Hello, everybody,
and welcome to Just DAOIT,
the podcast for people starting DAOs.
I'm Adam Miller, and I'm your host.
As always, we are streaming live,
and then we will push this
to our podcast feed later.
So apologies in advance for
any technical difficulties.
As always,
the first half of the show will
be the Just DAOIT news report.
followed by an in-depth
interview with Graham Novak,
who I'm really excited to
have on the show.
In the first half of the
Just DAO News Report,
I will be summarizing
recent DAO news stories,
and Graham and I will be
commenting on those stories,
giving our hot takes if we
agree or disagree with the
author or what we think
these articles mean for
people starting DAOs.
But first,
I would love to just do a brief intro.
Graham, welcome to the show.
Tell us a little bit about yourself,
and in particular,
what makes you an authority on DAOs?
Hey Adam, thanks for having me.
Excited to join you for this.
I am the CEO and founder of
a company called Bezzanine Labs,
and we build software for
on-chain organizations.
It's an application library
for organizations to kind
of mix and match,
build their own organizations.
I guess you could call me an
authority in crypto or on DAOs.
In 2021,
I started an organization a lot of
people participated in
called Constitution DAO.
We raised over $40 million
in a few short days to try
to buy an original copy of
the Constitution.
And the whole project was
literally one week from idea to auction.
And we ultimately ended up
losing to Ken Griffin.
Yeah, it's an awesome story.
If anyone's not familiar
with the Constitution DAO story,
maybe we'll talk a little
bit more about it later,
but you can also Google it
and there's lots of good media coverage.
That's awesome.
Well, let's dive into the news report.
And then as promised, after the news,
we'll go into a more
in-depth interview with Graham,
as we always do with our guests.
So for the Just DAO News Report, again,
I will summarize each of
these stories for the
audience and for you, Graham,
and we'll dive into some
commentary on each one.
Sound like a plan?
Sounds good.
All right,
so we haven't done an episode in
a couple months,
so we may have a couple
stories that are several weeks old,
but maybe new for our audience.
So the first story of the week,
this is a tweet from X,
and the tweet is from Citidao,
which is at Citidao.
And the tweet is, citizens,
it's time for an important vote.
Should Citidao return our
remaining funds to citizens?
Vote here on the snapshot.
So for anyone who's not familiar,
Citidao has been around for
at least a couple of years
and got some media coverage
as well when they incorporated in Wyoming,
one of the early DAO LLCs in Wyoming,
and I believe bought land in Wyoming.
At least they always talked
about buying land.
I think they bought the land.
And now they're running into
something that I think a
lot of organizations run
into at some point over their life cycle,
which is that they're
thinking about shutting down.
And in shutting down,
returning whatever funds
they have in the treasury.
I'm not sure what would
happen with the real estate.
but returning the funds they
have in the treasury to
citizens so I've been part
of some interesting
conversations recently
where for example I met
someone who actually rage
quit from city doubt
earlier on in their
development and when I say
rage quit it's not because
they had built a rage quit
functionality into their
dow smart contracts which
is something some dows do
do but the founder said
okay you know what if you
want out it's okay I'll
give you your share
or whatever you had
purchased your NFT for and
you can get out.
But now today, from what I hear,
there has been no rage quitting allowed.
And so that's part of the
interesting discussion now is, well,
is the only option for them
to completely shut down and
return the funds to everyone?
Or should there have been a
rage quit function along the way?
And if there was one,
maybe they'd still have
some passionate members and
some people who would have left.
So either way,
it's going to be interesting
to see what happens here in
terms of whether they kind
of wind up here and return
funds to their citizens,
as they call them.
Yeah,
my initial reaction is there's a lot of
DAOs,
there's a lot of organizations that
launch very rapidly,
especially during the bull market.
And not all of them had what
I describe as like life cycle plans,
like what happens in the
event that we lose steam,
we run out of funding,
or we just don't have
enough interest or whatever
our mission is no longer
feasible is that you have to
have like some type of
authority some type of
mandate from your
participants like are we
going to do this other
thing or are we going to
wind down and if you don't
have that system baked in
from the onset of how you
even make that decision
there's always going to be
disagreements right and so
if some people were saying
I'm surely saying oh like I
don't want to wind down I
keep I want to still do
this um if you don't have
that mandate from the onset
to wind down you're you're
caught in a lose-lose
situation um generally
speaking especially in like
a circumstance like this uh
I just encourage
organizations to try to
make good ethical decisions,
which it seems as though
they're certainly doing, right?
Which is, okay,
if we don't have maybe the
ability to continue
building this organization,
the right thing here is to return assets,
distribute back to people,
contribute pro rata basis,
but definitely best of luck
to them on that.
Not easy.
Yeah, totally.
Yep.
What do you think about Rage
Quit as a feature for DAOs?
Is that something that most
DAOs should have?
Is it just a design decision
that maybe a select few
will choose to implement?
I think it is a good
mechanism for some organizations.
It's not going to be right for everybody.
For those who aren't
familiar with Rage Quit,
it basically allows a member,
a participant in an organization,
to take their portion of
the treasury and say, hey,
I'm going to leave.
The group's going to make a
decision that I don't really like,
so I'm going to take my portion,
the fair portion of it,
and leave and choose to not
participate anymore.
Now,
this is problematic for some
organizations if it really
is you need everything or nothing.
Like if you only have half
the assets and half the people leave,
what you're doing might no
longer be feasible.
And also...
It doesn't it doesn't align
incentives or allow an
organization to have like really,
really long term commitment
to things as well.
So there's good
circumstances and bad circumstances.
I think there needs to be
more ways for organizations
to return money and to wind down as well.
I mean,
it's something that we faced at
Constitution Day.
Yep.
Good point.
Yeah, it's interesting too.
When I think about
traditional organizations,
not digital ones,
let's say public companies,
there would have been no
practical mechanism to do
something like a rage quit function.
The infrastructure doesn't
exist for a big public
company to allow a shareholder to say,
I'm going to rage quit with 0.0001% of
The company's assets, which, by the way,
are tied up in five or 10
different bonds and maybe a
bunch of stocks and maybe a
lot of some physical assets.
Now that with digital
organizations having a lot
of their assets on chain,
at least much of the time,
and this idea that so much
of what's on chain is
liquid or at least is tradable.
Now it's an option.
that organizations can
consider for the first time.
So it'll be interesting to
see how that's used
effectively where it is used.
Definitely.
Yep.
All right.
Turning to the second story of the week.
So we have one more post
from X. This one is from Dan Robinson,
and he is a lawyer and
coder and researcher at Paradigm.
And his post is...
It's disappointing to see a
large VC try to bully the
token governance process
and delay community
proposals at the last
minute in order to advance
their own pet projects.
Now,
this is a tweet quoting a post from
Uniswap Foundation.
Uniswap Foundation announced,
this was about 10 days ago now,
that a proposal that they
were planning on taking to the DAO
actually, we're changing our minds.
We're not ready to let the
community make the decision.
We're just going to go a
certain direction.
And this had the effect of
rubbing some people the wrong way.
And, you know,
I talk about this a lot
because we see this a lot
these days with DAOs.
But, you know,
anytime there's a foundation involved,
I think people need to see
that as a at least a yellow flag,
if not a red flag,
and understand what it
means to have a foundation
or a board of any kind
involved in your DAO.
If there's a board,
you should think seriously
about what power that board has.
And do they have the power to decide?
what proposals are allowed to be proposed.
And even if a proposal passes,
is it going to get implemented?
And so I think, you know,
obviously that's why I do
the work that I do with the DAO LLCs,
which I think are often a better fit.
But I think the important
thing is just to know,
like if you're dealing with a foundation,
you might call it a DAO,
you might not call it a DAO,
but that board of the
foundation gets to decide
what to do with that organization.
And so it shouldn't be,
it might still be upsetting,
but it shouldn't be a
surprise when you find out, for example,
that foundation is in bed
with the VC of the organ
that funded the project.
Yeah.
The back context here is
there's a handful of VCs,
namely Andreessen Horowitz,
that have very large token
stakes in Uniswap.
And they have their own sets of interests,
their own incentives,
their own types of interest agendas.
At the end of the day,
that's also representative
of a DAO and any organization broadly,
though,
is you have lots of stakeholders
and lots of different interests.
So I'll actually take a
counterpoint here as well, which is,
this is one of the
stakeholders that happens
to have a large amount of
voting power representing
their interests.
Part of this is public,
part of this is private,
but this is the type of
politicking and pushing
that happens in DAOs.
And if you want the
organization to function differently,
you need to change the smart
contracts the parameters is
to wish you know how the
organizations are the
decisions are getting done
right um I view this as
being kind of a natural
inevitable part of the
process if someone else
wants to submit the exact
same proposal they can do
that without the foundation
right so another another
you know set of individuals
could propose that same
thing tomorrow they don't
need the foundation's uh
approval to do that uh so I
i see both sides of this one for sure
Yeah, well,
that's great if they don't need
the foundation.
Maybe people are just
becoming too reliant on
some of these centralized parties.
I'll actually go right into
one of the other stories of
the week because it's related,
and then we'll discuss a little bit more.
