Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Aaron Wright: The LAO – DAOs From a Legal Perspective

Episode Date: January 26, 2021

Aaron Wright is a professor at Cardozo Law School and Co-founder of OpenLaw. Before this he was a successful entrepreneur, having sold his first company to Wikia - the for-profit version of Wikipedia. Today Aaron is a renowned thought-leader in the blockchain space at the forefront of DAOs. Last year OpenLaw launched The LAO, a DAO on Ethereum for investors looking to earn returns on Ethereum-based projects.Aaron joins us to share his expert legal knowledge on all things DAO, and discuss his latest projects the LAO and Flamingo DAO.Topics covered in this episode:Aaron's background and how he got into blockchain and the DAO spaceThe early vision for DAOsStakeholder participation in DAOsWrapped and unwrapped DAOsProxy voting on DAOsGovernance mechanismsThe multi-token modelHow DAOs are characterized under law and the legislation surrounding themThe Wyoming Blockchain BillThe different categories of DAOsWhere does Aaron see the DAO ecosystem headed in the futureEpisode links: OpenLaw websiteThe LAOMike Hearn: Autonomous agents, self driving cars and BitcoinAaron's book - Blockchain and the Law: The Rule of CodeOpenLaw on TwitterThe LAO on TwitterAaron on TwitterSponsors: 1inch: Discover the best rates and most efficient swapping routes across leading DEXes. Optimize on gas cost and execute DeFi trades faster with 1inch V2 - https://epicenter.rocks/1inchThis episode is hosted by Sebastien Couture & Friederike Ernst. Show notes and listening options: epicenter.tv/376

This is Epicenter, episode 376 with guest, Aaron Wright. Hi, I'm Sebastian Quitio, and you're listening to Epicenter, the podcast where you interview crypto founders, builders, and thought leaders. On this show, we dive deep to learn how things work at a technical level, and we fly high to understand visionary concepts and long-term trends. If you like Epicenter, the best way to support us is to leave a review on Apple podcasts. If you're on a Mac or iOS device, the easiest way to do that is to go to epicenter.rocks slash Apple. And if you're new to the podcast, be sure to subscribe on Apple Podcasts, Spotify, or wherever you listen. Today, our guest is Aaron Wright. He's a professor at the Cardozo

School of Law. He's a co-founder of Open Law. And he's an expert on the legal treatment of Dow's. In fact, he co-authored a book called Blockchain in the Law with Prima Verre DiFilippi. I believe it was last year that that book came out. The last year, he participated in the launch of the Lao, the LAO. It's a Dow that is organized as a legal entity. It's an LLC in Delaware. And it's backed about 30 projects in the Ethereum ecosystem since it came into existence. So we had a really interesting conversation about DAOs and how they're treated in existing legal frameworks, although we mostly focused on the U.S. We talked at length about the legal status of Dow's in Wyoming. There's some really interesting developments going on there, as I'm sure,

you're probably aware. Prior to this conversation, I had only like a limited understanding of what Wyoming is doing in this space, but it's really cool, actually, that they're making it possible for a Dow to be registered and recognized by law and that they have the frameworks also to kind of simplify this registration process. I think it's like a very good sign for the ecosystem. We also spent some time discussing the different types of the AOs that exist and different applications that exist in this ecosystem. And we speculated about the types of exciting applications that could emerge in the future. I think DAOs are just one of the most interesting things in the space.

And one of my first encounters with this concept, the concept of an autonomous organization, was this pretty famous Mike Hearn talk from 2013 at the Turing Festival. At least it's famous in my mind because it really inspired me. And it was the thing I think that really made me want to get into the crypto space back in 2014 or wherever it was when I got into it. And he describes this autonomous organization that runs a fleet of self-driving cars and it's like super far out and futuristic. So if you haven't seen this talk, if you're new to crypto, perhaps don't know about this talk or perhaps don't even know who Mike Kern is, you should check it out. The link is in the show notes.

Of course, Dows have come a long way since those early concepts and most Dows now have governance tokens. And well, you know where you can easily trade governance tokens on one It's my go-to decks aggregator, and I know that when I use one-inch, I'm getting the best price for my trade across all dexes and AMMs. To start using one-inch, go to epicenter.orgs slash one-inch. And with that, here's our conversation with Aaron Wright. Welcome to Epicenter. We're here with Aaron Wright today.

Aaron, you are the co-founder of Open Law and one of the founders of the Lao, and basically a good leader in the Dow space and the legal blockchain space, general. It's a pleasure to actually have you on. Can you tell us a little bit about your background? Yeah, absolutely. Thanks so much for having me on, as I noted before. I've been a long-time listener, so it's great to be able to join the podcast. My background is a bit interesting. I have a background in law and technology. I'm a professor at Cordoza Law School in New York. Before joining Cardozo's faculty, I started a company and sold it to the for-profit sister project to Wikipedia, so I spent quite a bit of time in the Wikipedia ecosystem.

I have been deeply involved in the blockchain ecosystem since about 2011 when I started falling down the Bitcoin rabbit hole. I had the pleasure of playing a small role to help launch Ethereum and work through some of the issues there. I've also had the pleasure of working with lots of other great folks in the ecosystem. I co-authored a book with Prima Verity Philippi on blockchain law and policy. I was able to help out a number of great projects when they were starting or early on, including working with Joe Lubin at Consensus, working with some of the folks on the chain link team, also working with folks on other great teams over the years. From my research with Primavera and thinking about kind of this emerging

blockchain ecosystem, I've been able to help build and co-found a project called Open Law, which is thinking about what I view is the third leg of kind of the commercial revolution that we're building. We have Bitcoin as kind of an first e-currency, Ethereum, obviously, is an axiomatic, smart contracting platform. And the last leg and kind of, the cypherpunk dream has always been a Ricardian contracting system, which is this idea of linking together traditional legal agreements, digitizing them, cryptographically securing them, and hopefully providing a sort of interface for the traditional world or meat space world that I think we still inhabit. So that's been a really great opportunity to work with so many

great teams and obviously build some hopefully important technology and kind of related to that. applying some of the tools we developed on Obama to start building out a network of DAOs. The first DAO that we launched was the Lao, which I'm sure we'll get into. We've also launched another DAO called Flamingo Dow, which is more NFT focus. And we have about three or four more that I think you'll see over the next couple weeks and months that are in the hopper. Super cool. So you've been in the ecosystem a very long time.

