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The Death of DAOs
Recorded: June 3, 2025 Duration: 0:59:58Space Recording
Short Summary
In a recent discussion, crypto enthusiasts explored the evolving landscape of decentralized autonomous organizations (DAOs) and the potential shift towards centralized company structures. Key points included the need for regulatory clarity, the challenges of governance, and the implications for growth and innovation in the crypto space.
Full Transcription
Thank you. this one is going to be an interesting one i've been thinking about this topic for a very very
long time around the death of dows the death of the foundation there's an article that recently
got pushed up and pushed out by miles jennings he's the general counsel of a 16 C crypto. He put out an article.
I'll probably like, uh, share it here in a second.
Uh, and I'll throw it up in the nest around the death of DAOs and kind of like what's
going on.
He didn't call it the death of Dallas.
He called the end of foundations.
Um, but what he's really calling for is DAOs to go away and uh effectively have everything run and driven um to companies
and start putting like company formations in there and so did a had a lot of thoughts on this
been following this guy for a very long time um interacting with him a couple times very smart
dude and very poignant and going to go over this topic and kind of like share some experiences in the crypto space and in, you know, yeah.
Cool.
We're going to wait here for like a minute or two.
Some people on my team are going to like hop in and join here in a second.
We're going to go through a bunch of topics.
Cool.
All right.
We got awful growth and we got risky.
All right.
Thank you, sir.
Thank you, sir.
All right.
Awesome.
Cool.
To jump right in, I think what we have to kind of like is. What was this dude talking about? What is he driving on about? What's the difference between a protocol and a company, a project and a foundation? something that is extremely important he uh basically says that uh foundations were like
a temporary fix or in in most in DAOs as well were regulatory arbitrage and if we go historically
like let's talk about like why the down governance came into place um so if you look at the Bitcoin
protocol in 2016 2017 uh there was an upgrade an upgrade to increase block size, to increase the amount of transactions that can go into a block.
And you had to set this weird setting on your miner manually to be able to denote whether or not you wanted the transfer in the block update. update this was like tony uh tony from uh bitpay and mike belche from bitgo and another two or three
people kind of put this proposal up and there wasn't really like a governance mechanism within
bitcoin and so the communication between the decentralized miners there was like bitcoin.org
forums and uh bitcoin talk forums but like that was about
it there was not a way to communicate and so the protocol was able to effectively uh update they
weren't able to increase the block size they didn't have a standard to be able to like do like eips or
vips um other than on the on the uh github forum github at the time didn't really even have forums,
but effectively they weren't able to talk about these upgrades
and decide whether or not that the network
was going to upgrade together or not together.
So kind of governance came into play,
and a student named Vinny in Civic basically said,
hey, we need forums.
We need forums of governance.
We need to be able to have these tokens vote on governance
and bring it in because a protocol in and of itself
cannot decide whether to upgrade or evolve to the situation.
So governance was needed.
One of the beauties of Bitcoin is that it's still the same.
It kind of remains the same,
but it also is kind of locked and can't necessarily
evolve the bips are hard to get through you have the things that are very like contentious like
runes and uh what was the other thing these runes and and these other like the taproot wizards
um type of like nfts that are on the bitcoin network like also name is passing me right now but
essentially like the taproot wizards and the runes are a way to add another layer of token
and tokenization the ordinals ordinals that's right so ordinals is uh that kind of the nft version
but so you need governance right and the governance basically comes into play on how to communicate what the
future is. How do you evolve a protocol in and of itself basically dies.
So governance came into pass. So once governance came into pass,
the DAO came into pass, decentralized autonomous organization.
The whole idea here is like,
it's a governance board of what we're going to do and where we're going to go.
And that's how this evolved.
And however, a DAO is an on-chain online entity.
It is not an offline entity.
And so to interact with the real world, the steward, the go-between between the atoms and the physical
realm, IRL life and legal entities and legal things that you need to put together and the
DAO. So that's why you had these two structures. The DAO was pure online, one token, one vote type
of situation. There's other governance things. And then the foundation was supposed to handle all of the off-chain in real life. So that's kind of set
in the context of this thing. So when you talk about the end of the foundation era in crypto,
you have a very, very strange collapsing of a state of superposition, if you will.
So the collapsing of these two topics is what you're now saying is the on-chain protocol.
If this is true, and Miles Jennings says it's true and it happens, the DAO doesn't exist
and the foundation doesn't exist.
You are basically merging these two concepts into a company, right?
That needs to follow the laws and regulations of the country that it's in
and the global laws and regulations, therefore, or it can get fined,
which is kind of directly against the, you know,
the cypherpunk ethos of decentralization.
Because as soon as you collapse this thing from a foundation in doubt
to a centralized entity, you then have the issue of compliance. And once you have compliance, you have token takeaways and you have the ability to basically regulate and sue these protocols, which are pieces of code into non-existence.
these protocols, which are pieces of code into non-existence.