So this one is from the Dow Times,
and the headline is,
the sandboxes Dow launch
raises concerns over
centralized control and weighted voting.
So this is the sandbox,
which is the metaverse,
a project that was received
a lot of attention,
at least also a couple of
years ago during the last bull run,
when these little plots of
land in the world of the sandbox
became very valuable and you
had lots of big companies, Tesla, Gucci,
Nike,
companies like that buying land with
the hope of getting some
good central real estate in
this new world.
And just recently,
so also at the end of May,
they announced the launch of their doubt.
And in the launch of their DAO,
which you can read more about on Medium,
it's called the Sandbox DAO
Vote on the Future of the Metaverse,
which is the official press
release post from the
Sandbox about the launch of their DAO.
They do talk about, for example,
having these special
councils as a council and a
group of advisors,
and that the council has
the power to veto the DAO's decisions,
among other things.
And so I also don't think
there's necessarily
anything wrong with this.
Look, I think every project,
every initiative,
every ecosystem has its own origin story.
It has its own group of participants.
investors, contributors, users, et cetera.
It has its own culture and values.
It has its own plan and strategy.
And if part of that plan is
to do some things in a more
quote unquote centralized way,
I don't think there's
anything wrong with that.
And whether that's through a
foundation or whether
that's through a council.
And I think in this case,
there is also a foundation again,
and maybe the council will
be the board of the foundation.
I'm not sure.
I just think it's important
for people to know what
they're getting into.
And I guess in the case of
something like this,
maybe if you got into the
land two years ago,
you might have assumed some
kind of fully democratic
decision making process in your future.
But I think that would have
just been an assumption.
And every project is
different and has to decide
for itself how
decentralized it wants to
be in the organizational regard.
how distributed it wants its power to be.
And if there's a couple of powerful VCs,
there's a couple of powerful VCs.
I don't think that's something that we can,
from an outside perspective, just say, no,
we don't ever want VCs or
we don't ever want a council.
At the same time, again,
I just think it's important
for people to know what
they're getting into.
this is a classic example of
an organization that made a
lot of promises and among
them conversations
discussions about
decentralization it means a
lot of things to a lot of
people and ultimately when
you try to uh you know play
this out organizations take
a long time to mature and
getting to the point of
decentralization is a very
hard thing that requires I
think a very gradual process
And I think people see
different time scales.
And so some users wanted
this instantaneously.
Some users are like, hey,
I understand this is a work in progress.
We're going to get there eventually.
But there's certain
decisions that we need to
delegate to the founding
team and the operating team
because they see the day to day.
They know what's happening
on the nitty gritty nuances.
Does it make sense for a
bunch of random people who
don't know what's happening
day to day to make a bulk
of the decisions?
This is the dirty grit of
governance and of voting
and of all the stuff that
we're building and
designing mechanisms around.
But the biggest discrepancy
here is the difference, I think,
between what's promised.
Our industry does tend to
overpromise and then the
delivery of that
decentralization or that
governance mechanism.
Yeah, that's a good point.
I think too, to your point,
it seems like it's becoming
almost a generally accepted
principle that you can't
start out to decentralize,
that you need to start out
with a bit more central control,
a bit more hierarchy,
a bit more coordination to
be successful at the early stages,
that you can't just like
quickly,
haphazardly give control over a
protocol or a project to the community.
And people are talking about
progressive
decentralization and that kind of thing.
Is that always true?
I mean, from your perspective,
is it always bad to
decentralize too soon or upfront?
Or are there some scenarios
where you actually can start out with
I mean,
what about like ConstitutionDAO
comes to mind, right?
You guys went, I don't know,
was it tens of thousands or
hundreds of thousands of
members in like two or three days?
And so did that cause any
problems or where did that
leave you on this issue?
Yeah.
So there's a lot of different use cases,
right?
Something like Bitcoin
that's designed to be
immutable from the onset.
Great, let's start decentralized.
And the sooner you can decentralize,
the better.
Like there's nothing to govern.
There's no decisions to be made.
Constitution Dao was a great
example of something where
the contributions, the donations,
could and should be broad-based.
The participants could and
should be broad-based.
But then when you start
getting to that nitty-gritty detail,
right, if we won the auction,
who's the person who
actually shows up and
receives the document?
Who's in charge of
delivering it to the museum?
Who's in charge of finding
the group that needs to do
some of the maintenance and
restoration of documents,
the preservation work, right?
These things don't need to
be gigantic group votes.
And so this is where you
have to make a separation
between what are operating
responsibilities that are
likely delegated and what
are governing decisions, right?
In our case,
a governing decision might
have been something like, hey,
here's three proposals for
where to put this document.
Which one do you want?
And then allowing the community to govern.
The operations should
probably be delegated.
Interesting.
Yeah.
So to answer your question,
it depends on the organization.
If there's no operations to be done,
if Bitcoin has no work that
has to be done by a central group,
let it be decentralized.
I also think there's a
misconception that things
need to go small, messy,
and decentralized to like, wow,
this is clean and
decentralized and we all
like how this goes.
You can also start off
you know, centralized, structured,
and then, you know,
let out powers as you go.
I think the biggest conflict
of interest you run into is
that is that group going to
continue to execute against
the plan that they promised?
And then how do you assure that?
Yeah, I mean, I feel like it's,
in some ways, a risk either way, right?
Either the community is
taking the risk that
they're trusting the
central team to continue
operating as they promised,
or if the central team is
giving power to the community,
they're taking the risk
that the community might
decide to go in a different direction.
It seems like maybe neither
is necessarily better, just different,
it's just a different risk.
Yeah, but Talc has this...
really great blog post where
he talks about concave
decisions and convex decisions.
And what this boils down to
is there's some types of
decisions that groups,
large democratic bodies
might be very good at doing.
So, for example,
markets pricing things are
actually quite relatively
efficient at finding a good
market clearing price.
versus there might be some
decisions that need to be binary.
Do we do with this?
Do we go with option A or option B?
And this might be something
that's required for legal expertise,
for example, right?
If an organization needs to
have a legal structure,
do you want to vote on that?
Or do you want to say, all right,
this is a really smart lawyer.
We're going to pick him and
her and let her make a
decision for what might be
right for the organization.
So you've got these
different types of
decisions and that's where
I think stuff starts breaking down.
Yeah, it's interesting.
I almost feel like even at
times over the past few
years in my time as a DAO professional,
I've at times
conceptualized DAOs as
really just being for the
governance layer.
And then maybe everything
else should be done the
same way it's always been done.
So maybe, again,
instead of a shareholders and a board,
maybe you have the DAO.
And the DAO maybe should elect a CEO,
maybe should elect a whole
management team and go from there.
But I feel like a lot of
what people are working on
in the DAO industry is
actually ways of doing the work
in a more decentralized way in DAOs.
And not just saying it's
just for the governance layer,
but it's for everything.
We want to be open to new
people joining anytime and
letting anyone in the world
contribute to strategy, planning,
the actual work that gets done.
I wonder
I wonder where the DAO really is.
Is it really just meant for
the governance layer or is
it going to change
everything about the way we
operate organizations?
I've actually stopped using
the word DAO by default.
The main reason being is I think DAO,
decentralized autonomous organization,
is a specific model of a
broader category.
That broader category is
on-chain organizations.
I think we're going to see a
massive amount of
organizational diversity,
organizational approaches,
governance approaches,
governance structures,
management structures,
operating structures.
All these things are very different.
Protocol DAOs are just one
very specific vertical.
And I think a DAO is a good
model for managing a
protocol that every once in
a while needs to decide,
should we upgrade?
Should we turn on a fee switch?
That same model might not be
applicable to lots of other things.
And that's a very important
core tenet of mine.
I think it's easy for the
crypto industry to get into
this echo chamber groupthink.
Everyone starts
regurgitating the same ideas of, oh,
it has to be flat,
it has to be decentralized.
Not everything, right?
Not every organization needs to be.
Some could, some do.
And I do think that generally speaking,
the ethos of Web3 and the
ethos of decentralization
is creeping into organizations of, okay,
well,
how do we allow a wider group of
stakeholders to actually have input?
Or how should we be getting
input from our customers
into decision-making?
How do we get input from our
employees and teammates
into decision-making?
So it's, I think,
that ethos creep that's
equally important.
Yeah, it's a good point.
I mean,
even if I think about like big
Fortune 500 companies that
are looking at how do we
use NFTs and maybe DAOs to
engage our customer base
better by giving them some
control over something.
And yeah, it's interesting.
You know,
I'm so attached to the word DAO because,
well, if nothing else,
it's in the name of my
podcast and my company.
Yeah.
So I might have to stick
with it for a while.
But I can see the philosophical,
what's interesting
philosophically about really looking at,
hey,
are these really DAOs or is digital
organizations really the
core innovation here?
So I think it's a worthwhile
conversation to have.
Yeah.
Let's,
let's turn to the next story of the week.
This one is from the Dow times as well.
And the headline is Dow
acceleration is a movement
aims to advance
decentralized organizations.
So this article is about a
group called DAO Accelerationism,
or DAOAC, or actually DAO-G for DAO OGs.
