How did ENS DAO become successful?
In this episode of Bell Curve, Jason Yanowitz and Mike Ippolito speak with Nick Johnson about launching ENS DAO, behind-the-scenes, challenges of decentralized management and more.
Read our notes below to learn more.
History of ENS DAO
Their goal from the start was never specifically to launch a DAO but to have maximum achievable decentralization.
They launched the DAO purely as a governance mechanism because there are some things in ENS that have to be upgradeable, manageable and so on.
They didn’t have a need to raise funds and didn’t have to compromise on the core goals of ENS being non-profit, decentralized and public good.
Building Infrastructure as Public Goods
Making things for profit necessarily erects barriers to entry because in order to make a profit, you have to extract some value.
Back in the day, AOL had a permissioned walled garden approach to things and it didn’t succeed in large part because everyone had to buy into it in order to use it.
If you’re encouraging people to innovate on top of your platform, then the platform should be open and most of the time, that means it should be a public good as well.
To a large degree, it hinges on people recognizing the value of having these things be public goods and being willing to make contributions to make sure they continue to exist.
Everyone in their team is dedicated to the mission that they’re building and the idea that this is a public good.
The people who work at ENS Labs are very much value aligned.
Tokens are an imperfect relationship in a sense that they’re the best tool they had available in their toolbox but they definitely have shortcomings and tendency towards plutocracy.
When is a project ready to be a DAO?
In their early days, they didn’t release a DAO because they felt their ecosystem wasn’t ready at that time and the only example of a DAO is TheDAO.
There was still too much human control over essential areas of ENS.
The things that changed were development of things like compound governor contracts, open zeppelin subsequent release of a rewritten version, so a demonstration of that working in real life.
They were able to reduce some of the human control over ENS.
It was frustrating at times to decentralize some of the decision making in practice.
When they launched the DAO, the more diversity of opinions they expected.
They started off with a delegated voting system then the system evolved where they elect stewards for different working groups and those stewards are responsible for day-to-day operations then it evolved to have a lead steward.
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DAO vs Centralized Governance
The crucial difference is that it's all governed by the token holders who represent people who have a voice in the DAO and there are a lot of parallels to corporate governance.
People mistake that decentralization means every single person giving their full attention to every single decision but delegation is both necessary and useful.
From a social point of view, he hopes that there will be enough holdouts who resist the profit motive in order to help ensure that this continues well in the future.
From a financial point of view, the goal is that it continues to be cost effective to buy up enough tokens to extract value from the treasury.
Challenges of Token Economic Systems
The alternative is to rely on some way to prove individual identity, like quadratic voting, but they only work if the civil problem could be solved, that means being able to prove that somebody is an individual human.
Putting tokens on locked staking provides a way to show that somebody is long-term committed to the organization.
One of their devs is working on a way to wrap ERC20 tokens using an ERC1155 wrapper.
Shifting the overton window
All of these KYC measures which have been demonstrated don’t effectively reduce money laundering but they do eliminate any hope of financial privacy.
A lot of people aren’t aware that the Tornado Cash devs actually built mechanisms for compliance.
Base Infrastructures
DAOs are a perfectly good structure for a for-profit entity.
Optimism is a public benefit corporation and he finds that enormously encouraging.
Arbitrum takes a generally open approach.
Gaps in DAO Infrastructure
Onchain DAOs like Compound were a key development and the idea was obvious but building and auditing it is a major lift.
He thinks we’ll see more standardization and professionalization in a way.
The template of how to launch a DAO will become better established through the successes of the DAOs that do well and the failures of the ones that do poorly.
He’s excited about stuff they’re pushing now with offchain names, L2s and so on that will make it possible for everyone to get a name without paying transaction fees.
They’re integrating with DNS and in more functional and low-cost ways to enable that with DNS names as well.
One of the biggest risks is governance in action because of internal agreements and fear of making changes or taking risks.
Value of Community
One of the cons is there are always a few people in the community who are very loud and very sure of themselves but also very single-minded on some topics.
The enormous pros have been attracting so many more people who are enthusiastic and dedicated to work on this and build it.
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Ledger’s latest innovation, the Ledger Stax, is a credit card-sized hardware wallet complete with touchscreen and Bluetooth capabilities. Did we mention it’s designed by Tony Fadell, the creator of Apple’s original iPod?
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