So you were here when the Dow, the entire the Dow thing went down. Were you interested in Daos before that, or did that kind of kick it off for you? Yeah, I mean, I actually was an avid reader of Bitcoin magazine way back in the day. And I remember Dan Larimer writing about decentralized autonomous corporations, which was kind of the precursor to Daos. I thought that that was a fascinating concept. So the thought being that you could use at that time, the Bitcoin blockchain and an interesting implementation called color coins to begin to represent

the organizational structure of a corporation. So using a blockchain to kind of record interests in the entity, using those interests to think about how to transfer assets, how to build controls into a corporation using smart contracts. I thought it was absolutely fascinating and kind of all clicked together. So not surprising when Vitalik and others began to venture towards Ethereum and Daos became an important part of that story, right? Dows appear in the white paper. There was lots of conversations around Dao's that the Ethereum community began to think about. I was equally fascinated. And the DAO itself was really the first expression of that interest, right? So Ethereum was just recently launched for the

most part, even though it took some time to get beyond test nets and a whole bunch of other technical hurdles. But, you know, I really thought it was great that Christoph and team began to really push here. They wanted to build what was in the white paper. They wanted to explore what these new digital organizations could look like. And the Dow was really the first great experiment in that area. I remember even before the Dow launched, you know, seeing certain demos and other things by the Slack of team dealing with, you know, Ethereum slash IOT related devices, which I thought were incredibly cool. And I think to everybody's surprise, though, the Dow just was much more successful than I think anybody would have imagined, right? It was

supposed to be kind of a small experiment. It became a massive experiment. And then it had a kind of a spectacular finish, which I think was great in terms of animating people's minds about the possibilities of Ethereum, but at the same time highlighting a number of the challenges and pitfalls, both technical and then over the subsequent months as lawyers and other folks began to begin, some regulatory challenges as well. So, you know, I think it was the first great use case for Ethereum was DAO's. And I do think people had a bit of PTSD DAO after the DAO, when they were kind of afraid to play around and dive in and start to start to see what this ecosystem could look like. There was obviously developer teams like the Aragon team and the Dow Sachs team

that we're pushing forward, but I think people put it to the side, you know, as we saw token sales and other kind of crypto economic systems begin to be explored in, you know, 2016, 17, and 18. But they're back, right? Dows are coming back into focus. There's a lot of activity in the DOW space that I think, you know, folks are beginning to pay attention to. And if you are a developer or are somebody that's interested in blockchain technology, I imagine that it's probably worth your time to start to dig in here and think about what may be coming over the next couple months and years. Yeah, we'd certainly come a long way.

I mean, when you talk about like colored coins and these things back in, back in the early days, like, it really takes me down memory lane, right? And also, I think I was also very kind of marveled at this idea that, you know, things, objects and also, you know, more femoral things like corporations could be managed by, some sort of an autonomous organization. And if you remember in the beginning, and you kind of alluded to this, a lot of the interest in Dow's was coming from this idea of managing devices, like physical devices. So Sloket was one example of this. But even before that, it was Mike Hearn who had given this really interesting talk about autonomous agents and how you could basically

have like a car drive itself and be its own autonomous economic agent. A lot of the interests back then seemed to be coming from this place of wanting to govern physical objects or having Dow's governed physical objects. But it turns out that what's the primary use case has been to govern software projects, govern things like investment funds and things like that. Where do you think the initial vision for Dow's perhaps was wrong? Or why do you think that this IOT vision of a Dow didn't quite come to fruition? And rather, we were governing things like software and investment vehicles. Where was the disconnect there in your view? Yeah, I don't know if there was a disconnect, right? I think it's both, right? I think we're going to

see Dow's manage human endeavors, right? People getting together and wanting to do something more productive and hopefully beneficial to society. And I think at the same time, in that Mike Hearn talk, I think that was at a London meetup or something along those lines, It's fantastic if you haven't taken a look at it. I think you should. It's definitely worth your time. I think that that's the endpoint, right? And so DAS will operate on a spectrum from helping to coordinate human activity.

And over time, as the technology matures, also increasingly coordinate machine-related activity as well. And the notion is that these software-based systems are natural fits to create efficiencies when it comes to coordinating human activity. and at the same time, due to their decentralized and autonomous and automatic nature, are also going to be useful for coordinating machines. I don't think we're there yet. I don't think the IOT ecosystem is necessarily there yet, although we obviously see lots of continued growth there.

I don't think the scalability of Ethereum or other blockchain-based systems is there quite yet and trust, because once you're managing a device, particularly something like an automobile which can hurt people, you're going to want really strong security guarantees. And I think that the last piece is this kind of real world to crypto or real world to smart contract divide. I don't know if anybody is firmly tackle that yet, right? Like the Slocket folks, we're playing around with some early examples with that,

and I haven't seen as much interest in that yet. My sense is when we get to blockchain 2.0 or blockchain 3.0, which I think we're kind of meandering towards, folks will begin to pick up those technical challenges again. But at a high level, I think DAOs are a very, very big umbrella intent. They're going to govern both the coordination of people and the coordination of machines. And I think we're just really taking the first steps in that direction after taking some steps, getting knocked down, and now we're dusting ourselves off as an ecosystem and kind of pushing forward.

Yeah, I think for the physical objects, I think liability is probably one of the biggest. challenges to get past. And there are some practical examples of this. Like if you look at, say, what are the, like, those, you know, the scooters that you see all over, like major cities, I think have probably some similar, you know, legal challenges around liability and like even, I mean, I know that, for example, here in France, there was a question about who's responsible if those they're damaged, right? Like, can you hold someone accountable for damaging one of those scooters if, In fact, I mean, they're owned by a company, but they're sort of in the public space. So there are probably quite a few legal questions around that.

Yeah, a thousand percent, right? So questions when it comes to machines is who's responsible if somebody gets hurt. And in many ways, it's not that dissimilar with more autonomous organizations. So one way to think about DAOs is to break them down into subcategories. One would be more of a decentralized organization, so one where humans are really in charge. The second one, which I'd consider to be the pure DAO, is where the algorithm kind of sits in the center. So if that algorithm is coordinating activity, is that responsible? If it's coordinating physical objects, should the algorithm itself be responsible or should the manufacturer be responsible?

These are kind of meta-questions that I think policy folks that are looking into technology are grappling with, and will grapple with it in the blockchain context, but also as it comes to other forms of autonomous. devices, right, like an autonomous car or self-driving car being the kind of first, I think, major example there. We'll sort through it. I think there's some folks that are thinking about where that liability should attach. And humans tend to find somebody responsible for something if people get hurt or something goes wrong. One inch is a decentralized exchange aggregator that sources liquidity from the top dexes and the AMMs to save you money and time on swaps. 1 inch finds the best possible trading paths across over 20 supported liquidity protocols

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And the fork that kind of feels legitimate to most people is legitimate. So ideally you'd want to make a lot more decisions than whether to upgrade the consensus protocol. So what are the options here? So I imagine, I mean, if you look at DAOs, they often deal with low participation and there's, you know, problem around the bandwidth of the attention of individual people. How do you make sure that a DAO can effectively create decisions between so many different stakeholders? Yeah, I mean, this is a good question and a challenge that I think both developers and other folks that are interested in DAOs are going to have to to sort through. So on the one hand, you have DAO or DAO-like structures. That's a debate as to whether

or not Bitcoin and or Ethereum or and should be classified as DAO's. In my mind, I do view them as DAWs, you know, where you have this code base and consensus algorithm and other aspects of the blockchain that's kind of coordinating human decisions at the edges and or you have other forms of DAOs, what I would call more decentralized organizations where human decision making is kind of more at the forefront and people are beginning to use blockchain technology in order to coordinate their activity. At the same time, and one of the major benefits of DAOs is that they lower transaction costs, right? The thought is by using smart contracts, by using blockchain technology, by using other aspects, you can reduce the cost and friction of coordination.