And it's a group of people
that has organized a series
of events and content over
the past couple of years,
somewhat loosely,
it's kind of different groups of people.
There's been DAOcember, DAOspring,
there's the DAO Handbook,
and uh and I think they're
also connected to the group
that does uh metafest which
is a big dao event that's
coming back for the third
year after after a year off
um and uh so this group is
kind of coalescing around a
new name they're going to
do a token launch there's a
dow g token and probably an
nft sale and then use the
proceeds from all these
sales to help drive
further progress across this
kind of decentralized or
headless brand that has
these various events.
So I bring this up just to let people know,
if anything, you know,
maybe go follow Dowspring
on X. It's actually the
handle is Dowsember and the
name changes from Dowspring to Dowsember.
depending on the time of year.
But there's lots of great DAO content.
And for any DAO OGs that
want to get involved with
helping out with a project like that,
it is also a DAO that's
going to be doing all this stuff.
So I recommend checking it out.
I don't know if there's much
to say on this one, Graham,
but anything you want to add?
They've got an awesome handbook,
a lot of great information,
a lot of great resources.
If you're new to DAOs,
it's a great place to start reading.
Awesome.
Love it.
All right.
Next story of the week.
This one is from the Block Tribune.
And the headline is
plaintiff argues Lido DAO
is subject to securities
laws as an unincorporated partnership.
All right.
So here we have a court case.
It's maybe the third high
profile court case that I'm
aware of in the United
States related to DAOs,
where in the past there's
been different things that
have gone wrong.
with the DAO or allegedly gone wrong.
But in all three cases,
there's this similar
pattern where what's being
accused is that the DAO is
an unincorporated partnership.
And therefore,
all of the people involved in the DAO,
all the token holders
should be held personally
liable for whatever allegedly went wrong.
which in this case is securities laws.
So someone who bought the Lido token,
the LDO token, and only 132 of them,
I'm not sure what they're worth,
but I'm assuming not a ton,
lost some money, maybe 50 bucks,
I'm guessing.
Maybe the tokens are worth more.
And now he's suing the entire DAO company
which sold $3 billion worth
of these tokens.
I think what's interesting
to me about these cases,
because it aligns with the
business that I'm in,
is I'll just read from the article,
the defendants claim
LidoDAO cannot be sued as
it is a non-judicial entity
without legal personhood.
and unfortunately what
lawyers every lawyer I know
in crypto and our company
and me what we've been
telling people for the past
few years is that you don't
unfortunately no one is
above the law we would love
to be but you just you just
can't I mean look if you
want to be like a
censorship resistant tao
that's trying to be
revolutionary or subversive
like yet maybe there are
ways of using dao technology to do that
But that's not what Lido is, right?
Lido is this massive project,
massive ecosystem providing
a really valuable service.
And frankly, for that group to say, oh,
sorry, we don't really exist.
It's just not going to fly in the courts.
And actually,
I think the case law is very
clear that if you don't
select a jurisdiction,
if you don't select a legal entity,
that actually just makes it
easier for any court anywhere,
including in California,
which I think is where this is happening,
which is probably the worst
place to end up in court as
a project or a crypto
company can just say, oh, well,
you didn't choose the
jurisdiction and you have
at least one person in
California and you didn't
choose a legal entity.
So we're going to call you a
general partnership.
And so unfortunately here,
and now I wouldn't be
surprised if this is not the whole story.
Maybe there's some nuance here.
I think Lido must have some
legal entities involved,
but maybe it never wrapped
the DAO per se.
Maybe it said, hey, we have a foundation,
we have a lab co,
but the DAO is this
non-judicial entity and you
can't hold them responsible for anything.
And unfortunately,
I think that part at least
is not going to fly.
I think that this brings up
the proper difference
between what's the legal
definition of decentralization.
A lot of people,
a lot of organizations
operate under what I
described as the guise of
decentralization theater.
Oh yeah, we're decentralized.
Yeah, we're down.
No, there's no one involved.
It's totally flat, whatever.
And effectively, actually decentralized,
right?
You can't sue Bitcoin, right?
Go try to place a lawsuit on
creators of Bitcoin or the
creators of Ethereum or Ethereum holders.
At this point,
they're now actually decentralized.
There is no entity.
There is no group to go to.
You couldn't make a good
argument that even Ethereum
Foundation is running Ethereum.
Not at all.
So far from it.
And I think the thing is,
if you do have people involved,
you need to have an entity
that limits your liability.
It's good and it's fine.
Of course,
there needs to be people
involved in some of these things,
but just don't leave
yourself exposed from a legal standpoint.
Listen to your lawyers, do the basics.
Yep, totally.
So that'll be really
interesting to follow both
from the securities laws
perspective and this issue
of DAOs and legal entities.
The next story of the week.
This one is from Coindesk.
And the headline is Crypto
Governance Advisory Metalex
Raises $2.75 Million.
Gabriel Shapiro Wants to
Borgify Crypto Governance.
A couple of bullet points here.
Prominent crypto lawyer
Gabriel Shapiro's Metalex
raised $2.75 million at a
$27.5 million valuation.
The project is building new
governance standards for
crypto groups to use when decentralizing.
So for anyone who doesn't know,
this concept that Gabriel
Shapiro has been promoting
called the BORG.
has been flying around for
maybe six to 12 months now.
And really the idea is just to,
it's kind of a legal concept,
which is to say, look, a lot of DAOs,
really a lot of crypto
ecosystems should not just
pick one entity.
They should think about
being what he describes as a Borg,
which is many different
entities that are all connected.
And so maybe your DAO has
five councils or committees.
Maybe each of those should
have a legal entity that's
fit for purpose.
And then maybe the head of
the DAO has a legal entity.
Maybe it doesn't.
So I believe they're
building both legal
framework and some software
around this concept.
And Graham,
this should be good news for
both of us as founders in a
similar space that fellow
founders getting some good funding.
and excited to see what what
they do with with the borg
plus it's a cool name um so
any thoughts on this one
graham yeah it's a
directionally great for the
industry I think what the
the broader gist that that
gabe is getting at with
what he's building is there
needs to be greater
organizational diversity.
There needs to be more types
of approaches towards how
we build and structure and
manage these entities.
That's a good thing.
I'm never going to look down
on new ways of trying to do these things.
And Gabe's a smart guy.
He's well connected in the industry.
And I think it's going to be
a really interesting set of efforts.
A lot of what he's working
on that the article might
not have mentioned is this
kind of intersection
between the legal and the
smart contract side of things.
And there's this, I mean,
interesting intersection.
A lot of it gets gray in a legal sense,
but there's also interesting, you know,
philosophical questions
that you have to ask and something that,
you know,
Gabe finds himself at the center
of many debates and questions on is,
you know, is code law?
Is it not law?
Where,
where are those lines actually drawn?
And, and,
there needs to be more
experimentation with how
can you push jurisdictions
and areas to recognize the
code that is written or the
code that is agreed upon as
being the final say as
opposed to having some type
of other social contract a
law agreement an off-chain
agreement that might
actually supersede that so
another form of
experimentation I'm
certainly excited about it
um and I think good things
ahead yep that's awesome
yeah so is code law
I don't think so.
No.
So, so in my mind, in my mind,
law is a social contract, right?
Constitution actually, right?
Great example, right?
It's the most important
social contract in America
and all of their laws come
as a result of that.
The laws that Congress
passes are only able to be
passed because the
constitution gives power to Congress.
The powers that,
or the laws that states and
municipalities pass only
have powers because
The Constitution gives them powers.
All these things are just
social agreements, right?
The Constitution has power
because I live in a society
and agree that we're all
going to follow the rules of that order.
Smart contracts are
different because they can
actually mechanically enforce something,
regardless of whatever a
social contract somewhere says.
If we both put money into an
escrow account and
programmatically under a
certain condition,
you get the money or
programmatically I get the money,
it doesn't matter what a
social contract says,
what I think should happen,
what you think should happen.
The code is going to get
executed exactly as it's written.
and the more that we can
align our expectations our
social expectations with
that mechanical enforcement
the better it's going to be
for you and me and for
society because then we
don't have disagreements we
have less discrepancies the
more we can align those
things the better but the
two are currently not the
same yeah and I think you
know one way of looking at
it too is that in some ways
these smart contracts this code
There is automating part of contracts,
but no one would have even
said that contracts are law, right?
Contracts are made between
people within a legal framework,
a social contract, et cetera.
And contracts have to be
legal to be enforced.
I guess that's where the difference is,
right?
If you write a regular
contract that's illegal,
someone will try to reverse it.
If you write a smart contract,
that's illegal.
I guess still people may try
to reverse it.
So it's clearly smart
contracts live within the
legal world and the legal system,
just like regular contracts do.
So I think it's risky to
think that code is a law,
even though it's connected.
Yeah.
Regardless of what happens on-chain,
We still live in a society
with options and
consequences and real
people and laws that will follow you.
And with real guns aren't aren't the same.
Yeah.
Real, real guns.
The state at the end of the
day has a monopoly on violence.
Yep.
Yep, exactly.
All right.
The last news story of the week.
This is from DL News.
And the headline is.
