April 4, 2022

Why DAOs?

June 27, 2022
Why DAOs?
This podcast was published on
Delphi Digital
and recorded by
Tom Shaughnessy
.

Podcast

Transcript

00:20 · Tom
Hi everyone. I’m Tom Shaughnessy. Welcome to Disruptors by Delphi, an invite-only, 12 guests per year seminar series, where we host the brightest minds in crypto, not only to educate the Delphi team, but to share the guest’s vision and knowledge for the entire space. Today, we’re thrilled to host Tracheopteryx, or Trach for short, for our second episode in the series. In this episode, Trach will discuss Yearn Finance and the story of what DAO’s are, how they work, and why they matter. DAOs were the next step in collective development. We’re at the very start. What we’ve seen is just the edge of the shadow. In this talk, Trach will share his insights from the frontier of the most decentralized DAOs on the planet. Trach will also be giving a new definition for DAOs, showing their anatomy, and contextualizing their value. With that, let’s dive into our second episode of Disruptors.

01:05 · Trach
Hi everybody. I’m Trach. Thank you for having me here. I’m going to be talking a lot about DAOs, and there’s a ton of material. So, this is me; I’m a dinosaur. As you can see here, I’m holding my own heart and I’ve summoned Moloch, which is the demon of coordination failure, and I’m not killing Moloch. I’m in communion with Moloch. I am speaking to Moloch because we have to love Moloch, and that’s part of the story of DAOs, is the balance – not shutting out one side of a polarity, because polarity is defined by both sides. The DAOs really have the ability to a balance in human coordination that no prior coordination technology has allowed. I want to start with a bit of my story. DeFi Summer rolls around, 2020, I’m writing a science fiction novel, and a friend tells me to look at this thing called Yearn.

02:03 · Trach
I had been fascinated with DAOs and their concept, but they’d always been a whitepaper and I hadn’t been paying that close attention, but then I saw Yearn and it was amazing. Here was a guy who had given away all the tokens, Andre, in the first fair launch. There was this community of people coming together to work on this thing. I started looking at the forums and participating in the Discord and then slowly creeped in some Telegram groups, and I was just amazed. Like, there was nobody in charge. There was no one leader. There was no C-suite, there was no corporation, but there were millions of dollars flowing through this protocol. It was being controlled in a purely decentralized way. There was on-chain voting; you could make proposals and people were making proposals and discussing them.

02:53 · Trach
I was blown away. Basically, I just contributed. I stopped writing my book and I started working on this new project, and it was hard. It was actually really hard because we’re all so used to this certain way of working where, “Okay, well, what do I do?” Then the boss or somebody tells you what to do, and then you do it. “Did I do a good job?” But there was none of that. There was nobody telling me what to do. There was nobody giving me any feedback on what I was doing. Maybe someone would be like, “This is cool.” Or like, “Yes, that’s a good idea,” but I had to totally decide for myself what to do. It was very new, and it was scary and very f*****g confusing, but it was addictive. One day, I guess in August, I decided, “I now work full time for Yearn,” and nobody hired me.

03:46 · Trach
Nobody was paying me, but I had made that decision for myself. It was probably the best decision I ever made. We talk about Yearn as being this black hole; aspirationally, a black hole for TVL liquidity, let’s say, but it’s more than that. It’s a singularity. Singularity is something that you can’t see beyond. Beyond is only the unknown, right? That’s what Yearn has been for me. Embarking on this journey of contributing to this completely new form of organization with all its unknowns has been incredible. What I’ve come to learn too, is that there are many DAOs. Many of you participate in many DAOs, and they’re not all the same. We’re still figuring this out; figuring out how to make DAOs and how to work on them. Yearn is the most decentralized DAO that I know of, and people will criticize that in different ways.

04:39 · Trach
We don’t have on-chain voting, for instance, but we’ll get into some of those details. The thing is, Yearn is decentralized to the core. There is no core company or team that is operating things/pulling strings in the background. Because of that, and because we’ve had from the beginning product market fit and millions of dollars flowing through us, and now billions of dollars in TVL, we’ve had a product that we’ve had to maintain and deliver on to real users with real things at stake from the beginning. We’ve developed an entire system of governance and operations to support that. Some cosmologists believe that the universe started with a big bang, with a singularity exploding into all known phenomena. Yearn was very much like this, right? There was that gift of YFI, which was like the explosion of the singularity, the scalar field that expanded and created everything that we know to be Yearn.

05:31 · Trach
There was this short 10 days of YFI farming where people could farm the governance token, which was this incredibly expansive event. Then the cosmic microwave background after that, all the snapshots of all the holders in the early days, the dark ages of nobody knowing what’s going on, and tons of proposals, and “We didn’t make quorum,” and trying to figure out what we’re doing. Then there was an important governance proposal that I co-authored with a bunch of people, Substrate was I think the lead author on this – YIP-41. Prior to this, we had no way to pay anybody. People were putting proposals through on governance for Andre to be on podcasts and such – it was very confusing. We had to knit together a theory of governance for ourselves. This is where it started. What this proposal did was it allowed for the multisig, which was a group of nine high reputation people, to make certain operational decisions on behalf of YFI holders. They could decide to spend a limited budget and make some other enumerated decisions.

06:38 · Trach
This was the beginning of what we call constrained delegation, where token holders give powers to autonomous groups to make decisions on their behalf, under guidance and oversight, but we knew it wasn’t good enough. We said, “Within six months, we’re going to have to improve it.” During that time, we did the mint, which is when we minted more YFI tokens, because even though the fair launch was fair for investors and farmers, it wasn’t fair for contributors. Most of the contributors didn’t get any tokens. The community decided to give the contributors YFI tokens. After that, we developed with Gabe Shapiro, who’s at Delphi, an amazing guy. We wrote Governance 2.0 together, which is what has been going on for about a year now – this concept of constrained delegation, which we’ll talk about more. Here we are, a bunch of cartoon characters in cyberspace, in the metaverse, creating weird ass software products.

07:37 · Trach
And it’s incredible. This is an NFT that we had commissioned when one of our contributors suffered a real catastrophe and his house was partially destroyed. He was living at a friend’s place for a couple of months. We couldn’t all be there in person to help him build his house, so we made this and we sent it to him. It’s so moving to me and like, this is my family. That’s what you can find in a DAO. I haven’t met all these people, but it doesn’t matter. Our DAO, Yearn, constantly pushes me to grow. It’s incredible. As the collective development of these organisms happen, the individual personal development to all the people that contribute, is also happening, and we’ll get more into this. There’s so much s**t posting and FUD on Twitter about DAOs and like, “This DAO didn’t work. DAOs can’t work. DAOs are false,” or whatever.

08:32 · Trach
So far from my experience of working in a DAO, so far from the quality of human beings that I’ve met through DAOs, that it’s important to communicate some of this from the inside. I’ve been at the forefront of working in DAOs and designing DAOs for two years. There’s not that many people that have done that. That group of people are some of the most incredible people I’ve ever met; the shadowy super coders and the builders and the contributors, unbelievable generosity of spirit and minds. We’re going to get to why DAOs are important. That was a bit of my story, but we have to start, I think, first with saying what they are – what our DAOs? To understand that, we have to start with development. Going back to the big bang, a singularity/a black hole explodes, it creates all the particles, everything, all the planets, it evolves over time.