And so you have like these really two big challenges, right?
The speed at which you need to,
the protections and speed at which that you want to
evolve your company and grow and have a lot of,
you know, standard practices that everybody kind of
understands in traditional companies, whether or whether or not you can kind of get around the regulation or not,
you should go to a company, or do you need to keep this thing completely decentralized,
transparent, something for everybody in the world that can use all over the globe,
cypherpunk ethos. And the challenge here is between these two segments and sections.
Okay, so Myles Jennings' initial thesis
is that the crypto industry should transition
from this decentralized cypherpunk ethos
to end foundations,
having the protocol and the DAO, the on-chain,
having the off-chain entity the
the foundation to company-based structures for efficiency and scalability and i completely agree
with them that they will be efficient and scalable but they're going to be a giant attack vector
as soon as you centralize and you have an entity um the the lawsuits uh the the regulation the kyc the compliance all comes into
play if you do all the kyc and the compliance you basically in crypto you will generally lose
business to those that don't do the kyc compliance and those that don't follow the rules because to
follow the rules costs you capital and therefore you have to charge more fees and capital to have all the
infrastructure the regulatory compliance and regulation and as we can see in the loud experiment
and many other times in in the fee switches that are coming on board or just the radical
competition that is in crypto as soon as there's a premium and if somebody following the rules
somebody will come in with the open source code to copy pasta it, undercut the fees, and all of the flow will go to the people that aren't following the rules, such as Blur, such as Blast, such as Matora and Loud literally yesterday.
iterate and move into the protocol and the different dApps that don't follow the rules
and charge less money than those that follow the rules and charge more money.
The theory here is in the thesis here is that if you follow the rules, you have the KYC,
you have the audits and everything like that, you effectively can get more tradfire capital
in and you'll get bigger and bigger bags and you'll miss you'll you will have the necessarily the decentralized
component but you will um you'll effectively be able to get bigger and bigger bags of capital
and you don't necessarily need to worry about the decentralization and the kind of um cyperpunk
ethos that anybody in the world can can use the protocol and use the software yeah it goes into
further state that um foundations uh were established as you know like i said before the
arm helps promote decentralization service steward networks to the blockchains and the dApps and then
over time the regulatory pressures and market dynamics have shifted the role of foundations
pressures and market dynamics have shifted the role of foundations to basically become like the
entities of the the records right the entities the um the legal record the the attack factor and
points so uh what happens in this is you have the profitability of a protocol and the foundation
that's a non-profit company and the incentive and structures are are radically out of alignment so it's like all the profit stays
on chain all of the legal all of the liability stays with the foundation off chain and which can
go i love this line that he had he goes um all told many this is this quote all told, many projects ended up with a kind of shadow governance of entrenched tokens that may represent nominal ownership of the opposed more opaque off-chain structures that merely disperse control.
Eliminating the trust dependencies is significantly better for consumers than merely highlighting them.
It goes on to talk about mandatory disclosure obligations, significant market breaks pressure
on projects to eliminate control rather
than invest into a few unaccountable hands. And I think that's the message here. There is a sort of
like YOLO, cypherpunk ethos, use the protocol, don't use the protocol. I don't care. I built this
for a couple different use cases versus like, oh, we need people to point the
finger and accountable. I mean, even last week, we saw this thing with like Chainlink,
who had a price feed who said this Oracle is high risk, an exchange went to go,
isolated money market went to go use this OEV, this Oracle, and we had a up peg.
I won't even call it a D-peg of a stable coin.
We had an up peg of the Elixir token that created $500,000 worth of liquidations
in a brand new market on thin liquidity.
And the $500,000 of liquidations was based upon a $12,000 purchase,
a $200,000 purchase that overbought $12,000 worth of the Elixir token on Avalanche.
And the interesting thing here is that there's no accountability.
There's no accountability to the lending protocol.
There's no accountability to Elixir.
There's no accountability to the Chainlink Oracle.
Whether or not they misrepresented
the price is a whole other debate we won't get necessarily into, but effectively zero
accountability on the protocol, on the Price Oracle, on the curator, on the asset itself
in terms of liquidations. There's no recourse, right?, why not wipe James Wynn on Hyperliquid for $100 million and whether they're doing that specifically or not specifically, or it's an emergent and he's just a bad trader, or he is a good trader and somebody, like, short squeezed him.
Like, we don't know.
don't know. But either which way, there's no accountability. So in that sense, if you wanted
But either which way, there's no accountability.
bigger, bigger bags of capital, you could look at the foundation model, try to deal with the
challenges of regulatory complexities. And without accountability, there's no recourse. And there's
going to be a bunch of people that just basically squeeze people out again and again, whether that's
legal or not legal. So there's lots of risks.
There's lots of buyer beware in DeFi.
And you have this like massive centralization risk.
Now the centralization risk becomes an attack vector for regulators.
