to say in exchange that proves where the funds that went into tornado cash came from you know so that removes that uh that layer of anonymity it provides just from the people you agree to provide it to which is pretty much perfect it means that you can have an anonymously from unknown people on the Chain but if you need to kyc yourself if you need to prove where the money came from you can do so cryptographically that mechanism was just completely ignored by you know ofac and by you know the Dutch prosecutors and so on and they

treated them as building a money laundering facility when in fact it would be exceptionally poor at money laundering because you know with all the kyc and so forth what exchange is going to go look at it and go oh we can't see where the money came from that's fine then you know problem solved um but none of that matters because the the um current prevailing political opinion is that anyone who wants Financial privacy must be a criminal you know and so the facts of the matter don't seem to be relevant Nick I actually think we could do a whole nother episode on uh Financial privacy but we'll save that for another one um no I actually just want to go back to some things you said like 20 minutes ago about um like the base the base layer should be Dows but other things on top of that are

applications do you think that all of the base layers have already been built and the secondary question there is like will we have any more Dows should any more Dows launch or like is it basically just like figure out the current base layer make those into Dows and like and then just build apps on top of all the stuff to make it useful I think I guess to address them in order no I don't think all the base layers have been built I think maybe we've seen the types of base layer we can expect you know things like l1's and L2 um but the you know there are definitely more to be made you know that I I think we'll see exciting new l2s I think we'll see Innovations in the zero knowledge space you know all all manner of things along

those lines um and I think many of them will be public goods or should be public goods and should have towels uh but also more broadly I don't think Adele necessarily can only govern a public good you know or can only uh govern a platform you know I think dowels are a perfectly good structure for a for-profit entity as well again as long in either case as long as you build the right governance mechanisms to make things actually happen other than argument you know do you think any of the l2s are approaching it in the in the right way right now yeah I think uh optimism is a is a public benefit Corporation and I find that enormously encouraging um arbitrim I'm least certain about

their underpinnings but I think they also take a generally open approach which I think is really encouraging and they're a little more skeptical approach of the approach of some of the the them like stagnet where they're like oh we're going to develop closed first and then open things up later um I think there's a lot of venture money yes exactly yeah I've always felt pretty skeptical about that because my you know and it's similar when people are like oh we're going to open source the code at V1 or whatever I'm like I've always been like just let it all hang out you know it's a code's a mess that's fine just say you know in the read me the code to me it's you know nobody is gonna like shun you because your first version didn't have perfect unit tests you know and it's never

realistically never going to be perfect so if you wait for that perfect moment it will never come you know and you get so many benefits from open sourcing and sharing and and uh building an ecosystem even around bad codes because it gets better you know whatever you mentioned some of the mechanisms right so one of the reasons why you didn't want launch ens originally as a dow is because there are some key mechanisms that didn't exist like the com the governor contract so what are some of the other you know it's hard to point to uh pieces of trustwear that don't exist yet but you know what are some of the other mechanisms that you think may exist or what are some of the gaping holes from an infrastructure standpoint that exists to manage Dallas yeah I mean I think you know on chain

Dales like compound were a key development and it's the sort of the idea was obvious but you know building it and auditing it is a major lift um I think there's there's a lot more progress to be made there around particularly around tooling uh off chain and on but mostly off you know like for proposals and proposal management and day-to-day Dow governance could get an awful lot better you know what we do now is a sort of strung together combination of like get book docs uh discourse Forum uh tele for voting on chain uh snapshot for voting off chain uh synchronizing everything manually between those you know we've had at least one well we've had one vote that I had to

embarrassingly ask you for them to vote down because I made a mistake when moving it from one place to another you know uh something that sort of unifies all of that and is is you know usable across dowels was a really important development that just how hasn't happened yet you know various people are tackling small parts of it but nobody seems to be building the whole thing um in terms of like on-chain components and contracts and so on um open Zeppelin released their version of the governor contract which is based on uh compounds but is a complete rewrite and they've made it really modular which is a really excellent starting point I think Ian s Dow was one

of the first ones to use it but the fact it's modular makes it easier to innovate in this area so you could for instance swap out the C20 voting token for like an 1155 token or you know for for um uh quadratic voting or whatever you see is is suitable how do you think you know from uh even zooming out a little bit from the specific mechanisms how are Dows how do you see them evolving let's just say I don't know if this is your belief but crypto is going to continue to be cyclical for a little bit uh you know Innovation sort of get made in Bear markets and then we see them through to the next Bull Run and there's Innovation that happens along the way like how do you think the big what do you think some of the big differences are going to be

in the next sort of Bull Run for Dallas do you see the majority of uh protocols being organized uh you know in in like a more more true to the idea on-chain version of a tower what do you think um I think we'll see more standardization and more professionalization in a way you know the template of how to launch and run a dow will become better established through the successes of of the dowels that do well and the failures the ones that do poorly um the uh you know and we can expect there to be more people who are you know professional delegates and so forth and that comes with pros and cons you know the cons being more lobbying and more sort of uh you know I guess uh