09:23 · Trach
There is a physicist at MIT whose work I love, Jeremy England, who has a thermodynamic theory of Darwinism, which shows mathematically that you just basically shine a constant energy source material with a heat bath and it will turn into life. Life is the turbulence in the swirl of time’s arrow as we progress to the heat death of the universe, which is when all the particles, again, coalesce into these black holes. This progression is unstoppable, and DAOs are a part of that, as are our human development. This is a slide from Ken Wilber’s Integral Theory, where he collected all these different thinkers, all these different developmental psychologists and gurus, and looked at human development from Piaget children development to adult development, and we progress in similar paths. There is an order to human development. That map is personal development; that’s for me, my internal experience.

10:20 · Trach
Another thing that Wilber showed is that there’s actually these four quadrants to experience: there’s internal, external, collective, and individual. While we, as humans, are progressing in the interior individual realm, DAOs are progressing in the collective realm. In the collective realm, DAOs are the next tier of development, and it’s not just an incremental step; it’s a major step. It’s one that we really need because we’re at a perilous place in the world. For example, I would look to biology because you can get inspiration and understand from these other quadrants other developmental paths what maybe we’ll have to expect. We don’t know for sure, but maybe. There was a time on ancient earth where there were just single cell organisms floating around in the ocean eating each other, and one day, one ate another, but it didn’t digest it. Instead, this became mitochondria, and they created a symbiotic relationship.

11:15 · Trach
This was from prokaryotic to eukaryotic life. From that moment, multicellular life became possible and complete new change in the ecosystem with larger body plans. This is similar maybe to where we’re at now with DAOs. Corporations have been like single cell little creatures eating each other, and we need something a little bit better. Yuval Harari talks about corporations as a coordinating fiction, and that the story of human coordination is one of fictions, stronger and bigger fictions, that allow this to scale bigger and bigger groups of people. What started with families from tribes to nations to corporations and now DAO, this is the developmental leap that we’re making now. Importantly, it’s ‘transcend-and-include’ at each stage, it’s not ‘replace.’ One is not better than the other. My feelings are not less valuable than my cognitive abilities. The wisdom of tribes is more important today maybe than ever before. We need to bring each of these to the next level.

12:18 · Trach
Importantly, let’s look specifically at corporations and DAOs. We’re at the very start of DAOs, and if you think back to the very start of corporations, i.e. the Dutch East India corporation in the early sixteen hundred, they looked very different from the Facebooks of today. They were very much more like the nation state. Over time, they developed into what we know as modern corporations. DAO’s today are mostly just corporations on the blockchain. Most people are taking the same systems of work in centralized work/hierarchical work, and they’re implementing them on-chain and saying, “That’s a DAO.” Sure – that’s at the beginning, but we can go much farther. To understand this, let’s look at the definition. This is the definition of a corporation: a company or group of people authorized to act as a single entity, legally, a person, and recognized as such in law.

13:09 · Trach
We don’t have a great definition for DAOs. Some colleagues and I have been working on creating a new definition for a DAO. This is one on which I’ve been working. It’s not final, it’s not accepted, it’s just what makes most sense to me: “A decentralized network of autonomous agents, coordinating resources with cryptographic fidelity.” Let’s look at these two definitions together. The definition of a corporation, you can see, helps distinguish it from a nation state. A group of people authorized with their own authorization – authorized by a higher power, i.e. by the nation – they can act as a single entity, and recognized by law. They have some type of independence from the nation state. We need a definition for a DAO to do something similar. It needs to help us differentiate from corporations and to see the essential features of a DAO and what it might be.

14:04 · Trach
Here’s the definition of split up: a decentralized network, decentralized autonomous agents, coordinating resources with cryptographic fidelity. That’s the organization piece. Decentralization is the network topography, right? It’s how the agents in that network are able to connect with each other. The autonomy part: operational access, it’s, “How available and accessible are all the levers of power to the agents in that system?” The third one: processes fidelity, “How trusted, repeatable, predictable, and transparent are the states and processes within that organization?” Another way to think of it as like a road, a car, and a driver, right? The road network is open. The driver is capable, and the car is trustworthy. You can go anywhere. Fred Laloux, in his book, Reinventing Organizations, one of my favorite thinkers on organizations and an amazing guy, he looked at the most advanced corporations around the world over a few years, researched what processes they were using.

15:09 · Trach
These are interesting places that do self-management and things like this. He synthesized these three axes that differentiate and defined what these organizations were like: self-management, wholeness, and evolutionary purpose. It turns out these are similar to what we’re seeing in DAOs. The way that I’ve been starting to think about it is: interconnection, how we connect with each other. It’s not just about decentralization. If you’re fully decentralized, that’s the heat death of the universe. We need something in between; sovereignty and what that means for each of us, and trust. So, that’s what DAO’s are. Not all DAOs work in the same way, but I’m going to show you what I’ve learned from how Yearn works and some of the most advanced and developed and fully decentralized DAOs that I know of work. The best metaphor again is biology. Cells are massively decentralized processing units.

16:06 · Trach
Corporations tend to be rigid hierarchical structures with limited bandwidth; cells have tremendous bandwidth, because all this s**t is just mixing around happening in real time, autonomously, without bosses telling you what to do. This is a rhizome, and this is how proteins are made within the cell. Within the cell, there is tRNA, mRNA, amino acids, ribosomes. Nobody’s telling them all what to do. There’s bottom-up and top-down processes, but they’re all just at the same time, in chaos, bumping into each other and making all these incredibly complicated proteins, permissionlessly. Let’s break the definition up again and go through in three steps. I fiddled with it to make it easier for this section. Starting with interconnection: DAOs are networks, so these dots are each contributors to a DAO or members of a DAO. In the middle, these are the people that are working full-time all the time,…

17:05 · Trach
…The core contributors – which is usually a smaller group, maybe 20% of the entire network. Outside of that ring are people that are part-time contributors, maybe they’re multisig signers, contractors, and people that are active in the forum. Outside of that, are just maybe people that are token holders that maybe throw a vote down every once in a while or say something interesting on Twitter. All these dots are probably token holders, but there’s different types of contribution and different levels of trust, different levels of engagement, in all these rings. Some people think, “Oh, what you’re trying to do is get everybody in that middle.” No, that’s not the goal for DAOs in my view. What you want to do is allow for freedom of movement between these spaces to be able to attract the most interesting, brilliant, capable, competent contributors from the outside and help funnel them in if they want.