Why Arbitrum might shower
crypto games with $200 million.
Arbitrum DAO is voting on a
proposal to create a $200
million gaming catalyst program.
Critics have expressed
concern that is too high a sum.
Crypto-based video games
have fallen out of favor with investors.
So interesting here.
I think I was a little bit
surprised to see the bullet point.
Crypto-based video games
have fallen out of favor
with investors because I
think over the past couple of years,
they've raised a ton of money.
And maybe that has slowed
down in the past six to 12 months,
as funding has for most things.
But my impression was that a
lot of crypto games are
under development right now
that are well-funded.
But it's just kind of a fun story.
You know, I think...
On one hand,
there may not be anything
inherently wrong with
giving a ton of money to
help develop crypto games.
I'm personally really
excited about what crypto
gaming might bring.
On the other hand, I think, you know,
when you give a group of
people democratic control over money,
of course,
they're going to choose to do
fun things with it, too.
And maybe that could be a
criticism of DAOs.
But I think...
You know, in some ways,
this may be an example of
how we end up with a more
fun world when you give
power to the people.
Because what are the people like?
The people like video games
are going to fund the
development of video games.
That's great.
Any thoughts on this one, Graham?
Yeah,
I believe the last update is that
they did end up approving this vote.
The main point of contention,
the main point of controversy here is,
uh is actually the way in
which uh proposals are
brought voted upon and
agreed there's a phase
where there was essentially
like a soft vote right to
introduce the community and
people say hey do we want
to have funding for this
effort around video games
huge overwhelming portion
of the dow says yep sounds
good and then the formal
on-chain proposal that
actually allocates the
capital came in with
substantially more money
than what was originally being requested
And everyone's like, yep, sounds good,
sounds good.
And then there was a handful
of people who were saying, wait a second,
even if we like gaming,
even if the thrust of this
is correct and we want to support this,
this isn't exactly what we discussed.
And so we have to have a
broader discussion about
how are we actually making decisions?
And this vote was actually
going on for a substantial
period of time before just
like a sole person like found this.
And I don't know for sure,
but I'm pretty sure credit
goes to a person who goes
by the pseudonym Paper Imperium.
They're involved in many
governance forums and does
a good job of just tracking,
are we doing good governance here?
And in a different world,
this could be something
where no one realized and went,
oh my gosh,
we wouldn't have approved it
if it was this much money.
So this is, I think,
it's the heart of what is
your governance system?
What is your process?
Who's involved in the
decision-making process?
Do you actually have good oversight?
Are people even looking at
the numbers on these things?
It's crazy.
I mean,
this isn't a small amount of money.
This is hundreds of millions of dollars.
It's insane.
It's awesome.
Yeah.
I mean,
it goes back to me to the point of
just every organization can
do its governance differently.
But it's important to know
what system you're living
in or working in so that
it's not as much of a
surprise when something at least that,
you know, when something happens,
is this the way things are
supposed to go or is there
actually something wrong here?
Yeah.
Totally.
Yeah, that's interesting.
So you're saying the
on-chain vote actually did end up passing,
or at least the off-chain version passed?
They did end up approving
the allocation of capital.
Yep.
Cool.
Awesome.
Exciting.
All right, good.
Because I tried out,
there was this crypto game
that came out last month
that had been very hotly anticipated,
and then I thought it was really boring.
Battle of Guardians, something like that.
So anyways, unfortunate.
Better things to come.
My take on video games is like,
for a second, pause anything blockchain,
pause anything crypto.
Is it a good game?
Is it a really good game
that gets people coming back again?
If that answer to that is yes,
now let's talk.
On what system is it built?
Does it happen to be on crypto?
That needs to be the secondary question,
not the first question.
I don't think that something
being built on crypto is
ever going to attract a large,
sustainable audience who's
got staying power.
The thing that brings staying power is
good games and broadly in
the crypto space good
applications and just being
on chain enough isn't
enough yep yeah good point
yeah I agree I mean to me
it's like and as you know
I'm the type who I love the
idea of video games and I
follow a little bit of
what's happening in that
world every now and then a
game captures my attention
and every now and then like
every few or several years
a game captures my
attention enough that I'll
put like a few hundred
dollars into whatever they're
their system is.
And in those cases,
I think I would spend so
much more if I actually
owned the stuff I was
buying and if I could
resell it in the future.
I mean, I would just, you know,
whereas before my limit
might be like 50 to 100
bucks if I like the game,
maybe like a few hundred
bucks if I really, really love it.
Yeah, my limit, I think,
would go up if I'm actually
buying stuff I can own and
trade and sell.
But to your point,
to even get me to put $300
into a black box that I
probably will never see again,
it's got to be a good game
in the first place.
Definitely.
It needs to be a good game.
I think that some projects
have accidentally shot
themselves in the foot.
And the reason I say that is
what we really need is a
really set of really high
quality AAA games.
And there's going to be a
group that nails the mechanics,
that nails gameplay,
that nails experience.
It's going to be great.
And it's also going to
happen via blockchain.
It's going to have a lot of
these properties that we
know to be important.
The problem if you raise a
bunch of money by selling NFTs,
selling tokens,
you've got all this money in the treasury,
the operating team has this money.
The incentives are a little bit backwards,
right?
You've got all the money now up front.
Now you have to go do the
hard work of building the thing.
It's actually, I think, a feature,
not a bug.
Most of the time when groups
don't have liquidity,
like if you're a startup,
a startup who's building video games,
completely off chain,
you go raise money from a VC.
It's illiquid.
You can't sell out.
You can't make money from this yet.
You don't have any choice
but to go build an incredible game.
get it in a bunch of hands of people,
have it be wildly successful,
and then maybe your game
will get acquired.
Maybe you can go public.
So you have all these
options for exits later.
But if the exit happens
before you build the product,
there's a lot of people who are like,
you know what?
The game might come out eventually.
And we've seen this cycle
happen again and again.
And it is a truly broken
incentive in many cases.
So this is a case where a
lack of liquidity on the
relationship to your
investment might actually be a feature.
Yeah.
Yeah, that's interesting.
So that could apply really
generally to any time we're
leveraging crypto to bring
liquidity to any project or
startup at the earliest stages, right?
Because if you get enough-
Go ahead.
Just thinking like if you
get enough hype and your
marketing team's good and
you haven't even built anything yet,
but you raise millions of
dollars and you actually
could walk away with that money, right?
Start selling your tokens or
borrowing against your tokens.
Yeah, I mean,
I think I'm sure a lot of
people fall into that trap, right?
It's like, oh,
I have now I already have a
million dollars.
Why do I even need to go build this game,
right?
And then maybe you just walk away.
You need people to be hungry.
You need them to be incentivized.
I'll be the first to say,
I guarantee you in this
cohort of AI tokens,
there's tons and tons of
them that don't end up building jack shit,
nothing.
And there's a lot of people
who make a lot of money.
And that should make you mad,
makes me mad.
It will make a lot of people
in the industry mad.
But it's because you're
putting money into a bad
incentive mechanism that's
not destined for success.
Yep, yep.
All right, with that,
let's conclude the JustDAOit news report.
So that was the first half of the episode.
I will do a quick segue and a quick ad,
and then we will turn to
the featured guest interview with Graham.
So for the ad, it's an ad for MyDAO,
since we're the company
that sponsors the show.
Just reminding everyone that
we're in the business of
providing legal entities
for DAOs and Web3 projects.
And we're happy to talk to
anyone who is interested in
the potential for legal
entities involved in their work.
We also have a partner
network of lawyers and tax
advisors and other professionals,
banks all over the world
that are interested in
working with DAOs and Web3 projects.
So if you are looking for a
lawyer or an advisor, please reach out.
There's no cost to get connected.
Or if you are a lawyer or a
advisor of some kind
interested in working with DAOs,
please reach out as well to
get added to our network.
With that said,
turning to the featured guest interview.
So what's fun about this format, Graham,
is we've already gotten to
talk about some really meaningful stuff.
But before we get back into the weeds,
let's just take one step back.
And would you please share
with us what got you into
Web3 and DAOs in the first place?
Great question.
Uh, getting into web three,
it started with crypto
specifically Bitcoin in 2017.
I was, uh,
running a regular web two company.
It was a real estate aggregation platform.
And one of my customers had
already hit it big on Bitcoin.
Um,
we were having just a really great
conversation about it.
And I,
I didn't know much and I was making
the con Bitcoin argument.
I was like, this is bad cash flows.
I don't understand this.
And he made a lot of good
points I just didn't have a
reputation for.
So he recommended a book to me.
It was Digital Gold by Nathaniel Popper.
And I fell down the rabbit hole.
Next thing you know,
I was trying to arbitrage
Litecoin and Bitcoin on random exchanges.
There's a crazy 80% premium
on US to foreign exchanges in 2017 time.
Super illiquid.
There was no money to be
made on some of these things.
But I was like, it's super fascinating.
I kept falling down the crypto rabbit hole,
ended up leading crypto
investing at 28th Street Ventures.
It's a family office.
I was doing private equity software stuff,
also public market software stuff,
but I started the crypto
investment practice and was
going to get deeper into it.
