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paxys

Correct me if I'm not understanding this DAO "revolution" correctly:

- A group of people pool some money together.

- The money is used to buy assets/fund projects.

- Members vote on spending, governance etc., with their vote being proportional to their investment.

- They can raise money by issuing more "tokens" for new investors.

- Existing members can sell their tokens to someone else.

Like, congrats crypto community, you just invented a...public company?

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Exactly, a public company that skirts KYC/AML laws and securities laws.

I'm not saying I necessarily agree with those laws, I just see much of the "DAO revolution" as designed to "free the people" into investing anonymously and without accredited investor requirements, without directly trying to change the laws.

One thing I think it does that most don't talk about: allows people to register a global company/org. Right now, I think the highest level to register an org is the nation-state level, not much, if anything, exists at a global level.

those bits on the net will sure come in handy when it goes to trial in "global court".

A fair point—there also isn't much of a global judicial system to regulate property ownership. WIPO perhaps but doesn't seem too relevant/powerful to most and probably doesn't cover most things.

So then we have global things often being regulated by national laws, which, seems to be a conundrum I see happening more and more.

That’s actually the point. You theoretically shouldn’t need a court. Everything is regulated by code, and if something goes wrong you have to own it. The code is public. You can vet it as much as you want. Proposals are voted proportional to code ownership. It looks controversial but not utterly nonsense to me.

For on chain stuff, sure. Where it interfaces with the real world, how do you make the agents carry out the decisions of the code without using the courts?

I'm by no means an expert, but my intuition is that the relationship between on chain and real world should be regulated by real world courts. So, for instance, an on chain DAO hires a contractor, that then does insider trading on behalf of the DAO in the US: both the contractor and any real world activity in the US get targeted by US courts. It's like fining Google in the EU: you can't touch it in the US (it's as if it's on chain), but you can prevent it from doing business on EU soil. Or what happened with Facebook in the UK: the parliament summoned Zuck, and he just didn't show up. It's convoluted, but not far fetched imho.

You can’t say that it’ll rely on real word courts and then two minutes later say that the benefit is that you don’t need to hire lawyers.

You don't need to hire lawyers to create the entity and coordinate internally. I've managed a multinational company: it's absolutely crazy the amount of complexity needed to coordinate between legislations, just because states can't efficiently talk with each other. It doesn't make any sense. It's a broken protocol. It's a fine line: within the org, on chain and no lawyers, only code and everyone must take care of code due diligence. Outside the org (ie. real world), you deal with lawyers as much as needed.

I've thought that many crypto solutions are just workarounds for not having global standardization around laws. Do you think a global governance level (with more buy-in than the UN) would help mitigate some of the challenges that a global company encounters?

In other words, do you think there would be as much of a need for DAOs if a company could register with a global authority, had globally aligned taxes, etc?

It's literally an implementation of a Kafkaesque judge that can never be reasoned with, will never explain itself beyond pointing to the rules and can never be overruled.

Why this is supposed to be a good thing is never explained.

Because it's global. I don't need to reason with anyone anywhere, I don't need to hire lawyers, I don't need to make a global enterprise fit local regulations that are often conflicting. I'm not saying it's recommended, or even reasonable. I'm arguing that is not utter nonsense in some peculiar cases IMHO

I don't find any of these points to be convincing.

Storing data in a blockchain doesn't mean that local laws don't still apply. Even if the FBI can't prevent you sending money to a terror organisation with a smart contract, they will still arrest you for it.

Being able to reason with someone can be an advantage. With imperfect rules, having authorities involved that are allowed to have some discretion can be a huge boon.

And not having to hire lawyers? Well, you still have to hire someone who understands smart contracts, someone who writes them, and someone to negotiate them with whoever you want to close your contract with.

I believe we're not saying opposing points of view. What I'm arguing for is moving corporate law on chain, mostly regulating relationships between shareholders, and keep everything else real world. In Europe for instance it's quite absurd how much bureaucracy you have the cope with to create operating entities in different countries within the same economic space. Everything else can stay the same - penal law in particular. It's a very fine line but I believe it can make sense in some instances

It's more like a co-op. The difference is that every participant has a voice. With the traditional public company - with few exceptions - decisions are made only by the board and the execs.

> more like a co-op

The owners aren’t providing labour. Votes are tied to shares—one person can have more than one vote. And the shares are acquired with capital. Closer to corporation than coöp.

