March 22, 2022

DAOs Explained

June 27, 2022
DAOs Explained
This podcast was published on
Means of Creation
and recorded by
Li Jin and Nathan Baschez
.

Podcast

Transcript

Li Jin  
Hey guys, this is Lee and Nathan back with another episode of means of creation a show all about the future of work. We're brought to you by every writers collective focused on business. And this is another episode of our web three explainer series. Today's episode is going to be all about DAOs, or decentralized autonomous organizations. So for some context, I think blockchains are typically seen as this technology that is radically transforming our financial system. But it expands really beyond that trust lessness. And immutability aren't only useful in financial applications, they also have the potential to transform how we organize ourselves and allocate our resources. Historically, humans have organized themselves in all kinds of different ways, from tribes and councils, to more recently through LCSW, C corpse, or cooperatives. But all of these different forms of organizations tend to be more centralized in nature. And now with much of our lives being online, it begs the question, what does an internet native way of organizing ourselves and our resources look like? Many people in crypto claim that DAOs are the answer to that they enable an entirely new way of organization that runs autonomously without the need for centralized control. So this episode is going to explore the fundamentals of DAOs. What these organizations are, how they work, how they function, and what they imply for the future of work. And to take on this task, we're welcoming, tricky. Optrex. trake is a co founder at coordinate, which is a platform for decentralized compensation, built for the needs of DAOs. A quick note that I am a proud investor in coordinate. And he's been operating in this space for a while now and is also a core contributor at Yearn finance. So trake is the perfect guest to help us unpack this topic. So welcome, Craig, thanks so much for being here today.

Tracheopteryx  
Glad to be here.

Unknown Speaker  
Thank you. Awesome. So I'll just kick it off with the highest level level setting question, which is, you know, what is your definition of what a doubt is, we hear so many metaphorical definitions, like group chat with the bank account, or internet native Co Op. But I would love to hear your definition of what a DAO is.

Tracheopteryx  
Sure. So actually been working with a group of DAO leaders and on crafting a definition. And we've been working on a few different versions. I think the first thing is that the word itself is actually quite informative, decentralized, autonomous organization, each of those you can kind of go deep into to understand the nature of what these new things are. So a bit more definition of one that I've been working with recently is a decentralized network of autonomous agents, coordinating shared resources with cryptographic fidelity, I can explain that in a little bit more detail, if that seems to be great. So the first part is DAOs are networks. An organization is a kind of network, an organization is a network with a common purpose like a corporation. But we also see DAOs that are a little bit more fuzzy in that area. So network can be a bit of a better descriptor than organization. And there's kind of three pieces to it, right? decentralized network, autonomous agents, coordinating shared resources with cryptographic fidelity. And so these networks are places where people take action with resources. This is like what you're familiar with with a corporation. But the real utility of having a definition for DAO is to help differentiate it from other forms of human coordination. So a corporation has certain features, which help differentiate it from the prior dominant form of human coordination, which was the nation state, and in the history of corporations, was the Dutch East India Corporation, and you know, the early 1600s, which needed to actually like, twist a bunch of arms to be able to become an independent entity from nations. And that was the beginning of the kind of corporate epoch, which is now kind of slowly coming to a close, where in my view, DAOs are the next developmental leap in that direction?

Nathan Baschez  
What do you think is the force that's driving it to come to a close? Like, why are people choosing DAOs over corporations? What are the key advantages? Well, I

Tracheopteryx  
think the biggest advantage is that DAOs thrive with sovereign human beings taking full responsibility for their feelings and actions, right? Whereas corporations are often outsourcing. So you as a worker in a corporation, you outsource responsibility for what you're doing to your boss, right? And that's what a lot of us are used to. But in DAOs, that doesn't work very well. In DAOs. You need each person to really be sensing or responding to their own environments, making the best decisions that they can and taking responsibility for those decisions and many of us are pretty tired of the rigid corporate mask that we have to wear. When we go into normal work world, it doesn't represent us as whole, like alive beings. And also corporations don't really effectively do what many of us want them to do, which is to, you know, live in balance with this world that we're in and, you know, create more benefit than they do. peril.

Unknown Speaker  
What is it about the mechanism, the DAO that makes it easier? Because it seems like you're describing a common challenge of any group of people who are organized to accomplish something together? And I can understand why that's a problem, basically. But I'm curious what sort of mechanism makes DAOs solve that problem? Because I think you describe a problem in a solution, but I didn't understand the mechanism.

Tracheopteryx  
Yeah. So I think going back to the definition, that last part, cryptographic fidelity, so if you think about a corporation, a corporation is kind of like a organism that emerges. It's like, I am an organism. And I have all these organs and cells in my body, right. And people talked about corporations as being people. And in a real sense, they kind of are their life forms in the collective frame, similar to like a beehive, or an ant colony, in one way or another to right. But corporations have a pretty weak foundation they Corporation is, is made possible by our modern notions of governance, right, where select few power brokers, you know, make decisions on behalf of others. And there's, it's pretty easy to be corrupt, it's pretty hard to be transparent. And then you have a system of jurisprudence built on this notion of governance, which, you know, all the studies and research show can be incredibly inequitable. And then from that you have property and finance law. And above this, you have the corporate entity, but DAOs get to start on a much stronger foundation, they get to start in the foundation of digital computation, which is global, you know, and kind of permissionless in many ways, just by its nature. And then we have just on that alone kind of didn't really allow for DAOs to rise, what they needed was to move from RNA to DNA, they needed a stronger means of memory and storage and state, which is blockchain, the public ledger, which is like a robust system of shared information. And that's a foundation that you can really build a much stronger collective organism like a DAO, on top of this is why they're kind of going out compete, the competitors, corporations,