In 2021,
Constitution DAO was just the
craziest whirlwind week of my life.
I really don't even have words for it.
And after that,
I decided to go full-time crypto,
spent some time at Salt's
Crypto Fund and now
building mezzanine for
building tools for on-chain
organizations.
Awesome.
So tell us just a little
more about Constitution DAO.
I mean, how did that happen?
Yeah.
I think like a lot of things,
it's the right mixture of people, events,
and circumstances all at the same time.
The very origin of it's kind of funny.
I was in group chat with a
couple friends from college.
None of them are crypto.
None of them are Web3 or
technology.
One of them works at an
auction house in Ohio and
follows auction house news,
had seen this thing about
this upcoming Sotheby's auction.
There's an original copy of
the Constitution.
She sent this little article to the group.
And I'd been doing research
on DAOs at the time,
on specifically Aaron
Wright and the folks at
Tribute Labs had started a
group called SharkDAO.
It's one of the first
collector DAOs of sorts to
pull together money and to purchase NFTs.
And
And so I had this fresh in
my mind when I got this article.
And there was two things that struck me,
which is the estimated
price of the auction was
going to be way too low.
They were estimating $10 to
$15 million for a copy of
the Constitutional Convention copy,
right?
This is insane.
And I was like, that's nuts.
And also...
fresh off thinking all this, you know,
this doubt that things I was like,
we could definitely launch
a data by the Constitution.
So I messaged my buddy, Austin,
we put together a quick,
like one page plan,
started messaging everyone
we know on crypto Twitter saying,
kickoff call 8pm,
launching a data by the Constitution.
A bunch of folks showed up
immediately after kicked off the Twitter,
the discord.
By that point,
we'd already reached out to Sotheby's,
we had three different
plans and process in
parallel to start legal
entities to be able to
actually participate in the auction.
So all the parts that
started did moving right away.
And then that whole thing
was exactly one week.
We started on November 11th
was the day we hosted that kickoff call.
November 18th, one week later,
our core team was in New York City,
a couple blocks away on the
phone with David Schrader.
And Brooke was the famous
person across from us
bidding on behalf of Ken Griffin.
That's awesome.
That's cool.
So you know what I didn't
realize until now was that
we passed our first law in
the Marshall Islands in November of 2021.
Is that when you're talking about too?
Yeah, that's it.
Yeah, around the same time.
That's cool.
Well, really exciting story.
Again,
I definitely recommend people check
out the Constitution Dow story online.
Although before people go do that,
are there things they get
wrong in the media?
Like if people just go Google this,
is there anything you'd
want them to know that was
like different or-
So actually there's all kinds of, um, part,
I, it's almost never malicious.
It's just people don't have, you know,
complete stories, complete facts.
And part of it is we,
we did try to keep it
fairly decentralized.
And so it means you don't
have as much of like a
clear narrative of exactly what happened.
Um, one of the things that gets, um,
wrong frequently or people
are just confused about is, well,
what happened with the money, right?
We raised tens of millions
of dollars worth of Ethereum.
We lose the auction.
What happens next?
Um,
This was very straightforward.
The mechanism design that we
used was if you put in one ether,
you got 1 million tokens
and you would have pro rata,
proportional governance of
the document if we'd won it.
If we didn't win,
all the money went back
into the smart contract.
There's no fees, there's no cut,
there's no pre-mine, there's nothing.
And you can take your
million tokens and redeem
them for your underlying assets.
You could get back 100% of your refund.
Of course, you still pay gas fees.
There's nothing we can do about that.
That's just a part of transaction costs.
But you can get your refund.
What we did not expect,
what we did not know,
what we did not predict was
that when we said, all right,
we're winding down the
organization because we lost the auction.
Take your money back and go home.
It's the right thing.
It's the ethical thing to do.
People said no.
I don't want, I don't want my money back.
I want my token.
And they started,
they started speculating on
this token on secondary markets.
This thing is, I mean, to this day,
right now,
hundreds of millions of dollars
in market cap,
doing hundreds of millions
of dollars daily volume for
the purpose of memes.
Like, right.
There's,
there's no rational explanation
other than, you know, people want it.
There is locked underlying assets.
If you were to go buy people tokens today,
you could go buy them on
the market and go redeem
them for the underlying
collateral at the same
original exchange rate.
There's no game theory to
consent is because
secondary market price just
so much higher than the
value people put into it.
So that's kind of the funny
circumstance about how we
got to where we're at today.
Yeah,
and I think that's going to be one of
the most interesting things
to watch as crypto develops
and hopefully goes more
mainstream over time is
just how much power is
there in this market
capitalization mechanism
that you introduce anytime
something can be traded
freely or publicly,
but I don't mean through the SEC,
but through...
you know,
just crypto markets that are
practically free and anyone
can take advantage of them.
And so like, what's the power of a meme?
I think maybe that's the question, right?
As people are just more and
more online and put more
weight on the digital world.
And as people are wealthier and wealthier,
I mean, the wealthier people get,
the more they have a few
hundred bucks or a few thousand bucks,
to spend for fun on something.
And if that fun thing is a token, well,
now you have a market cap of,
like you said,
maybe hundreds of millions of dollars.
And what does that do to the
economy at large if we
suddenly have piles of
capital being generated all over?
Really,
this should be a great thing for
capitalism.
You can capitalize something
that previously was just in our heads,
right?
Yeah.
Yeah, really interesting.
I don't know exactly how
it's going to pan out,
but there is something that
crypto has done that's the
best representation of,
which is things that
capture a lot of mindshare,
things that people think about a lot,
have some price
potentially value to them as well.
There's the common value investing adage,
I think,
from Buffett or Munger or
something that price is what you pay,
value is what you get.
You can make an argument that price,
Constitution of Dow's token,
is what you buy on the market right now.
The value is what is the underlying asset.
There's an actual knowable
value of Ethereum.
For a lot of these other things,
I think we're going to have
interesting questions, which is,
do people actually care about value?
And increasingly so,
the answer to that question
might not be yes,
that people are
disconnecting from what
traditional measures of value have been,
not for days or weeks or months,
but entire years.
And so it does beg the question,
is there a fundamentally
different paradigm and is
the traditional means of
assessing and measuring
price or value or
predicting that are those
beginning to deteriorate or
they're just certain
sectors that you can't
apply those same rules do
the laws of you know
physics not apply in the
same way and only long
duration of time is going to tell
But there is also like a
different value that people
are presumably getting, right?
Like a emotional value, a spiritual value,
right?
Even if the underlying
Ethereum isn't worth much
compared to the market cap.
And by the way,
I just looked up the token.
I assume you know,
it's almost 10x in the past
like three weeks for some reason.
Yeah.
This is how the crypto industry works.
I didn't plan to make a meme coin,
and it's a meme coin now.
The thing's hit over a
billion dollars of value.
It's nuts.
I hope you still have some.
You don't feel free to not comment on that,
but I hope you still have some.
I think a lot about DGEN.
You know the DGEN token?
which probably has a similar
market cap now,
but this is a token that
was launched about six months ago.
It kind of launched as a meme coin,
but then it became in some
ways the unofficial token
of the Farcaster ecosystem,
which is people who listen
to the show know I talk about a lot is,
this Web3 social network.
And irrespective of all the
cool things people are doing with Degen,
because there's a Degen
Layer 3 blockchain, there's a Degen,
there's all these things
people have built with Degen,
there's all these apps you
have to use Degen on.
But still,
when I look at all that activity,
I'm like, it doesn't seem like much,
but the market cap is
probably similar to the People tokens,
the Constitution DAO tokens,
hundreds of millions of dollars.
And
I don't know.
It's a head scratcher,
literally and figuratively.
It's just really hard to
evaluate whether it should
be worth that much.
Could it be worth 10 times as much?
Should it be worth 100 times less?
It's just so hard to know.
There's not a good framework for it yet.
The best thing I've got for
now is just what is the mind space?
What's the mental share?
People are thinking about it
enormous amount.
People are using it.
People are tipping in it.
And people are constantly referencing it.
It's on people's minds.
And so to them, it has some type of value.
If someone's willing to pay for it,
there's a price.
Yeah.
Interesting.
It reminds me a little bit of celebrity.
Like you have these like,
I want to put like air
quotes around celebrity.
You know,
someone's on like a reality TV
show one time, like literally one time.
And then for the rest of their life,
they can go on talk shows.
They can get speaking arrangements,
you know,
you get paid to show up at a
club and dance, you know, it's, and now,
so you do, you have one, you do one meme.
you're involved in one thing
that gets meme value and
you potentially have a
lifetime of credit for it.
At least as long as there's
a token involved, right?
As long as there's a token
related to your meme and it
gets big enough and you
hold some of the tokens,
maybe it's a lifetime of income even,
you know,
in a way that already exists in
the celebrity industry,
but maybe new to tech and
organizations and, you know,
Yeah.
Entirely.
And some of these
celebrities are very good
at rolling awareness into business.
And then they make a lot of
really good business decisions about it.
I mean,
the Kardashians are probably one of
the most notable example
have earned billions of dollars,
created billions of dollars
for themselves through the,
the original thing was Kim
Kardashian got public,
got publicly a bunch of
public publicity because of a sex tape.
