“Let's Run The Experiment”: about DAOs and the future of organizations online
adjacentpossible.substack.com
adjacentpossible.substack.com
For example, could organizations give stocks/shares/tokens/choose-your-security-name to users of a platform in the current (US) legal environment? I don't have the legal background to know. Can they sell private securities to any user? I think no because it would go against accredited investor laws. Also, I think if they're selling to an open public, it might violate SEC laws by being a public security, not a private security, unless they also reported truthfully about risks, etc., to the SEC.
So what if the law got rid of the accredited investor requirement? Or got rid of the reporting requirements for public vs private securities?
So I think one part is that companies aren't legally allowed to sell private shares to just any individual and if they do sell to any individual, they aren't legally allowed to not report to the SEC.
I think another part is that I wonder how many companies actually want more cooperative/democratic style ownership. Cooperatives (one member, one vote) have struggled to get investment because of that precise equality in decision making. [edit-added] And also, a more equal profit-sharing may not be in the interest of many people wanting to become the next unicorn billionaire.
So it makes me wonder how many of the orgs using DAOs are doing so because they want to become more equal cooperative-like orgs, and how many are doing so to skirt securities laws.
Despite that, I like what seems to be their intention around cooperatively-owned research, so I'll try to follow them to see what comes of it. Thank you.
edit: Also, maybe one of the problems is that the internet is global and most regulation is at most national, so even if it were to break US laws, does it break other national, regional, or local laws? Do DAOs and crypto lead to some larger global form of governance?
[0]: https://www.casebriefs.com/blog/law/securities-regulation/se...
It's 99% just evading existing laws. The best example of this is the browser Brave which only uses a cryptocurrency so that they could raise money without following the accredited investor laws.
Also, could an open ledger make corruption more visible and harder to get away with? Yes, it could. Will it? I'm not so sure.
They have no incentive to change how they've done things. I do think it would be cool if there was an automated solution for real estate transactions that didn't require crypto (or smart contracts). That would be great and I think someone should do it if they can.
> So maybe it's not so much skirting of laws, but sometimes also working around systems, not with a bad intention, but because things aren't necessarily keeping up with technological change.
I think this is right on the mark. The US banking system is a great example. Many of the arguments I see against the benefits of instant payments in crypto are from people in Europe, where instant payments are commonplace. I do think the competition and innovation in crypto forces existing legacy structures to innovate, which IMO is a good thing. The other thing is to consider those who are unbanked and unable to participate in existing structures, but do have smart phones. I think crypto can play a part in their lives as well.
> Also, could an open ledger make corruption more visible and harder to get away with? Yes, it could. Will it? I'm not so sure.
I agree. I'm not sure crypto will supersede all existing structures. I do like the idea of governments and politicians having to be more transparent, but I don't think they will give up what they have now.
The issues crypto can solve are 1) the government/bank can't steal your money, 2) the government/bank can't hide corrupt transfers, and 3) you don't need permission from the government/bank to exchange cryptocoins. If the government/bank wasn't a bureaucratic mess it could solve all of these issues centrally. Decentralization is good because it's hard to create a central agency without it turning into a bureaucratic mess.
From what I understand, and I admittedly don't feel certain on this at all, LLCs are private entities where ownership can only be offered privately, not open to be sold on a public exchange, and many DAOs plan to sell their tokens on public exchanges.
Again, I think laws can change and personally think we need more global overarching governance to deal with internet interactions, yet think that some of these things are quite incompatible/contradictory to current law.
LLCs are just one business entity type and a DAO does not have to be an LLC.
Also, to sell publicly, I'm pretty sure they need to register with the SEC, but unsure, do they have to list on a stock exchange?
They can be sold privately in a bunch of different ways and not necessarily just to accredited investors depending upon how the investment is structured and who it is offered to.
Let me give a concrete example: The first time I used Stripe and Uber, I immediately wanted to invest. But I couldn't because I wasn't wealthy nor well connected enough. If they had been a DAO, I could have invested $100 and paid off my student debt and theoretical mortgage AND probably covered losing investments. One winner covers many losers, which is how VCs play the game. That's the power of early investment.