So the transaction costs go down. At the same time, there's one transaction cost that you can't limit with blockchain technology, and that's attention, right? So there's a cost to accumulating information, to assembling it, to processing it, to taking and making decisions related to a certain organization. And that's why I think in part we see low participation rates. Not everybody is going to be engaged. They're not going to invest.

their time, energy, to actually get up to speed on certain decisions. So you see in some DAOs that the participation rates are very, very low. And in my mind, that's not surprising. When I spent time in the Wikipedia ecosystem, it was very, very hard to get people to edit anything, right, to even click the edit button to change one word on Wikipedia. It was about 2% of the users of Wikipedia would actually click the edit button, and a fraction of a percent would actually make an edit. So it's not surprising, particularly in online environments,

that people are not going to be actively participating. Many people just like to lurk and read and kind of process. I think, though, we see something a little bit different in some of the DAOs that we put together, most notably in the Lao and also Flamingo, where the participation rates are higher. They're at like 60 to 70 percent. I think that's in part because the amount of assets

that folks are assembling together is higher, so there's more at stake, right? So they're able to, and are more committed to actually taking actions or weighing in on certain things because there's a financial incentive for them to do so, and because they've put up, they've contributed a fair amount of capital as part of this collective. So I think that that's one way that some of these solutions may be addressed. It could just be making sure that people put enough at stake in order to guarantee a sufficient amount of participation. At the same time, I think we're seeing other experiments where they're flipping kind of the question. So the folks at Colony, I know, are looking at this and I think it's quite interesting.

They're basically saying that if you put something up for proposal, it will pass unless people vote against it. So they're changing the dynamic, which I think is clever and smart. So if people aren't violently opposed to a certain activity or something that's going on within a Dow, things will move forward, right? You have an implied consensus around that, but the folks that are participating are paying attention at that point in time. If they see something that goes wrong, they're able to block that. I think we're also seeing other forms of governance mechanisms, whether that's weighing different conviction related to a certain activity that people are going to experiment with to kind of solve this attention issue. But the big barrier, in my mind at least,

is the cost of attention, right? There's costs associated in affiliate with it, and that's something that we're going to need to figure out ways to deal with. But the nice thing about Dow's is that we can actually play around with these mechanics for the first time, right? We have a sandbox or an ecosystem where we can take these governance-related decisions and not the complex governance-related decisions that we have for kind of core blockchains, but smaller groups of people. and we can begin to play around with different ways to address that.

So if we want to optimize for high participation, well, we can play around with different approaches and implementations to do that. Maybe we don't want that, right? That's what the folks that colony are beginning to think about. Maybe we don't want, we have to assume there's not going to be high participation. You know, maybe we need to deal with it at that point in time. Maybe we use markets and some sort of prediction market to make decisions, right? Lots of folks are interested in that as well.

But at least now we have the framework to begin to explore those things. And that's very different than the traditional world. And that's in part why I find this space so interesting. These governance decisions, which are very hierarchical in a sense of like a corporation, or fairly hierarchical when it comes to a traditional fund structure, they've been kind of set in stone over the past 50 to several hundred years. And now we have the opportunity to begin to play around and experiment with new forms. And my sense is through that experimentation, even though we don't know the right answer,

we'll figure out better ways to begin to govern ourselves and hopefully make better decisions. And I think particularly in today's times, that's sorely needed across the board, no matter where we are. So around 10 years ago, so in Europe, there was this huge wave of euphoria in IT circles for liquid democracy, where basically you would delegate your vote depending on the topic to different people. Do you think something like this has a future in the context of DOWS? Yeah, I mean, I think we're starting to see the threads of that. So a more traditional lawyer would call that proxy voting. So proxy voting has existed in corporate context for quite some time.

So you can provide somebody else the authorization to vote on your behalf. The problem when it comes to more traditional corporations or legal entities, there's a lot of expense and cost in providing a third point. party with the ability to vote on your behalf. There's a lot of difficulty and expense and kind of aggregating those votes. You have to usually use a third party service to implement like some sort of shareholder vote or other other voting scheme. So it's quite expensive. On a on a blockchain or in Ethereum, it's so breezy, right? You pretty much have to put an address, sign a transaction, pay a little bit of gas, and then that person can be your proxy. So on the model V2 smart

contracts that we help put together, that under GERD the Lao and also Flamingo, we already have delegated voting. Other DAO frameworks have it as well. And we're starting to see in some of these organizational DAOs related to open source technology, things that are trying to manage defy protocols or other emerging blockchain protocols, we're starting to see services built on top of it. So boardroom is a good example there, where they're beginning to make it easier for you to basically back a protocol politician so that that person can make and or take an action on your behalf. So I think it's there. The substrate is there, right, like the basic core functions are there, but the tooling isn't yet mature. The ecosystem of Dow's is not yet mature. But I do think we'll

start to see things that are what I think you could call liquid democracy or kind of a more advanced form of proxy voting emerge in part. I think that that could be a good solution. solution to solve this information problem, right? If you are a protocol politician, if you're somebody that's aggregated a lot of votes from other folks that are participating in Daos, then you may have an incentive to actually cut through that information, cut through the noise of whatever information these DAOs are producing, and invest your time and resources to making good decisions. So I think it's a super fascinating part of kind of emerging DAO governance. Do you think there's an upper limit to how many people can coordinate within a DAO?

Yeah, this is a good question. So, and here you can go back to some famous economists. So Ronald Coase actually wrote not just about transaction costs, but he also wrote about transaction costs and organizations and how they form and how they're structured. He has some pretty prescient writings on this topic where he noted that when the cost of organizing and when the ability to disseminate information related to an organization, is reduced. So you can think of that as the smart contract-based Dow frameworks that people are putting together, and then the Internet as a means of propagation. It suggests that you should have organizations that are much larger in scale.

And that's why I think you've seen some folks say that DAO's at some point should be able to coordinate tens, hundreds, hundreds of thousands, if not millions of people. I do think that the entropy and the complexity of organizations that are much, much larger, may provide some sort of upward bound. But I do think we can get to DAO's that are of that size, assuming that scalability solutions are implemented. There's innovations when it comes to governance mechanisms. I just think naturally they'll gravitate towards larger organizations.

That being said, in the Lao and also Flamingo, it's a much smaller group of people. So due to U.S. legal regulations, it's capped at 99 members. And we found that even though it's not five people, it's kind of like a smaller roving band of folks, that it actually is working pretty well, right? As noted before, we have participation rates that are high, much higher than what you see in other DAOs, and you also have some form of cohesion. But I do think that at some point DAOs are going to get quite large.

And that's not surprising, right? We have corporations that are quite large too. So if you look at some of the largest corporations in the world, you may not be fans. of those corporations, you may not like their products, but they're coordinating hundreds of thousands of people, whether that's like a McDonald's or like a Walmart or even a government, right? They're coordinating the activity of lots and lots and lots of different people. So I don't see conceptually why Daos wouldn't be able to do the same thing. I think the framework component of this is what's most interesting here.