And after that, they had a TV show.
And after that, they had music.
I mean, they had all these brands,
all these companies,
and they've done a good job building it.
But it started as originally
essentially meme, a bunch of publicity.
It's incredible.
All right.
Let's go back to coming out
of Constitution DAO and
leading up to working on mezzanine today,
which I want to talk more about, too.
But I'm curious about your
journey in between.
Actually, not just your journey,
but if you could reflect
for us on the journey of
the DAO industry over the past few years,
if that's fair to ask.
What's your journey been and
what has the journey been
for the industry and for DAOs?
in the few years since constitution doubt.
Yeah.
So there's a couple of
charts that actually I'll send your way.
We can throw into the show
notes so people can access.
Electric Capital puts out
this great developer report every year.
And one of the things they
charted was DAO participation,
DAO activity.
And this was something that
they definitely tracked during 2021,
2022.
I think during 2023,
they might have stopped
doing it because DAO
activity largely started declining.
And they just said,
we're not going to follow this metric.
But it was really funny.
There's literally this inflection point.
in November 2021,
with the measure of DAO
activity is going up steadily,
and there's this kink point,
and it just goes up.
And it was Constitution DAO.
And so we saw this mass
creation of organizations afterwards,
because we got into the
Wall Street Journal, New York Times,
New Yorker,
everyone was talking about
what was going on.
And some people said, wow, DAO is like,
this is cool.
And they started copying and
pasting them all, right?
We had DAOs for purchasing
basketball teams.
We had DAOs for purchasing golf courses.
We had DAOs for purchasing books,
this kind of purchasing thing.
Then people were saying, okay,
we also have DAOs for
schools and DAOs for
biology and DAOs for cancer
research and DAOs for this
mass proliferation of them.
And there was a lot of
copying and pasting of the
existing model rather than saying,
for my particular use case,
how do I take what's
already been demonstrated
to have success and modify
it for my use case?
And so I think we actually saw this really,
really tough period now for
the last two and a half or
so years where people have
been using models that are
somewhat inadequate to
exactly what they need and
what exactly their use case is.
A lot of DAOs have struggled
A lot of DAOs had this initial burst,
pop-up excitement, pop-up energy,
enthusiasm,
building up these large Discord servers.
And then people are like, oh, yeah,
what happened to them?
What's going on anymore?
What happened to the money?
And this is, I think, on account of,
do you have a model that
matches well what you want to do?
And in the last few years, especially...
We've begun to see, like,
there's a handful of DAOs
that have done all things
considered an excellent job, right?
We talked about arbitrage
from DAOs earlier, their DAO earlier.
They might still be making
decisions that I might view
as suboptimal.
Oh, no, we accidentally spent, you know,
tens of millions of dollars
more than we all originally
agreed we were going to
because we didn't double
check what the proposal said, right?
Like, crazy stuff like this.
But at the same time, they're functional.
They're developing and
cultivating a great community.
But I think that what we have to,
as an industry,
kind of be asking ourselves is,
what are those really great examples?
Where have things gone well?
Why did they go well?
And how do we emulate those things?
And I think in many of these cases, right,
it's have we thought a lot
about the design structure?
Do we have the ability to
delegate spending power to
people who can make good,
thoughtful decisions?
This is a question of capital allocation.
I think those are some of
the examples that are interesting.
But everyone's got growing pains.
MakerDAO has had a lot of growing pains,
probably one of the largest,
most successful DAOs out there.
Even NounsDAO also, I mean,
I think in 2022 was by a
lot of measures and votes, like, you know,
one of the most biggest and
interesting DAOs out there.
They literally had a schism,
a literal split into two organizations,
a hard fork.
And now no one knows which
was the original,
which community are you part of?
And there's different types
of disagreements.
So it's growing pains.
I'd categorize the last few
years as growing pains.
And I think going into this next cycle,
we're going to take a lot of those pains,
a lot of those learnings and say,
how do we be more robust?
How do we approach this from more angles?
And I think that's what I'm
excited to see moving forward.
Yeah, yeah.
Yeah, it's awesome.
Yeah,
it reminds me again of just this
concept of like,
is the DAO just the governance layer,
which would be one thing.
But I think what most DAOs
are actually trying to do
is run entire organizations
differently from before, right?
Like if I think about my startup,
the governance layer,
is one of the least,
it's like the least of my concerns.
Now, of course, my investor might say,
well,
I care a lot about the governance layer.
And of course it's important.
But like,
I know who the owners are and
they pretty much have told me just do,
you know, they trust me.
And now I'm the CEO.
Now I go run the company.
And most of what I'm worried about,
I think most of what
they're worried about is not governance.
it's the day-to-day the team
team dynamics the strategy
the plan the execution the
operations you know all the
things we're focused on to
try to build a successful
business are not on the
governance layer um and so
I just have to wonder you
know if you have these
these dows these organizations
that are trying to be successful,
but are focused almost
entirely sometimes on governance,
I feel like that's going to
be a really big challenge for them.
I think vision and purpose
are super essential and
oftentimes lacking in DAOs.
Arbitrum or L2s might have a
very clear vision,
which is we want to be the
L2 or the network 4X.
And
The way to get there is fairly clear.
Grow users, grow adoption,
have useful applications in your network.
A lot of other DAOs,
I think there's been kind
of this nebulous vision
that people actually don't
know what they're getting behind.
They don't know exactly what
they're rallying efforts towards.
One of the reasons I think
Constitution DAO was
successful was it could be
explained in a very simple, basic mean.
We're all going to buy the Constitution.
People are like, all right, I'm in, right?
It's very, very simple, right?
It doesn't have to be necessarily a crazy,
heady thing.
It doesn't have to be a
massive technological undertaking.
But it needs to be very,
very clear for people to be
able to get behind.
And I think that
nebulousness is the doom of
so many organizations.
Yeah.
All right.
So let's,
let's continue following the story.
So that's where DAOs have
been over the past couple of years.
And now you're working on a
project called mezzanine.
And I want to just reflect
for a second on the state of DAO tooling.
And I'm curious, you know, how,
if you would agree and then
where mezzanine fits into, into this, if,
and I know you guys are
looking a little more
broadly or a different lens
from the word DAO,
but I think it's still fair
to say it could be used as a DAO tool.
Yeah.
You know, if you had asked me,
I think like six to 12 months ago,
I probably would have told
you that like last cycle,
DAO tooling was not ready.
It was just too hard to use.
And and then now it's ready.
And so we're going to see
this like giant
proliferation of DAOs and
the tools are going to
support them adequately.
Now that a little more time has gone by,
I would probably say that
DAO tooling is not quite
ready and that we haven't
made as much progress as I expected.
And that therefore,
maybe it's going to be like
one more cycle until like
we're still very much at
the experimentation stage.
And like we've got to figure
out how to make, you know,
not only fund and make more DAO tools,
but tools that are flexible enough to
or fit for purpose,
but have found a really
good product market fit.
And I'm just not sure we have that yet.
I mean,
there were some exciting DAO
tooling projects that got
shut down over the last year.
So I'm curious,
is that indeed the state of
DAO tooling that we have a
lot of progress still to go
before we're ready to take
DAOs mainstream?
And then how are you
participating in that space?
Yeah.
we got a long ways to go.
We got a long ways to go.
If we're making like the internet analogy,
right?
This is like,
late 90s actually there was
a really great uh tweet
from uh toby luke from uh
shopify the other day and
he shopify if you're not
familiar right it's a
e-commerce platform that is
you know was started very
early on he was trying to
sell snowboards online and
realized okay I can help
other people start their
online stores and when he
was going out to to uh
raise money the common thing was
how many people are going to
be selling things online?
How big are these internet
businesses going to be?
How big is e-commerce going to be?
And people are still deeply
skeptical of Amazon.
And certainly like this type
of model where he's
supposed to be helping
other people build these things.
And the criticism he got from people was,
well, there's only like a couple dozen,
maybe a couple,
maybe a couple hundred of
these e-commerce stores.
It just can't be that big of a market.
You're not going to make that much money.
people didn't believe that
business was going online.
And right now,
a lot of people do not
believe that organizations
are coming on chain.
It is inevitable, but it takes a long time,
takes a long adoption cycle,
and there's a lot of
primitives that need to
exist and need to be
adopted in order for them to occur.
Organizations are tough, right?
And especially if you start dealing with,
right,
we talk about the legal issues that
DAOs have had.
If you want to deal with
The SEC, if you want to do a FinCEN,
you need to have identity.
That means we have to have
identity products and
identity primitives.
But we care about privacy,
so we need to have
zero-knowledge identity
that's privacy-preserving, right?
So this takes time to build.
Identity is one category.
Okay,
now we also need to have the actual
logic that facilitates the
movement of money between these things,
right?
That's recreating what has
taken decades to build in
Web2 software and
traditional financial rails.
Now it needs to get
translated over into Web3 rails.
We might have some of the verbs of finance,
lending, borrowing, trading, swapping.
But when you think about the
traditional finance space, it's really,
really big.
And so you've got the investing world,
but then you also have a
whole enterprise SaaS world
that touches everything.
