#DappCon22 : Day 3 - DAOs & Public Goods In DeFi, Nathan Arhat

Transcript

uh next we have a talk from Nathan arhat works at DX Dao the talk is entitled Dao's and public goods and defy [Applause] hello everyone welcome to my TED Talk uh my name is Nathan and uh I'm one of the numerous known and unknown contributors at the global remote on The Sovereign Collective geek style those are not just empty words they bear important meaning today we're going to talk about Dao's and public goods in defy web 3 or and in general and draw a

distinction between profit extraction and value creation uh most of you are familiar with the tragedy of the commons um I'll be mostly having my head down reading because I'm a bit of a scattered brain if I don't read I'll go off topic so please excuse me um back in 1968 the essay the tragedy of the commons by the ecologist Garrett Hardin argued that human overpopulation will stress ecosystems beyond their limits and cause a resource catastrophe it's a problem in economics occurring when individuals neglect the well-being of society in pursuit of personal gain

we also have this in Game Theory the tragedy of the commons is seen as the Nash equilibrium where no rational agent cooperates despite it actually being the strategy that would maximize the collective payoff if adopted by all players and what was hardin's solution proposed um as a possible uh way out of the tragedy of the commons and he was saying we should seed our freedoms to the state and be bound by Mutual coercion mutually agreed upon however if we

um look into it agreed upon involves Trust and in crypto we say don't trust verify so when you give someone complete control whatever was mutually agreed upon can be revoked at any time in back in the 19th century the English historian Lord Acton had said power tends to corrupt and we all know absolute power correct absolutely so Elon Musk recently said in an interview the government is simply the biggest corporation with Monopoly on legitimate forests and we should be careful if we want to give them the ultimate power and

trust them with managing our resources but that's unfortunately what we have nowadays and all of these smart people that have been working on these problems busting the heads they they didn't know of blockchain and nowadays we have blockchain so we can experiment and and see uh if if we could have this workout um Eleanor Ostrom the first woman to be awarded the Nobel Prize in economic Sciences argued that common resources can be well managed uh there's not necessarily a doom and gloom scenario where we have uh ultimate tragedy of the commons

and those could benefit from the resources should be in close proximity to that resource for her the tragedy only occurred when external groups exerted their power whether that's political economical or social in order to gain a personal advantage and so she argues and and proposes this um plan forward as a solution to managing uh common resources the features of successful systems um ashram and her colleagues find include clear boundaries reliable monitoring of

shared resources a reasonable balance of costs and benefits for stakeholders a predictable process for the fast and fair resolution of conflict an escalating series of punishments for cheaters and a good relationship between the community and other layers of authority that's from households heads to in international institutional bodies so these rules for managing the commons are established to maintain the long-term sustainability of resources and this way there's no need for government to step in or also no need to move into the opposite

polar direction of having complete privatization these are the two extremes and and the truth lies in between um but when we think about those uh guiding tenets um for sustainable Resource Management they sound a lot like a protocol and Protocols are sets of rules and guidelines for communicating data and back in the days those were verbal agreements or put on paper but nowadays we have this amazing technology called blockchain that allows us to have those protocols and have them trustless so smart contracts unchain governance systems

specifically on decentralized distributed ledgers some might argue well isn't distributed decentralized no they're different we those are words that bear special meaning and we have to be careful using them so all of these systems can serve as censorship resistant protocols giving communities sovereignty and autonomy to coordinate self-organize themselves trustlessly which in effect enables Collective ownership development and governance of public goods in yeah in May 2014 vitalik bitteren wrote

instead of a hierarchical structure managed by a set of humans interacting in person and controlling property via the legal system a decentralized organization involves a set of humans interacting with each other according to a protocol specified in code and enforced on the blockchain this is the technological Revolution we have in our hands today the Innovation that we're testing out to prove to the world that this could be the future of organizing societies um and so there's a bit of a Schism in in

crypto with a lot of people debating what a Dao or a dow really is or isn't it has become somewhat of a spectrum uh many people have misused the term many people have misunderstooded many people have been misinforming people they try to frame it the way that it suits them um for marketing purposes generally the a in Dao is not automated it's accepted generally as autonomous and the two are very different if it's automated you don't really need

organization but Dao has an o in it and it stands for organization and what an organization is those are people and those people need autonomy not automation there is automation but the organization needs autonomy and autonomy is a synonym for sovereignty or censorship resistance there's no one above you that you bow down to and tells you what to do you have the ultimate Freedom Sovereign individuals comprising a self-organized sovereign Collective with the purpose of collectively owning developing and governing censorship resistant protocols

and applications that is what a Dao is and nowadays many applications are not decentralized they're fragile they're not managed by dows and I would argue that is not defy um the italic uh well actually okay yeah so um another uh quote from vitalik and AI is completely autonomous I would say automated whereas a Dao still requires heavy involvement from humans specifically interacting according to a protocol defined by the Dao in order to operate and I I would add here it's it's easier

said than done uh there are very important prerequisites and those I would say are the distribution of power and trustless setups the Zeitgeist uh so as of late uh for many years that Zeitgeist has been a short-term profit extraction which has led to tragedy of the commons if we see the Earth is This Global resource we've kind of like mismanaged misused and abused severely for personal gain over common good and unfortunately the the way the

economy Works nowadays the global economy economic incentives actually encourage behavior that it's counterproductive to humanity it will bite Us in the ass actually it's pretty avid nowadays uh we see what's happening with uh economic crisis crisis uh ecological disasters so for the last say hundred years one could have made money to create a perfect bubble for themselves but nowadays problems seem to surface globally everywhere affecting everything and everyone and those that have been chasing profit at any cost and their loved ones would likely be