ossification of governance and also potentially governance capture um you know the pros being that we have more people who actually like know what they're doing from the start and aren't feeling their way through this for the first time um I think those could be the main Trends in the next few years at least is there anything in particular that you're excited for in your like either in your domain or for eth as an ecosystem or tell us something that you're like excited about that might not be as as obvious to some of our listeners I for the Dao I'm excited about us moving to like a more to a longer term vision and more sustainable sort of approach you

know I've I sort of started the conversation around an endowment and its goal isn't to like weather this downturn or the next one it's to make a dow that can last 50 or 100 years and I don't think many people are thinking about that um for ens I'm kind of excited about some of the stuff we're pushing out now with with off-chain names and so forth and l2s and so on that will make it possible for everyone to get a name without paying transaction fees uh and we're even integrating with DNS and in more um you know more functional and low-cost ways to enable that with DNS names as well um and for the wider ecosystem I guess I'm I'm excited about uh the fact that ethereum's ecosystem

continues to be Lively and and not ossified and willing to make Innovations you know we're talking about things like the ethereum object standard about dank sharding and so on to continue to evolve the platform and the direction it needs to go and that we haven't fallen into the Trap that Bitcoin had already fallen into by this point of resisting all change no matter how well considered what's the greatest risk to ens right now Nick um I think uh probably two things one would be um governance and action because of of internal disagreements and because of a fear of of making changes or taking

risks uh you know we have this big discussion going on around financial management and there's a lot of people who are very cautious about doing anything other than just sitting on Earth and I worry that that caution actually blinds them to other risks you know that we incur by being in that position and the other one is the one you alluded to is governance capture you know we try to make it as unaffordable and unattractive as possible but there's still the possibility someone comes along and manages to swing a vote in the direction they want purely because of their vested interests would you say those are the two biggest risks to Dows in general not just DNS I think that's a reasonable take yeah yeah have you created a fake

word yet and put in this conversation uh I've I've created one but I haven't found a way to work it in yet I've got a couple of real ones I think I think I was cheating um okay I got one more question for you Nick which is just on the value of community which is something that we've been trying to suss out which is you know if you were on the clock about a year ago the the value of Dallas was really in the community and you have your you know it was like find your thousand true fans or whatever it's like kind of that idea but for shipping products you start with the community and you've got this great pipeline already into them and and talking to some of our uh people on the

season there's pushback against that idea so I'd be curious to get a sense of how you think about the value of community in a dow it's been mostly pros and a few cons you know the few cons to start uh there are always a few people in a community who are very loud and very sure of themselves but also very sort of single-minded on some topic that is their pet topic and they can easily derail conversations for as long as you let them you know you can end up in a situation where everything becomes about the pet topic and nothing can get done you know because everything just sort of gets derailed into these endless circular conversations but the enormous plus has been attracting like so many more

um people who are enthused and dedicated and and you know want to work on this and build this than I could have foreseen you know they part of it's been the growth of the unese in general but part of it has been the the outlet the Dow has provided you know for these people to to actually make meaningful contributions um and what I've really seen at win-win since we launched for instance the uh the small grants rounds where every month you know five projects get an e feature to help kick-start them um just the number of things people are building uh you know in and around the Dow because they have a feel that uh you know they can make a meaningful contribution here and that you know they're allowed effectively you know

just giving them permission to be involved I think those are all the main the main questions that we we have I guess Nick you get the final word on the entire season my friend if you uh if people take away one sentence from this entire season on no pressure yeah no pressure uh you know what do you want people to take away no pressure yeah uh I guess uh one of the biggest problems Dale's face is that people decide for themselves that their voice isn't useful or valuable or they can't make a meaningful contribution and so often low participation is because people have pre-selected themselves out of it uh and I think more people need to realize that actually you don't have to be in some

special position you don't have to have a track record you don't have to be a prominent individual to make a meaningful contribution well well said Nick well said you have certainly been our most verbulous guest of the year foreign [Laughter] [Laughter] to make up some words related to cryptocurrency and it came up with crypto picture which is the architecture and design of cryptocurrency technology and systems so I was going to translate that one in red picture that's the theme of season three

yeah um Nick it's been a real pleasure having you on yeah this was fantastic man and congrats on everything with ens it's been awesome seeing you guys grow and become this like backbone of the industry so yeah keep on doing you thank you great episode that was a lot of fun I just like Nick I've never I've dm'd with him a lot um one time there was like this I was trying to buy a a name on on EMS and I messaged him and he was like basically wanted to customer support mode and really helped me out and we just exchanged a bunch of DMS but this is the first time I've ever talked to the guy and I just really like him he's very Mission driven but not in like a crypto Maxi mix uh Mission driven type of way do you know what do you know what I mean