It's sort of a governance system to end all governance systems because the governance system itself can evolve to cater the needs of how it scale. So setting aside platform scaling problems, like the ability for Ethereum, for example, to process transactions at scale, the governance system itself can evolve as the size of the number of participants grows. So we were talking about this earlier, a governance model that implements a geneal coefficient, for example, that, is malleable based on the inequality of wealth in the system. But you could also think of a governance system that evolves based on the number of participants. So it could start off, for example, as a very sort of stake-based system.

But as you start approaching higher bounds of users, that it turns into something more akin to a democracy where you have like a one-person, one-vote type of system. I'm a person. I think this is just like the most fascinating aspect of this is that it, it, you know, it's a It's governance technology for governance as well from a meta perspective. Yeah, absolutely. And I think the other areas outside of, I think those are really great examples. I do think DAOs can also explore multi-token models, which I think are under-explored at this point.

We're starting to see some projects that are digging in a bit more there. But I do think multi-token models could be helpful to start to segregate people in DAOs into maybe different groups or folks that have different rights or are weighing in on different decisions, which can allow for specialization and maybe cut through some of the noise or some of the challenges of coordination. So it's a playground, right? It's a governance framework, a governance playground. We have the ability to do the same thing to organizations like we've done to software, which has evolved over time. And that's important and something that I do think is going to, you know, to go back to your question before, you know, coordinate a whole bunch of different

people start to seep into lots of different places because it's probably more efficient, right? If you have better governance and you have lower cost, the ability to operate these organizations at lower cost, it should be, in the long arc of history, the endpoint for organizations, right? There's probably not going to be a reason to have a corporation or an LLC or some of the existing organizations we have today. If you have something that can get propagated around the globe, is entirely digitally native, has lower costs, stop, and operate and also has the ability to actually solve some of the corporate governance or just governance in general issues that we know that the existing organizations have. Developers can experiment

and figure out the kind of right approach there. Can you illustrate how a mighty token Dow might work? Yeah, so this is something we've thought quite a bit about. So, you know, there's lots of legal challenges, obviously around Dow's, and I'm sure we'll probably dive into that at some point. One question is, if there's a profit that's made, who should be entitled to that profit? In the U.S. and in other jurisdictions, we say that only folks that are wealthy, accredited investors should be able to hold those tokens, trade those tokens, et cetera. And while those are, in my opinion, dreadful policies, that is just kind of the law of at least my land and many other folks land. With a multi-token model, though, you could support those requirements, whereby folks that may be

entitled to distributions are, let's say, accredited or wealthy and able to satisfy the requirements, but maybe you want other folks to weigh in on governance. So you could have a multi-token model where you split economic rights from governance rights. And that may be kind of a first step towards the democratization of some of these organizations where you're gaining the benefit and the wisdom of a group of people that may be interested in a project, whether it's an open-source project or otherwise, that can weigh in on decisions. But it's a group of people. But it's a group of At the same time, the value transfer is kind of held by another party. You can almost think about it, and I have a U.S. perspective here, as a separation between the House and the Senate, right?

You can have the House, the folks that have the governance votes saying, hey, you should be paying attention to this. This is important to us. We believe in this project, but anything dealing with assets or transferring assets would go through another house, right, the folks that have another token. And maybe that's a decent way to, A, navigate some legal requirements. and be ensured appropriate separation of powers. We've already segued a little bit into the legal model of DAOs now. So, I mean, obviously the legal framework has come, I don't want to say a long way, but it's come some way since the DAO.

So if you speak with legal DAO people, they typically distinguish between wrapped and unwrapped DAO's. Can you explain to us what the distinction here is? Sure. So there's always been a question when it comes to DAO's as to what they would be characterized under the law and what are some of the tricky legal questions that may emerge. The first time I learned to these questions, there's some great programs at MIT put together right before Ethereum launched, looking at Bitcoin and Ethereum and other blockchain technology. And we began to have a conversation about, well, let's assume that a DAO exists. what would it be characterized as, at least in the U.S. and many other parts of the globe, they'd be characterized as general partnerships, which means that each partner would be

responsible for the activities, the other partners, both from a liability perspective and potentially also from a financial perspective. So that's not a great place to start. So folks began to think about, well, how can we limit that? And they looked at different organizations that exist today and looked at organizations like a limited liability company or some co-ops or other forms of organizations and began to think about, well, why don't we use this vehicle as a legal wrapper? We'll wrap it in this more traditional entity,

but the engine of it will actually be administered entirely or primarily through software or some sort of software-based system. So that's the idea of kind of a wrapped DAO, where you have a DAO that's embedded within a traditional legal entity, but it's operating the way that folks that want to participate in, DAWS and the developers of the DAOs are intending, i.e. operating via software. And we've seen some early experiments in that vein. So from kind of these more academic conversations, we've seen over the past couple of years folks like Ross Campbell, who's on

the Oklahoma team, who set these up, and the D-Or team begin to explore what wrapped Dow's would look like in the US. And then obviously with the Lao and Flamingo, at Flamingo Dow, we've been pushing on that some more. The way they tend to work is that they're a limited liability company in the U.S. that modifies almost a number of the default rules under the law, which is permitted, using a contract, a traditional legal contract, such that it can set up something that's akin to what people want in a Dow. So what does that tend to mean? Well, I can't speak to all the projects, but I can speak to what we've done on the Lao and Flamingo side, It means that when you join the DAO, you're not joining as a partner.

You're joining without, and to the extent limited by law, without any other fiduciary duties to your other DAO members. You're agreeing that potential conflicts of interest are waived so that we can kind of preserve this arm's length notion of how DAOs operate. We're making clear that the underlying smart contracts are governing the behavior of folks within the organization. So it's not as extreme as what we saw with the DAO itself, where they pretty much had a terms of service that said the code rules or something to that effect. But it's trying to kind of preserve that same feeling.

And then it's dealing with other issues that lawyers worry about, things like dispute resolution, things like representations and warranties, these very boring basic things that just help clear out some of the croft if something goes wrong. And so that's how we've set it up. It's set up as a member-managed limited liability company with the default rules related to how those limited liability companies operate, modified such that it can accommodate the Dow. The U.S., and at least in my understanding, is a bit unique here. There's no need to have a manager of a legal entity in the U.S. They can be entirely member-managed. They can enjoy a limitation of liability, which means that they're not responsible for activities related to the organization. except to the extent that it relates to their activities within the organization.

And it's been growing pretty quickly in terms of development. So I assume that the 99 member limit kind of rises out of that. What's the constraint here? And is there any way to lift this? So those are not organizational or corporate law constraints. Instead, those are other constraints that are in the U.S. related to securities laws and a related statute called the Investment Advisor Act. So for DAOs that want to pool capital and deploy it for investment purposes, there's a couple

additional concerns. One is, what are the interests of the DAO itself? Are they securities, or are they not securities? And I know, as a long-time listener, you guys have spent quite some time looking at some of the legal issues related to tokens, so I don't think we need to go into that, but it's not that dissimilar from some of those challenges that we saw with. characterizing tokens from, you know, the 2016 to 2018 token sale euphoria. And then related to that, you know, if you pool together capital from a lot of different people, the U.S. tends to view it as something akin to like a mutual fund and you have to go public at that point in time. So there's some limitations. The most notable one being, if it's

under 100 people, then those requirements don't necessarily apply. So those are some other, some other kind of parameters that we kind of had to navigate through. And so that's why in the Lao you have at its core, it's a limited liability company that defers almost entirely to software. It deals with all these ancillary issues like we saw with the Dow in terms of limitation of liability, in terms of questions related to fiduciary responsibilities, including questions related to dispute resolution. And then at the same time, to comply with securities and or the Investment Avisor Act, it's limited to 99 members. In the abundance of caution, we've limited it to accredited investors, although my personal belief here is we shouldn't have needed to do that.