affected just as everyone else now you you cannot just buy a hundred million dollar yacht and go into some sea um there's going to be some climate disaster that will get to you you can move from one place but there will be fires you'll move to another place there'll be an earthquake you'll move to another place that's gonna be flooding um it it it's no longer as easy to just make some money and and go create a bubble for yourself and escape from the world that you helped destroy so we need a new um Gestalt mindset seeing the whole is greater than the parts and I would argue long term it is actually in the interest of individuals

as well so if one is smart enough even if they are egotistical if they just have this long-term mindset it's in their best personal interest to to work together with Society um in in his essay on hyperstructures the co-creator of Zora Jacob horn States while it is entirely possible to extract profits in the short term this is likely in direct conflict with long-term success and value creation so he envisions a system which recognizes that the value created and provided to Society at Large by far exceeds any amount of profits

that can be extracted in the immediate term many teams struggle we see in in crypto web 3D Fight teams struggle having to sell their own token to cover operational expenses to avoid tanking the price they get themselves into a shilling mode that uh you know they try to counter the cell pressure and this isn't what Builders should worry about it's even more severe and critical in a bear market like the one we're probably in right now um dumping a token that is already severely undervalued it's just crazy and the focus should fall solely on development

and improving product quality instead of dealing with VCS chasing checks and and pumping tokens so what's your team focus on I I think we'll all agree on the fact that teams just keep building and not get distracted by um worrying about money so public goods funding for public goods is not popular uh stock prices don't move on universal notion of value to society prices move on the speculators own perspective of product value or often let's be honest how much they can extract arbitraging

pumping and dumping so we we need more Engineers from Big Tech corporations to feel comfortable joining open source projects not as a weekend hobby but perceive it as a serious uh well-paid work currently public goods are not popular funding is not secured they're not taken seriously and unfortunately we're just relying on altruistic hobbyists I've had a ton of people say they're still wondering whether it's the right decision to jump ship leave the work in traditional Finance or software development and join crypto or web3 and it just doesn't speak well for the space

defy matters why does D5 matter what is a free market and so we're using the term free freely here it's an economic system that's the definition in which prices are determined by unrestricted competition between privately owned businesses and we all know uh no matter what our minor or major in University we've all had like economic courses we know about the invisible hand so the British moral philosopher Adam Smith used the metaphor invisible hand for the unseen forces that move the free market economy

now how can we have both free market and unseen forces like if those forces are hidden and we can't verify them and it's not trustless this blind Trust and that's why there are Bad actors and that's why there's manipulation that's why we have Banks working with cartels money laundering and I have no clue why Regulators are going against blockchain Tech defy when we actually are solving all those problems public goods should not be

synonymous with non-profit public goods can have investors they can generate returns for stakeholders they just need to prioritize long-term ecosystem value creation versus short-term profit extraction so that calls for patient Capital long-term investment versus the hedge fund trading mindset three hours capital pumping exiting manipulating markets acting as crypto Twitter influencers dowels are perfect for this they're really well suited trustlessly governing resources development it's just a need for a secret sauce special ingredients

Jake Stout in 2019 that's more than three years ago but it it's it's boring no one knows about it noses and dalstack introduced DX down to the world it's an independent organization with its own life and identity using a highly scalable decentralized on-chain governance system which leverages the holographic consensus a dick style was formed as a Dao first so um it was very prescient back then from gnosis and the the sole purpose initially of forming this Sovereign

Collective that is censorship resistant was to um own and govern The decentralized Exchange that that checks Exchange and we've seen nowadays so many um defy applications that are like protocols that are mostly that mostly have their users access them through the centralized front ends get hijacked they they get DNS hacks and this is um something that was solved by gnosis by allowing censorship-resistant autonomous organization to govern a protocol and

own the front end three years ago sadly it's not caught up it was created by Distributing voting power to a wide number of ethereum addresses across the globe in order to manage funds trustlessly from the get-go dxdao coordinates ownership development and governance of Open Source protocols and applications on chain and what is unique about DX Tower is that unconventionally it's actually using voting power in the form of non-transferable reputation we've seen vitalik um post lately about soul-bound tokens so-bound governance moving away from

liquid token governance so um DXL has been doing this for more than three years already it cannot be bought sold delegated it's inflationary and it can only be earned through direct contributions to the community this serves as a protection against financially powerful entities which could easily buy liquid tokens and attempt to exert unbalanced governance power for possible malicious purposes however although they can permissionlessly submit governance proposals and participate in discussions honest stakeholders that have provided Capital to the Dow cannot directly participate in voting and we are highly critical of ourselves and we see that

um the current setup falls short on accountability to investors that's why Dao the Dow has recognized that and ratified a new framework dubbed governance 2.0 which I argue is the secret cells that could help a lot of communities in the future it aims to create a sustainable system as a feedback loop for all relevant stakeholders and it will align the interest of both investors token holders and the core contributors who hold reputation in the Dow so that was a bit of a mouthful um I hope it was interesting if anyone has got any questions thank you so much we have about five

minutes for a q a so if you have any questions go forward yeah maybe I could add if we don't have any questions um developers in defy they they need not focus on centrally hosting their front ends and risking censorship by regulators out of fear self-regulating themselves angering their users being susceptible to hijackings and risking hundreds of millions and

billions of dollars of their users they have this amazing Sovereign Collective that is censorship resistant and they can easily have their front ends owned by the Dao so that no government government body or regulator could exert their power over them and I believe this this should be the future of defy this is a public good and it doesn't require a lot of resources actually so um if if you go to dxdao's Twitter page there's a pinned tweet with a really nice animated video explaining just how jigstall owns its

front ends and how their censorship resistant and Unstoppable thank you Nathan thank you so much