17:51 · Trach
Allow people to move back and forth. These are the nodes of the network, the agents and resources in the network using the nodes. The edges in the network are the activity: that’s action, the relationships, and the coordination of information through relationships. Together that’s the network; all DAOs are a network. Corporations are a network, too. Networks can take different types of structures, so these are different network topologies. As you can see, there’s a tree structure there in the lower left. That’s like what you might see from a normal corporation; it’s hierarchical. The truth is there is nothing wrong with hierarchy. We’re not trying to say that the sun is the same size as the moon. They are different. I’m not trying to say that I have the same wisdom as a quantum physics PhD, I don’t, and when I’m with that person, I’m going to defer to their expertise.

18:47 · Trach
That’s a natural flowing hierarchy, and that’s extremely valuable. There’s number six, a mesh network. This is what a lot of DAOs are like now – very highly decentralized and chaotic. Then there’s also a hybrid network. Each of these types of networks are going to give rise to different kinds of structure, different types of behavior. So, there’s this beautiful hypothesis – the Sapir Whorf hypothesis made famous from the film Arrival, and it goes: the structure of a language affects its speakers’ worldview or cognition and thus people’s perceptions are relative to their spoken language, basically that language constructs the mind. If you look at some studies of developmental disabilities and children, if you don’t have certain words, you’re not able to create certain mental constructs. In DAOs, we’re the words. Here’s something with which I’ve been playing with: the structure of an organization affects its contributors, perception, and autonomy.

19:40 · Trach
Thus an organization’s capabilities are relative to its structure. The way that your DAO is structured, i.e. the way that its network is connected and all the other things, are going to give rise to different levels of collective intelligence. Let’s look at some of those different types of network structures. This is a robot; a robot is kind of like a corporation. It’s got a rigid control structure, where there are dedicated sensors that send information up the chain to a processor that makes sense of it, and then sends its commands and the electrical impulses to actuators that then execute it perfectly. This is what corporations often are trying to be. This is a very limited type of bandwidth, very limited type of collective intelligence and quite brittle. This is the other side, where corporations are more centralized. This is massively decentralized. This is slime mold. A lot of DAOs are kind of like this.

20:32 · Trach
Slime mold is fascinating. Some researchers have shown that it can solve the traveling salesperson problem in linear time, not exponential time. It is capable of these incredible computational feats organically, with each cell sensing and responding to its environment, making decisions on its own and sending those messages out to other cells. This is where I hope we’re going. This is a fly brain. It’s not totally decentralized, not totally centralized, somewhere in the middle. It’s capable of giving rise to incredible levels of collective intelligence. We’re not there yet. We may be more like this. This is a siphonophore, which is a colonial organism composed of medusoid and polypoid zoids that are more philologically and functionally specialized. Thank you, Wikipedia. Beautiful, but the cool thing is they’re actually different species. Those pink things are one species, the yellow thing’s another, and this is kind of like Yearn.

21:31 · Trach
You’ve got the Y-teams, which is one kind of organism. You got YFI holders voting, and the multisig, and the bunny rabbit; all different species kind of working together to make something happen. Maybe this is where DAO’s can be now. So that was interconnectedness. Now let’s talk about the next one: sovereignty. Now this word has some baggage with it, right? I think it’s important to look at it through a developmental lens. For a child, sovereignty might be the ability to control one’s body, and for a young person it’s about dominion, like a king having control of other people so they can’t hurt you. You can develop further and see that sovereignty is about responsibility. It’s about taking responsibility for your own emotions, your own desires, not blaming other people for one’s fate, being a responsible, sovereign individual, working with others, taking responsibility for my own stuff.

22:28 · Trach
Again, all the nodes in the network, these are the agents and the resources. So, let’s start by defining agents. Agents can be human beings, they can be software objects, or they can be groups of human beings and/or software objects. Because, as we know in DeFi and crypto land, smart contracts can make decisions. They can execute things; they can be agential. All different types of resources: cryptocurrency, smart contracts can be a resource too, something that receives, agents emit resources, data, and also simps, because human beings are on the spectrum too. We can be agents, we can be sovereign, or we can be resources. We can be property. If we outsource responsibility for actions and feelings to other people: to a boss, to a father, to a memory, to people talking s**t on Twitter, we’ve given away our sovereignty, right?…

23:22 · Trach
…Allowing other people to control us and then becoming a property of, essentially. Now there’s nothing wrong with giving access to one’s feelings to other people, but to do it in the light with trust and consent. To have sovereignty allows for us to move from the command-and-control architecture of corporations and nations and conquest to the sense-and-respond architecture which is at the heart of a healthy DAO. When you’re sovereign in this DAO, like, what do you do? How do you know what to do? Many people have asked me this question. I borrowed this from the Japanese concept of ikigai and adapted it to DAOs. When you’re sovereign, when there’s no boss telling you what to do in a DAO, how do you know what to do? You have to listen, and you have to decide for yourself. What you do is think about, “What do you love?”

24:09 · Trach
What are the things that you truly love doing? If you’re doing that, your work is going to get better. What are you best at? What can you be paid for? This stuff doesn’t happen in a vacuum. There’s a market out there. The skills you can be paid for are going to be worth more, generally, to the DAO. What does the DAO need? You can find that on message boards and Discords and bug bounties, all these different things, Anything in that red area is what you should be doing. Every action within a DAO is part of its dance of coordination. All these edges are active coordination happening within the network. Let’s look in detail at that action. This is the anatomy of decentralized work. All actions are between multiple agents and resources of the DAO to a certain extent. In order to understand how to take action in a DAO, I’ve borrowed another concept:…

25:03 · Trach
…This is a Betty Martin’s Wheel of Consent, which comes from Sacred Sexuality, as a way to understand deep consent in relating to other people sexually. The same thing can be said for any type of collaboration. Interestingly in corporations, the people on top are on the right, they’re the ones that take and accept. The people on the bottom are on the left, they’re the ones that serve and allow; they give to their bosses. In a DAO, that barrier is torn down. You can be an owner or you can be a worker; you get to choose. That’s why this is an important thing to look at because relationships and contribution can emerge through all different places on this. Let’s take a few examples, say there’s a contributor and they’re in Discord. They’re saying, “I can’t find the financials.” Like, is that a contribution?

25:53 · Trach
Or is it interference? In this case, the DAO has an aversion to this. This is interference. This is not useful, right? It’s not a contribution, but in another case, it might be a contribution. That contributor taking space and energy from the other people in the DAO might be useful because maybe somebody else in the DAO is like, “Oh wow, the link is broken on the website. Let me go fix that,” so that has become a contribution now. It depends on the context. Maybe you’re a designer and you want to create a logo for a DAO, but nobody likes your logo, and no logo is needed, so it’s not contributing. In that case you are taking, but here in a different case, you could be serving. You can say, “I’m a good designer,” or maybe the DAO wants you to provide a logo, but you’re not sure. You’re outside that circle of consent.

26:43 · Trach
You don’t want to give the logo to the DAO for no reason. If the DAO adds in some money, then maybe yes. Now you’re in consent. Now you can make that contribution for the DAO. An example of allowing: perhaps you’re a fantastic developer and you have a private repo that you could share with the DAO to help them. That’s passive and giving. That might be valuable to the DAO. It’s another way to contribute. Or, if you don’t want to, don’t share it. It’s all up to you. You can contribute by accepting as well, e.g. airdrops: DAO’s do airdrops all the time because it’s valuable for the DAO, or maybe its just a shitcoin. How do you know if it’s a contribution? If we look more closely at the anatomy of contribution and action within a DAO, all actions start with an inspiration of some sort.