Those kind of returns are only available to the already wealthy under our current laws. Why should that be? By the time a company IPOs most of the opportunity has already been extracted. How many of us have wanted to invest in Stripe for years now? We still can't. We can only sit and watch as its largest growth years go by and the rich get richer. In the eventual IPO they'll sell their shares to us now that they've appreciated by orders of magnitude. These laws should be abolished, but I wouldn't hold one's breath. So I'm in favor of the cryptoeconomy being an alternative that one can opt into.
Accredited investor laws exist to protect common people from the endless amount of scams we see crypto have today.
If you don't like the laws then petition to have them changed, but simply ignoring them will probably result in the SEC knocking on your door.
This is a truism that's not based on reality. You can question whether the protection is actually useful for the case, but there's a reason a bunch of professional licenses exist, and they do protect people. I don't want to "educate myself" to see if my doctor is competent to practice.
In the absence of resources and desire to provide strong safety nets, such as the education and tools you describe above, one way is to just prevent people from doing it.
I agree with you, I'd rather have more freedom to experiment and take risks. I also don't want people to fall to their physical or financial death.
Actually, there's a book that kinda talks about this idea called Care to Dare by a former hostage negotiator named George Kohlrieser. I took his leadership training seminar and he strongly suggested that to encourage people to take risks, we must first build secure bases for them so they feel safe enough to go off and explore knowing they can come back home.
https://www.amazon.com/Care-Dare-Unleashing-Astonishing-Lead...
More profitable but more risky is the most you can hope for. There is competition in private equity market so it's not like it's profitable unicorns for everyone who has access to those opportunities. If anything you should be able to invest in a private equity firm to begin with so they can balance the risk for you by investing in portfolio of assets and guess what - you can do just that as some are publicly traded!
It's really not an evil plan. The regulation is just common sense to protect you from big risk of going bankrupt.
There is plenty of opportunity in public market btw. Some examples of x20s from recent years: SHOP, AMD, TESLA. Some examples of very recent although smaller multipliers: NET (really, if you just read HN once a week you know they are awesome), Unity. I mean if you are so confident about picking Uber it shouldn't be rocket science to pick one of the above either.
The risk of going bankrupt is part and parcel of trying to suceed and live the life you want, whether in business, investing, day trading, or even just getting a university education in some places…
That being said, I think the individual vs communal risk decision and regulation is complex and really depends on the situation.
You probably don't have a sustainable investment strategy if bankruptcy is a likely outcome. You may have a gambling problem that involves securities, but that would not be "investment".
Not allowing small investors to buy shares in non-public (and therefore not needing to disclose much information) companies doesn't sound like an especially radical idea. You just need resources to do due diligence to invest in such companies and as a small investor you don't. There is a common interests in preventing people from being idiots in the investment world.
First, just because people do it doesn't mean it 'should' be done. See the naturalistic fallacy.
Second, just because smaller investors lack resources, doesn't imply they should be prevented from acting with less information. This doesn't follow from your final claim that there is a common interest in preventing them from participating and this is unsubstantiated.
Let people make their own mistakes, you don't get to decide for them.
I struggle with this. I wish my mistakes didn't impact other people, and for a lot of things, they don't. But for some things, they really do.
What do you think we should do when one person's mistake impacts many others?
Joe Public needs to do better than the people who already have more education and tools and influence than the average person can ever expect, just to break even on their startup portfolio. And let's face it, Joe Public wants to "invest" whilst being so wilfully ignorant of basics like liquidity and adverse selection they think there's nothing to actually be protected from...
Not everyone wants a nanny state to dictate their activities.
With the benefit of hindsight it's easy to see how you would have made a killing on Uber. But what you're not seeing the money you might have lost on Theranos, or Juicero, or WeWork, or any number of other hyped-up but ultimately worthless companies.
Maybe this analogy doesn't seem so applicable to you as it seems to more directly impact other people than one's permission to risk money on a stock, however, I'd argue that decision impacts family members and communities more than apparent at first.
