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Fresh off the press:
▹ Week's Top Signal
▹ Vitalik on DAOs <> Decentralization
▹ Kevin Buist on Metaverse <> Meta
▹ Jake Brukhman on AI <> Web3
▹ Seed Club Cohort 05
▹ FF Labs new Drop: Cut The Cord
▹ ... much more
Plus: Market Pill, What else is Poppin'
Let’s get into it.
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Regulators are heating up in the fight against crypto. Now targeting DAOs.
This past Thursday, the CFTC announced charges against the founders of bZeroX, the company behind the bZx protocol. The founders were fined $250,000 for allegedly “illegally offering leveraged and margined retail commodity transactions in digital assets.” More importantly, though, the CFTC also brought charges against Ooki DAO, the DAO governing the bZx protocol.
“The order finds the DAO was an unincorporated association of which Bean and Kistner were actively participating members and liable for the Ooki DAO’s violations of the [Commodity Exchange Act] and CFTC regulations,” the Commission stated in a press release.
Despite warnings that DAOs may be viewed by regulators as unincorporated associations by default, this was a shocking development to many folks working in crypto today. Gabriel Shapiro tweeted, “already seeing DAO delegates talking about quitting their roles,” referring to many folks who are afraid of potential legal action for being active members of DAOs.
Others, like punk6529, claimed this was obvious: DAOs today are not decentralized or autonomous, and asking community members to vote on decisions might actually increase risk to your organization.
But even within the CFTC, not everyone agrees with this decision. In a dissenting statement, CFTC Commissioner Summer Mersinger called the action “blatant regulation by enforcement” and said it fails to “rely on the legal authority” of the Commission’s mandate.
TAKE NOTE
The need for DAO’s to directly grapple with their legal status is becoming very clear, very quickly. As DAOs become more relevant, onboard more people, and deal with more capital, issues like these will need to be handled swiftly in order to bring these organizations to the masses.
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DAOs are not Corporations: Where Decentralization in Autonomous Organizations Matters. Vitalik dropped an essay this week on DAOs that got a lot of people excited. He drew a distinction between two types of DAOs that we’ll see in the future: DAOs that look like governments, and DAOs that look like companies. He makes the argument that we'll likely have a small number of DAOs that look like governments, and many more that look like companies. Today, the “government” DAOs are some of the major protocols in the space, such as Uniswap or ENS. Many of the organizations that we call “Service DAOs” and “tokenized communities” fall under Vitalik’s “DAOs that look like companies” umbrella, and are able to move much more quickly in getting work done and funding projects. However, Kyle Samani of Multicoin Capital argues that the essay “completely misses the importance of using token incentives to drive novel capital formation.” All in all, these sorts of distinctions between organizations that call themselves DAOs will be critical to the development of the ecosystem.
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Access Management Without Tokens. Reka from Guild has a message for us all: you can manage your web3 community without issuing tokens. She argues that communities need three things: access, rewards, and cross-platform identity. We can build infrastructure that handles these three things in a decentralized fashion without necessarily needing to distribute tokens to community members. Guild, she says, is the infrastructure for platformless membership management that enables all of this without needing a token. Reka also mentions Platformless Quests, an essay she wrote with Forefront contributor Jihad that covers many of these same ideas.
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The Invisible Metaverse. In this essay for Zora Zine, Kevin Buist makes it clear that the metaverse that Meta and other large corporations want to bring us is… bland. Kevin argues that Meta is attempting to build a metaverse that fades into the background, but is completely owned by the company. Meta wants to build tools for universal and unquestioned human interaction on the internet, he says, but “hiding a point of view is not the same thing as not having one.” This piece explores many of the parallels between Meta’s strategy to rise to (and fall from) social media dominance, and why this time is different. “The name change is an attempt to deliberately confuse the metaverse as a concept with Meta as a company. The hope is that the vast user base won’t notice the distinction.” This is a very insightful piece highlighting many of the issues underlying corporate metaverse strategy, and why the open metaverse will be built by the creators and users that are core to the culture of the internet today.
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Open Neural Networks: The Intersection of AI and Web3. As more advanced AI breaks into the mainstream through LLMs like Stable Diffusion and GPT-3, the intersection between web3 and AI becomes increasingly interesting. Rishin Sharma & Jake Brukhman explore this intersection by highlighting potential use-cases for web3 in AI development. For example, the duo describes what a DAO might look like that is focused on rewarding and validating data labeling in a decentralized fashion. Additionally, decentralized governance may be used to fund and allocate resources to train community-driven projects. Web3 allows open source projects to be as financially lucrative and further rival those that are led by private investments by Big Tech. This is a fascinating overview of many of the developments at the intersection of AI and web that we might continue to see in the near future and beyond.
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DAOs Treasury Management. This essay from the DAO Research Collective observes that a DAO’s treasury is crucial to the longevity of the organization as it holds the financial fuel for future development and growth. This piece dives into two factors in treasury development: diversification and liquidity provisioning. On the diversification side, the piece explores token sales, revenue, and DAO debt as potential avenues to achieving a truly diversified treasury. On the liquidity side, mining incentives and protocol-owned liquidity are discussed, amongst other more novel methods. All in all, it remains to be seen how effective many of these treasury tactics will be given their relatively limited use across the ecosystem. Besides token sales, most DAO treasuries remain in native tokens, ETH, and stablecoins, often at unfavorable balances.
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Web3’s Missing Killer Social Media App. Doug Petkanics of Livepeer writes that web3 is still missing it’s killer social media app, and it’s not going to be a X-for-web3 shift – it must be something fundamentally different than what came before. He highlights some of the things that web3 has really brought to the table over the last 5 years, including crowdfunding, capital formation, digital ownership, and global permissionless coordination. Based on these things, what might the killer social app be? Doug argues that it might be a web3-native video CMS or Zoom, but those opinions may be biased by the fact that they’re extremely similar to the company he has founded. His idea around DAOs focused on curation is heavily aligned with Forefront’s thesis around tokenized communities, but we’re biased as well :). All in all, this is a solid piece if you’re looking to break down what a web3-native social experience might look like.
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A Discord Wellness Experience - Cut The Cord. FF Labs is back with another drop: welcome to Cut the Cord, a wellness experience designed to help anyone with soul-crushing Discord fatigue. This was a collaborative project developed by members of the FF community designed to highlight the difficulty of living with never-ending Discord notifications and “message debt.” The experience is designed to be tedious and anxiety-inducing, yet still enjoyable, ending with a special surprise for folks who make it through the entire journey. We hope you enjoy! If you’re interested in working on another drop with FF Labs, join the Discord!
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Market data on the last 7 days. Last updated Sept 26, 2022
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Updates from the DAO
— This week we published a recap of our Season 2, give it a read if you missed it. We also announced "Infinity" Merch drop a limited edition artifact of Season 2. The drop is live on Metafactory and will run until October 5, 2022.
— FF Labs dropped Cut The Cord "a wellness experience designed to help anyone with soul-crushing Discord fatigue. FIND ZEN.
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◎ Check out FF Signal for more daily web3 feed
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