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Fresh off the press:
▹ Week's Top Signal
▹ Adjectives by Forefront
▹ FWB Fest goes Mainstream
▹ Jesse Walden w/ "Token as Products"
▹ a16z on Treasury Management
▹ SuperBenefitDAO on Permissionless DAO
▹ Foobar on NFT Royalties
▹ ... much more
Plus: Market Pill, What else is Poppin'
Let’s get into it.
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Arguments about "how DAOs will scale" often come down to a single word: squads. It’s argued that small groups of high-trust people are where coordination happens with the least friction, and that we should design around these groups. A Forefront Journal essay from Scott and Maxwell of Gitcoin last week argued the same. However, they made one key observation:
“What squads gain by working through these tradeoffs and integrating into larger groups is, at its end point, the same benefit we all get by participating in society. By introducing structured agreements we can support each other's ambitions… and ultimately work together towards grander visions for the future.”
The argument here is that community is at the heart of all DAOs, and DAOs are really optimizing for alignment between small groups rather than every member as an individual. At its core, this means that DAOs are not just communities, but platforms for communities to coordinate along a shared set of rules and values.
Li Jin offered a tangential perspective in a tweet last week: “Tokenized communities will build media, tools, and applications to serve various needs of their community--first using those tools themselves as “customer zero,” then expanding to serve other communities.” As these organizations develop their own sets of goals and values, they will need to build tools and structures not necessarily to solve those problems, but to align groups in the community to be incentivized and empowered to solve them.
TAKE NOTE
Tokenized communities and DAOs are still early, but we’re honing in on a key lesson that every single organization, community, and startup will need to design for: the core primitive of these organizations is the squad or the project. Everything else comes second. Understanding this will unlock a massive design space that we’ve barely begun to scratch the surface of.
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Inside ‘crypto Woodstock’ where technologists plot a utopian future. FWB Fest has received almost unanimously rave reviews, and this piece from Taylor Lorenz is no different. Lorenz frames the festival as “crypto Woodstock,” which is pretty telling of the culture that FWB has managed to build. The piece dives into the origins of the DAO, including its early members, fundraise, and more. A quote from Alex Zhang really hits home: “It started as a scene. Most people who are part of a scene can’t recite the mission statement of a scene.” That’s true for almost all tokenized communities, but especially FWB. The group has managed to be at the frontier of culture and crypto without rigidly defining their endeavors in a way that would stifle creativity. Awesome work across the board.
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Tokens are Products. This piece from Variant has a simple but powerful thesis: tokens are products, and their design space is ownership. The logic follows that if great products optimize for excellent user experience (UX), great tokens should optimize for a great ownership experience (OX). A token, like a product, has a job-to-be-done. Giving too many “jobs” to the token makes the experience confusing and difficult to use. Giving unclear jobs to the token raises many of the same issues. Ultimately, we are designing token economies for members of specific communities to solve specific problems. We should view tokens less as an add-on to communities and more as the core product that turns a community into something greater.
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What Does “Ownership” on the Internet Mean? Liz Hagelthorn explores a pressing question: what does ownership on the internet really mean? The answer? It means a lot of things, but not necessarily in the direction we’ve been headed. The promise of the “creator economy” is creator empowerment, but what we’ve really seen is more work be created for creators in order to continue to make a living. Platforms still own the vast majority of data, relationships, and revenue from creators’ work. Liz outlines 13 recommendations for better ownership on the web, including data portability, tracking and selling assets across marketplaces, token-gating, and much more. Ultimately, web3 tools are only as useful as the way they are implemented. We have a long ways to go to building a truly liberating creator economy.
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Treasury Management: A Guide to Navigating Downturns. This piece from a16z Crypto offers some extremely practical advice on treasury management during a market downturn. For example, understanding monthly burn and maintaining operating expenses in cash is critical to the survival of any business, and DAOs are obviously included here. Figuring out how to properly invest treasury assets while maintaining stablecoin reserves to run the organization is also an important problem to solve for. Additionally, outsourcing some of your work to DAO tools that can support various processes can help achieve major goals without having to build everything internally and waste additional resources. All in all, this advice is a straightforward and helpful reminder of the work that needs to be done in order to ensure the sustainability of DAOs across the ecosystem.
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On Royalties. Foobar throws his hat into the royalty conversation with a strong argument: royalties are unenforceable, and thus not good fits for blockchains. Creators who fully lean into the cryptonative mindset of creating decentralized bearer assets with thoughtful mechanism design will be richly rewarded. He argues that royalties not only misalign incentives between all parties involved, but that the centralization of their implementation actually destroys the value proposition. Instead, creators can sustainably monetize their work through creator-owned liquidity, token-gated sales, companion works, and even Harberger Taxes, which have been endorsed by Radical Xchange and other organizations promoting more equitable economic systems throughout crypto and beyond. The design space is still very rich, and royalties aren’t necessary to ensure that artists are sustainably supported by the tools we’re building.
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Minimum Viable Permissionless-ness. Rather than thinking of permissionlessness as vague web3 ideal, this piece explores it more as a principle to design from. What dynamics are we hoping to produce through employing “permissionless access”? How can we balance permissionless access with the need for security, privacy, capture resistance, etc.? Essentially, the piece argues that access to the network (possibly defined by token ownership) should be completely permissionless. Then, anyone can attract other network members to what they are working on and the vision of the network that they would like to see. This thesis takes inspiration from the “Go Fork Yourself” piece from Not Boring: the beauty of permissionless organizations is not that anybody can contribute, but that anybody can leverage the network effects to establish their own version of the organization.
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Efficient DAO Design. @0xJustice from BanklessDAO offers a great overview of efficient DAO design. First, he argues that DAOs gain efficiency from decentralization. “Decentralization isn't one way of doing things — it's the only way in complex adaptive systems. It's the edge computing of efficiency.” That is an extremely powerful argument on which to build. However, 0xJustice argues that decentralization can be designed by a small, centralized group: Bitcoin was not designed by committee, but rather by an individual (or at least, that is what we believe). There is an "allergy" in DAOs to anything that feels familiar. “This is naive. We can't design DAO hyperstructures in a historical or academic vacuum.” Great, useful piece for any DAO operator or aspiring DAO designer.
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Over $100 Million Worth of NFTs Stolen Over the Past Year: Report. According to this report from Elliptic, over $100 million worth of NFTs were publicly reported as stolen through scams between July 2021 and July 2022, netting perpetrators $300,000 per scam on average. Tornado Cash was the source of $137.6 million of cryptoassets processed by NFT marketplaces and the laundering tool of choice for 52% of NFT scam proceeds before being sanctioned. The report outlines some of the major problems and vulnerabilities that led to these problematic actions, the current regulatory environment, and how we as an ecosystem can combat these problems through policy and better UX design. Still, the numbers here are staggering, and it is understandable that the space has a negative impression from the outside.
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Market data on the last 7 days. Last updated Aug 29, 2022
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Updates from the DAO
— We published An Exploration of Internet-Native Organizations, by Scott and Maxwell of Gitcoin.
— We proposed Adjectives to Nouns Prop House. If you hold a Noun, make sure you got vote here.
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◎ Check out FF Signal for more headlines
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