The Blockchain Debate Podcast

Motion: DAOs are better than corporations (Kain Warwick vs. Edmund Schuster)

October 13, 2021 Richard Yan, Kain Warwick, Edmund Schuster Episode 32
Motion: DAOs are better than corporations (Kain Warwick vs. Edmund Schuster)
The Blockchain Debate Podcast
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The Blockchain Debate Podcast
Motion: DAOs are better than corporations (Kain Warwick vs. Edmund Schuster)
Oct 13, 2021 Episode 32
Richard Yan, Kain Warwick, Edmund Schuster
Announcement: I have a new show called “Crypto This Week.” It’s a weekly, five-minute news comedy satire focused on the world of crypto. Check it out on YouTube here: Crypto This Week with Richard Yan


Kain Warwick (
Edmund Schuster (


Richard Yan (

Today’s motion is “DAOs are better than corporations.”

Crudely speaking, DAOs are chat rooms with a joint bank account. More sophisticated DAOs code up treasury management decisions to be dictated by the outcomes of on-chain community voting. DAOs generally operate with a culture of maximal, real-time transparency. And there are very restrictive rules about what the governing body of DAOs can do.

As DAOs gain popularity, we are increasingly seeing claims of how DAOs are superior to the corporate form. In the summer of 2021, the state of Wyoming even passed a DAO-related law that will provide liability protection for DAO members who organize as a Wyoming LLC.

But are DAOs truly revolutionary forms of governance as they’re made out to be? This remains up to debate.

Our two guests today are the founder of a major DeFi protocol and a returning guest in the form of a law professor at the London School of Economics and Political Science. It was a great debate, I hope you will enjoy it as much as I hosted it.

If you’re into crypto and like to hear two sides of the story, be sure to also check out our previous episodes. We’ve featured some of the best known thinkers in the crypto space.

If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.

Please note that nothing in our podcast should be construed as financial advice.

Source of select items discussed in the debate (and supplemental material):

  • DAOs related to Synthetix:
  • Edmund Schuster's paper on smart contracts:
  • Wyoming DAO law:

Guest bios:

Kain Warwick is the founder of Synthetix, a protocol for trading synthetic tokens that wrap non-crypto assets such as currencies and stocks. Before Synthetix, Kain founded Blueshyft, a cash payment gateway for online services in Australia. In July, Kain published an article called “DAO First Capital Formation” where he advocated DAOs as a powerful mechanism for fundraising of new crypto startups.

Edmund Schuster is an Associate Professor of corporate law at the London School of Economics and Political Science. His research focuses on corporate law, law and finance, takeover regulation, as well as the economic analysis of law. In October 2019, he published the paper “Cloud Crypto Land” that discusses inherent obstacles in the legal system that prevent blockchain systems and smart contracts from being truly useful. He is a self-declared no-coiner.

Show Notes Transcript Chapter Markers
Announcement: I have a new show called “Crypto This Week.” It’s a weekly, five-minute news comedy satire focused on the world of crypto. Check it out on YouTube here: Crypto This Week with Richard Yan


Kain Warwick (
Edmund Schuster (


Richard Yan (

Today’s motion is “DAOs are better than corporations.”

Crudely speaking, DAOs are chat rooms with a joint bank account. More sophisticated DAOs code up treasury management decisions to be dictated by the outcomes of on-chain community voting. DAOs generally operate with a culture of maximal, real-time transparency. And there are very restrictive rules about what the governing body of DAOs can do.

As DAOs gain popularity, we are increasingly seeing claims of how DAOs are superior to the corporate form. In the summer of 2021, the state of Wyoming even passed a DAO-related law that will provide liability protection for DAO members who organize as a Wyoming LLC.

But are DAOs truly revolutionary forms of governance as they’re made out to be? This remains up to debate.

Our two guests today are the founder of a major DeFi protocol and a returning guest in the form of a law professor at the London School of Economics and Political Science. It was a great debate, I hope you will enjoy it as much as I hosted it.