Again, and so the question in my mind is really like,
are you going to be able to sell over a global population with a centralized company running DeFi protocols?
Or are you going to have to go through like the KYC, the money license, the money servicing, money through the regulatory complexity. You're talking about a protocol that's launched over a weekend versus having to raise 20 to
$50 million to navigate the regulatory complexity.
And then those cost savings don't go to the users.
You're just playing almost like a C5 tri-5 game because anybody who will follow the regulatory
complexity and do the 20 million to $50 million that it costs to go and lobby the world to get your protocol in every country, city, and state, you effectively are creating a capital-based moat, right?
And you might as well just go build in Seafi, in my opinion.
But let's go back to what he says the advantages of company-based structures are.
Companies can deploy capital more efficiently.
They can attract more talent.
There's systems in place that can respond swiftly to market forces.
There are new US-based regulatory frameworks that are coming in favor of company structures for the crypto industry.
of company structures for the crypto industry.
And there's implementation models like Borgs and Dunas
as potential frameworks to be able to do this off-chain,
on-chain kind of like dichotomy, right?
This switch of where it's really one entity
that's both the off-chain and on-chain kind of organization versus
the dao as the on-chain organization and the foundation is the off-chain organization
i think there's a bunch of issues um within his within his uh kind of like article i'll go over
a couple i think you know they they suggest that um that daos are incredibly
inefficient and we do have some successes we we've seen you know success of the ave dow and and you
we have success of the ethereum foundation right so if you can look at like what's going on there's
a restructure going on with the ethereum foundation now, but dude, this foundation was able to
create like billions and billions of market cap through its organizational structure,
$316 billion of market cap to today's date. And this was mostly guided by Vitalik and the
Ethereum foundation that was put together at the beginning. And I, so if you're like, oh, it's not successful.
It's like, can it evolve to the current market?
Yeah, there's questions in that.
But if you're not, if you know, if you're not calling the Ethereum foundation a success
to get the $316 billion of market cap, that's kind of like, that's kind of like crazy.
I think there's also this kind of like this or that type of fallacy, right?
Which is there's a binary choice between a company or a foundation.
And I think he really kind of like undermines the DAOs or DAOs that have more like centralized control, like Aave, right?
It has a dictator.
It has a president.
It works.
It's pretty darn effective.
And it is the largest,
it's the largest DeFi lending protocol in existence,
but it might be the largest DeFi product market fit
of any DeFi protocol in existence.
And it works.
What they're doing is working and they're winning.
There's a big assumption here that there is going to be regulatory clarity.
And I think the evolving nature of like regulations will basically, you know, they're temporal, right?
It's like if we have a regime switch or we have like flipped from Republican to Democrat, we could see a massive undertaking of different regulations and different regulatory environments so are we going to be
switching our our organizational entity every four years to deal with the the regulations in in the
united states and you know there's there's a little bit of a concern and question there that i have
um and just the fundamental removing of the cypherpunk decentralization
like principles you know company structures will 100 lead to the same types of externalities of
profit making that um you know you see in like why there's like the the uh the corporatization
or you know corporatocracy of of of America is basically run by corporations,
externalizing as much cost as possible, creating, you know,
lifting up the ladder, the metaphorical regulatory ladder,
like I'm going to win first and then I'm going to lift the ladder for all the
for all the different companies behind me is also there.
different companies behind me is also there.
The decentralization is extremely meritocratic.
It's extremely capital efficient.
And you have to make the next most capital efficient,
specifically DeFi, protocol or you're going to lose.
And so you don't need these regulatory controls as a moat.
Like I said before, it's going to cost,
if you want to
get all the licenses throughout the world, I think there was a report done by Coinbase where they
spent like another 40 or 50 million to get the regulatory licenses and the money transmission
licenses that they needed to work with in all 50 states. So it's capital prohibitive to basically
do that. If you're a project, you build a new mechanism design of a lending protocol
or an exchange over a weekend
that's massively better
and more capital efficient,
sorry, you can't play in this game.
You need to raise $50 million
to be regulated like this.
So the speed of innovation
will drastically decline
if we kind of go back
to that landscape, in my opinion.
Let's see.
A lot of key assumptions.
Talent acquisition will be easier.
You know, I guess, you know, there's a bad sentiment, market sentiment,
at least in the United States, around crypto.
It's all a bunch of scammers.
People aren't necessarily proud to tell other people that work in crypto
just because of, like, the media the media and what they put out there.
And there's a big assumption that a corporate structure will have more incentive alignment than a DAO structure.
And I agree with that.
Is there a need for evolution? Yeah.
Is there a need for a hybrid model yeah is there
are we are we kind of kicking our principles out the door uh of the of the crypto movement for
for competition we we kind of are and and whether that's needed or not um is
is interesting that's that's miles take he talks about shadow governments and um and i'll
kind of switch to my own perspective around uh the death of dallas right and and i'll and i'll
i'm gonna steal man his case in a lot of different angles but i'll call this uh the
I'll call this lessons from TradFi and the need for governance redesign.