Unknown Speaker  
it would be interesting to sort of talk about the full spectrum of what DAOs look like today, because there's a huge breath in the landscape ranging from kind of what you're describing as like the autonomous version where everyone has agency and is taking responsibility. And a lot of the activities of the DAO are just, you know, entirely running autonomously, for instance, like in the Ethereum network, you could draw an analogy from that to a DAO or Bitcoin even. But then there are DAOs that do resemble more like social groups, and a lot of their functions and activities and interactions are happening on traditional channels like, like chat groups, or discord or, you know, even offline channels. And so do you consider the full range of that to be a DAO? And I would love to hear like, what you think of as, like the strong form of the Dow versus maybe the relatively weaker form?

Tracheopteryx  
Yeah, well, I think importantly, like we're really at the beginning of Liz DAOs have only been around for a couple years. So what it's like imagining the difference between the Dutch East India Corporation and Apple, you know, like, who knows what DAOs are really going to be like in the future. But what we see now are all these different versions of them. And in some cases, it's just corporations on the blockchain, in that they call it DAOs. In some cases, it's fan communities on blockchain, which you call it DAO, and I'm fine with calling all those things. DAOs, I think that the the language will, will evolve as we understand what's happening more. But um, yeah, there's a variety of DAOs, you can break them down in a lot of different ways. There's protocol DAOs, which would be like uniswap, where you have an immutable smart contract with a limited set of functions that can be controlled by a specifically defined on chain governance system. And to make that a little bit simpler, it's like, you've got a software object, you got a piece of software that has a few functions, and you've got a system where large groups of people can decide together what to do with those functions. Right. And then you've got protocol DAOs, like Yearn, which are a little different, where instead of governing a immutable software object on Aetherium, you're on whatever blockchain you're governing an entire community, and you need different in different types of all the people actually making it, there's no corporation with a hierarchical model and like, you know, top CEO, and there's like everybody making it is under the same governance system. So you, you really need a different style of governance. And then you've got service DAOs, which are like like crater DAO or raid guild, these are DAOs that are or D org that are providing specific services for other DAOs. Social DAOs friends with benefits, investment DAOs. These are there's more, but there's a variety of these different kinds of shapes emerging now.

Unknown Speaker  
And your mind is a critical component to something being a DAO, is it, that governance is non higher goal, as it would be in a corporation where you have a CEO and decisions sort of flow top down? Do you feel that that is in conflict with the conceptualization of what a DAO is?

Tracheopteryx  
Yeah, this is a great question. And I think a place where there's a lot of confusion. So there's nothing wrong with hierarchy, like hierarchy is a natural feature of the universe, the sun is bigger than the moon, you know, like, you know, quantum physics professor knows more about quantum physics than I do, I'm not going to pretend that I, you know, I have better expertise in that situation. So it's important to embrace hierarchy and embrace the differences in the variety of the people around us. The important piece is to be able to move from rigid hierarchies, where one person is made the authority and has dominion over other people, regardless of the context, into a new form of fluid hierarchy, where leadership can emerge from within the group, and people can choose in their own sovereign way to follow or to lead. And DAOs are really good at enabling the second form that form of fluid hierarchy. So I think actually, hierarchy is a critical piece of DAOs. The difference is, you know, where the decision making power is held, and how that's negotiated?

Unknown Speaker  
Totally. I mean, it's kind of a key thing of like, throughout history we've seen there's like a feudal lord who controlled everything in your entire life and all aspects of their circle of land, so that they had enough people to defend Right? Or equipment or whatever else they needed. And then there was like, Okay, let's, let's break it up a little bit, and have different people who are maybe like elected to different roles. And like, maybe you could also move somewhere, if you wanted to, if you like, one governance area better than another, and then let's break actually, it's unbundled of economic control. So you have entrepreneurs kind of like with a new idea. And then if it works, and if they're the kind of thing that people like want to be a part of, then they can attract workers. And so it all gets more fluid, how, what's the key step in the progression from corporation to Dow, because the stuff you said to me makes total sense. But I view it is also something that I can do within the context of a corporation, like, you know, ideas emerge, the ones that get traction, get resources, if people can offer resources to other people, then they can participate in a market of like, basically supply of jobs. People can choose between different jobs, they want to they can choose if they want to be a freelancer in a traditional corporate setting, or if they want to join full time. And in traditional corporate setting, there is like a lot of fluidity. But I'm curious how there can be more,

