Real-World DAO Governance Failures Explained by Nicolas Biagosch of Q Protocol

Transcript

C can you point to some some practical cases where Dow governance has catastrophically failed I'm thinking you know there's this this ukie da case that I'm I'm not super familiar with but I think I think you are and then there's obviously like the Aragon thing that happened like late last year um wondering if if you have like if those are relevant examples in your view and if you have others in mind yeah so I I have a little bit of a a party trick where um I I challenged the crowd to throw like any hack or disaster or failure in the last two years at me and I will explain how it's been a governance uh hack in whatever sort so

like Aragon is an obvious one what's the problem with with Aragon and that's a fundamental structural problem in in the whole Space the idea is um to to protect a value let's say like a arogant treasury or or the tvl of a uh defi system or whatever a value let's say of a 100 by a token that's worth only 15 you know market cap 15 that's an obvious attack Vector I mean montin my my coinitiator has written about that in our white white paper in 2019 vitalik has talked about this with respect to maker in 22 uh at length so it's it's a widely known factor and it's

nowhere else ever in history has that it would be like trusting the ma the eyes of your your bank manager to not run with the money instead of like the the system behind it you know it's but everybody still believes like yeah we we need to solve this alone like fragmentation is is another big problem of that um so that was the Aragon uh case they if you look into the um uh into their block post why they uh decided to dissolve their their foundation and then like leave the decentralized space is a they they said like we couldn't set up a system including human judgment I mean that's

what we're doing at Q with the including the ICC and and all of these things B um transaction costs so they they they couldn't do onchain voting which I think is Paramount um snapshot is great but it it's a it's a Crux it's a it's a tool it's not what it should like voting should be onchain and then the third thing was exactly that they were missing an external credibly neutral security anchor for their Treasury and governance so that's one Ida another Super interesting one so um the the Uka case every like what the takeaway from many

people is like there was a California judge who decided that all Dows are going to be um everybody's a uh responsible for for everyone in the um in in the Dow so the unlimited liability yeah the unlimited liability um and part of that and the if you look into that and if you have a little bit of a legal background what happened is the following so a California judge the first question a judge always asks is do I assume jurisdiction over this case do I take this case so here in the absence of any kind of contract rules whatever this like description of what that Dow actually is he that judge

resided to say like well um that's a California resident uh who's suing so I have to um assume jurisdiction so what what we do like for for the qow and what we offer to others is like a contract which we call Constitution you could call it whatever which is a private contract amongst all members of the Dow so there you have something where a judge would look into and say like what am I dealing with here and that contract would say like we are the Dow and blond light this is how we do things and another thing um our constitution includes and others could include as well is an integration

with the IC so that's that concept is coming from the um from like international trade or I was in telecoms international roaming so you have international parties that can agree on the terms of the tradeit like American Chinese can agree on the terms of the trade but they can never really agree on the jurisdiction they the Chinese won't go into the us or otherwise for to beef out their their dispute so they came up with this idea of private arbitration they they and the ICC and some others like the IC being the biggest one they are being recognized by all relevant courts around the world so that judge in the US would have said had he seen a contract

or like a constitution including the ICC for a dispute resolution mechanism guys I'm not assuming jurisdiction you know it's like go beef it out before the IC and then you can come back and I will um happily enforce arbitral Award of the IC because that's what then uh nation state or local courts do so that's what happened it's not not that the the that judge had a was on a mission to determine all uh Dows being whatever you know and the other thing what happens is like if they don't have any you know uh they have to tap into their

toolbox they have to use the tools given to them by the law and the Dow wasn't anything he knew but a private contract including the IC that would have been something that that that guy would have known so so essentially in this case the the what what takes place is that because the doubt because there is no contract there is no binding agreement between the Dow members the the judge uh presiding over a dispute you know looks at what he has in front of him and says okay there's no contract and then defaults back uh to a standard partnership I guess it is in in uh in the law right and then standard partnership is sort of defined in the

law has having like these characteristics and where you every person has unlimited liability and then the other thing is that anytime there's like a member of the Dow who is a resident of a country or or or a state or any jurisdiction that person immediately becomes um the the the judge can then claim jurisdiction over that so basically what you're saying here is that with with Q well one there's a contract and so it it we can Define the terms of the of the contract and also the jurisdiction in which disputes would be resolved so for instance in this case private arbitration and then the jurisdiction also falls on whatever arbitrary body is defined in the contract yes and and the the beauty of of private arbitration is that you have

a lot of options that you can choose from so you can choose uh the law applicable to the proceedings you can choose the law applicable to the to substant uh subject matter to the substance of the case you could even CH choose for the contract a to be the law and nothing else which we did for for Q because we um we believe that we had to be neutral as neutral as possible so we are independent of any nation state or country or whatever and and the partnership in the law is kind of like a catchall clause it's like a fallback you know if it's not this if it's not that well then it's got to be something so

it's got so it's a partnership you know but had it been a like a contract like a private I mean this happens and had I mean this is so customary in like International Trade um as I said like in telecoms global roaming agreements it's the same thing it's it's nothing really new you know it's like blockchain it's a good combination of things that are tried and tested yeah and I mean blockchain is being inherently you know Global Systems it it makes sense for blockchains you know perhaps to adapt and adopt uh their contractual or sort of like legal structur is something that's been tried and tested in uh international

business and sort of international Commerce for you know decades [Music] [Music]