And that's kind of a separate issue, but something that we're hoping to fight over the long run. And it's grown pretty well. So the LOW, as an example, started with about a half a million worth of ether in April this year, at least as of today, it's circulating around $15 million. dollars. Flamingo Dow has about $5 million in it. And just to give you a point of comparison, the Dow when it launched had about $50 million. So using this approach, we're about halfway to where the Dow was, just taking a little bit slower of a burn in terms of kind of growing at the ecosystem. To what extent do you think the frameworks of the limited liability company can dissolve into the code? Like I'm thinking about things like dispute resolution, for example,

these are things where we've already observed, you know, a significant number of examples in the blockchain space where we have dispute resolution, like things like, like Aragon, of course, the Aragon court. When do you think, you know, we'll be able to have a sort of like legal Dow that exists only as a Tao? Is that even where there's no wrapper company around it? Yeah, I think that dispute resolution, at least for it to be enforced by traditional courts, it's going to need. some sort of legal agreement that's attached to it. It doesn't necessarily need to be a heavy-handed one, but there's certain provisions that if they're in a binding contract and if they defer to some sort of arbitration system, whether it's a digital-based arbitration system or some other more traditional arbitration system, it will be deemed enforceable. So I do think there'll be

pretty much like a light wrappers around a lot of Dow structures, particularly sophisticated ones, and particularly ones where the amount of assets that they want to administer or pool are fairly large. I think until there's an actual modification of the core statutes to permit this, you're going to have to have some sort of light penning on it. That being said, if you can wrap it or wrap a Dow or at least wrap some sort of relationship with a contract, and that contract does have an arbitration. provision in place, at least in the U.S., it's pretty hard to impeach that.

So the way I view this in many ways is these contracts create the space so that people can experiment in the digital world. You can actually begin to kind of quarantine out the ability for more traditional entities, like courts, et cetera, to begin to administer what's going on in the online world, with the caveat being that it doesn't obviously absolve criminal-related questions and concerns. Right. This is something I totally neglected is the enforcement aspect, which, of course, for the time

being at least, and probably for the foreseeable future, relies on the state enforcing. Exactly. Yeah. Yeah, I mean, you see some early examples, and there's some great projects where that's beginning to get challenged, right? So one, I do think underappreciated thing about smart contracts is that they can, in effect, enforce, right? The question is, how do you get claim on those?

assets via smart contract, right? So unless people are depositing the amounts in dispute into some sort of smart contract, an online dispute resolution provision comes in place, and that arbitrator group of folks has the ability to administer those assets, you probably are going to, you know, want to file that in a traditional court, especially if you've lost a tremendous amount of money and enforce against that. So I think we'll get there, but there's not enough assets that are able to be easily managed on chain and some of these questions related to giving an arbitrator the ability to settle a dispute are still not fully worked out, although I imagine folks will figure that out, such that we can kind of have a full closed loop system. But if that falls in

place and you wrap it in a legal agreement, there is not much that a court can do to unwrap it if it's done appropriately and if the decision is administered in a reasonable way. And there's obviously exceptions to that, but it makes it really, really difficult to do that. And that means that we can kind of move into an entirely digital framework, which is something I'm interested in and kind of shed some of the more traditional aspects of the legal system, et cetera. Let's dive into unwrapped DAO's a little bit later. But there's also, I mean, so basically in the, when you talked about the rap DAO's, you kind of talked about giving the DAO's a legal personality of like some sort of legacy system. There's also novel legislation that actually

sees Dow's as a legal, that kind of imbues them with legal personality in their own right, right? Can you talk about the legislation that's kind of come into force there that's going to come into force soon and how you see that? Yeah, sure. So in the U.S., there's been a couple attempts at kind of legally recognizing DAO's. The first one, it was in the state of Vermont, which passed an act called the BB blockchain-based LLC. So the BBLC, it was a really important, but pretty narrow act that just said, if you have an LLC, you can designate it a BBLC, blockchain-based LLC, and that's going to be fine under Vermont law. I, along with other folks, have been working with some state senators in the state of Wyoming, which has passed a number of bills related to

blockchain technology, Caitlin Long, who I imagine many of the folks that are listening are aware of. She's been historically spearheading that effort, although I think other folks are jumping in increasingly there as well. And the idea is, and this is a bill that's been pushed through a committee in Wyoming, is that you'd be able to set up a DAP in Wyoming. So, you know, XYZ DAW. So it can actually be called a DAO. They'll be recognized by the state of Wyoming. You'll file one document.

So instead of extensive paperwork, and if you've ever set up a business, you get a stack of paperwork that your lawyer or lawyers will prepare. You have to sign a whole bunch of different things. It's very confusing. So the thought here is let's strip that all away. You can file one document. It's called an Articles of Organization. It identifies the underlying smart contracts that are managing the system.

You're designating the DAO as either a member-managed DAO or one where humans are involved or an algorithmic DAO where an algorithm is involved. You can put in place any legal provisions that you need to either account for things like dispute resolution, modify certain provisions to just make sure it fits neatly onto your organization. And then you can follow this document and you will have a DAO. And what's also interesting about what Wyoming is pushing towards, they've authorized this, although it's not built yet. They want to make it feasible so that you can file things in Wyoming via API. So I think we're rapidly getting towards a future where you're going to be able to set up

an organization, you know, hopefully from command line, right? You'll be able to load up terminal, type in a couple of commands, and, you know, push that to Wyoming, push some code to Ethereum, and your organization is set up. And on some of the automation tooling, that's in part why we built things like Open Law. You should be able to automatically generate those filing documents as well, right? That's incredible. Maybe pay the fees in Ether as well, like just right there in your code. Yeah, or, you know, or USDC, I don't know, or, you know, but something that presumably and will hopefully be settled on Ethereum.

And that's amazing. And not only is that amazing that you could soon be able to do that, it's also amazing that the cost of setting up the organization should go down, right? So just like we saw it's software, if the agreements themselves, this document that you need to file become standardized or there's a couple templates that people can use, the smart contract code is standardized, something like the Mollick framework or some future framework.

and the cost that Wyoming charges to set up an organization are not unreasonable, it's several hundred dollars, which I know it may be unreasonable for some, but in the scheme of things is a lot better than where we are today. That's pretty incredible, right? Instead of spending tens of thousands of dollars talking to lawyers that are going to run you in circles, putting together agreements that in many ways are unnecessary or unnecessarily complex, you'll be able to hopefully, you know, treat it like any other. software, just another task that you need to do. Another thing that you can click off your checklist.