Tracheopteryx  
it's a continuum, right? It's not like a nonlinear phase chain. It's not like we had corporations now have a totally different thing. So it's a it's a gradient, and you can make move from one to the other. And you can see examples of really incredible corporations on the planet today, like Patagonia, or Burt's org, and Amsterdam, or teal organizations, organizations that are practicing self management, and wholeness and evolutionary purpose. And all these things that Fred Liu identified in his amazing book, reinventing organizations and other researchers are looking at a lot of the stuff that we see happening in DAOs. Now, and actually, a lot of DAOs aren't as evolved as some of these corporations are truly, but the differences. So I've looked at these three kinds of dimensions that to me, you know, help differentiate corporations from DAOs. And maybe point to what DAOs could be. So one is network typography. That goes back to the definition, a decentralized network. So network typography is like how the different people in a network are able to communicate with each other. And most corporations have a rigid, hierarchical tree structure, right? Where there's people at the top, and then there's people at the bottom. And it also separates ownership. The people at the top are the owners, the people at the bottom of the workers. In DAOs, you can be an owner and a worker you can choose right? And not all corporate is like this, some corporations will have more of a mesh network or a hybrid network where the people can all self manage and interact with each other. But where you are on that spectrum, points to being more DAO, you know, and so fully decentralized isn't good. That's the heat death of the universe. That's nobody wants that no work happens there. You want to be somewhere in between centralized and decentralized and you want to be decentralized as much as possible but allow for centralized groupings to form to this will help to find out has that ability to move on that spectrum and be more decentralized. Another key dimension is operational access. So who in the network is able to wield the levers of power? You know, in a corporation, generally, decision making power is tightly constrained. And even if you try and delegate it more to people in the in the corporation, you're kind of fighting uphill, because all the legal structures that support corporations are such that they put specific responsibilities on leaders. And it's very hard to shake that, right. DAOs don't have that incumbrance. And they can share leadership much more naturally. But like, how transparent is it, if a 13 year old from Mozambique comes into the DAO, and she has an incredible idea for what should happen? Like, can her voice be heard? Can she make that decision for the DAO? And the best DAOs are gonna be ones that that she can you want the best decisions to happen? You want the leader to be the one who knows what to do next?

Unknown Speaker  
Yeah, totally, maybe most interesting distinction would be like it's got a it's got a much more kind of like permeable membrane to continue with the biological analogies, like a corporation does not just invite you into their, you know, communication space, right? Like, there's this very hard membrane of like, but it's behind an NDA, it's behind a whole hiring process, they're looking at your resume all this stuff, the seems like a key thing that DAOs is really focused on is treating their supply of ideas and labor and you know, project management or whatever, they treat that supply almost the same way that most companies treat their consumers where they want to have a really clear on ramp where anyone can get started and have some way to get people involved. It's almost more like a nonprofit or something, the way that they organize volunteers where it's treated as kind of like a thing and experience to be managed, and to recruit a lot of people into that there's much more like people can get involved in like a low lift way. And then sort of organically, you know, people who have a lot of energy for it, and who are doing really well and are really helpful can can kind of like take on more, is that? Does that feel like accurate?

Tracheopteryx  
Absolutely. I think that's a key feature of that operational access dimension, like corporations in DAOs have similar structures in that there's a core of people that are working all the time. And then there's a ring around that people that work some of the time. And then outside that people that are less involved, but still part of the network, and then a corporation, this might be your full time staff, and then outside that the board of directors and some contractors and outside that shareholders and in a DAO, there's a similar structure. They're all token holders, and then there's full time, part time, etc. And what can differentiate a really good down what's a lot easier if you're a DAO is that mobility between those layers to be able to move into the membrane and out of the membrane. And another thing you pointed out is that corporations have this hard seal around them, they have this this hard membrane, the corporate veil, and it's very clear if you're inside or outside, because when you're inside, you signed a bunch of contracts, and you're legally bind bound by all these things. And you know, you, you can't you can't really imagine the situation where like, half of Microsoft Works at Apple, also, right. But in DAOs, that's totally possible. Yeah, you know, in DAOs, we're kind of all playing on the same team, which is amazing. The nature of, you know, corporations are constructed from a very adversarial worldview, one of kind of conquest, that's where they emerge from. But DAOs come from a different worldview, really, and we're still figuring this out. But it's much more about balance. It's much more about collaboration, less about the bottom line. And what you see is this tremendous amount of kinship and collaboration between DAOs there's very little competition.

Unknown Speaker  
I want to go back to your list of different dimensions of DAOs, as well, and wanting to make sure we heard the last one. So you mentioned network topography, where a DAO is maybe not fully decentralized, but somewhere on the spectrum of decentralization. And then operational access was the other dimension of how fluid is the hierarchy? how able are people from outside able to participate, and perhaps rise up within the organization? And then I think there's a third dimension, that is the

Tracheopteryx  
most important one. Yeah, process fidelity. So what that means is basically, how much can you trust things? Right? Like, how much can you trust that your Bitcoin will be there tomorrow? This is the amazing or how much can you trust, you'll be able to take your money out of the bank tomorrow. These are very, very different trust assumptions. And the Bitcoin one is much, much more trustworthy. Right? So DAOs, rest on this, this goes back to what I was saying before they rest on this founding a much stronger foundation. But it's not just about financial value. There's a lot of other areas to this, that we need to start really thinking about more. How much can you trust that if you put work into the system, you'll be rewarded? How much can you trust that the rules of the system will be the same tomorrow, or they'll advance in a predictable way? How much can you trust that the people you're working with are credible and reliable. We're very used to those trust assumptions being mediated by third parties that hold power in the normal corporate world, we outsource responsibility to judges and bosses and things like that. And DAOs, were really forced to take that responsibility back, and to claim that again, and make these decisions for ourselves. But in order to do that, effectively, these rules need to be embedded properly into the collaborative tools, right. And we're still growing a lot of that functionality. But taking this back to the kind of three axes are three dimensions, the more you can trust all these different features of a DAO, or of an organization, the more DAO like it is.