Any part of like a company, nonprofit,
philanthropies, organizational structure,
right?
You got all these tools for
billing and fundraising and
payroll and for, you know,
raising capital,
anything that touches your money.
There's software that got
written as logic and it's
built for old rails.
All that stuff needs to get translated.
So the problem that we face
is when you only have a little bit of it,
right?
And someone says,
I'm going to go launch a DAO.
They go, oh my gosh,
I'm used to having all this
great software for running
my organization.
I've got nothing.
that the lack of software
creates inadequate
organizations that are less
empowered and have worse tools.
And then those organizations,
we saw over the last few years,
sometimes struggle.
And the lack of tooling
means that people go,
I'm not sure if this is
really going to be a thing.
So it is a struggle,
but the arrow of progress
and the direction of
progress is very much inevitable.
And what we have now,
the cycle is much better.
I do think,
this might be unpopular to some people,
a lot of bad tools
dow tooling got funded
during the bull market when
I say bad stuff that's not
sensible teams that were
not good products that were
not sensible and so when
you build when you found a
whole wave of things during
a bull market during uh
this period of uh great excitement
you don't have the idea of
how do I make this really durable?
How do I make this really useful?
How do I make this really sustainable?
And I think that in the last
couple of years,
a lot of interesting things
have started getting built
and we're going to see the fruits of that,
but it takes time.
So what is it that you guys
are doing at Mezzanine?
What's your approach?
What kind of tooling are you building?
So what we're doing is
essentially providing a
marketplace for these types of tools.
By marketplace,
I mean it has a unified
interface and it allows
someone to connect and know
something is safe and say, okay,
we've started an organization,
maybe we've got tokens,
maybe we've got governance.
All that aside, that's the governance,
you've started your organization.
Now you have the question,
what is our organization doing?
And what tools do we need to do that?
So these are the questions
of how does an organization
have to operate day to day?
The billing, the payroll, the fundraising,
the invoicing.
And so what this allows you
to do is it lets your
organization start on blank slate and say,
OK, I'm an event DAO.
We're hosting ETH DC 2025,
and we're going to need to issue tickets.
Let me use this ticketing app.
We're going to need to have
a donation portal.
Let me add a donation portal.
We're going to need to give
people maybe refunds at the end.
Let's add a refund mechanism.
We're going to need to, you know,
so you can start building
your own organization.
We're going to need to
visualize our treasury.
We're going to need a manager's treasury.
Let's add that tool.
That dashboard is going to
look entirely different
than someone else who's running, say,
a developer guild, right?
Me and 40 other developers
start building some great software.
We need to pay each other,
distribute money to ourselves.
We need to invoice our clients,
receive money.
So all these activities are
coming on chain,
but all of them are going
to look different.
But you should be able to
choose between the suite of
tools and services to build
the organization that is
exactly right for you.
Awesome.
So mezzanine is a place
where you plug in as kind
of like your core,
and then you find all the
apps that you need on the
mezzanine marketplace,
whether that's payroll, billing,
invoicing, fundraising, et cetera.
That's correct.
So what does that
environment look like right
now in terms of apps to
plug into the marketplace?
Are you finding that people
have built really good
solutions for a lot of these problems?
Are they all under development?
Do you wonder if you may
have to build some yourself?
It's a mixed bag.
There are some good tools
that have been built.
There's some that are in the works.
And there's some that have
yet to be built and I
imagine are going to be on the way.
The way we imagine this
marketplace is we're not
going to start with the
assumption that anyone's
just going to be sick.
for distribution,
we're going to use you for monetization,
get our product in people's hands.
Let's start by saying,
let's build a basic product
for batch payments, for invoicing,
for these things.
But if we're doing our job
as a marketplace,
any of the individual apps
that we're starting with
and letting users start
with will be supplanted and
replaced by a multitude of
other options that are
narrowly specific for a
particular use case, particular function,
for particular organizational type.
And that's the world that we
all want to live in that says, oh,
I'm a grant counsel.
I need a specific tool for
compensating people in a
nonprofit like way,
or I need a way for distributing grants.
Right.
All these things are very, very specific.
Let's just start with very general tools.
The thing that is hard about
this and something that's
very important to us,
we want to do it with a
unified interface.
So say that when you connect
your safe that represents
your organization,
Right now,
bouncing between a million
different applications,
you've got these problems
of access control,
you've got problems of permissioning,
and just simply differences
of interfaces.
You also have fragmentation
between chains.
So if you solve a lot of that and say,
look, it's a simple interface.
You have to think about chains.
You have to think about networks.
You have to think about
permissioning and access control.
It's done at the base layer.
So any of the tools that are
built here all exist kind
of at that same starting point,
that same initial point.
So the only thing that those
applications have to worry
about is what's the actual logic?
What's the actual interface?
Use our SDK and make yourself available.
Use this to distribute your
product to many,
many on-chain organizations.
So does doing that require
you to create some kind of
standard interfaces around the data?
Like if I assume there might,
you might need to connect
an invoicing with a payroll,
with a financial system
that may all be different
components in the marketplace,
but they may want to be
able to talk to each other.
How do you make it so that
they can talk to each other?
Great question.
The nature of smart
contracts and on-chain data
makes it a lot easier for
these things to interact with each other.
If I were to make the Web2 analogy,
I've got Web2 products that
intentionally build walled
gardens and gated moats
because that's how they
defend their business model.
Web3, I can read that on-chain data.
I can spin up a new
interface for that exact
same smart contract and say,
I don't like your interface anymore.
I'm going to use this other one,
but I get to keep my
contract that I instantiated.
I get to keep my software.
So there's not platform lock-in.
So there's this big,
big difference here about
that underlying structural incentive.
Interesting.
So just because smart... My
initial thinking is anytime
you're building software,
you get to decide what...
effectively API to make
available to the world, right?
Whether you're building a
smart contract and
technically maybe
everything's available to
the world by default,
or you're building a
traditional piece of
software where you are a little more like,
look,
unless you specifically build the API,
no one will be able to touch
that function you want to
make available but still in
both cases you're choosing
you know what functions to
make available from the
software to other software
and I would think that
still has to be done in a
careful and thoughtful way
if it's going to be easy
for other people to
interact with your software
is it just that smart
contracts because by
default they're public
people are forced to build
in a way that makes them interoperable um
So yes and no, right?
So if I build something
that's built off smart contracts,
but the most useful parts
of my application are
actually things that
involve off-chain data and
off-chain information,
that organization probably
still has some type of
traditional web two mode
because that information is locked in.
If you solve that base layer and you say,
look,
the basic building blocks of like
your organization's identity, existence,
access control, permissioning,
and spending is done here,
then you can allow the DAP
to only focus on the logic and rationale.
So all those financials are
still flowing through the same treasury.
All of a sudden,
it becomes theoretically
quite easy to generate instantaneous live,
real-time, up-to-date cash flow statement,
income statement, balance sheet,
other types of financial documents,
other types of reporting potentially,
right?
So all those types of things,
if you've got things going
through smart contracts,
are definitely very feasible.
With existing financial rails,
maybe that API is down.
Maybe that company goes
under and I can't export
any of that data.
I now have to go rebuild my
system somewhere else.
if I don't like an interface
I could actually just go
spin it up somewhere else
but but you are you're
right there are certainly
questions and there's a
question of standardization
and part of our product
does require some
standardization so that the
user gets a delightful
unified experience this is
an important push and pull
in crypto world which is
How standardized do you want
to make something?
And I make the argument that
the most powerful thing in
crypto is standards, right?
The ERC20 standard means
that anyone can go long to 20,
follow that standard, and they know, oh,
this product I created is
compatible on this exchange
and this lending protocol and this thing,
right?
So it is that
standardization that is truly,
truly powerful.
But if it's only in the backend...
then you have some limitations.
So we're introducing some
additional standardization
at the platform level,
at the interface level to
make it easier for these organizations.
There isn't so much
fragmentation and
splintering and horrific user experience.
Awesome.
Do you see a potential to
have actual like EIPs or
official standards related
to DAOs and digital organizations?
Is that something you guys
have thought about?
Do you see other people doing it?
I don't think what we're
doing has aspirations for EIPs.
I think that the EIP
adjacent area would be
things like how do you
choose to structure account
abstraction because
organizations might have a
specific structure that
might be useful for them.
But I think most of these
things are best off done at
the smart contract level
rather than the blockchain level.
Cool.
Awesome.
So I want to ask you to
reflect a little bit on the
current state of DAOs.
I know we've already talked
a lot about where DAOs have been,
where they are,
maybe where they're going.
But I assume through your
work that you get to talk
to a lot of DAO-related
folks like myself and
probably many others.
What are you hearing in the
DAO world in terms of how we're doing,
what we're doing wrong,
where we're going?
Any highlights that you
could share with me and
with the audience?
Definitely.
I want to start with maybe
the parts about some of the
things that are challenging.
I mentioned this a little bit earlier,
but it's this idea around
organizational diversity.
I almost think the analogy of like,
why is biological diversity important,
right?
So you've got a whole bunch of plant crops,
a single parasite comes in,
doesn't wipe out everything.
Biological diversity is important.