And from my own perspective, I'm happy that DAOs exist.
I did a lot of DAO interaction and form interaction within the Cosmos ecosystem early on and while it the cosmos ecosystem is extremely
interesting and it was like pretty cool bridging technology uh they they couldn't um coordinate
like the mass they could not coordinate fast enough to evolve however because the cosmos
ecosystem i'm grateful for existed i am grateful for it because I learned
a shit ton. I learned a ton about the governance. I learned a ton about the technology. Everything
was open. And people were complaining and talking about and debating whether it was in good faith
or not in good faith. That's a different story. But there was enough information there in good faith to be able to understand
what was going on, what people were trying to accomplish, and why people were trying to
accomplish what they were trying to accomplish. It's incredibly powerful. You cannot get access
to this in TradFi. You have to go and work for these entities and then kind of like navigate yourself into the right pockets of information to be able to have access to the information because it's all considered proprietary.
This information isn't available.
There's kind of two sides of the same coin.
Because everything is public and transparent, everybody can learn faster and evolve faster.
Because it's public and transparent, your alpha leaks away immediately.
So it's harder to retain a competitive edge because everybody can see what everybody else is doing.
So you can't really do the value capture and you can't sustain the Dow and the profitability if everything has to be in public.
you can't sustain the Dow and the profitability if everything has to be in public. So what you get
is these like systematic, like political traps, right? Because it's like permissionless coordination,
you're not going to be able to compete. So you kind of get this, these two different powers,
two different powers, system risks in conflict that, it's just, you have alpha, you can't make
it public. You have alpha, you have to make it public in a doubt. And these two things are
inherently in conflict. That's one of the main issues.
The other main issues is I see that governance capture increases by,
over a set period of time,
governance capture by service provider hotels
and political savvy delegates continually get governance capture
and token capture and alignment.
And while this is good because your expertise grows, it creates this effect where it creates
a moat based upon brand and the service providers continually providing the brand, but they're
always continually charging a premium
so dows are overspending because people don't have the information dows also have to understand
because the prices are in public dows also have to overspend because the process of getting a
dow contract is abhorrent like you're talking about there's a need hey there's a need we want a need and then be
able to communicate with all the delegates go through the process be able to go through it
you're talking about uh in most cases six to twelve months to to get a contract and embedded
in that is there's no key decision makers and you have this game you're playing with delegates well
it's whatever the community wants it goes goes, no, what do you want?
As a delegate, as one of the large delegates,
what do you want?
Well, I don't know.
We'll have to take a pulse check of the community.
Let's put it up there and see what the community says.
And then you get these trolls that come in
and like tear it apart and tear you apart
and call you grifter and everything else along this line.
Instead of having discourse or dialogue to
be able to coordinate and correlate and iterate to the right answer, you have a bunch of trolls
and forums that will rip you apart because you're proposing something that you think is beneficial
to doubt but will not discuss and have discourse with you in good faith. And I've seen this time and time again.
So obviously there's a new design that is needed.
Whether it's not wrapping it in a company or not,
I think may not be the overall arching solution,
but there's definitely some evolution,
especially around service providers,
entrenched delegates, accountability.
There's not enough truth seeking.
And here's like a really key point.
The delegates and the service providers have conflicts of interest everywhere, right?
They're afraid to speak the truth and seek the truth because it may hurt them and may hurt their pocket on another competitive DAO.
So you have these conflicts of interest everywhere on the service provider level, on the delegate level.
It's not a pure representation of ownership and incentives.
The whole purpose was if I hold a big portion of a particular token, a DAO token, I'm going to vote by my backs.
I want my token to go up and to the right.
I want dividends.
I want a piece of the returns of my investment in the protocol. And what historically happens is you get this governance capture, you get the service provider capture, and then you get these like little cabals and cartels.
And you start to switch from meritocracy of the numbers in the protocol to a much smaller microcosm of politics and governance capture.
And this is a problem.
It's a tragedy of the commons, right?
So in a particular that I'm thinking of,
you effectively have a tragedy of the commons
where the founders are gone,
the original investors are gone,
and all that are left are delegates and service providers.
What you have is a treasury, a pile of money,
something that's in a protocol that's running at a loss.
Nobody is particularly incentivized in radical accountability.
And if you call out radical accountability,
they'll take you in the back and shoot you in the head and say,
you're not grifting together, right?
Everybody has to grift together, but like not at the same thing, which is crazy because you can't have a community like hold an entity accountable, right?
All you can do is control the sentiment about said entity.
If the sentiment about the entity goes
down, then the service provider goes out. If the sentiment about a delegate goes down,
then they go out. And so you get this Mexican standoff. Nobody's telling the truth. Everybody's
cabaling. You're making backroom deals left, right, up and down to try to do what's best for
this thing so that you can sustain your fees as
on a long enough time horizon, not make the token holders win.