27:34 · Trach
This is the sense-and-respond, the wait and the action, the zero and the one, The inspiration leads to execution and then another reflection period of evaluation. The evaluation might be automatic, unconscious in the shadow, or it might be a specific process. There might be a grants committee or Coordinape or something like that. Once that evaluation has happened in whichever way it happens, there’s generally a completion. It might be a payment. It might merge a poll request. Who knows? This is the structure for permissionless actions within a DAO. When it comes to permissioned to actions, it gets more complicated. This here is an atomic unit of action in decentralized work. It starts with inspiration, and if this is something that requires permission, i.e. something gated, you have to make a proposal. And then there’s a decision-making process. If that goes through, it becomes execution, then evaluation and completion. It can go back and keep going.

28:32 · Trach
The lines can connect between each other too, but this decision-making piece is fascinating. It’s one of the things that we really learned a ton about in Yearn. There are all different types of decisions, and there’s tons of different decision-making processes. We’re very familiar with token-weighted voting, but there’s also something called the advice process. There’s rough consensus, there’s consent, there’s game mechanics like Coordinape. There are many different ways to make decisions, which is good because the space of decision-making is very vast. There are many dimensions to it. Not every decision is the same. There are some actions which should be permissioned. There are some that should be public and some that should be private, some that should be off-chain and some on-chain, fast and slow. This one is like, “What’s the potential impact of a decision? Is it insignificant? Or could it be catastrophic? Does the impact of this decision affect just one person or does it affect every member?”

29:25 · Trach
All the different positions on these axes means that you need a different way often to make those decisions. That decision-making is the consensus mechanics as well as the empowerment and the people. This was the foundation of what Gabe and I did in Governance 2.0: Constrained Delegation. What we saw at Yearn is that we had to kind of thread the needle between both making sure that YFI holders had ultimate power and control over everything that was going on and that individual people that were at the core of this thing, working their asses off, could be empowered to do what they knew is best because we trusted those people. It’s a very high trust network. You don’t want to trust them with everything, though. You need to have the multisig or you want to have on-chain voting or some method of creating a trusted envelope, but then be able to delegate powers to people and allow them to do stuff with it in a transparent system of accountability.

30:12 · Trach
That’s what this does. Instead of delegating voting power, we delegate specific decision-making powers. Any group of people can say, “Hey, we want to execute this type of power for a Yearn,” and they can make a proposal. They can carve that power out of the stack and start working on it. They might need to have specific reporting requirements or whatever. If the YFI holders don’t like it, they can take the power back. This is the kind of foundation of this new form of governance. We’ve been working on it now for a year and it’s gone well. There’s still a lot to improve and it’s bumpy in some ways, but it’s starting to be adopted by tons of DAOs. Later we developed Coordinape, which is a DAO tool for doing decentralized compensation because compensation is one of the hardest decisions to make in a truly decentralized way.

31:06 · Trach
Most DAOs do compensation in the back room, and then they rubber stamp it on the forum. To do it really decentralized is hard. Coordinape is one way to do that. There’s a novel consensus mechanic where all the members of a circle can decide to add new members through decentralized vouching, and they can reward each other through giving a poker chip like token called $Give, and then the total allocation directly results in the distribution of funds. All of this comes back to the action unit, the anatomy of contribution. One of the fascinating things is that it’s fractal, right? If you look in each of these nodes in each of these edges, it’s the same cycle. It turns out that the network is fractal too, but a better word for it is holarchic. This is a concept from Arthur Koestler.

32:05 · Trach
A holon is something that’s both a whole and a part. The cells in my body, they are whole beings on their own, and they are a part of something larger. Me as a person, I am a whole being, and I’m a part of Yearn. I’m a part of the Coordinape. I’m part of these different DAOs. This creates this structure of fractal sovereignty. The autonomy needs to go all the way down the stack to give rise to the most powerful, most healthy DAOs. Now, as these artificial constructs and the nature of the firm have changed, the shape of work is changing too. This is social physics. If people aren’t constrained into specific roles and they can relate to anyone and collaborate with anyone, the nature of work/the shape of work changes, the surface tension changes. I got this from Richard Bartlett. The more people together, the more relationships there are.

33:04 · Trach
Two people, one relationship; five people, ten relationships; seven people, twenty-one relationships. Every one of those lines is a different place for conflict, tension, mistrust, misunderstanding to arise. It makes it harder and harder to collaborate. It turns out corporations are these strange, distended creatures, with these weird, long chain decision-making processes. The more biological DAO, that coefficient of friction has changed. We’re seeing new working patterns emerge. This is also from Rich, from his micro-solidarity work, where there’s small work groups that can be part of bigger congregations, bigger crews, and bigger congregations’ networks. This is the kind of sub-DAO thing that we’re actively figuring out. That’s the sovereignty part. The last part is trust, which is really the most important part of DAOs – the thing that separates them from corporations the most and starts in the blockchain, but we can think of it as trust or fidelity, which is, “How repeatable is something? How good is the memory?”

34:15 · Trach
How transparent is it? How much can you trust DAO? How much do you know that your work will go somewhere valuable and that you’ll get rewarded if they say you will and that you aren’t being tricked? This is incredibly important. In DAOs, it’s so powerful because of the innovation of blockchain, and blockchain is like the Higgs boson of inter-subjective space. This is the Higgs, this is the subatomic particle responsible for giving matter mass, right? Imagine matter without mass. Who knows what that would be like? Because it is physical, we can act on it. We have consensus reality around it. We’d never had that in the collective space until blockchain because blockchain gives memes mass, and this is a profound thing. Memes are not just a joke. Memes are like the genes of the collective space. The collective space is just as alive as the individual space.

35:07 · Trach
We just don’t see it in the same way. Before we had to rely on text and magnetic platters, on jurisprudence, on governance, and centralized power holders for our trust method, but now we can rely on blockchain. It’s such a stronger foundation. It’s like going from RNA to DNA, right? RNA is highly mutable. It can do great over time, but DNA is this incredibly robust storage medium. That change goes from like the ability to create a virus, to the ability to create a human being. That’s the level of change that blockchain enables. Now that we’ve looked at all this stuff, we understand these three axes of DAO-ness: interconnectedness, sovereignty and trust – let’s go back and look at corporations again and the difference between DAOs and corporations, Those four circles are the network diagram. Let’s start with the private company. All three layers are closed in the private company.

36:02 · Trach
All the shareholders are decided through a centralized system: the board of directors, the employees; the trust model is really based on how much you trust that company because they can hide reporting from the government. The sovereignty of the individuals depends on whatever the centralized power holders decide: who can do what, who can do something else. That’s like the most closed. The next one over is a public company. Now the outer circle is opened. The outer circle is decentralized. You can buy shares of Apple. You can permissionlessly, mostly, become a shareholder, i.e. to be a part owner of something, but then the inner circles are still both closed, right? There’s the board of directors, the people in the middle sphere, that’s still closed off. The trust model is better, but now you’re relying on the trust model of the government that is supporting this.