Unknown Speaker  
That's super interesting. Yeah, that third axis is is really, really fascinating, where I think in the examples that we typically see in the data landscape today, that that trust is strongest in terms of the financial value that the DAO controls the resources that are held within, you know, the multisig wallet. That is, it's on chain, it's tokens that are tracked via, you know, a blockchain ledger, all the other things that you mentioned around like, how much can I trust that the rules of the system will change around me or that people will compensate me fairly within this DAO? I feel like that is still very much under development. And some of it might even lag behind a traditional corporate structure today. But it's very much an evolving and developing story.

Tracheopteryx  
Yeah, like we have all of these labor laws and like rules for how people can work together. And then in the traditional governance world, we don't haven't developed a lot of these in DAOs. And, and hopefully, we don't just pored over those old things, we need to create new ways of, you know, of dealing with this stuff. And that's, you know, we're very much at the beginning of that.

Unknown Speaker  
Yeah. I would love to hear kind of your, like relating the story of how did this all happen, like DAOs, as you mentioned, are only about a couple of years old. What were some of the key moments in the development of the DAO as a concept that you think should be highlighted that inform where we are today?

Tracheopteryx  
Sure. Well, first thing is I'm not this isn't my real area of expertise. And I've only been deep in DAOs, since the summer of 2020. But some some key pieces were, you know, Vitalik Buterin, wrote about DAOs. Early on, I think in like 2016. I mean, I think it was part of the Etherium white paper, actually, the idea that you can have these kinds of autonomous organizations on top of a world computer like Aetherium. So conceptually, that was part of the beginning of Aetherium. But then there was the Dow, which was going to be an investment vehicle, and that got hacked, it raised hundreds of millions of dollars and then got hacked. And that really set I think DAO development back quite a bit. Because smart contracts we're still in still are, you know, very, very new. And we're figuring out how to keep them safe. They're much more secure now than they were then. But then I think it was only like 2019, when, like maker Dow, I don't I don't know what the first modern DAO was, I think it's maker Dow, but I'm not sure. There really weren't, haven't been that many, you know, and then it was, you know, 2019, when we started seeing that, it could really work, you know, that that you could really do something this way. And more and more started happening. And you had these incredible DAO toolkits to like Moloch DAO where you could spin up a DAO really easily. And in Gnosis safe multisig, which is kind of a DAO to all these different tooling started coming out Aragon and colony, which recently launched DAO stack, and slowly people started to, you know, be able to use it, and it was attractive for a lot of reasons, you know, it's attractive, because it's really crypto native way to work. And also, you know, had some regulatory advantages, like a lot of this stuff is confusing, and it's really, really caught on and I think, starting to explode right now, in a really profound way.

Unknown Speaker  
Yeah. Do you think that? So I want to get back to something that you said earlier in the conversation, which is that you believe that that epoch of the corporation is coming to a close? I would love to double click on that. So do you believe that all organizations should be structured as DAOs? Or is there still room for traditional centralized forms of organization like the C Corp? And what are the I guess, like, different use cases for which different types of structures would be most suited?

Tracheopteryx  
Yeah, so I think, you know, the logic of development logic progresses, nothing ever gets destroyed, you know, like nothing ever goes away. Like you know, we still use record players. We still use all the old media they've been created still find a way into the future, and new developments transcend and include Due to the previous developments, so like when multicellular organisms came around, it didn't mean that there were no more single cellular organisms, they're still there, they still have a purpose, they're still part of the body. And in the same way DAOs will transcend and include corporations. So corporations will still have really useful roles in the future, just as corporations transcended and included the nation state, which still is around today. And quite large way when I say the age of the corporation is declining. It's like the age of corporate dominance. Right. Yuval Harare has a beautiful way of talking about this. He says, you know, the thing that unites us is stories, fiction. Fiction allows for human beings to coordinate, just like the fiction of a religion, or of a corporation or of a nation. These are real things that you can point to in the world, they're stories that we tell. And that's how human beings coordinate. And the Dow is the better story, the Dow is a stronger story for where we are now. And it's going to be a bigger story. And it's gonna allow humans to scale in much more profound ways across many, many more people, the highest scaling corporations, now maybe Facebook with like 4 billion users, but those users are all consumers DAOs will be able to scale to billions of having active contributors, you know, people all working together towards the same thing with shared ownership, that's going to be just, you know, world changing thing. But so you also asked about, you know, why might you want to use a corporation? Why might you want to use a DAO, you know, you see this debate a lot on on Twitter, like when, you know, kind of simplistic ways people will say, like, you know, corporations are better, like DAOs are better, but there's more nuance to it. It's like, for instance, why would you want to be the leader of something versus a leader of something. And there's good reasons, like, let's say, you have a very clear idea of something that you want to make, and you know, exactly how you want it to be, like, yeah, hire people, have them work for you create a corporation make exactly that thing that you want, if you want to co create something with a bunch of people, and you don't know exactly what the end game is, but you want to be around, you know, other sovereign beings like you like, with an emergent future like a DAO is a is a better device. A corporation represents more of a command and control style of engagement with the world. Whereas a DAO I think, is more suited to sense and respond more listening, we're emerging more imbalanced with the environment, which means that you can't really focus on the bottom line, if you want to just make a shitload of money, like a corporation is probably a better way to go, if you want to, you know, develop, you know, develop in your life personally, spiritually, and also make money, then maybe in Taos, a little bit of a better path,