yeah I do I got the impression that he genuinely some person who's motivated by trying to do good things improve his surroundings and he's clearly someone who you know has a very strong work ethic as well so it's it's very cool because I think I think his perspective was a little bit distinct from some of the other people that we've talked to so far in in this season and I thought it was a great you know very true to the ethos of what we're trying to do here in crypto and with thousand I just loved it as a conclusion for this year so tell me a big takeaway tell me what you're thinking about after that episode yeah I really think he helped cement for me sometimes it's funny to hear someone just really believes it themselves and it just had a very clear-headed not some

big crazy vision of the future but it was just very easy for me to walk away with this idea that look if you're building the the base layer infrastructure uh of a new Financial system then yeah you want to be optimizing for good decision making but really you want to be optimizing for resilience as well and if you if you use the analogy of this is the one that people in crypto love but tcpip and HTTP those open early internet protocols which are a really good example of really public goods you know that that a lot of the modern day internet is built on I think there's a very compelling there's a very compelling case where yeah you do sacrifice a little bit of efficiency and good decision making in the early days

of a startup but I think the the premium that you get for the resiliency and the environment that you create for other for-profit entities or companies to build on these events so I just walked away thinking there's a lot of Merit to what he was talking about yeah yeah I completely agree um what did he say okay so he had his so his thesis is that public goods should be to house here in crypto land and so something like ens should be a public good well I I what I heard him say is that he thinks all protocols that are close to the infrastructure layer the infrastructure yes okay good point so what what did he say again about uniswap and like he actually he drew the

distinction I think one that we've talked quite a bit about and I like you can look at I personally wouldn't necessarily put uniswap in the bucket of a public good I I would because and I think he was making that argument as well unless I'm totally misunderstanding because uniswap is an application and there is probably you know at the end of the day I I don't know you hear this come up a lot in discussions about uniswot V3 and all right now we've solved liquidity it's already has the most dominant market share so everything should be that's the public good and then we'll build stuff on top of that and I'm just not necessarily that's convinced I'm not convinced that that's actually how it works like you need to find a way to maintain that competitive advantage

for for unit swap it's it's a it's a financial exchange I I'm not really sure why that should be a a public good but I think what he you know where he I like I mean definitely I don't think that you would hear many other people arguing that ethereum should be anything other than a a public good Bitcoin should be a public good in my opinion as well what he's dealing with is the same thing we're dealing with centralized company or decentralized company it's people management and creating incentive plans and it's just funny to hear um that that's the exact same thing that he's working on and it was interesting like that seems to be I know he mentioned his two greatest like fears at the end but like it seems like the biggest thing that maybe keeps him up at night on a more like short-term basis

and more like in in the now is is just like how do you incentivize people how do you how do you create incentive systems that that Propel the Dow forward yeah I think if you zoom out far enough everything is about people management and incentive creation what do you think about his biggest fear being the VCS um and I think uh I think that I think that got him thinking I think he had already thought about it quite a bit and and I don't even think this is like the VCS getting undue influence I you know we talked about this in the last episode with Chris where I really am of the opinion yeah that all the people right now who are saying yeah no no wait I'm not gonna buy in are the same people who are going to be ripping VCS for getting outsized

allocations like this opportunity is there for for all of you right now it's VCS in Trad five land this is more this is more sort of in the land of hedge funds in the realm of hedge funds I think kind of like vulture funds or it's kind of like the bad side of what do you call the funds that Carl icon activist investors sometimes activist investors actually come in and they say hey like the way you have governance set up here is not necessarily proper or I don't think you're doing what's in the best interest of the shareholders here and they're supposed to be these white Knights I bet that's true like half the time you know probably the other half of the time there's a little bit of corporate rating being done and a lot of profit extraction frankly from businesses that were probably fine and I

think I think the analogy is probably more to like activist investors like Carl icon than VCS right now the right now VCS is sort of the boogeyman because they're the active professional Capital class in crypto but eventually I think what ends up standing in there is hedge funds basically and yeah I think it's a and people worry about this in Corporate America all the time that's why they have like poison pills and that you hire fancy investment Banks like Lazard or whatever to help you protect against active investors coming in and just buying up a whole bunch of shares and then taking control of the company and then in the worst case extracting a whole bunch of profits

and harvesting value instead of creating new value so yeah I think it's a I think it's a valid concern I think the reason it probably hasn't happened yet is because probably a lot of people that would be sophisticated enough to try stunt like that don't believe that you're doing value Buys in a lot of these companies right now like they're sort of protected by their own high valuations but yeah probably will be a concern eventually anything else from the app I had an enormous amount of fun this season I think I want to digest some some thoughts before we we come back with our like full list of takeaways we'll do one more we'll do a recap that and yeah yeah uh also Jason and I have we we are between two topics for next season I'd

be very curious anyone who's listening and who's made it uh all the way so far in this episode if you guys have topics that you'd like to see Jason and I explore deeply I would love to get your your feedback this is the topic for season three so if you tweet tweet at Mike or tweet at me um and let yeah let us know what you want the topic for season three to be all right buddy this is a fun one let's see on the other side foreign [Music]