36:57 · Trach
The sovereignty of the people depends on whatever the centralized power structure decides. DAO’s have this remarkable feature of decentralized tokens and blockchain and voting. That happens all in a much more decentralized way, but there’s an important difference between governing an immutable contract and governing an entire group of creative workers. We can look to examples of fully decentralized immutable contracts in which the governance surface area is quite small, so you can do it all on-chain with one single channel voting process. That makes sense. That is fully decentralized, but it really depends on where you think the center of that DAO is. If the center of the DAO is the immutable contract, then yes, it’s fully decentralized, but what about the private corporation, the development corporation, and the VCs, and the big power holders in the background?

37:52 · Trach
That’s where the center tends to be most of the time. That’s okay. There’s nothing wrong with that. It should be put into the light more often, but you can be centralized if you want. Most DAOs have this closed center, and most creative teams behind DAO are operating in the same way that corporations have operated for 50 years. This last one is also a DAO, but this is what I believe is the future of a DAO. This is what a DAO could be like when interconnection, sovereignty, and trust go all the way through it. This is more like what Yearn is like, but there’s places where Yearn doesn’t meet all these criteria – we’re still early. Our trust model could be improved. Our sovereignty and interconnection – all of it could be improved, but the central part is decentralized and open and very much permissionless for a lot of it.

38:39 · Trach
We’ve gone through the ‘what’ and the ‘how’ so let’s get to the last piece, the ‘why.’ Why do DAO’s matter? Why not just do a corporation? Well, you can do a corporation. That’s fine, but DAO’s in many ways are a better story. They’re more trusted. They allow for people to find their own way into it. That’s better for people today in many ways. It’s the best fiction we have for coordinating whole, sovereign, evolved human beings. Development goes in the other direction, too. The many can act as one. We can all come together to create intelligence. What we want is to create the most intelligence that we can together. Our drive is to be able to contribute. It’s not just about making money. People want to make money, but people want to contribute. They want to know that their contributions are valuable, and they’ll go somewhere.

39:34 · Trach
You want to be able to put it together into something unified that has strength and intelligence and the ability to progress, with fractal sovereignty through the whole hierarchy. This is the nature of development, the story of development. It becomes clearer when you look at the foundation of these organisms, right? The corporation rests on this pyramid: at the base layer is government and then jurisprudence. From that, you have finance and property law. On top of that, the corporation can emerge. The DAO has a new foundation. The DAO is developmentally in the same sequence with corporations: at the base, it’s got the internet or maybe digital computation, and on top of that blockchain. From here, DeFi and NFTs can emerge, and then DAOs on top. It is a much better foundation, a much stronger foundation. The stronger the foundation, the more coherent the mind on top of it. On the right here, that’s the even that’s an even stronger foundation: chemistry, physics, DNA, blood and body, and then person – that’s the type of mind that can emerge from that strong of a foundation that far in the developmental ladder, because a person is actually in the collective space also.

40:40 · Trach
We just see it from the top, not from the bottom. These are these DAOs. This is the potential future for collaborative work. We’re going to need the strongest foundation for the networks to be able to contribute to these things. We really don’t know what it’s going to be like. This logic of development, although true, is not without its pauses. Time’s arrow does go all the way, but not every life form makes it. Not every planet is going to make it. Not every corporation or DAO is going to make it. We might not see the full form of a DAO, but I know it’s out there somewhere. We’re at this phase now where we have expanded to the edge of the Petri dish. Some bacteria, when they grow on a medium, like a Petri dish, they start with one phase of work, which is like conquest.

41:35 · Trach
They grow very fast, and when they hit the edge, the metabolism changes. There are now limited resources, chemical signals travel back through the entire colony, and they change how they work. They go into balance with their environment rather than conquest. That’s what we need to do now. That’s what DAO’s are capable of. We need to, as Charles Eisenstein says, move from mother earth to lover earth. As children, we took from the mother, and now we’ve grown. Now it’s time to be in a relationship with the mother, to give to the earth as a lover, as a partner. Command and control, which has been the nature of civilization for a long time, is very aggressive. Both of them are emitting. Sense and respond is listening. It’s more balanced. It brings more of the balance into the way that we could act. Corporations, like militaries, they create these extremely distended structures.

42:32 · Trach
They become abstracted. The body of the corporation is abstracted/disassociated from the world of the corporation because of these artificial barriers to different people’s cognitive sovereignty or the cognitive capabilities and their personal sovereignty. They can’t make decisions for themselves. They have to pass things up the ladder. You look at Dan Ariely’s work on lying and cheating or on Enron. You can see that these types of abstractions lead to these types of bad behaviors. From one lens, you can say, “They’re killing everybody,” but from another lens, you see that, “Actually, this was important.” The nature of the corporation is the thing in the state, although violent in so many ways, that’s what allowed us to cohere. That has created globalization. That has wired this whole planet so that we can transcend into this new digital space, which I think might’ve been a precursor for the next phase, just as the caterpillar eats and eats…

43:23 · Trach
…(this is something I got from Daniel Schmachtenberger) and you think it’s going to explode, but then it does something different. It spins a cocoon, and its body breaks down into a cellular slurry and imaginal cells come and rewire it into a butterfly. It turns into something totally different. I think the corporation phase is over.  We have now reached the edge of the dish, and we have to rewire ourselves into something else. If anything can do it, it’s the DAO. There’s another way to look at this, which is, Eliza Zurkowski’s work on inadequate equilibrium. If you look at the game theory of our planet, these Nash equilibria, all these different players playing their different strategies, and we’re stuck in these inadequate equilibriums, these inadequate Nash equilibria, and you can’t get out. Because if any individual player changes their strategy, it’s just worse for them.

44:14 · Trach
These multipolar traps that make us stuck as a civilization. The only way to change that is to change the whole game, right? Blockchain is potentially for that, as are DAOs, as is changing the consciousness. You can change your consciousness. You can see beyond the game. A final thought, this is a quote from Thich Nhat Hanh that has really inspired me. He says, “The next Buddha may be a Sangha.” In Buddhism, there’s these three jewels: the Buddha, the Dharma, and the Sangha. The Buddha is the teacher, the enlightened master. The Dharma is the teachings of all the previous masters, and the Sangha are your partners on the journey. You need all three. The idea that these DAOs might turn into these enlightened organisms, capable of bringing more balanced to our life again, is why I wake up every day. Thank you.

45:13 · Tom
Trach – that was an incredible presentation. As with any Disruptor, it’s going to take me a few times to go through it to really understand the gravity. I loved your comparisons, your metaphors, and the references to biology. It was amazing. I’ll start off with a couple of questions for you, and I’ll add in a couple from the group. One question for me is: everything you’re describing here, when does this become normal for people? When does this become plug-and-play? They just show up. They don’t have to understand everything you’re describing, which is incredible, but when does it become second nature to them where it’s just how they interact with the world?