If you’re into crypto and like to hear two sides of the story, be sure to also check out our previous episodes. We’ve featured some of the best known thinkers in the crypto space.

If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.

Please note that nothing in our podcast should be construed as financial advice.

Source of select items discussed in the debate (and supplemental material):

  • DAOs related to Synthetix:
  • Edmund Schuster's paper on smart contracts:
  • Wyoming DAO law:

Guest bios:

Kain Warwick is the founder of Synthetix, a protocol for trading synthetic tokens that wrap non-crypto assets such as currencies and stocks. Before Synthetix, Kain founded Blueshyft, a cash payment gateway for online services in Australia. In July, Kain published an article called “DAO First Capital Formation” where he advocated DAOs as a powerful mechanism for fundraising of new crypto startups.

Edmund Schuster is an Associate Professor of corporate law at the London School of Economics and Political Science. His research focuses on corporate law, law and finance, takeover regulation, as well as the economic analysis of law. In October 2019, he published the paper “Cloud Crypto Land” that discusses inherent obstacles in the legal system that prevent blockchain systems and smart contracts from being truly useful. He is a self-declared no-coiner.

DAO Debate 

[00:00:00] Richard: Hey folks, this is your debate host Richard Yan. Before we get started, just a real quick announcement. I have a new show called "Crypto This Week." It is a weekly five-minute news comedy satire focused on the world of crypto. So head over to YouTube and search for "crypto this week with Richard Yan." The link will also be in today's show notes. Thanks, and let me know what you think. Now back to normal programming.  

[00:00:20] Welcome to another episode of The Blockchain Debate Podcast, where consensus is optional, but proof of thought is required. I'm your host, richard Yan. Today's motion is: DAOs are better than corporations. Crudely speaking, DAOs are chat rooms with a joint bank account. More sophisticated DAOs code up treasury management decisions to be dictated by the outcomes of on-chain community voting. DAOs generally operate with a culture of maximal real-time transparency. And there are very restrictive rules about what the governing body of DAOs can do. As DAOs gain popularity, we're increasingly seeing claims of how DAOs are superior to the corporate form. In the summer of 2021, the state of Wyoming even passed a DAO related law that will provide liability protection for DAO members who organize as a Wyoming LLC. 

[00:01:20] But are DAOs truly revolutionary forms of governance as they're made out to be? This remains up to debate. Our two guests today are the founder of a major DeFi protocol, and a returning guest in the form of a law professor at the LSE. It was a great debate. I hope you enjoy it as much as I hosted it. 

[00:01:39] If you're into crypto and like to hear two sides of the story, be sure to also check out our previous episodes. We feature some of the best known thinkers in the crypto space. If you'd like to debate or want to nominate someone, please DM me at @blockdebate on Twitter. Please note that nothing in our podcast should be construed as financial advice. 

[00:01:56] I hope you enjoy. Let's dive right in. 

[00:02:00] Welcome to the debate! Consensus optional, proof of thought required. I’m your host, Richard Yan. Today’s motion: DAOs are better than corporations. To my metaphorical left is Kain Warwick arguing for the motion. He agrees that DAOs are better than corporations. my metaphorical right is Edmund Schuster arguing against the motion. that DAOs are better than corporations.  

[00:02:19] Richard: quickly go through the bios of our guests. Kain Warwick is the founder of Synthetix, protocol for trading synthetic tokens that wrap non-crypto assets such as currencies and stocks. Synthetix, Kain founded Blueshyft, cash payment  

[00:02:32] Kain: Okay.  

[00:02:32] Richard: for online services in Australia. In July, Kain published an article  

[00:02:36] Kain: Yeah. “ 

[00:02:37] Richard: 

[00:02:45] Edmund Schuster is an Associate Professor of corporate  

[00:02:47] Kain: Okay.  

[00:02:48] Richard: at the London School of Economics and Political Science. research focuses on corporate law, law and finance, takeover regulatio obstacles in the legal system that prevent blockchain systems and smart contracts being truly useful. is a self-declared no coiner. Welcome to the show, Kain! And welcome back, Edmund!  