And it's unfortunate.
It's a non-functioning governance system, right?
We put out a proposal to have a president in a DAO structure.
I won't go into the details.
Well, if you know who I am, then you can figure it out.
A president in sub-DAOs, all with accountability,
all with the available to have their funding,
have their funding reclaimed at any given time,
and then be able to vote people in and vote people out
whether or not the budgets make sense or not.
And what ends up happening is if you don't go into this like sub down model or have this like the ability you can't you can't coordinate the experts right these votes come in for these
dow votes there's a lot of apathy people can't tell what's positive or negative because
they're not experts in marketing like think about the things that you have to get right
into running a successful protocol you have to have a fine good financial design you have to
have good tokenomics you have to have a product that people want you have to be able to market
it you have to be able to track liquidity you have to be able to attract investors
you have to be able to secure it you have to be able to manage risk you have to be able to attract investors. You have to be able to secure it.
You have to be able to manage risk. You have to be able to have good design, good product development. You have to be able to do so many things that very, very few people in the world
are an expert at like three or more of those things. Very few. And then what you're asking to is
a non-paid delegate or a non-paid token holder to be able to have that expertise,
to be able to rationally make a rational decision, be able to negotiate, be able to communicate,
be able to have like cognitive discourse on the topic, and then make the right decision.
And if they're an expert in all these aspects, and they're able to make the right decision,
and they'll be able to vote correctly, the idea is that this will drive value back to
the protocol and the token holders.
The reality is that nobody's an expert in all these things.
Like, I don't know how to write a smart contract at all.
And I don't know how to monitor the security of a smart contract.
I am not an expert in that. I should not be necessarily voting on it. What I can't vote on
is the potential price points of things and what I can see in the market and the competition in
the market. So you get these service provider lock-ins and you get a tragedy of the commons and you get
rent-seeking behavior where service provider firms are extracting value from the DAO without
accountability, without long-term alignment, without any fundamental clear incentivizations
and mapping the incentivizations accordingly.
All right.
Let's dive into the conflict of interest.
So when you have a limited amount of service providers with this expertise, a limited amount
of delegates, what happens is sentiment over substance.
The votes are driven by emotion.
They're driven by memes. They're driven by memes.
They're driven by zingers and social media narratives.
And they're not driven by meritocratic analysis and assumptions because nobody has the time.
Because the cost of an expert to do the meritocratic analysis of any DAO vote, they can make a lot more money just going doing this on their own or getting paid to do this somewhere else. So you have a lot of sentiment over substance. The coordination play
of the delegates too, I mean, a lot of them are not doxxed. They hang out on Telegram, they hang
out on Discord, they hang out on Twitter. But to be able to get a group of people together on
serious topics is incredibly hard to coordinate and have like real conversations and real conversations of substance.
What ends up happening is that's why sentiment rules, because there's not enough time to get delegates up to the educational knowledge barrier to be able to be educated on the subject,
to be understand the pros and cons of any particular policy
or vote. And I think this is like, I learned a fundamental lesson in democracy. I think this
happens in our political system all the time. When democracy was really put into play and the
republic was really put into play in early America, everybody had the same job. Everybody was a homesteader that traded like wheat and their vegetables and had cattle.
Like we all had the same job, which was land.
You know, the first were men who were land-owning white males, right?
And I'm not saying we should go back to land-owning white males.
What I'm saying is that they all had a similar lifestyle, right?
The lifestyle was one of they knew what other people were doing, right?
Because they had the same job.
And they knew how to kind of navigate it because everybody had fundamentally had the same business.
You had some specialists and cobblers and printers and this type of thing. But most people had the same business. You had some specialists and cobblers and printers
and this type of thing, but most people had the same job.
And so democracy in the Republic makes a lot of sense
when everybody has similar expertise.
What ends up happening over a long enough time horizon
is information asymmetry.
And the delegates don't lack the deep context about marketing business development
security audits audits risk parameters right it's too much information it's too much specialization
so most proposals are written to obscure like downside risk right so everybody is trying to
get funded for their proposal so everything is trying to get funded in a positive light.
And we're constantly not, I want to say not being honest, but there's no incentives to
produce all of the cons of why a governance proposal shouldn't go through.
So you have two, lack of expertise across the board within a DAO.
And then you have the incentive alignment of the proposer is not
most of the time putting out conflicts of interest.
They're not showing like, you know, they're diluted loyalty
because they're a service provider across multiple, multiple DAOs.
And their proposals are being written to obscure all of the cons.
So conflicts of interest, information asymmetry, diluted loyalty, this happens in any contentious DAO proposal.
The beauty of the transparent nature is that anybody can come along and it's meritocratic,
you can write some code, you can come in and play.
And so the question then really becomes,
and I don't have a specific answer here,
is how do you come in and provide value in a DAO
and aggregate the best people in a community?