45:50 · Trach
I think it’ll come in phases and come over time. I think as consumers, people will start interacting with DAOs pretty soon, as consumers of media and as consumers of content. As active workers/contributors to DAOs, it’ll take longer. The barrier to entry of the user experience of blockchain tech, dApps, all this stuff, is pretty significant. Understanding how to be responsible with your own funds, with your own wallet, the UX around wallets and addresses – that stuff is going to take some time. As that starts to spread more, I don’t know if I can put a time on it. I think we’re going to see massive change in the next five years, and DAOs will probably be pretty common within five years. Then, over the next 10 years, they might start to really disrupt the corporate model, but don’t hold me to that.

46:42 · Tom
Don’t worry. I won’t. When do you think we’ll get to a place where people identify with DAOs on a global level? They no longer identify with a country or a geographical region, but they identify with themselves as their place and their role within a DAO?

46:57 · Trach
Yeah, I think that’s happening already. I identify more with my family at Yearn and Coordinape than I do with being a US citizen in many ways. It’s a great question because the future of DAO’s is a really fascinating one. I didn’t put a lot of this kind of speculative stuff into the talk, but we see all different types of DAOs in the world: there are service DAOs, there’s social DAOs, there’s protocol DAOs. I imagine this future where we’re part of all these different circles, and we’ve got maybe a physical-level DAO which are the people that we’re around every day, the people that make our food and teach our children. We’re going to have interest group DAOs of science fiction fans, and we’re going to have work DAOs, and we will identify with all of them in different ways.

47:47 · Trach
One that might be the most important is going to be where the money is, the financial union DAOs that could really destabilize everything; that might be what we identify with the most. which will be a new type of modular politics.

48:01 · Tom
One question from a past Disruptor guest, Brooks Brown of Nor, was that governance votes within DAOs are commonly thought of in the traditional “one vote, one coin method” to mirror the real world, like the “one man, one vote idea.” Given that mirrors pretty poorly, are there other models you might explore or that you’re interested in for handling governance voting?

48:23 · Trach
Yeah. I think Vitalik has written some great critique over token-weighted voting. I think his post was titled, “Why Coin Voting Sucks.” There are a few reasons why: one is that you can disintermediate the economic value in the voting power through wrapping, and you can sell votes. That stuff hasn’t happened very much yet, but surely it will. Another reason coin voting works now and maybe it isn’t so great is because we’re still very early and there’s a lot of camaraderie in the space, but these systems are easily manipulated. While they have been effective and they do work in a lot of cases, they’re not going to last. It doesn’t mean that token voting doesn’t have part to play. Going back to one of my previous slides and looking at all the different types of decisions, the whole decision-making space, different consensus mechanics are going to be good for different types of decisions.

49:19 · Trach
We have to create a heterogeneous architecture of decision-making bodies, right? We’ll be using different types of consensus mechanisms. Reputation-weighted voting like what is implemented in Colony and other places, could be really useful. Using multisigs with elections, with delegated representatives like Synthetix does or like the Pods project. There’s a lot of interesting possibilities that are all emerging now. We’re all trying. There’ll be a lot of development there.

49:52 · Tom
Definitely a lot to try out. Another question from Sarah Brennan, who’s our general counsel on the venture side, is that there is this beautiful utopian vision of DAOs that’s being advanced, like a lot of what you shared in your presentation. How do you deal with frictions protecting against bad actors? What are the edge cases or what are the guard rails that we have in place to protect against the bad things or the bad people that might enter the system?

50:16 · Trach
The first thing I’ll say is that people will do bad things, always, and that’s okay. Going back to biology, DNA does mutate sometimes; it’s actually part of the system. What you want is a system that’s robust enough that it can accommodate all these different types of actors. That’s part of what we’re learning how to do. The traditional/legacy governments use jails. With DAOs, I think we can do a lot better. Clare Graves work on spiral dynamics – he looked at post-apartheid South Africa and tried to figure out, “How do you create a system of governance for this diverse group of people?” He realized that (and this is true across the board, including in DeFi) you’ve got people from all different worldviews coming together to coordinate. When we’re on Twitter or on Telegram or Discord, you don’t necessarily know that one person is a 13-year-old from India.

51:14 · Trach
One person’s a 70-year-old banker in America. One person’s a spiritual guru. Another person punches his friends. Everyone’s coming from different places. The goal is not to make everyone become a guru. The goal is to create a robust enough structure that can accommodate both adversarial environments and collaborative, high-trust environments –  that has levers that our children can push to contribute. I call it a party bike. With a party bike, you can have ten people all sitting around a table peddling, and anyone can peddle as much or as little as they want. One person steers, and you get somewhere good. The nature of that structure harvests everybody’s sovereign work activity and coheres it into a direction. DAO’s have the potential to create structures that can accommodate all these different types of people, the entire ship. Bad actors are a part of that, and there will be hacks. That’s part of how we grow, right? We’re forged in the fire of this stuff, and every day we’re learning how to do it better.

52:20 · Tom
I guess it would be bad if there were no bad actors, right? You have no one hardening the system, nobody improving it.

52:25 · Trach
Exactly.

52:27 · Tom
One of the other things I had was: you have such a great grasp of everything happening within a DAO. For me, it’s so complicated. For new people to a DAO, it’s so confusing. When do we get to a point where somebody shows up and it’s just easy and simple? Frankly, everything you shared is incredible, but I highly doubt that most are going to understand that that exists, but it will power the next DAOs.

52:52 · Trach
Yeah. Most of my talk is not like a newcomer user manual. It’s more of like a designer’s handbook for thinking about how to make DAOs and how to make governance systems. There’s a lot of people doing great work on onboarding people into DAOs, like Forefront and 0XX. There’s so much. It’s hard, and it might be hard for a while. A lot of people want to be like, “Let’s get there already. Let’s deploy this into some underprivileged community and have them use it.” It’s like, “Yes, I see where your hearts are. I love that, and – we’re not there yet.” Go ahead. Try it. Maybe it’ll work, but there’s a lot to learn first. That doesn’t mean that we have to do it ourselves. Everybody’s welcome to work on this, but we can’t expect it to be ready for some of these higher challenging environments that soon. It will take some time. It’s very confusing.

53:51 · Tom
Do you think Yearn is at a place right now where banteg, Andre, you, can leave, and it will persist and move forward? What do you think the impact would be?

54:01 · Trach
Absolutely. Andre hasn’t contributed much to Yearn in a long time. I stepped away for a quarter, and I’m not one of the most important people at Yearn by a long shot. We’ve got a team now of like fifty core contributors that are incredible. There’s tons of redundancy. A lot of what we’ve worked on is creating more and more robust decentralization. We’re very committed to this and to redundancy and to make sure that information doesn’t accrue in one place and our systems are robust and secure. That’s what we work on all the time. Sad to say, but me leaving probably wouldn’t change too much. There’s a lot of stuff I want to do. I think somebody else would do it differently – maybe not as well, but they’d be fine.