Same is true for organizations, right?
We don't want monocrops in
our organizations.
We don't want them to all be
copy and pastes of each other.
And so one of the issues
that a lot of people are working on,
actually just today,
I wish we'd maybe include
it in the news update.
Maybe it's a good one to add
for next week.
ZK Sync just announced
something called ZK Nation.
It's a slightly different
type of governance
structure that has three
types of bodies to it.
This is a great example.
Organizational diversity, a new approach,
a new methodology using
some of the interesting learnings,
things that help prevent major downfalls.
And this is a very interesting structure.
I hope people take it and
continue to iterate on it.
it's designed to have three
bodies so they've got a a a
token body they've got a
security council they've
got a guardian council
right so now we're starting
to evolve how do we protect
people how do we make sure
we're protecting against
exploits but also how are
we getting democratic state
of participants how are we
delegating some
responsibilities this is
good all of these things
are good so so this is I
say I think quintessential
um how do we encourage even
even more of that um
I think earlier, right,
we talked about how is
Arbitrum spending money?
I think organizations have
this question about how are
we spending money?
How are we allocating capital?
This is a very top of mind
question for lots and lots
of DAOs because a lot of
them raise large treasuries.
and then have been continuously spending,
continuously spending,
and starting to see the
numbers dwindle and ask
themselves the question,
how sustainable is this?
Does this make sense?
And so you always have to
ask yourself the question,
why am I spending money?
What is the use of this money?
Is it accomplishing my objective?
Is it going to grow users on
the network to allow me to generate fees,
to grow,
to allow me to have more assets
to distribute into the system again?
Maybe that's the objective.
Are you going to accomplish
that with games?
Are you going to accomplish
that with organizations?
Now that's where we get into
the nitty gritty conversations.
There's lots of theories about it,
but still the question is
how do you effectively
spend money is a very good question.
I think the same types of organizational
rot that we see in
governments and
bureaucracies and philanthropies,
nonprofits of where did that money go?
And what happened to that funding?
And, oh,
I know a buddy who's on the grant
council and he's going to
make sure we get a million
dollar budget for this thing, right?
These are systemic.
I mean, not even dozens of years old.
I mean, hundreds, thousands of years old,
right?
These are problems that
every civilization has dealt with,
which is how do we
effectively spend that money?
These tools are actually
designed to be perfect to solve them,
but we have to build good tools for it,
right?
How do you build in accountability?
How do you build in good design choices?
We're still in infancy,
but we're getting there.
Yeah,
I also feel like the tools that we're
building in the DAO
industry provide a new set
of options that you can use
and combine with all of the
options that have been
available for thousands of
years or that have been
developed over thousands of
years for how to run and
govern and operate organizations.
And just because these are
the newest ones doesn't
mean they're always going
to be the right tools for
every situation and doesn't
mean they should be used
exclusively without some of
the older tools and approaches too.
So, you know, to me,
that's part of what will
make DAO successful is
actually being a little bit less,
you know,
less focused on avoiding the
way things have been done
in the past and maybe more
focused on embracing some
of the things that have
been done in the past with
this new technology we have now.
I mean, even thinking about,
to your point about grant
making or spending, I mean,
it's a challenge that, I mean,
just look at nonprofits and
charities that make grants
and the challenges that
they have and the
approaches they use to try
to make good decisions.
Anyone who's trying to build
a grant making organization
today in a DAO,
I assume will do a worse job
if they don't at least look
at the history of how to do
grants well and learn from it too.
In addition to leveraging
modern technology.
There is a really funny,
our sad congressional
hearing a couple of months ago,
and it was someone from I
think DOD or Pentagon.
And the, the,
Congress was asking them,
where did this money go and
what happened to these things?
And they had to answer honestly,
we don't know where these
billions and billions and
billions of dollars went.
Blockchain is a great way of saying,
I know exactly where every
dollar got spent.
The things that ail societies, right?
How do we make sure money's
going to the right places?
How do we do good, thoughtful,
retrospective audits of how
money got spent?
And then assess,
how do we not make those
same mistakes and make them better?
If you don't even have the tools to say,
how do we spend money badly?
Then you can't fix it for the next time.
These tools are going to change society.
I think government's
actually a great use case.
Public utility companies are
another great use case, right?
There's some types of businesses,
usually we describe them as
public utilities, that
that are societally
beneficial to have sanctioned monopolies.
And by monopolies,
I mean that they should be
the only one doing a
particular service because
there's a good reason for it, right?
I don't want to have 20
different power and
electricity companies
having to run power lines
20 different times over so
I can choose between 20
different services.
So they need to be
structured as a public utility company.
But what that also means is
they still need to be profit-seeking.
So you're trying to balance
all these things.
A public utility company
would be a great example of something of,
yeah,
let's make sure that the money
that's getting spent by
people who are using it,
the citizens who are getting electricity,
who have a need,
that the money's going to
the proper places, getting spent properly,
that the budgets are
getting spent reasonably,
that there's good
incentives baked into it.
So you don't scratch your head and go,
Where did that money go?
So I'm excited to see this
use case start to permeate.
How do we actually allow the
everyday citizen to conduct
their own audits, not just trust someone?
Yeah, an audit got done.
Trust us.
The money is being spent accordingly.
It's like citizen auditing
almost when a lot of data
is on chain and available.
It's a great point.
And I think it's important
for us all to recognize that even if
you just take DAO technology,
just take that component of
it that makes the use of
money and the making of
decisions transparent,
that alone could be so
transformatively valuable,
even if you don't
decentralize everything
else about the organization, right?
Just do those things digitally,
do them on the blockchain
or a similar public ledger,
and then just use the
traditional legal system
for accountability.
You don't even need to do
on-chain accountability.
And that's such an unlock,
even without all the rest
of what we're building for DAOs.
You know how earlier I was
talking about we have
social contracts and we
have mechanical enforcement.
Blockchain smart contracts
are really good for
mechanically enforcing.
What did we agree on and
make that thing happen?
I think there's a lot of
these fun thought
experiments that I
wholeheartedly expect will
be implemented in the years
and decades ahead.
It's going to take a while.
But think about this, right?
If people all were voting
on-chain for their congressmen,
for their senators, for things like this,
people would feel better
about the legitimacy of voting.
But then you could also
start taking this to the next step.
Okay, so
this person, let's say Adam, right?
You get,
you get elected Senate to the Senate,
your ID card,
the day after you get
inaugurated allows you to
walk into the Senate
because that's connected to
the actual voting system.
You get voted out by the people, your,
your swipe card doesn't work anymore.
You're not allowed in that building.
The person who replaced you
is now allowed in that building.
So all of a sudden you
actually have legitimate
mechanical solutions to
things like the peaceful
transfers of power.
Someone who says, I refuse, like,
like even something like, right.
Well,
What's the actual system to
press a red button, right?
The big red button.
It's a thought experiment,
although actually a real thing.
What's the actual governance behind that?
If you have real mechanic enforcement,
you don't have this weird
situation where the wrong
person in the wrong way was
able to do something just
because they refused to give up power.
Mechanically enforcing these
things from the ground up,
from the grassroots up,
allowing democracy from
actual process of election
through the rest of the system,
permissioning, access control,
all these things should be
done through powerful
cryptography and through
blockchain systems, without a doubt.
Yeah, I mean,
it's kind of like we're saying,
rather than just have
democratic systems
implemented by small groups
of people who can cheat,
now we have the potential
to have democratic systems
that directly control things.
And that's an important
security guarantee we may want.
Let's self-audit our own
systems and make sure
they're actually working
the way they're designed to.
The design is good in theory.
And blockchains help with
the practice and execution of enforcing,
make sure it's actually
done the way we all said it
should be done this way.
Yep.
Love it.
So we're already over time.
So I want to turn to the conclusion.
First of all,
if folks want to find me or
the podcast on Twitter or
Farcaster or anywhere,
it's not that hard to do.
MyDAO is MyDAO DS for MyDAO
Directory Services.
I'm Zero X Thriller or The
Thriller on Farcaster.
Graham,
where can people find you and your
projects on the web and on social?
You can find me on Twitter.
I'm gnovak underscore, also in Telegram,
G-O-N-O-V-A-K.
It's probably the best two
places to find me.
You can go on our website, mezzanine.xyz,
sign up for our beta, reach out to me.
If you've got an application,
happy to talk to you about
putting it on the platform.
If you want to use the
products that we've got,
happy to talk to you about beta testing.
And happy to chat.
I'm a huge fan of this space.
And Adam, thank you for having me.
Yeah.
Thank you so much for coming on the show.
Just a quick ad for MyDAO again,
a reminder to anyone
listening that we do legal
entities for DAOs and we
have a partner network of
lawyers and tax advisors
all over the world who work
with DAOs and Web3 projects.
If you're looking to get
connected with them or
would like to be added to the network,
please get in touch.
Graham, again,
thank you so much for coming on the show.
A quick disclaimer,
it's never legal advice.
We're not lawyers.
We're not financial advisors,
not financial advice.
It's not tax advice.
But finally, for the audience,
are you thinking about starting a DAO?
Just DAO it.
Thank you, Graham.
Cheers.