How do you filter it and not get these like tragedy
to the commons like locked in service providers
that are locked in for years and years and years.
And the coordination problem is one of the things.
And the weird thing is, is like you have to create more sub-downs,
more expertise, in my opinion.
And that's why we proposed a sub-down structure in the past
because risk is a component, marketing is a component,
business development is a component, security is a component, product development, roadmap, design is a component marketing is a component business development is a component security is a component product development roadmap design is a component right institutional sales is a
component these are all should be thought of as these different business units or these sub
dowels that have goals that have kpis that can work and win together with incentive alignment
win together with incentive alignment.
Most data-driven proposals that we've seen are ignored.
That's another problem.
Like the feel-good slogans and whatever the narrative of the month that feels good tends
to go through with the status quo, especially if there's a positive sentiment.
And we got this like echo chamber thing going on where it's positive
sentiment, positive sentiment, positive sentiment, a bunch of yes men, yes and nodding yes, but
not really even looking into a proposal or giving a pro and con breakdown and then expected
to be paid as delegates and representatives. So when you kind of break it down, you have this formal governance structure of what
happened in the past, right?
Fiduciary duty, like right now, DAOs don't have a fiduciary duty to their token holders.
They don't have any disclosure laws.
You don't have to publish any conflicts of interest.
You get a set of bad practices.
I think across the board that compensation needs to be tied for performance.
If we're going to do this in the transparent meritocratic viewpoint and keep DAOs alive,
we need people who are experts at these things to be able to negotiate
and make sure that
performance and compensation are tied to each other. Now, we could go into governance working
groups and audits and committees and independent review boards, but the reality is that most of
the people are not experts across all of these eight different facets that you need to run a
protocol. I think we laid out eight or nine different sub dows that would be needed to run
one of the largest led in protocols because these are the activities that take to make it and run it
i think um you need i think you need like an executive each of the sub dow at a minimum but
some person that's kind of placing these people overall. And I think the DAO should place that person in. And the best one that's running like this right
now is Avi, right? They're showing success. They are showing that this can be done and this can
drive value accrual and alignment. And they're doing it and they're figuring it out. It's a
little bit of a dictatorship. I think we need to like separate some of the roles and responsibilities.
But Zeller's cooking, dude.
He's making it work.
And make sure that, you know, there's another, that the delegates are, when the delegates are right, I think that's kind of the idea of futarki here, right? Voting as a prediction
market, which is kind of one more interesting concept. So vote and the delegates are wrong.
Maybe they lose a little bit of their delegation. Maybe they lose some financialization. But we
need to figure out how to incentivize the voters for being correct, not just from a macro $300, $400 million market cap token.
But on – that's why FoodTarky is interesting as a prediction market, but it's also very, very challenging.
And it's unseen what the unintended consequences and the externalities of FoodT and function and prediction markets are on voting. But most of the service providers, most of the delegates
don't have skin in the game. They don't care where the token price goes up and go down. So
that's like a fundamental incentive misaligned. All they really care about is the reputation so
they can get their next delegation or their next service contract. And, you know, some of this, I think, is just human nature, right?
It's like we have this saying that we came up with, which is called,
man, well, you have the alpha male and you have the diplomatic corruption.
And what ends up happening in the tragedy of commons is diplomatic corruption within these governance point of views.
You can see that within Doge, who tried to alpha monkey his way in and cut all the spending.
And you have diplomatic corruption with like USAID.
These are like the two extremes, right?
You know, cut off all the wrong things that we're spending on
and then spend as much as we can.
And if you end up in diplomatic corruption state
where that is the status quo and the norm,
you basically unwind your governance,
you unwind your organization
because of a long enough time horizon.
It's as old as like the Tower of Babel.
The diplomatic corruption has a flaw in its system.
It unwinds and all of society will collapse or that structure and that entity will collapse.
And then you get this like really shitty times and then shitty times strong men.
Alpha monkeys come into play and they're like, hey, we can do it better.
It's a tale as old as time right
you this is this is like it's getting a little philosophical but this is the difference between
like you know conservative and in in progressive right so you need you need the frameworks of the
past because there's a lot of like things that have worked and then So you need the frameworks of the past
because there's a lot of like things that have worked
and then, but you need to evolve for the future,
for the future state that is coming.
And we have yet figured out how to do that within crypto.
We get into entrenched cabals and diplomatic corruption
and lack of accountability, lack of transparency and lack of accountability,
lack of transparency, and lack of incentive structure.
And it just kind of turns into this thing,
like Ethereum Foundation, some other protocols.
I won't mention their name.