54:54 · Tom
Do you think that’s a pretty big difference versus the corporate structure? In a corporation and a general business, if one of the leads leaves or is fired or takes a vacation, stuff comes to a standstill. The way you’re describing Yearn, you can leave for three months and come back and you’re still moving forward in the interim.

55:11 · Trach
Yeah. I’m not the leader of Yearn. I never have been. I am one of many leaders. It’s a leaderful organization. We’ve got fifty leads at Yearn, and I’m in the middle of them. You don’t know a lot of their names because not all of them love to talk about stuff like this like I do. It is different. In a corporation, that’s part of the brittleness of a corporate structure where you have these people on top that are responsible for making all the decisions. At Yearn, we all make the decisions, and there’s some that are gated, but those are also decentralized. I’m not even a voter on any of the Y-teams. There’s different people that do different things. It’s super different and way more robust than a corporation.

55:55 · Tom
That makes a lot of sense. Yes. It’s definitely a different feeling. Another question we had from Avi, who’s a venture associate on the ventures side, is: what tools and infrastructure will enable DAOs to make a stepwise improvement in their efficiency or coordination? What are the tools that are most important to you or that you see as the most valuable?

56:12 · Trach
Yeah, there’s a lot. There’s been a huge explosion of DAO tooling. I’ve said Pods before, but it’s Orca Protocol. I love what they’re doing. They’re doing a wrapped multisig consensus mechanism with NFT-gating as a way to do delegated decision-making – very much in the model of Governance 2.0. There’s also Gnosis Zodiac, which is an infrastructure for putting together different modules within a governance architecture. It’s also inspired by Governance 2.0, certainly on other things as well. There’s a lot of work being done on decision-making. There’s things like Boardroom and Tally too, that help you see different governance processes. There’s Coordinape, which is a way to do decentralized compensation. There’s so many. There’s this whole space of DAO tooling which will make the DAO more and more efficient. There’s a lot of them and not all the tools are great.

57:11 · Trach
A lot of the tools are just taking legacy corporate models and putting it on-chain, like with ‘sign-in with Ethereum’ and integration with a wallet. That’s fine, but we need to get to the space of DAO-native tooling. Clarity is a project I love. It’s like a DAO-native Notion or a task tracker that’s doing amazing stuff. We’re getting there.

57:35 · Tom
Last question for me, unless others post, but one comparison I really liked doing your presentation was the idea of the biology example, right? You have all these cells within the human body, all these building blocks, they’re all doing exactly what they need to do at the right time. With a DAO, the comparison for me breaks down a little, right? Because you have people, but they can do many things. They’re not constricted by their DNA or what they’re built from. Do you envision there being guardrails for what people can and can’t do to fit into this biology example? Or is there more flexibility and freedom there?

58:07 · Trach
Yeah, it’s a good point. I have to say that, there are some problems with using these biological models. I was talking to Daniel Schmachtenberger about this in Denver, talking about Dave Snowden’s work on anthro-complexity and basically saying, “Look, human beings are at a level of complexity and development that we do not have any other examples for,” and trying to say that we’re like yeast growing is ridiculous. It’s a different level. You can’t apply logic from one to another. I disagree in some ways and agree in some ways. I think that, like I said, the logic of development does have a pattern to it. We can learn from some of these different phases, but you’re right. People are not tRNA. They’re not just there to bind to one amino acid. They are doing many different things.

58:56 · Trach
I think we can look at it inspirationally or metaphorically. The people in a DAO in the future – there will be rails, but what we need to make is the minimal viable structure. We need to create structures that are robust but have the greatest access for permissionlessness, and that are as clear as possible. The idea is that, if these structures are good enough, it’s like the party bike: people can just flow in, they can do something, and flow out. In the future of work, which is what Coordinape is developed for, is one in which I hint at in the presentation, which I actually forgot to say this part – corporations, like the Coase article from ‘37, the Nature of the Firm, like, why do corporations create mass? Why do they have vertical integration? It’s because of the logic of overhead and the friction of the technologies that supported large scale work, but that has changed so much.

59:54 · Trach
That friction is no longer there. The work groups become smaller and you don’t need to have this protective layer like the corporation in the same way anymore. What we see working in DAOs is that they’re extremely collaborative, right? We’re all on the same team. That’s the amazing thing. Because of composability: because one person can make the data layer, and then different teams can put their data into it, and share it out of that. That makes everybody stronger. It feels like, often when meeting with other teams, that we’re in this together – like we’re different divisions of the same company. We’re different visions of Apple or something and we’ve never met before. Totally separate financial models, but we’re working together.

01:00:40 · Tom
I totally got it from where you’re going there. The other thing for me would be, I asked you earlier on, when people show up and they’re a part of a DAO in this new world and how it works – but there are a lot of teams out there that aren’t going to do what you’re describing. They aren’t going to follow this vision, and they will have a corporate hierarchy. They’ll have a CEO, they’ll have a founder, they’ll not have a multisig. Do you think people will start to subconsciously move toward the DAOs that are trustless, that do compensation on Coordinape, that are decentralized by working groups, because they’ll just be put off by the traditional copy-paste corporate model used in fake DAOs? I’m trying to get a sense of if people will just say, “This is what I was used to, I’m going to go to the new world here.”

01:01:29 · Trach
I think there’s a few ways to think about that. One is that there are people on the planet today that think the best use of their time is to get into a tank and shoot a Ukrainian building, right? There are people of all different perspectives on the planet, and that will still be the case. Some of those people will want to start a corporation. DAOs don’t replace the things that come before; they transcend and include them. They’re going to attract, by their nature, people at specific developmental levels and communities that want to form with other people of like-minds, and they’re going to want to operate in a certain way – people with more sovereignty and with more of a desire for being sovereign agents among other sovereign agents, without wanting to tell people what to do, that don’t need to protect themselves from harm, that they are available emotionally and cognitively and more integrated, and want to work in this kind of new way.

01:02:21 · Trach
The people that are unhappy with the work masks of normal corporate life and want to be their whole being, with their magic in the DAO, they want to express their femininity and their masculinity, whatever, in the way that they work together. It’s going to be attractive for people like that. We can look back to postmodernism, we can look to the counterculture revolution in the sixties, and you can see that kind of emerged from a change in global consciousness. After a certain amount of people have reached new levels of consciousness, this kind of sensitive egalitarian view, it creates entire new political movements. We’re at another phase now, this kind of integral tier of consciousness where people are gravitating towards these self-sovereign modes of interacting and relating with each other. These types of true, deep DAOs are the only place for people like this. Not just that – the other piece is that they have to out-compete, They have to create better products or else people aren’t going to like them. And they do. And they can, and they will.