Unknown Speaker  
I think it would be really interesting to delve into the contributor psychology, that is driving the wave of DAOs that we're seeing right now. Like, people often talk about DAOs, as the future of work like this is going to be how people earn their living in the future. But I think the counter argument that I often see is like, why would you want to join a group chat, where things are so noisy, you're fighting for attention, fighting for someone to notice your contribution and maybe decide to compensate you like versus you know, getting a job where you know exactly how much you're going to be paid for your work upfront, that map's better to the world in which we exist and have to pay our bills. So I would love to hear you unpack the psychology that's driving participation and contribution to DAOs?

Tracheopteryx  
Yeah, this is a great question too. And like, we're all at different places in our lives, not all of us have the financial freedom to try new things, or the safety nets to take a risk. Not all of us have the education or the exposure to concepts which allow it to be easier to work with, you know, these new tools, you have to meet people where they are. And in some cases, joining a corporation getting a job, something stable, like that is gonna be much better. But then to others, this kind of system is going to call to them. And in some ways, it's a developmental difference. We each go on these paths of development, and it doesn't stop when you become a teen, you know, and you're a child and you grow up and you develop skills, and it keeps developing, we keep developing through our whole lives. And depending on how effectively kind of we've made these different leaps in our development, or where we're at where our wounds are at, we're going to have different worldviews. So you know, you grew up in a world in a war zone, you're going to tend to see everybody is trying to kill you. And that's not a very good worldview to work effectively in a DAO, that person might very well be able to work in a DAO in a few years after they work through that trauma. But it doesn't suit everybody really, and that's okay. And it's not better. You're not better if you're, you know, at the level of working in a DAO like, everybody's where they're at. Everyone's fantastic. And DAOs will appeal to people that are a little bit more, I think, developed in that way, as beings because it requires a tremendous degree of personal agency response. ability sovereignty and, you know, understanding of one's own system to be able to negotiate it. It's very at the beginning, when I first started working at DAOs, I was like, it was really challenging for me personally, it was like man who's in charge, how do I know if I'm doing a good job, all these things? And it's such an incredible teacher, because I realized, oh, like, why am I letting somebody else be in charge of whether I'm doing a good job? How about I decide if I'm doing a good job or not? And I decide what I'm supposed to do on what I want to do or not. And that's a pretty profound leap forward.

Unknown Speaker  
I'm curious to hear more of that, like, how did you get started, what pulls you in? What kind of work was there to do? Normally, when I think of work, I think, you know, whatever, like, let's take a typical software development cycle. There's like a pm who interfaces with a founder or whatever stakeholders comes up with, like a rough plan gets buy in, you know, the engineers, the designers, everyone else, there's, there's room for feedback there. And then it turns into tasks on like, an Asana or Trello, or something like that. And then, you know, people pick up the tasks, and they do them. And then you have another cycle where there's more tasks. How did you get started? What was the organization? What were you building? How did work get organized? I'm just really curious to hear like, kind of like the visceral details like, what did you see? What did you feel all that?

Tracheopteryx  
Yeah, man. So there's a lot in that question. And just one note, first, is that that process that you're outlining is one that's evolved for the nature of kind of rigid, hierarchical, top down work, which we know super super well, not only do we know it really well, but it's in our bodies. It's like, you know, we've, we've adapted to that way of relating to other people. And we look for that. And when it's not there, we project it into the world around us. And, you know, when I got started in DAOs, it was July of 2020. And it was the last day of Wi Fi farming for Yearn finance. And I saw this incredible group of people that with no leader, you know, this, this interesting guy, Andre Crone, he had given away all the tokens and, and said, Here's my whole prop, my multimillion dollar platform, like you guys own it now. And there was nobody in charge, right? There was there was no C suite, there was no rules. There was like one way of making decisions like token voting on a forum that was it

Unknown Speaker  
was the thing. Sorry, like, what did like the quote unquote, company do? Like if I've got like, kind of like, went to mindset, I'm like, Well, what's this company?

Tracheopteryx  
Sure, sure. It's a yield aggregator. So it's a kind of investment vehicle where you can put your crypto assets like Aetherium, or a stable coin, like USDC into a vault and you earn passive yield, the yield that you're earning is like double digits up to triple digit, sometimes, you know, sometimes low single digits to if there's no yield opportunities, but a lot more than you get from your bank, right. And so a lot of people were putting their money into this stuff and earning a lot of money and a lot and Yearn was also taking a fee from that. So there's a lot of money from the beginning, flowing into this DAO. And with no real, you know, operational system, you know, just people kind of doing work, and nobody was even getting paid at that time. And that was just extremely exciting to me to try and help help figure out how to do and sorry, going, going back to your question, too, it's like, yeah, there wasn't there weren't these agile workflows, and scrums and project management stuff, because there was no structure that determine that and instead of what a lot of DAOs do, which is, what I said before, is you just project your experience on this new space? And he was like, Okay, well, we need a, we need KPIs, and we need a project manager and like, we know how to get things done, let's get things done. We didn't do that. We're like, well, it's something new is going on here. Let's, let's, let's see what it is, you know, at least that's how I came to it. And we started to grow new ways of working together. Where, you know, from the base from the beginning, it was always this very strong idea of sovereignty. Nobody can tell anybody else what to do at Yearn. Everybody is responsible for their own actions. Everyone decides for themselves what they do. And we want to work together. We want to help each other do good things. We want somebody to take responsibility for certain things. So we figured out how to do

Unknown Speaker  
that. How did you do it?