If the DAO committed to turning the team over to its players or fans, and then fixed one vote one member, that would resemble a coöperative.

There are worker-owned co-ops and customer-owned co-ops. DAOs also are a fairly generic concept, made more specific by whatever terms and conditions are memorialized in their originating contracts.

> worker-owned co-ops and customer-owned co-ops. DAOs also are a fairly generic concept

Totally agree. There is no reason a coöp couldn’t run on a blockchain.

This DAO is not that.

As far as I can recall, I had never encountered this kind of usage of https://en.wikipedia.org/wiki/Diaeresis_(diacritic) in the word cooperative.

I was going to ask you about it but Wikipedia gave a sufficient explanation, so commenting for the benefit of other readers.

The New Yorker is one of the few places you'll see this regularly

https://www.newyorker.com/culture/culture-desk/the-curse-of-...

There is nothing stopping a company doing a shareholder vote for every decision as far as I know.

I don't see how this is a co-op. The voters are neither workers nor customers. Their voting power is directly proportional to the size of the stake of the company's asset's/money they own. That a publicly traded corporation decides to concentrate day-to-day decision-making power rather than hold a full shareholder vote on every small matter is an organizational choice. Many co-ops have boards and execs too.

> With the traditional public company - with few exceptions - decisions are made only by the board and the execs.

In a public company, ownership and management are separated, for a good reason. You want to be able to own a company, without necessarily being involved in its management. Otherwise, you're severely limiting the number of companies people can invest in and preventing the owners from having other jobs, or you end up with a bunch of amateurs managing the company in their spare time.

Basically, A pseudo public company funded using unregulated digital assets = DAO.

But this time when a DAO executes a rug-pull, or the token crashes to 0, the regulators are not going to save you.

Yes, crypto is not about inventing some kind of new financial instrument that never existed before.

It’s about having software that runs the regulation schemes surrounding those financial instruments without needing human regulators.

The revolutionary bit is you can raise money through a DAO without paying millions to a corrupt investment bank to handle your IPO. No letting the investment bank set the opening price too low so their stable of institutional investors get a reliable "pop", etc. You don't need to spend millions on special consultants to help you prepare regulatory filings. So far, anyway. I'm a major crypto skeptic, but I definitely see the appeal of disposing of these gatekeepers and putting the public back in public markets.

direct listings? or any of the other ways to go public with an investment bank?

With an investment bank, you can negotiate an agreed upon price. Here you're at the mercy of whatever unpredictable gas fees a cabal of invisible miners decides to charge.

I'm pro-cryptocurrencies, but I also don't really get what's so amazing about DAOs. Are there any references or explanations from people who love them?

Here's a piece by Vitalik I found compelling: https://vitalik.ca/general/2021/08/16/voting3.html

Right but it’s like a meta company. Like, a company of anything, not just traditional businesses. Plus the whole process is totally streamlined and, outside of rug pulls, super transparent. Ownership and transfer of ownership is in front of everyone’s eyes.

It’s like what Amazon did. People could buy stuff before, but now they could buy stuff with much more ease (search, order, return etc).

Like just an organization? A non-profit or other type of cooperative depending on your local regulations might fit exactly.

I don't see how it improves any part of the process.

You can create and fund one on Twitter over a weekend…

I just assume that could be possible with a gofundme or kickstarter platform if they were allowed to sell ownership shares to the public. I think why it doesn't happen on those platforms has more to do with the securities laws than tech challenges.

As usual, crypto is not a technical solution but rather a regulatory arbitrage solution. The technology is old and boring. Scoffing at the law, though, well that's fun and new.

> outside of rug pulls

Other than that, how was the play, Mrs. Lincoln?

I assume none of the existing regulations or laws that involve public companies apply to DAOs? Like can you pool the money and then do nothing or go against what was agreed upon?

You assume wrong. The things regulators have authority over are rather broadly defined, and the regulators will and have rather eagerly pursue novel attempts to avoid regulation. The best that one running such things could hope for is a period of indecision.

This though seems pretty cut and dry “is a security” and all sorts of compliance will apply early.

I’m not sure this should be your example about what a DAO actually is, if you were to choose between the ones that currently exist.

that runs by itself

First, the difference is that it's trust-less because people votes are backed by crypto.

Second, you're aware the "congrats, you've just invented" argument is a ridiculous fallacy that can be used against any kind of innovation. It's also has a very bad record as it's been used against the internet, smartphones, social media etc.

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