Hey fam, issue 91 highlights:

▹ Week's Top Signal
▹ DAOs Legal Framework PT2
▹ Orca on Trust in DAOs
▹ Scott Kominers on Metaverse Land
▹ Controversial $OP Airdrop Proposal
▹ BAYC going to Hollywood
▹ ... much more
 
Plus: Market Pill, Member Spotlight, What else is Poppin'

Let’s get into it.

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Digital asset insider trading... Former OpenSea Head of Product Nate Chastain was arrested Wednesday and charged “with wire fraud and money laundering in connection with a scheme to commit insider trading,” according to a press release from the U.S. Attorney’s Office in the Southern District of New York. The case opens up a whole slew of questions and concerns for the ecosystem at large.

Interestingly enough, the case is not focused strictly on Chastain’s manipulation of the NFT marketplace and insider trading. Instead, the case focuses on wire fraud and money laundering he supposedly committed in connection with the insider trading scheme that he admitted to. This means that if someone thought trading on inside information about NFTs is not against insider trading rules (because they are not securities, for example), they could be right and still go to jail.

Despite the fact that Chastain only sold $40k worth of NFTs in the scheme, he is facing up to 40 years of prison time. This is a fairly strong indicator that this case is making an example, with potentially much more prosecution to come. In this case, wire fraud is "using confidential business information to make money." 

TAKE NOTE
Crypto regulation is coming, and cases like this are going to pave the way for regulators and policymakers to point the finger. It’s absolutely critical that we self-regulate as an ecosystem: stay smart, stop and expose bad actors, and work alongside real builders to spread the good word.

Scaling Trust in DAOs: Trustware vs Socialware. Trust is a social act. It requires a set of rules or norms between people, and an expectation that folks will follow them. For a system to be “trustless” is not removing the necessity for trust – it is simply removing it from the social layer. Blockchains allows us to shift things that have traditionally been “socialware” into “trustware.” Many DAOs today are overcorrecting for one or the other, without a clear understanding of where the lines are drawn. The team at Orca explores the implications of this shift and how a balance between the two allows for DAOs to scale.

DAO Legal Framework part 2. Miles Jennings and David Kerr are back with a second installment of their work on DAO legal frameworks. Part 1 explored the challenges DAOs face and the current options that they have at their disposal. They also introduced the UNAs as a potential legal structure for DAOs. Part 2 breaks down a method for evaluating the proper legal structure for your DAO, packed with flowcharts and a whole lot of nuance. This work is absolutely critical to the maturity of the DAO space! Odds are, this is a question and process that every DAO will need to think deeply about at some point in their life cycle, and probably sooner as time goes on.

Bored Ape Is Going Hollywood. What does community-owned IP really look like? Well, in the case of BAYC, it looks like a whole lot of people rushing to bring their apes to movies, toys, and other mainstream methods of monetization. The allure of a "decentralized Disney" is creating a gold rush folks trying to be the “first to do X” with their BAYC IP. GQ did a deep dive into how folks are using this work, the opportunities ahead of them, and the challenges they’re facing. It’s still an open question as to whether anyone will care about BAYC outside of the existing ecosystem. Disney has mainstream appeal, but do the apes (or any other NFT project)?

Metaverse Land: What Makes Digital Real Estate Valuable. It’s easy to cringe when the term “metaverse land” is used, and to some extent it’s justified. In a world where land is valuable because it is scarce and immovable, how is it still valuable in a virtual world where those traits no longer hold? Scott Kominers argues that things like proximity and platform geography could have an even greater impact on the price of virtual land vs. IRL land given its global nature: there’s only so much space on the wall of a virtual concert hall, and the entire world can access that wall from the comfort of their own homes. Definitely an interesting thought experiment that forces you to get creative.

Scale and the levers that provide DAOs their power. Rowan from SuperBenefitDAO opens with a strong claim: companies have business models, but DAOs are network economies. He leans into the work of Geoffery West, abstracting the ideas of sub-linear and super-linear scaling onto the world of DAOs. Rowan argues that like cities, DAOs are able to take advantage of both levels of scale, reaping the rewards of infrastructural efficiency and Metcalf’s Law. On the other hand, companies are limited to rigid structures and cannot reap the same benefits of the social networks they create internally.

Mental models for L1 and L2. Discussions about new and competing L1s and L2s are everywhere, and this is a super helpful essay for understanding the nuance of those conversations. Patrick McCorry breaks down the agent interactions and trust assumptions of both L1 and L2 architecture, and the different goals they seek to achieve. He concludes by arguing that comparing the two is like comparing “Apples and Oranges” given these differences, but a deep understanding can help us to make informed decisions as users and investors. Great piece for anyone who spends a significant amount of time in the ecosystem!

MakeDAO: The Endgame Plan. Plagued by financial losses and apathy by its members, MakerDAO Founder Rune Christensen proposed a restructuring plan for the project. In a post to Maker’s forum titled "The Endgame Plan", Christensen outlined a roadmap to improve governance, expand Maker’s utility, and bolster its sustainability for the long term. While the proposal is intensely nuanced and insightful, this is a trend we’re seeing across the ecosystem. Protocol and product DAOs are taking learnings from the last few years of DAO progress and making radical organizational and governance changes in order to ensure long-term sustainability. The balance between decentralization and mission is a tough one to find, but those who get it right will succeed in the long-run.

User $OP Airdrop Proposal. The first phase of the Optimism airdrop happened this week, and lots of people immediately sold their tokens on the open market. A discussion was opened on the Optimism forum proposing that anyone who sold this airdrop should not be eligible for future airdrops. Of course, the conversation both on the forum and on Twitter was heated. Cobie posted another (satirical) discussion on the forum highlighting the absurdity of the original proposal – why wouldn’t we encourage open buying and selling of the token, he implies, unless we only care about the token price? Definitely a conversation we will continue to see across protocol airdrops.

Market data on the last 7 days. Last updated June 6, 2022

Updates from the DAO

Voting on W3CR finalists is live this week! Check out Snapshot to vote.

FF Labs S2 Investment Proposal is now live on Snapshot.

Terminal by Forefront is launching soon… be sure to spread the word and let us know if there are any communities that you’re a part of that would be interested in having their own terminal.

Follow us on Twitter & join our Discord to get the updates first

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▹ NFT - NFT 100 Nominations
▹ Opinion - Shut it Down!
▹ Fresh Take - Intentional Churn
▹ Cool - CHAOS Reigns
▹ Listen - Hyperstructuralism
▹ Watch - Decentralized Society
▹ Tooling - Zora NFT API

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