It turns into Gitcoin and Wokefest for Ethereum Foundation. Now they're trying to turn it around they're losing
market share um people are more interested in trading and transactions on other chains they're
like okay we got to put some alpha monkeys in there to to drive uh activity transparency
meritocracy again and get rid of the the woke uh esg get coin type of funding we acknowledge I think
we acknowledge that all the stakeholders the service providers the delegations the delegates
the users the token holders we're all here because we're self-interested right at the end of the day
like this is a cool experiment it's fun and i know some people that are not token holders that are delegates uh i'll call one out all the
colors uh that i work with sometimes i don't agree with them all the time um but he's here
for the experiment he wants to see this thing works he's a he's a he's a good dude um even
though we don't see eye to eye and we have different perspectives on things, it is always conversations in good faith, trying to iterate to the right idea.
And that's a very beautiful, beautiful thing.
Unfortunately, the monetization, the incentive structure around keeping other delegates and other service providers honest, they're financially incentivized to not have truth-seeking behavior, which is the fall of every organization, entity, ever.
So, I don't know what to do about that.
But it's not good.
It'll collapse a thousand.
That's why you get these like shadow governments.
So you have to get the experts voting on the things that they're experts about.
You have to automate as much as possible to get rid of the governance overhead.
And you have to figure out how to align incentives
and make us all meritocratic.
Because if you're getting all the delegates
to vote on the same thing every time,
they just get voter fatigue.
And you have to have conflicts of interest
and limit these service providers and delegates.
If they're single objective align, like make a token go up, make it valuable, and they're living, eating, breathing, and dying to sacrificing themselves to make this thing work, then they're going to do like all the research and do what's beneficial for it, just like they work at a company.
Unfortunately, because of the macro nature and there's not enough necessarily like capital to do all in, there's no relationship or entity that's going to say, oh, I'm only going to be working for this DAO or this project back and forth because it's too much of a commitment.
Right.
And there's no long term contracts and it's all kind of a commitment, right? And there's no long-term contracts,
and it's all kind of like gig economy.
So you get a bunch of LARPers and floaters in and out.
They're like, oh, I know what to do.
I know how to do it.
But they don't understand all of the unintended consequences
of what they're pitching and what they're putting out there.
We could do some real reputation weighted voting um delegate slashing for poor
performance i think that you know at least having to be able to read the prop before you vote on it
right like that we could put some tech in there is like did you read the proposal do you know
what's in here?
Or are you just voting because someone asked you to vote and you're voting on sentiment?
DAOs are failing, in my opinion.
It's because of governance designs.
It's a tragedy of the commons.
It's kind of ingrained in humanity.
It's, you know, it's the tale of oldest times
the tower of babel it's it's a rephrased story of the tower of babel where corruption leads to the
death of the the beautiful thing and if we don't rip out the corruption bring back transparency
align incentives and align meritocracy,
most of the DAOs will not be here in five years.
And so the next phase of crypto governance, we ran this experiment, needs to evolve.
We need to think about getting votes from experts where the experts at and be a little bit more realist and be a little bit more truthful.
Because as soon as you start to lie and not tell the truth about what's going on,
then it's not transparent.
Then the entire thing collapses in and of itself.
You can look at Soviet Union.
You can look at the Tower of Babel.
You can look at what's happening in America today.
Now that Doge has failed,
we'll likely spend ourselves in a non-existence.
But cool.
That's my rant.
Happy to answer any questions.
And if anybody has any questions or comments.
What do you think about tokenized equity like Moloch DAOs?
Your tokens are backed by treasury value.
Yeah, I think that gets more back to the incentive alignment.
The original concept of let's take Uniswap,
it's the largest DAO in existence,
was that you own the token.
And if you own the token,
there is someday a fee switch
and that someday fee switch will have financial value.
And because of regulatory arbitrage
and certain investors
not wanting to hold all that responsibility, they came up with this delegation model.
And as soon as you get the representatives and delegates, you kind of move away from
direct impact and responsibility. So if people voted and they owned the token,
actually owned the token, the token had NAV behind it,
like net asset value behind it,
I think people would vote differently.
And it would be more true.
And people would care more.
But they just want somebody else to do it,
which kind of turns the token into security in a weird way.
When you're kind of like delegation all the decision-making and responsibility, that's why we have securities laws.
So, you know, slippery slope.
That's like a cultural, like you cannot change that as a cultural thing.
Or if you do, you have to have different types of participants, like a smaller group that has a
bunch of active participants who have equity versus a larger group who just want, you know,
my bags to go up or something like that. That seems to be the security versus like, I guess.
And we're moving quickly into corporate governance, right?
Because you have like preferred shares in common stock.
Preferred shares are from the founders and the equity holders
and early employees.
And the common stock are the participants
that don't have a ton of voting power.
Preferred stock has, in many cases common stock you know
can all vote to to wipe away the board and the ceo but in many cases they can't though only the
preferred stock shareholders can and those are you know backroom deals behind the scenes in a in an
apocalyptic scenario the common will can always vote out preferred i think like a majority of
cases otherwise this there's laws against that.
But corporate governance works.