[00:03:14] Kain: Thank you. Thanks for hosting this debate. 

[00:03:16] Edmund: Yeah. Thanks for having us. 

[00:03:17] Richard: Awesome. we normally have three rounds: opening statements, host questions, and audience  

[00:03:21] Kain: Yeah,  

[00:03:22] Richard: Currently our Twitter poll shows that of the audience agrees with the motion that DAOs are better than corporations. And then minority disagrees with the motion. After the release of this recording, we'll also have a post-debate poll. Between the two polls, the debater with a bigger change in percentage of votes in his or her favor the debate. Okay.  

[00:03:42] Richard: So Kain, since you're in the proposition, I'll have you start with your opening statement and in your opening statement, please explain to us what does DAO mean to you?  

[00:03:51] Kain: So it's still, I think like a lot of crypto definitions, a little influx. I think there have been a number of different definitions over time. Although I do think that we are starting to converge on least a functional definition of DAOs. To the extent that we can at existing DAOs and look at the properties of those DAOs and draw some conclusions from how they're all independently operating. How they're kind of in it's convergent evolution. 

[00:04:20] But from a definitional perspective, got these three terms, right. That have been jammed together. So Decentralized Autonomous I think organization is fairly tame and fairly easy. It's group people coordinating towards some outcome. Right? So, I think from that perspective that's not too controversial. 

[00:04:45] Decentralized is challenging because I think there is a range of decentralization. I don't think it's a binary construct. I think it's on a continuum. And have questions about what even the intent of decentralization is. But if we work on the assumption that decentralized organization is intended to allow anyone to come and join it or exit. And that it has low barriers to entry. That it's not capturable. That it can't easily be controlled by any particular entity. Then think that that's a fairly reasonable definition of decentralized. So you've got these decentralized organizations. The autonomous part, I think, is where there's the most uncertainty. 

[00:05:31] And I was on a panel with the Bankless guys earlier this week. And this came up again because they sort of, think, have a bit of a dispute about the autonomous component. In my view, autonomous simply means that it's self-contained. So a DAO has a set of rules that are internally consistent. it doesn't rely on any external So rather than a corporation, which often has to fall back on courts of law, or some legal framework or regulatory framework. is completely self-contained. The rules about how it can change and the rules about how it operates are essentially in itself. 

[00:06:12] So if you combine those things, you have, an organization that can join. That's open and decentralized. is resistant to capture from any single entity. That is self-contained in its rule set in how it's constructed. And is organizing in the sense of operating towards some specific outcome or goal. 

[00:06:33] Richard: Okay. Great. And then can you explain quickly, why do you think the organization structure that you just described is better than corporations?  

[00:06:41] Kain: I believe that are a number of aspects that make DAOs better than corporations. But probably the primary one, and I think the one that maybe Edmund and I will have the most disagreement on is lack of reliance to any external arbitrator. So you create a corporation, that corporation will often be domiciled in a single location. If we ignore for a second multinational corporations and all kinds of things like that. But you know, you start a startup or something like that, or you start a small business. domicile that small business in some jurisdiction. And there's going to be a set of rules. There's going to be a set of corporate governance documents and incorporation documents, all of those documents will have multiple references to which jurisdictional, which court of law any disputes will be mediated by.  

[00:07:32] DAOs have none of that. So DAOs have this ability to exist as like a supernatural organization outside of the jurisdiction of any particular locational regulatory framework. And I think that that's a very powerful thing for allowing much wider participation by anywhere on the internet essentially can come and join a community and participate in a DAO. 

[00:07:57] Richard: Great. Well, thanks for the opening statement, Kain.  

[00:07:59] Richard: Edmund, it's your turn. Tell us you disagree with the statement that DAOs are better than corporations.  