Tracheopteryx  
Do you have another two hours? Two hours, maybe? The short. The short, the short version? is? Well, the first thing the beginning of this was we did a governance proposal. Yep. 41 Yearn improvement proposal number 41, where we gave the multisig limited operational powers. So the multisig was a group of nine people, any six of them need to agree in order to make a transaction. And this is what controlled all of the funds within Yearn. And these are nine high reputation people that you could trust, you know, the chance of six of them colluding to steal some money was so low that I They're very trustworthy. But what we did was he said, Okay, not only are you just responsible for this trust environment, you can also do things like pay some of the team, and you can make some limited decisions. And this was the beginning of what we call Constrained Delegation governance, which then gave Shapira and I took and evolved further into the notion of governance to where we will use it you're now with with empowered teams that can make decisions on behalf of the whole under wifey holder control. So there's that side, the governance side, like how we created a decentralized governance system that allows for fluid hierarchy and for delegated control. And then on the operational side, it's very, very organic and emergent. So different teams have self organized, they've decided together what processes they want to use, like this, the software development team has created these risk frameworks and workflows and check ins and brought in people to to handle more of the project management stuff. And in some ways, it's kind of similar to what you'd see in a normal company. And in other ways, it's, it's totally different. Because, you know, every day each of us decides whether or not we really want to do that, and you can stop going to these meetings, you're still going to probably get paid as long as you're doing something else.

Unknown Speaker  
Have there ever been teams like maybe two teams that self organized with incompatible ideas?

Tracheopteryx  
Yeah, so that has happened a bit like there was on the web team, there was some people that wanted to do some, there was a different group of people that were doing some web stuff and the web design in the early days, there was like three different groups trying to do web design, and it all kind of got sorted out on the forum. And then in the in the actual workgroups and on the discord. So there's been plenty of conflict, plenty of tension,

Unknown Speaker  
sure. How did it get solved how to get sorted, different

Tracheopteryx  
things got sorted in different ways. So there's multiple designs for our front end at Yearn, and some of them went to four votes, and they got voted down, and other ones got voted in. So we have some processes at Yearn that we still need to publish. But one really important one is called the conflict resolution process. And so in a normal Corporation, if you have a problem with somebody, you know, you would go to HR, you know, or you go to your boss or something, we don't have that. Instead, we rely again, on your personal responsibility. If you have a problem with somebody, you start the conflict resolution process with them. And you together resolve your conflict. And if you struggle to do that, more and more people come in to support you. But it's all started, you know, with each individual person.

Unknown Speaker  
This is super interesting. I want to uplevel this conversation a little bit and just talk about more broadly, the challenges that DAOs are facing as as a whole category, and kind of your assessment of what are some of the biggest limitations that are holding back DAOs from mainstream adoption?

Tracheopteryx  
Yeah. Well, I think we know how to govern immutable contracts fairly well, you know, it really it comes down to the governance scope. You know, if there's a very clearly defined set of immutable immutable functions, like a single channel, decision making system like token weighted voting is not bad works reasonably well. But even so it might not work that well for a long time, because we're still very early. So I guess to answer your question, specifically, and then we'll go into its governance, it's like, it's how do you actually do governance properly for these different environments and, and operations? That's the key bottleneck really. So even token weighted voting has a lot of problems, like, you know, there, you can do vote buying, you can separate the economic and the decision making power of a token. You can do Sybil attacks, you know, you can, you know, look really decentralized, but actually, Sybil attack is when one person splits up their holdings across many, many different wallets. So it might look like like a protocol has a very decentralized network, when really one person is in control of everything. So you can there's ways to do governance attacks like this. And we've seen numbers of these things. So really, token weighted voting works reasonably well. Now, mostly because we're early, there's a lot of camaraderie in this system. And a lot of the bigger players haven't really figured out how to fully manipulate this stuff yet, but they will. And there is a lot of manipulation going on now, too. It's just not catastrophic yet. Although in some cases, it has been like with the Steam community, but they forked and they made a new community. And in any case, that's on the immutable software contract governance side, on the area of actual, like, governing groups of of sovereign workers without resorting to rigid, hierarchical constructs. That's very new. Right. And we, you know, there's very few groups that are actually doing this for real. There's like there's Yearn. There's synthetics. There's maker Dow, there's index Co Op, there's maybe a few others, but almost nobody does it. And it's very hard. It's very new, and it requires a group of people to be really pretty sophisticated in order to operate something like this. So there's been notable failures when people try it and because of not everybody, like there's some, not just bad actors. But anyway, various reasons why it doesn't always work. It's because we just don't have the tools or the processes or the knowledge to do governance in that way yet. But we're, we're, that's the main thing I work on. And that's what we're learning every day.