As you acknowledge, the same goes for your speed limit example. It directly affects others and it could be argued it is necessary to protect their safety. Even though I acknowledge that, I don't think speed limits save lives over longer periods of time and could be removed. There would likely be a spike in accidents shortly after the transition but would normalize after. Having lived in several countries around the world, some with de facto no speed limits, people just avoided the left lane where the super fast people drove. I didn't see accidents everywhere.
But isn't that specifically the challenge, in defining what's a "clear and present danger to others?"
> There would likely be a spike in accidents shortly after the transition but would normalize after.
I agree that many things do normalize over time. We create informal rules on how to interact, embedded within morals, ethics, or just expectations of how one should behave in a society. I also think sometimes rules don't informally coalesce, that we don't always resolve conflict without outside guidance and more formal negotiation.
> Having lived in several countries around the world, some with de facto no speed limits, people just avoided the left lane where the super fast people drove.
From my (cursory) understanding of at least German law, while there may not be a speed limit on some roads, those roads often have very strict laws about passing on the right, and one might get their licensed removed for doing so.
You may be a conscientious person and take responsibility for outcomes which arise out of your "freedom". But not everyone would take responsibility and that is why these laws are there.
I wonder if skirting the law is the best way to change the law, as it seems to skirt the law-making and law-following process. At the same time, I believe in the principles of civil disobedience, in openly disobeying a law and facing the consequences for doing so in order to shed light on the unfairness of the law. I guess I just don't know how much, if at all, I believe in the skirting of laws.
You can’t really have it both ways, you can’t have a super strong social safety net for people who lose it all and a system where it’s easy to gamble your life savings on incredibly unregulated markets and incentive all the scammers to come out of the woodwork.
There’s a reason IPOs are much later these days than during the Dotcom boom precisely because too many retail investors lost their shirt to pump and dumps which at scale leads to broader social instability.
I really liked this point. Then I thought about it more and I think the reason why we have accredited investor laws is because we don't actually have that strong of a social safety net. For example, I've often wondered how much risk people would be free to take if we had a UBI or government dividend or whatever ya wanna call it. If people had a guaranteed income (or guaranteed home or guaranteed other basic service), how much more risk would people be able to take? I imagine a lot.
Conversely, I've worked in entrepreneurship in the US and in East Africa. In East Africa, I think because there's very little social safety net (government provided, there's more social safety in family networks), it can be really really risky to try to be an entrepreneur.
All that to say that I think if, frankly, the ones who win the bets they place would put more money into social safety nets, then others could take more bets as well. I just think sometimes the people who win the bets they place think they won because they're skilled not because of mostly random luck and then don't contribute to government or non-government social safety nets, thus we make laws preventing the majority of people making bets that could drop them through the safety net that currently exists.
Very comparable: the idea of just letting unvaccinated people die in hospital parking lots. Yes, they were stupid. Yes, they were told about as much. But no, that's not the sort of offense that warrants the death penalty. No, not even if you suspect they'd gladly let you die of your delayed reaction to the vaccine, if that were actually a thing.
The real problem is that we need much more investment in ideas that are considered good/useful by some kind of democratic standard. This is a monstrosity of a puzzle to figure out. It would take a long quest transforming the questions it raises to the quality required and much effort in gathering usable data before any kind of possible answers (read 'bad') could be considered.
Yes, and then what do you do when they have taken all that risk with their UBI? UBI only works if you draw the line there - you have to tell people there is no other support. Otherwise they will just gamble their UBI away and fall back on the same safety nets that currently exist.
Seems like you could have it both ways, if you wanted
Me too, because the "cryptoecomony" has been an endless series of painful lessons on exactly why we need those laws. And not even in new ways! Just literally the exact same kinds of scams and abuses that led to these laws being passed in the 30s.
Cryptocurrency is the first modern wave of unaccredited wealth generation that is beyond regulatory control. Many people were fleeced by alt coins and get rich quick schemes. Academics have more than enough examples to draw conclusions from and use to advise policymakers, if they were so inclined to. Poor rubes didn't bet everything they had on crypto, although there undoubtedly is anecdotal evidence of some doing so. Losses were actually quite within the band of acceptance. Homes weren't lost. Family fortunes weren't wiped out.