The very idea of interacting with any government authority over an API is something that I never thought I would see in my lifetime. Living in France, I never thought this would be something I would see in my lifetime, but this is very, very cool. Yeah, so, you know, the API piece, I think they're well-intentioned. I don't know how far along that is in development, but I think that that's where we'll get at some point. And then at the same time, I think going back to what we were talking about before, then we'll see experimentation on governance and really have a hopefully a framework to begin to do that. Can I just loop in there? So basically, if you talk about the internal governance of the Dow, I assume that the state of Wyoming won't be able to butt in there, right? So because you can have

all kinds of internal dispute resolution that Wyoming wouldn't be able to facilitate and that kind of that holds? Is that so? And so basically the least, the least, personal personality that the DAO has is only in external circumstances. So basically it can enter into a contract with like a supplier or it can it can contract people to do things for it and can open a bank account. But I assume there's no dispute resolution and you can't, you can't sue a fellow Dow member in front of a Wyoming court for breach of contract or whatever, I assume. I mean, you could. The Wyoming courts would have the ability to administer any disputes for any Wyoming entity,

but in general in the U.S., the U.S. loves contracts. We love them. We think that they're absolutely fantastic. What legal academics will call this is private ordering. So we enable to a great degree and probably to the greatest degree in the world, the ability of individuals or groups of individuals to organize their affair using contracts. And the state has very limited ability to upend that. and that includes to decide how you want to administer disputes. You want to use Aragon Court, and that's in a contract, and that's written down clearly.

All folks have signed it. You're going to use Aragon Court, right? There's not going to be much choice. So if you walked into Wyoming and talked to a judge there, he's going to say, well, look, in this contract, you agreed to use Aragon Court. So what are you doing here, right? Go to Aragon Court and get that administered. And if you're trying to kind of work around that, you're not going to have much wiggle room to do that.

And in general, the state doesn't really get into the affairs of private enterprises, right, whether that's a corporation and or a company. And what that would mean is also a DAO. There's obviously lots of exceptions to that, but in general, they're fairly narrow. And that's exciting. There's certain abilities, though, in this statute for Wyoming to basically unregister a DAW if it goes completely haywire. and that's something that we were concerned about. There's also, if you're going to have a purely algorithmic system, there's a requirement.

Now you're getting, you know, like a charter from the state of Wyoming, so you have to give something up. And what we propose that folks have to give up to set up entirely algorithmic system, so something to kind of manage this future autonomous car that I think folks are thinking about. It's just that it's upgradable, right, in some capacity. There has to be some ability to upgrade it. So that's a trade-off that I think the state senators, at least those on the committee, thought was somewhat reasonable. And that may change over time as it goes through committee, et cetera.

One of the dispute resolution things that come to mind, I don't know if you guys have thought about this, but what if one of the members of the DAO is another DAO? And how does that, how would one then handle dispute resolution when you have perhaps like a sort of cascading DAO's, right, that at some point have ownership in a Dow and there's a dispute that needs to happen there, right? Or dispute resolution. Yeah, well, that happens all the time, right, in traditional legal arrangements, right? Like a corporation can be a shareholder in another corporation or a corporation could be a shareholder in an LLC and the LLC will have an agreement that has an arbitration provision.

So you just have to find kind of the operative agreement to deal with the dispute and then you look to that. So that's why, to your previous point, I just think that there's probably going to be some light pinning with some legal documents. It could be something like what we're building on the open law side where you're able to automatically generate them for more complex things. It could be something even like in terms of service or some sort of click-through like related agreement that that will kind of deal with some of these types of questions. Can I just ask one last question on the Wyoming framework? So basically, if your DAO goes haywire and it's kind of redirect, registered by Wyoming, what then happens? Because, I mean, basically, it's on the blockchain. It doesn't, you can't unsummon it. It's still there. So basically, does it no longer have legal

personality or what, what? Exactly. So it defaults back to a general partnership. Is that it or is that exactly. Yeah, that's the thought. I mean, there's not, the state can't, they can't take it down, right? You know, the one thing, if it is upgradable, that could be conceivably part of some sort of court order, right? That, you know, you need to upgrade it so that it no longer is operating. You know, these are the edge cases. I imagine over time those edge cases will become a little bit more magnified. So that's the concern that folks have. But as you know, and I'm sure many of the folks listening in know, once something's deployed in Ethereum or other, you know, comparable blockchain-based systems,

it's hard to put the genie back in the bottle if people want to use it. So that's some of the challenges. This is so cool. I'm super excited to see how this actually plays out. And so it's going to be wild. What about if a Dow summons another Dow and, you know, through this API, like, creates another legal entity. Can we have a Dow owning a Dow in Wyoming?

Yeah. I don't see why not. I mean, it's the same thing. Traditional corporate structures, you'll have a corporation that has a subsidiary, right? So, you know, with the LAO, we're already members of other DAWS, and that's been mediated entirely through just smart contract-based calls. So it's already possible to do this. So, you know, the LAO is a member of Pieda.

And so the members voted that they wanted to join Pieda, and then we did, right? So once the vote happened, right, smart contracts were triggered. once the smart contracts were triggered, it interfaced with the Aragon Dow that undergirds PIDO, and we joined. So, you know, I think it's going to happen. There's nothing technically limiting that ability to happen. Yeah, there's nothing technically limiting it.

I just wonder what kind of complexities might arise when you have sort of like DAOs and child DAWs and child DAWs being completely automated and autonomous themselves forming new DAWs through some sort of an API and then like, I don't know, it just seems like a beast nest of complexities to me. With some sentient AI administering the entire thing. Yeah. I mean, not even an AI. It could be pretty simple business logic. I mean, I think like to come back to the Mike Hearn autonomous vehicle, I think like in his example, there was this notion that at some point, if the vehicle had

sufficient capital, it could invest in other vehicles, and those would be sort of autonomous vehicles in themselves, and there would be like a child vehicle or the other. So this, this, this kind of thing is always fascinating me since I've heard this story. So this kind of like just awakens all those fascinations again. Yeah, again, I don't, I don't think that there's, there's nothing conceptually that would limit that. There's a couple technical requirements in it. The entities need to have a registered agent, which is basically like a point of somebody to contact in the state of Wyoming, so that would have to be accounted for. But you know, you don't need to have a manager, like there's nothing necessarily saying that you need to have a manager of an organization.

You need to have, you know, some legal person that would probably file it. So that's a big question. I don't know what's going to happen with this API and whether or not there'll be some sort of like technical issue that may muck up what you're just describing, but I don't see why you would necessarily not want that to occur. I mean, we already in the, enable humans to do that, why wouldn't some sort of algorithmic system have the same general ability to do that? I agree, yeah. But it's a good question.

I haven't fully thought that through, but I'm going to make sure to spend some more time thinking that through over the next couple days. Maybe your next book. So if you look back at the history of organizations, it kind of seems weird now, but I mean, you didn't always have shareholder-based organizations, right? So basically, if you look at the Dutch East India company, that was founded, I believe, in 1602. And that was the first one of those.

Do you think this is that moment again? Do you think Daos are going to have an analogous position in our society and legal system? So my belief is yes, right, for the reasons described before. You have an organization that can propagate anywhere around the globe via the Internet. And I do think smart contract-based organizations will just be cheaper and cheaper to administer. And presumably over the next X number of years will develop superior governance mechanisms. And that's a big question. And you can disagree with that.