It's probably the most efficient, but if we could kind of replicate that
within the, the DAO framework, people have to actually own the token and care.
And everybody's like too distracted and like, dude, I don't know how many
tokens I have, like in one of my wallets,
I have like dust of like hundreds of tokens,
if not thousands.
Some are worth like negative pennies, right?
But most are worth negative pennies.
But you just get all these tokens
and you're like, you don't have enough attention span
or time to like focus on any one of them.
So there's an attention opportunity or tension issue as well
i've also seen one other kind of theme it's about like uh idealism versus um like profit-seeking
behavior like there's a lot of um like i think that if dows are much less idealistic and more focused on
earning uh money that they would be more successful but instead we've got a lot of
reliance on emissions uh which is basically like fake money uh and um idealism which is sort of
coming from like the cypherpunk type type uh idea and it's also kind
of tied into this sort of socialistic get coin type thing um but just any kind of dow stuff that
i've seen if they just had a bit more effort towards um running it like a business uh they
would be much more successful and you know I've seen that that attitude replicated elsewhere, people are frustrated with the idealisms.
And they want more, they want money, they want to know they
want their people to get paid, but you can't do that unless
you operate a business.
Yeah, those styles aren't businesses. I mean, that's kind
of like why we exist in the first place. Yeah, I mean, that's kind of like why we exist in the first place.
Yeah.
It has to move towards business or go away.
You got, you know, somebody just pinged me like missionaries versus mercenaries.
And the early DAOs are idealistic, like missionaries, and they want to see it exist, and that's good.
And that'll get you zero to one a lot of the times.
And then to get to one to 100, you kind of have to mature.
You have to turn into a business.
You have to have some more structure.
You have to take care of the eight or nine key components of every... i'm you know talking specifically d5 but mostly working d5 d5 protocols it's like risk security marketing business development
development product roadmap user experience like smart contracts so it's a lot and um if you don't
cover any of that um what effectively happens is you lose and somebody else who's
better at one of those things that and so you have like a really we we set up a sub dow kind of
like you know proposition and put it out there risk and versus like this versus that um
for each one of those business units and sub dows previously uh it wasn't it wasn't taken on this versus that.
For each one of those business units and sub-dials previously,
it wasn't taken on.
The pushback was that
there was going to be too many votes
and you're kind of like
doing like transparency
and radical responsibility.
Yeah, it hurts people's money.
It hurts the cabal's money.
It hurts the service provider's money to have, like, radical transparency.
I think I got a comment that in the background here, someone DM'd me.
The only, the biggest problem with Miles' take is that the regulatory change will completely rewrite it
if Democrats are still going to be anti-crypto when they get back.
I think that's true.
Anything else?
I'd like to say one more thing.
It's that the radical responsibility and the point person for the sub-DAOs, it's like the sub-DAOs are pretty cool structure because you need that.
And also I've noticed this in cooperatives, like housing cooperatives that I've lived in.
There's people that take action that get things done.
And then there's people that just kind of passively exist.
It seems like that's a very common thing in most structures.
And usually I think in business that would translate into a CEO type type thing versus like a worker, I assume.
Yeah, you have executive roles, right? You have like people that are like, yeah,
obviously like COO, CFO, CEO, right? Chief product officer, like there's all kinds of
these roles that are like, they own it, right? And I got another comment in the background is that
this cycle or attention is thinning more and more. And it's hard to launch with a team with
a solid foundation in the space because the attention cycles here are incredibly fickle
and new, right? You can spend more time pumping and dumping coins,
was this person's comment,
than working on something long-term with a long, long take.
And because the attention cycle of something like Loud and Loudio,
it took over crypto Twitter,
and it's here and dead in two weeks.
So you spend years on structures
and incorporating structures
and this thing and that thing
and $50 million to get all your licenses
across all these things
to have like a two-week pump and dump.
It's a very, very difficult industry.
It's a cool experiment.
We're still running the experiment.
We want to continue to run the experiment.
I want to keep playing the game.
I want to learn.
I want to be more radically transparent.
I think the biggest thing that's struggling on is the radical transparency versus capital
struggling on is the radical transparency versus capital intake, right?
intake, right?
The truth seeking and the radical transparency ends up hurting the capital
income of the company.
But I think over like a long enough time horizon,
I think that'll change where we have like associated short positions when we
have information on, you know,
where things are going wrong and what
they're not going wrong um that's that's that's how you do it right you you that's one good thing
is like you bet on your bags right you can put your money where your mouth is and you can take
a 10x short on a token if you know something and you believe that it's going to go down on hyperliquid and you
can win massively so as as we get more information and get into this um you know betting on your bags
is the thing cool i think i'm gonna end it here unless there's anything else
appreciate it cool conversation thanks man appreciate it thanks bye unless there's anything else. Appreciate it.
Cool conversation.
Thanks, man.
Appreciate it.
Thanks.
Bye.
Host
bryancolligan
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