01:03:31 · Tom
Throwing my VC hat on, it sounds like we need to be positioned in projects that are leaning into everything you’re describing: founders that are okay firing themselves and giving up control, projects that allow people to come and go, everything you’re describing. It sounds like, if that’s going to be the new way in a big way, we need to look for projects as VCs, but also individual stakeholders have to position themselves in projects where they can grow in such a way like you’re describing, right? So when you get to the edge of the Petri dish, there are the resources there to grow in the way that you want to do. Not to throw an investor hat on you, but I’m assuming you’d be more bullish on the projects that are leaning into everything you’re describing versus those that are trying to maintain some type of strict hierarchy or constraints within their projects.

01:04:21 · Trach
A hundred percent. You still need product market fit, right? You still need to have a smart team that’s capable with a great product that’s needed in the world. My investment thesis is really the ones that are communities/teams that are pushing the limits of interconnectedness, of sovereignty, and trust of DAO’s. If they’re pushing the spectrum of DAOs further, they’re going to out-compete the other ones, because it’s going to be the DeFi-native/the crypto-native people that are working. Like I said before, you can take the old models, the rigid corporate control structures, and you can take those tools, the ways that we’ve had to handle, because we’ve developed… – this is something I see a lot in DAOs and a lot in Yearn and in myself too, is that we are at the beginning of this thing. It’s very formless and it’s confusing.

01:05:18 · Trach
We fall back on what we know, so we project our experiences onto this new space when it really doesn’t necessarily need them. We try to do KPIs, and we try to do payroll management and direct reports. All these things that work in corporations, we try to do in DAOs, and you can make it work in DAOs, but DAOs can do even better. I’m not saying anything is wrong with those pieces. Some of them can really work, but it’s the teams that are creating the DAO-native ways of working that are going to out-compete. From an investor perspective, that’s what I’d look for.

01:05:52 · Tom
I couldn’t agree. Definitely more of a near-term lift but well worth it in the long-term.

01:05:57 · Trach
A lot of volatility probably near-term too, because we’re still figuring it out, but long-term, yes.

01:06:03 · Tom
Agreed. Last question for you from Rob on our ventures team is: transparent compensation in DAOs is net positive, but it forces the conversation about how we should value the work that was performed by an individual agent. Do you think that these decisions should be localized early on, like by the early contributors, or totally permissionless from the get-go?

01:06:21 · Trach
It’s a good question. I think you can go in different ways, and the truth is that we don’t have enough decentralized permissionless compensation tools available yet. We’re building that with Coordinape, and it’s good for some things, and it’s not good for everything. At Yearn for instance, right now today, we’re at the end of a massive experiment in decentralized compensation where all the doers, i.e. the core team, are self-setting their compensation through this iterative process of feedback, and it’s painful. We’re having all these conversations of, “What’s valuable to us?” and giving each other feedback that we haven’t given before. It’s been stressful for me and for other people too. The first thing I’d say is it’s not easy, but it’s worth it. The trust that it builds – those conversations are important to have, but there’s a lot of conflict.

01:07:24 · Trach
I’ve been in conflict with a few different people over the past few days, and there’s probably more, but healthy conflict processing is important. I’m going on a bit of a tangent, but to the specific question, I think it’s okay if you do it in a simple way. What are you trying to do? Don’t spend all your energy trying to reinvent every wheel. At the beginning, figure out a simple compensation thing, don’t worry about it, and just work. Let yourself work. Then, figure out how to do it better as you grow. Use Coordinape from the beginning or tools like it, so that you start playing with these decentralized systems and then finding, “no system available yet that does all this stuff.” So, once it’s there, use it.

01:08:09 · Tom
As a follow-up question, do you run into a lot of issues where people will, instead of building what they want and what they think is valuable, build the thing that they think they will get most compensated for within the DAO? Would that cause issues between what people want to build versus what you need?

01:08:27 · Trach
Yeah. I think if that’s what’s going on, that’s not the problem. The problem is the culture, right? You can have an adversarial environment where people are gaming each other, and that’s a cultural issue in DAO. You can’t fix that with a tool. You fix that in conversation with each other and by leaving or by starting something new, leading by example, or forgiving. There will be bad actors. There will be people that game the system, and there will be adversarial environments, but what I’ve seen at Yearn is that everyone is trying to make the thing that they think is best for Yearn. I can’t think of any gaming that’s happened. That’s the culture that we have. We have an incredible culture, and we are not alone. There are other DAOs like this too.

01:09:25 · Trach
Yeah, basically that stuff can happen, and it will. Just like any corporation, there’s good ones, and there’s ones that are harder.

01:09:33 · Tom
To your point though, to protect and mitigate that, you have to have a large focus on scaling the culture and embedding that in every new entrant that joins. That has to get hard as you start to grow. Right?

01:09:46 · Trach
Oh, absolutely. This is another thing we’re thinking about a lot at Yearn right now. It’s like, we don’t think that our way of working right now can scale a lot more in terms of the team size. It goes back to that kind of social physics. You bring more people in, there’s more conflict, less trust. We have an extremely high trust group right now, and I don’t mean like with user funds – that is all part of a different security envelope. I mean, just in trusting each other that we’re doing good work, etc. Figuring out how to scale that is a super active topic. There’s the idea of sub-DAOs and different work groups and how that fits into compensation and work, etc., very much actively under evolution.

01:10:25 · Tom
If somebody is starting a project today and believes in your vision but understands that not all the tools are there to pull it off yet, and there’s a lot of education and learning that have to take place to get there – what would you recommend to them as a step one to implement what your vision is but while understanding that they obviously can’t do all of this from the get-go? How do they set the right foundation?

01:10:52 · Trache
You’re talking about people that are trying to create a new DAO or a new project?

01:10:55 · Tom
Exactly. Yes. It gets hard to fix this after they implement a foundation or a culture a couple of months or years down the line.

01:11:02 · Trach
Man, it’s tricky. I think the first thing I’d say is spend some time with other DAOs and learn from them. You don’t want to just come into it and try and do it all from scratch. Contribute to DAOs. Even as you’re building your new DAO, contribute to other DAOs. I think that’s another key piece to the future of work is that we’re working on multiple different projects, all of us, and moving between them. You’ll learn that way. Like cloning a bread yeast, grab a bit of it, or cut a piece of a plant and plant it in a new place. Import the culture from a place that is really working, and draft off that. Beyond that, be as transparent as you can. Do as much in public as you can. Try to avoid the accrual of power in backrooms. It’s natural.

01:12:00 · Trach
It’s easier to work that way. I’m not saying don’t have private conversations, do because it’s essential, but as a leader in particular, the job is to constantly give away power. Because if you’re not careful, it’ll just keep accruing onto you. People will see you as the leader. They’ll see you as the boss, they’ll project all their s**t on you. If that’s what you want, you’ll get that, and then all of the sudden you’ll have a corporation. You need to give away power, let other people fail, let other people succeed, and create a culture of support; the servant-leader model where you are helping other people do their jobs.

01:12:38 · Tom
I couldn’t agree more. My thesis is to fire yourself as soon as you can. This was an incredible presentation. You just sharing all your wisdom on everything you learned from Yearn, from DAOs, your definitions of what we should have, the comparisons and metaphors to biology – we really appreciate your time. Thanks so much for being a guest.

01:13:00 · Trach
My pleasure. Thank you.