But that's my belief. So I think that this is going to be the default, almost like how folks argue that Bitcoin is the soundest money. And obviously all money over time, at least as the argument goes, will gravitate towards the soundest. money. I personally think that DAWS will be and are the soundest organization for the digital age. And that means that increasingly I think you're going to see more and more organizations begin to operate via DAWS. And this is not fully surprising. So you mentioned the Dutch East India Company, but if you even go further back in time, people have been setting up organizations of different stripes for millennia. You know, Romans had limited liability entities to deal with trade.

and shipping. Obviously, we saw the Dutch and then English state chartered corporations that really led to the age of exploration with all the benefits and the downsides related to that. In the U.S., though, you know, we came up with the state chartered corporation. That was 1811 in New York. So we said, why do I have to ask permission from the state? I should just be able to set this up any time I want if I satisfy these requirements, a very American way to approach it. And then corporations became the dominant form. When there was the railroad boom in the 18, you know, in the 18, mid to late 1800s in the U.S., it led to the birth of preferred stock or different forms of stock that a company can have, which is what fuels venture capital investing. When we saw

the increasing internationalization finance, we saw the birth of the limited liability company, which is what predominates in the U.S. now for many businesses. So I think for each technical age and each technical innovation, we've seen kind of a subsequent shift in the way we decide to organize our affairs. And I think that DAOs are that shift for the Internet. There's no reason why you shouldn't have an organization that can stretch across the globe that's lightweight that kind of reflects the behaviors of how people interact. They don't necessarily want to join together as like partners, like venturing out to do something. they don't want necessarily to have somebody in charge of them in some sort of, you know, top-down hierarchical way.

They want something that's looser, more at arm's length, and that relies on software so they can actually begin to coordinate things because it's a bit more trustworthy than these, you know, paper-based agreements that are hard to administer or expensive to put together and specific to a particular jurisdiction. So I just don't see how Dows don't win in the long run. And I think we're starting to see that play out. I don't know if you've looked at the numbers, and I do like numbers, but if you go to platforms like DeepDow, which is a really great platform if you haven't been there, that's taking a stock at the Dow ecosystem. At the beginning of this year, there was about a little under $10 million worth of digital assets in DAOs, and it's up to almost $500 million.

And the last time I saw growth like that, I think it would be defy, right? When we saw, you know, in 2017-18, when we started seeing the first D-5 projects kind of emerge, there was a couple people, you know, a couple projects that were getting some traction. But I think in the DAO ecosystem, we're going to see similar levels of growth. I think that's particularly true for the DAO's that you mentioned before, those managing open-source projects. I do think the developers have a significant amount of demand to either have their assets or the entire project kind of managed in a more democratic participatory way.

So I think we're going to see a lot of growth here. And then as the blockchain ecosystem continues to grow, it eclipses more than a trillion dollars in assets, you know, tens, if not hundreds of trillions of dollars, then it's just going to be difficult for organizations to compete. And they're going to have to, you know, they're going to have to copy it, just like they always have done. So that's how I see things playing out.

Super cool. So just before we dive into the current DAO ecosystem, one last theoretical question on DAO. So basically, we've talked about rap DAO's in both legacy rappers and novel rappers. What about unwrapped DAO? So if you don't actually have a legal wrapper for your DAO, is there any way to not automatically default into becoming a general partnership? Yeah, so this is the tricky part. It's going to depend on whose members and it's going to depend on all the jurisdictions in which they reside. So at least in the U.S. and in Europe, that tends to be, and I'm not a European lawyer, but this is my understanding, that tends to be a general partnership. That's also why I think it does make sense to have some sort of contract in place

amongst the members. I call those contractarian dows. So you can have a contract, even if you're not legally recognized, just governing the affairs of the different members and potentially limiting or waiving rights that you think are sensible as a group to the extent permitted by law. And that's a complex question, you know, which law governs, you know, what rights you're able to waive and, you know, some things you can waive, some things you can't when it comes with partnership. But at least I think that gives you some shot at organizing things and dealing with these risks. It's, you know, being a lawyer is a little bit like being a security researcher.

You're not thinking about the happy path. You're thinking about the bad path, right? And we saw some dramatic bad paths with like the Dow itself. where there was big questions. And if there wasn't the hard fork and people really lost their shirt, my sense is the courts would have weighed in at that point in time. But, you know, dealing with some of those downside risks, I think, are important, particularly if you're trying to build something that's, you know, potentially massive.

We're even seeing that in the MakerDAO ecosystem, right? As MakerDAO is becoming more and more important, as DIP is becoming a more essential asset to the crypto ecosystem and potentially other ecosystems, these types of legal questions about who's responsible is the foundation. is it's somebody else. They're beginning to come into focus. And I do think agreements that are put in place

can kind of stave off those forms of what I call like regulatory attacks in the future. So that's something folks should consider. And I think there's some great projects that are already considering that. And I think we'll start to see some more following that path to. Because legal recognition is not for everybody, right? So either philosophically or otherwise.

But, you know, we decided to go down that path. And the reason we kind of thought about it is it's a little bit like Coinbase. I know Coinbase is a bit of a touchstone, but they took Mount Cox, right? They just copied Mount Cox and just said, hey, let's do it in the right way in the U.S. In many ways, what we're trying to do with the LOW and this ecosystem is explore the same thing. Like, can we do this in the right way just so we can push the ecosystem forward? You know, we know that that's not going to be the right approach for everybody, though. Speaking of ecosystem, so we've talked about lots of different DAOs today, we at least mentioned a few, you know, looking at the different DAOs exists, do you have a way to categorize them?

Like, how would you kind of put them in different, for different use cases or applications? Yeah, so I think one major category is this idea of using a DAO to coordinate an open source project. I think we're seeing that first emerge in the blockchain ecosystem for DFI projects. But I don't see any conceptual reason why that should be limited to just blockchain projects. And I think we're seeing interesting experiments like Deb Protocol and some other interesting projects that are trying to kind of bring comparable models to other open source projects. So I think that's one area. I think the second area would be what we talked about before, these like base protocols. So that's an argument.

I tend to think that they are kind of Dow-like in structure, things like Bitcoin and Ethereum. So I call those protocol level DAOs. And then I think that there's a lot of potential use cases around pooling capital. So if you think about a lot of industries at their core, what are they doing? They're pooling and deploying capital. So venture capital is an obvious example there, right? People pool together capital, make investments into projects. But if you think about media, it's not that dissimilar.

A label that may be funding music or some other form of creative endeavor, they have capital, they have folks that decide where it gets deployed. They pool capital and decide where it gets deployed. Very similar. So I think you're going to start to see a lot more DAOs in that ecosystem. If you think about insurance, it's just pulling capital and deploying it. If you think about other forms of fund structures, whether that's hedge funds, private equity funds, et cetera, pulling and deploying capital.

And really any corporate form is not that dissimilar, right? If you're running a dev shop, you're pooling instead of intangible capital. It's human capital, right? So you're pulling human capital and deploying it. So I think that the pooling of capital is the other major category, and that's the one that we're just beginning to explore with projects like the Liao and Flamingo Dow and a handful of other examples here too. So that's kind of my broad categorization there.