Huh? Axie Infinity is a Ponzi scheme. They're the people behind the Smooth Love Potion token. See chart for that.[1] They prey on poor people in the Philippines and Vietnam with a pay to play game that costs about US$1000 to enter.
[1] https://coinmarketcap.com/currencies/smooth-love-potion/
I'm not advocating for Axie Infinity, but I think there are multiple sides to this.
The bottom already fell out of Smooth Love Token.[2] The Axie Infinity governance Token is down a bit after a big runup.[3]
"Daily Earnings of Typical Axie Infinity Player Fall Below the Philippines’ Minimum Wage Line".[1]
[1] https://block2block.io/daily-earnings-of-typical-axie-infini...
[2] https://coinmarketcap.com/currencies/smooth-love-potion/
A truly decentralized crypto game is a smart contract where the outcome of a transaction is unknown to both parties until they agree to it. For example, "crypto roulette": an Etherium smart contract where N parties enter M coins, and then a (pseudo-)random-number generator decides which party gets the spoils.
You could build off this concept with other games like "crypto blackjack", "crypto poker", etc. where you somehow enable user input and output once players enter their coins (this would need a timer, so if a player doesn't input in X time they are disqualified. I really doubt this is currently possible and I don't even know if it's possible at all). You could also use NFTs instead of coins, and replace the basic random-number generator with a more complex algorithm which simulates a kind of "battle" based on parts of the NFT hash. Kind of like a battle between Axies.
But the fundamental point is, the entire game is a smart contract. There is no centralized server handling the transactions, and the game-maker can't "shut down" the game or change the rules or create an overpowered NFT. And the rules are visible to anyone (you can still add "cheats" but you have to hide them, because other players can find and use them too).
They started as a group last friday, so far raised $5.7m, looking to get to $20m by thursdays auction. I don't think any other process could move so quickly in a few days, from a joke to being taken seriously so rapdily. its memes all the way down.
Biggest issues faced with DAOs on ETH right now is the gas fees. Can't take small contributions with gas averaging around 100-200$
my experience with daos i have worked with is they are often closely aligned with co-op style organisational structure. the difference is we dont all know each other and live all over the world, some people are anonymous dogs jpegs and thats all i'll ever know about them, some people are present in their irl persona. but its a group of people with some shared aim in collective ownership, this doesnt mean there arent directors and roles, but often you can just start talking and participating and be rewarded. e.g. anyone can write a strategy for yearn, pass it on to the team and be rewarded https://twitter.com/iearnfinance/status/1459658364837896192?...
I'm personally working on just a basic ERP system to manage Cooperatives (Housing, Consumer, Worker), that would reward people for consuming, working, volunteering, etc with 'tokens' good towards rev shares, maybe health benefits, and ability to vote for company officers, etc... It'll have everything to manage ecommerce shops, restaurants, grocery stores, property management, etc.. as 'modules', kinda like ODOO, but for managing employees/users/consumers it needs to get the reward system right and make it modular enough so each co-op (SaaS/Multi-tenant) could have their own rules, etc....
It's for building a more democratic org, but still is centralized at least the DB parts, as it allows better control... I could see maybe rebuilding parts on the blockchain, and implementing some sort of crypto w/ UBI and a tax that really benefits those who spend more, and hold less of the crypto, but it'd need be sybil-proof, so would probably need some centralization for verification of identities.
the app will also have tools for voting, w/ ranked choice and weighted votes (people w/ different roles can have heavier weights), and maybe even have settings like those 'weights' be voteable by the group, say the CEO is petitioning for 20:1 ratio for voting power, so maybe you setup the vote to allow just pick a numeric# from 5-20 (or some other min/max range) then the average is what gets picked, etc... even for voting for new company officers - maybe every two years a vote is triggered the winner has their roles and permissions automatically switched, and the loser has them revoked, etc...
The ultimate idea is using it to create syndicated co-ops that maybe share some mutual aid benefits among users/consumers/workers of other co-ops... For e-commerce for example store owners could opt to include their stuff in a marketplace, so their products are distributed like Amazon's marketplace...
We keep trying things with our coop, but we often just fall back on google sheets for everything - which everyone hates but it’s flexible enough to do what we need and we all know how to use it.