Unknown Speaker  
Yeah, I think the emergence of token weighted voting as like the predominant governance system within these DAOs is really interesting, because it feels like it has echoes to just shareholder, shareholder control of companies. And it feels very, like counter to the notion of democracy and representation that you would think DAOs are espousing? So I would, I would love to hear like, where do you? Where would you like to see DAO governance moving towards? And are there any interesting examples that you've seen in the wild?

Tracheopteryx  
Yeah, so I think, starting is to think about decentralization of power, you know, in all the different forms, right. So when you have a single channel decision making process, like token weighted voting, it's actually a centralization of decision making processes, there's only one way to make decisions is through proposals and voting. But if you look at all the decisions that need to be made within an organization, there's all different types of decisions, there's some decisions that have massive catastrophic potential impacts, there's some that have insignificant impact, there's some that you know, need to be made very quickly, some that can take months, you know, you have to look at that whole multivariate space, multi dimensional space. And then there's also all these different types of consensus mechanisms. There's way more types than just token weighted voting, you know, you can do Condor save voting, you can do vouching you can do consent, you can do the advice process, there's so many in some decisions are going to be better suited for some consensus processes. And some decisions are going to be better made with the entire network and some in small groups. So the direction of governance that I'm most interested in is this kind of, you know, more holistic understanding of the entire network, and all the different things that need to happen in creating a transparent, reliable system to hold all of that. And there's just very few examples I've seen of this, you know, there's synthetics has a great version, where they have the Spartan council that makes decisions on behalf of the whole group, and every person in that council gets elected by the token holders. So they have this very representational democracy method, which is similar to what Yearn has done, but we've done it a little differently, which is kind of fascinating to compare where, instead of voting for people, what you do is you vote to delegate power to teams. And so you still have the same type of small teams that are empowered, but the way you get there is a little bit different. And the checks and balances on it are a little bit different. Or there's maker Dow, which is split into all these different work streams that each get independent budget, you know, and have their own independent processes. So these kind of set of sub DAOs. And all this stuff's really, really super fascinating, actually, in new see examples of, like full scale governance, you know, with for complete organizations working in, you know, these are like some of the rarest things on the planet. Yeah,

Unknown Speaker  
super interesting. I want to read a quote from my partner, Jesse Walden 's essay on progressive decentralization that he wrote a couple of years ago, which I think highlights a really interesting challenge for DAOs. He says, he writes much of what it takes to build a successful product at the outset, product leadership, rapid iteration, and manage go to market complicates the path to community ownership and regulatory compliance, which guarantee long term health. So essentially, he's pointing out that there's really a tension between kind of this notion of having a decentralized organization full of the sovereign individuals, versus what has historically correlated with startup success, which is, you know, having strong leadership a person with a vision,

Unknown Speaker  
the otter model,

Unknown Speaker  
exactly that kind of like, founder as kind of like the the visionary founder model of a startup. And so, I mean, I don't really have a question, but I would love to hear like your reaction to that and, and whether the DAO model works not just in the defy world, which a lot of your examples have come from, which I think have like a more constrained set of parameters to govern, but whether it can be applied to a more complex product development context,

Tracheopteryx  
so many things there. I love what Jesse said, and it makes sense. I think what I would say is what What are we trying to do? Right? Like, do we need more apples in this world? Like, if we keep making more Apple computers, there's not going to be many, many resources left for us to use on this planet, like we are. Corporations have been extremely capable at extracting match maximal resources from the world and converting them into money. And look, no value judgment. They're like, that's been really great. I love my computer. But it's time to do something a little differently. So the same features that make a corporation so good at at conquest and at growth, you know, make it harder to do that in a DAO, which is a good thing. You know, DAOs are not about in my mind conquest, they're not about the bottom line, you know, they're more about emergence. Does that mean that they can't make good products? Absolutely, not, they, they can make good products, it's just goes in a different logic. The products that we make at Yearn are fantastic, you know, we've got some of the best software on the planet, with the highest security and the greatest developers working on it. But we haven't done a pro platform for like, you know, banks and stuff like that. We could make a lot more money if we did that. But nobody wants to do that. We don't believe in that, you know, what I say? I mean, I'm speaking for myself, but you know, there's a bunch of people that together kind of come up with this, maybe we could do that some some time. But that's not what we're doing. We're following a different logic. And really, this is the logic that this phase of the universe of the of the Earth needs. You know, I've said this before, but it's like, we've reached the edge of the petri dish, you know, we can't keep doing things in the same way anymore. There's no more jelly to eat, the bacteria needs to change its metabolism. Now, we need to move to a new way of relating to the world and to each other. That's more imbalance. And that means that the logic that we are so good at from corporations no longer works.

Unknown Speaker  
Do you think it's a good fit for the logic of venture capital? Because venture capitalists, Lee included, are very interested in web three and the logic you just outlined?

Tracheopteryx  
Not really a great model. But look, VCs will adapt, you know, they will learn and we'll we'll get we still need money. We still need venture but the traditional way now, it's not good.

Unknown Speaker  
Yeah, it's really interesting as you as you say, all of that, because it's like, venture capital historically has been predicated on the conquest model. They've been looking to back monopolies, natural monopolies, things that are winner take all things that dominate markets. And if DAOs are not that it really suggests a different kind of model for financing actually, and or different expectations that that the investors would have, which is really fascinating.