You also have some sort of coordination tools, right? So basically, for instance, there's Keeper Dow, which hasn't been around that long. So basically for organizing the extraction of MIVI is probably how I would characterize it. Do you have any other DOWs that are centered around coordination and basically division of assets? Yeah, so I think that this is an interesting potential new frontier for DOWs. So viewing a Dow is almost like a point for coordination or also a point for signaling. So you can view a Dow as almost like a bit like a.

a web of trust of some sort. So if you're like interested in a particular topic or a particular project, you can, you can see DAO's potentially be useful for curation or dissemination of, of certain things. So an example, we did this in, or for Flamingo Dow, which is an NFT-focused Dow, we had a Dow drop, where an artist was able to drop onto all the members, an NFT that, that they created. So they used the DAO as kind of like a vetted web of trust of folks that were interested in, you know, NFT or digital art-related things. So I do think that there's going to be more forms of use cases for DAO's. I just think we're just starting to scratch the surface.

And what we're doing is looking towards previous models and trying to apply them in the digital context, a little bit like Web 1. And then we'll start to see some more kind of emergent things that we may not be able to think about. Things like Keeper Dow or things like using DAWS for curation or other aspects like that, that could also be potentially interesting.

So I don't have all the answers, but I definitely don't. But I think that there's lots of ingenious things that we'll be able to do with organizations now that we were effectively turning them into software. So what's the outlook here? Where do you see this space evolving in the next, say, decade? And what are some of the risks that you might perceive? I mean, one of the risks, and I like I mentioned this in the, in our shore rundown, but I think given the current context with the social media censorship

that we've observed, is there a space for DAUS to occupy some of that space? And what are potentially some of the risks that that might incur on society? Sorry, I went from a broad question to a super narrow question. No, well, from my vantage point, I hope that blockchain technology can come and hopefully address some of the issues that I think we're seeing with central social media platforms and other services. And hopefully by banning together in these more loose digitally native structures, we're able to replicate, if not improve, improve what we're seeing on social media. Otherwise, with all the caveats about scalability and all the other issues,

with some of these broader, kind of more consumer-focused applications will have. I think the outlook for DAWS is bright. I think it's one of the core use cases. It's something that's animated, both the Bitcoin and Ethereum, communities for a number of years now. I think the tooling is coming into place. So we have shaken off this PTSD Dow. I think Malik Dow was wildly innovative. I think Amin and team who put that together really deserve a pat on their backs because I think it was tremendous work. I think we're going to continue to see some kind of core innovations around the underlying smart contract frameworks.

So some issues that DAOs are facing are not just regulatory questions. They're actually just nitty-gritty, technical issues. It's very expensive to deploy a DAO. It's very expensive to run a DAO in terms of gas and other other issues. So I do think we're going to see innovation in that realm. You know, on the open law side, we've been working on this. We've been putting together what we consider to be the third version of the Mollick Dow framework, which means that you'll be able to set up a more modular Dow. You'll have the ability to vote on governance-related decisions at no cost and transfer assets if there's no evidence of fraud and effectively the cost of transferring that asset, which is a couple bucks of gas, at least when things are not entirely insane, which we think will lower the cost

related to operating DAs, which is a big pain point and a problem that needs to be solved. I think what we were talking about earlier in the show related to the appropriate way to get people involved and participating in these structures is something that needs to be solved. but I think we're getting close to having at least frameworks where people can begin to experiment there. And then the last is regulatory questions. So we may have figured out a way to set these things up, but I'm not satisfied that we can only set up a Dow in the U.S. that's under 100 people. I want to see those DAOs that are tens of thousands of people.

So I do think that there's the long slog of convincing the gray-haired and gray-beard politicians that have a disproportionate weight on our lives, that it's a long slog of convincing. okay for people online to organize and do something productive together. I think that that's a pretty reasonable argument to make, but, and something that does need to be, does need to be made, and hopefully we'll be able to begin to do that. Yeah, I mean, but if I buy my regulator hat on for a second, it's a beautiful, great hat. It's a green hat for some reason. But if, if I, if I put that hat on and, and, and I think, okay, well, this is great, but I mean, a Dow can also allow for extremist groups to organize,

for Daos to also serve purposes that are not in the common good, what is your answer to that concern? I think that's always a concern, right? But people can band together to do bad things all the time, right? And plenty of people set up legally recognized entities and perpetuate a tremendous amount of harm to begin with. So I think it's just like anything else. If you're putting together a DAO to set up an assassination,

market or something crazy like that. And it wouldn't be a good conversation if we don't dive into those types of questions. You know, there's other regulations that you can, you know, there's other regulations that can apply there. And if folks are doing bad activity and can be identified and that may become more challenging over time as, you know, cryptographic primitives become easier to implement, et cetera, then, you know, I think we're just going to have to grapple with these types of questions. I don't know.

You can't, again, put the kind of genie back in the bottle. You just have to kind of deal with the hand that's dealt. How large do you think the overlap between regulatory reach and DAWS will be? So basically, if you look at technology where it's now and where it's going, you can kind of see that it relies on centralized infrastructure increasingly less. And we see the rise of privacy-protecting technology on Ethereum. and other platforms. So in principle, it would be possible or feasible to actually partake in Daos completely anonymously without being able to be traced. Do you think DAO's will evade regulatory

capture? I mean, basically, because laws are only as good as they are if you can enforce them, right? Basically, non-enforceable laws don't really, I mean, they just discredit you as a state. So how do you resolve that conundrum? It's a great question, right? We saw early examples of this. I remember there was a project called Damon Dow who was claiming to be purely anonymous and trying to explore this, you know, this vector. I think there's always just meta questions just about how anonymous can you actually make things. So even with more advanced privacy preserving tools like tornado cache, we've seen that there's still holes that people can poke through to identify people. it's hard to kind of achieve that pure anonymity. I guess that raises a question as to whether or not,

even though it's an interesting theoretical question in practice that will actually play out, you'll have some completely impervious system with no way to de-anonymize things. But I think it's an issue, right? I think as more anonymizing technology gets deployed and as the coordination tools get better, it can be used for good or bad.

You hope that people, and I tend to believe this, that people are generally good. And if folks are perpetuating something bad and they're identifiable, there's other tools to do that. But this is a risk that's been known for a while. We can go back to the Cryptoanarchist Manifesto that Timothy May put together, where he prophesies that strong cryptography, other forms of systems, including things that in my mind and my read seem to intimate and kind of, prophesied blockchains, this was written in like the late 1980s, early 1990s, are going to create a lot of regulatory challenges. But in my mind, again, you can't go backwards, right? So you just have to

deal with the issues as they emerge. I will say that we didn't have this pervasive surveillance systems that we've been putting in place globally over the past 20 plus years before the 1990s, right? So we were able to stop bad actors then. I'm assuming that we'd still be able to stop bad actors in the future, even if our ability to track and trace things is not as strong as it may be today. Your word in the politicians' ears, I think this is a great note to wrap up on. Techno-optimistic to the maximum. I love it. Fantastic. Aaron, thank you so much for coming on. Yeah, thank you so much for having me. I really appreciate it.

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