1. What value does a DAO actually have/bring?
2. Are there any examples of a successful, functioning DAO that adds additional value over a traditional organisation?
Forget DAOs for a second, how about just putting roles and permissions on the blockchain? Why do I have to trust some site won't have a guy gain access to the centralized database and change everyone's roles and permissions willy nilly? What if we had a trusted and audited codebase (like Uniswap factory) for creating smart contracts which any website on the Internet could query through Infura or GetBlock or another gateway to popular blockchains? And this codebase was about membership in communities, roles, tickets, etc. displayed as non-transferrable NFTs, and so forth.
I see smart contracts as enabling stuff like that. Managing communities. Running elections for representatives, and making sure you know that someone "really was" elected or appointed to a position. Constitutions can be expressed in this way. Direct democracy and delegating your votes to actual scientists when it comes to certain issues etc. And that is only the "base functionality", if you will. Here is what you can build on top of it: https://intercoin.org/applications
For instance, last year I wrote this for CoinDesk, and since then we have built it: https://coindesk.com/tech/2020/03/12/in-defense-of-blockchai...
PS: To me, one of the biggest problems in the crypto space is that each team roll their own smart contracts, and same goes for Web 2.0 startups and their app code. It's far better to have factories of heavily audited and battle-tested code on the blockchain, and produce instances from that. People would then make decisions about using the smart contracts based on standard init() parameters that can be easily documented around the web. The smart contracts wouldn't have an "owner", but would serve entire communities, with multiple businesses providing "utility" by accepting their "utility tokens", so the whole thing wouldn't be dependent on one single team or business. There is so much we can do, we've only scratched the surface.
PPS: If you are a Solidity developer, contact me at the email greg at-sign intercoin.org, we are currently looking for partners to go and deploy all this to our millions of users worldwide by early 2022, here are the repos: https://github.com/Intercoin
> When you have an internet service that serves hundreds of millions or billions of people, there is a huge asymmetry of power and knowledge between the service provider and individual users. To fix this, you’d want a system that provides a way for users to organize and act collectively. You’d want users to receive a straightforward digital representation of their economic and governance rights. You’d want a system that has unambiguous rules along with mechanisms to enforce those rules. And you’d want this all to be available globally and accessible to anyone. Sounds useful, right? Well, the system I’ve described is basically a blockchain.
I think: a blockchain is an append-only distributed transaction ledger. But how is the system Dixon describes "basically a blockchain?" A blockchain has some of those properties, sure: it's available globally and accessible to anyone (with the technology to access it). It has mechanisms to enforce its rules, e.g., you only get to append transactions to the ledger and you can't modify past transactions without the tampering being obvious. But the "non-protocol" parts here -- providing a way for users to organize and act collectively, receiving a straightforward digital representation (?) of their economic and governance rights -- seem to me to be orthogonal to blockchains. What legally recognized rights you have in anything stems from, well, laws -- from legally binding contracts. Those don't need the blockchain. If you buy the "digital original" of your favorite meme for $3M, a transaction entry on a blockchain could be agreed to be the bill of sale -- but so could any number of things off the blockchain. What the blockchain brings to the party that's entirely new seems to be the ability to get ridiculous sales prices because there's currently a frenzy for anything NFT.
And this is an issue I have with an awful lot of Let's Build It On The Blockchain! thinking right now: it's not that I can't see value in the concept of blockchains, it's that there seems to be a "it's good because it's on The Blockchain!" frenzy around a lot of things that are transparently dubious (see: millions of NFT scams, the insistence that digital in-game assets can be easily transferred between games built on entirely different back-end systems just because blockchain, etc.).
And stepping back from that, the whole "Web3" pitch is "we can build an entirely decentralized Internet now because BLOCKCHAIN!" But, again: why are blockchains critical to this idea? We already built a decentralized Internet before blockchains; it was called (checks notes) "The Internet". I get that the idea is the new blockchain-based everything can't be centralized, but y'know, that's what we thought about the non-blockchain Internet a quarter-century ago. All the tools we had then to not be centralized still exist now. The issue with centralization now isn't a technological one -- which makes me pretty skeptical of purely technological solutions.