Tracheopteryx  
It is, we have to really start thinking about things in a lot of different ways, you know? And hopefully, we will.

Unknown Speaker  
Yeah. I would love to hear your vision of the future of the world. If all of this comes to fruition, like in 50 or 100 years, like, given that we are now out of this jelly in a petri dish to consume. And let's presume that that necessitates a different model for organization. Like play that out for us. What does the world look like in that timeframe?

Tracheopteryx  
Well, it's great. It's one of my favorite things to think about. And to start, I love this thing that Daniel shmotkin Berger said, which is like, you know, if you've never seen a butterfly, before, and you're looking at a caterpillar, you'd be like, Man, that fucking thing's going to explode. Like, it's getting so big. It can't It can't go on like that things doomed, right. But then at a certain point, the caterpillar stops eating leaves, and it spins a little cocoon, and it breaks its body down into a cellular slurry. And these imaginal cells come along, and they, they move, they send hormones through the system, and it grows a completely new body plan. And it turns into a butterfly and flies away. And, you know, I'm very optimistic, but I think this is where we're at as a as a human species. So what does that look like? It looks like a tremendous period of change, right? Like, the body does need to break down. And then reform. And so what does that look like from your perspective of love labor, or DAOs? Or what is it? You know, there's probably going to be tons of trauma but who knows how much might not might not destroy everything. But what's gonna what's gonna need to happen is like, you know, moving from what Charles Eisenstein says, moving from Mother Earth to lover Earth, you know, we we've, we're, we've grown out of the hero's journey, you know, it's not about slaying the demon anymore, right? We have to recognize that we create the enemies and actually, that's all it's all me anyways, we have to grow up. We have to relate to our planet as an adult to a lover Not as to a mother, that gives you everything that you take everything from it, taking back responsibility for ourselves growing up, like work, work becomes, you know, in my mind life in the future is a system of circles, you know, you've got the circle of people that you live in the same physical plane with, you know, that your children go to school with that provide your food. And they have local legacy governance processes, right. And then you've got circle your economic circle, people that you are generating, you're, you're making things with, and you're getting paid with, and you've got maybe multiple circles, like this multiple DAOs that you're working with, because you're a designer, and you're contributing to this down on that down. So they're down, you're getting paid through all the different coordinate circles retroactively, based on whatever work you do. And, you know, you can decide on your own how much work you're going to do and how much money you want. And if you're gonna take a month to go away, or if you're going to keep working, you don't sign any contracts anymore, you know, your work in your value is is is determined in real time based on your output. And so you have to constantly reconnect with what's most interesting to you what's most vital, and navigate that train on your own, looking at what you're best at what you love what's needed, and then providing that to the world. And then you've got social interest groups, you know, so there's all these different circles of people that you're that you're working with, that are all overlapping in these different ways. And then you've got a financial union that your income goes into, that does fancy tax arbitrage, and allows you to redirect your your money into public goods in the way that you like, you know, rather than, you know, into weapons of mass destruction, and then you've got legal circle that helps inter mediate between you and the local authorities, you know, because you're part of these giant structures of hundreds of millions of people that have so much power together with sovereign ownership all the way down, that they can compete with governments and governments start to be come important, but lesser functionaries in this larger system of circles and the power transitions from Legacy government to these new digital super structures.

Unknown Speaker  
Amazing. So we are the caterpillar on the brink of becoming a butterfly. Basically. Totally.

Unknown Speaker  
That'd be a good meme like web to me, the caterpillar web three me the butterfly. Totally.

Unknown Speaker  
Excellent. Well, we like to end with recommendations. And so this has been a fascinating conversation. I think there's a lot of folks who would love to go deeper and learn more about DAOs or, or read more about them, or maybe even join some of them. So could you share some recommendations of articles, podcasts, writing resources, anything that people should check out if they're curious to learn more?

Tracheopteryx  
Oh, great. Well read any of metallics, writing any of his stuff on DAOs he wrote a great article on token voting coin voting, which shows a lot of the problems with it. And if you want to if you're kind of nerdy get into that. There's some great podcasts like, I like the collectively intelligent podcast from colony Krypto sapiens. bakeless. Chase Chapman's podcast, I forget the name of which was a lot of great stuff on DAOs. So yeah, mostly, I think I think a lot of the best information really does come from podcasts right now on this stuff, but, but really, the best thing to do is to join a discord, join a DAO and start talking to people. There's so many opportunities, there's so many cool DAOs you can become a part of, don't worry about joining the biggest one or the fanciest one, like, what I always recommend to people is like, just follow your instincts. Like what are you interested in? Are you interested in food and wine like my friends, DAO thirsty thirsty is doing like, really cool wine and beverage projects? As a doubt, you know, you can find anything, you can find something for anything. So just like, you know, get on Twitter, start following some cool people start talking to people and just follow your

Unknown Speaker  
heart. Good, generalizable life advice. Yeah.

Unknown Speaker  
Well, this has been great. Thank you so much, Triq for coming on the show and sharing your wisdom. This has been really fascinating and we loved it. So thank you.

Tracheopteryx  
My pleasure. Thank you for inviting me.