[00:08:06] Edmund: Yeah. So, I found that this functional definition very useful. The one that Kain just gave. For me. So when you asked me to participate in debate, you know when I hear DAOs are better than corporations, to me it sounds a bit like saying: Discuss weather ATM's are better than investment bankers or something like that. And so I was going to focus a bit more on what to my mind is kind of a core feature. And that is the absence of a clear delegation of authority in DAOs.  

[00:08:40] So I think what Kane said is very interesting because it's putting the focus on how DAOs, um, in a way immune and insulated from the legal system. And maybe that's something we can talk a bit more about. I don't believe that this is... that this can actually be achieved because ultimately, the assets of the DAO will be subject to a jurisdiction or sometimes multiple jurisdictions. 

[00:09:09] And this creates all sorts of problems. The reply to that is that it's very hard to enforce against the DAO. I don't think that this is a kind of a long-term solution, although I do appreciate that at least in the kind of short and medium term, that there, there may be very effective, practical enforcement barriers in place. 

[00:09:32] But what I was going to focus more on was how corporations compare to DAOs. And as Kain mentioned earlier, there are many, many different forms of DAOs and different implementations. And I have no doubt that Kane will know infinitely more about these specific implementations that are available. But I believe what they do have in common is the idea that there is no authority that is delegated to a group of people that is comparable to a board of directors. At least I believe that is true for most implementations, but please do correct me if your perception is different there. And so starting from that point, from my corporate law influenced perspective, this means that DAOs really eliminate what has been a core feature of corporations for centuries. 

[00:10:29] So if you do away with this delegation of authority, and I don't want to bore the listeners with kind of the historical developments and how we got there and cross jurisdictional differences that exist here. As a matter of fact, all corporations designed around this delegation, like you have a separation of the investors and the people who actually make the day-to-day decisions. 

[00:10:54] Now, when we create a corporation in law and we create a separate legal person. And this is of course just made up stuff by lawyers and legislators. A corporation has no brain, anything like that. So we just then choose a group of people who make the decisions. Now why do we do that? And why is that so useful? Much of Contract Law Theory, and that is both in law and in economics. Basically it takes as a starting point, the observation that all contracts are incomplete. And that just means that the real world is too difficult, too complex to describe in advance exactly what parties expect in each of the various possible states of the world in the future. And in most cases, that's not a big problem. For most contracts, we can kind of deal with it. But because corporations typically built around longer term projects, we know that we can't really solve future problems with contracts written today. So that's why we need the delegation. 

[00:12:04] Now how do DAOs fit in here? And that is at least how I understand most DAOs. There are a number of different ways in which DAOs address this problem. Some DAOs are really decentralized, I would say in name only. And I think Kain will agree that this is true for some of these organizations. There you have a bunch of people who effectively retain full control of the organization. And by that, I mean, they ultimately retain control over the content of the core governing smart contract. So in that sense, I think, such a DAO would to a certain extent fall short certainly of their decentralization aspect of Kains definition. And potentially also, fall short of the autonomous element. 

[00:12:56] So I'm not sure there's really much to discuss here. If you have a DAO where you're in full control, is that really something that we need to compare it to corporations? I'm not sure. But I'm happy to discuss, if that is of interest. Most DAOs, as far as I can tell, um, designed around giving members or quasars shareholders, some sort of influence. Some sort of voting rights. And then that will often include the rights to do some form of updates of smart contracts, and so on.  

[00:13:28] Now, when I look at these forms of DAOs, my kind of high level view is that what we seem to be doing here is we seem to go back a century or two and returned to a form of organizing business where we actually want members to get involved with each and every decision. I think there needs to be a very strong reason, a strong theoretical reason to go back to that state that we've abandoned basically because we've said it's not a good idea for a lot of people to get involved in these decisions. And I think the alternative scenario is pretty much like a corporation where the smart contracts are written in a way that there is an explicit delegation of power to a third party. 

[00:14:19] In which case I believe what you really do is you replicate the delegation of authority that we know from corporations, but you do so in a way where, the insulation from legal systems that Kane mentioned earlier works primarily against the investors, against the members, because it means that we can't rely on what we've developed over a long period of time. And that is a set of expectations, a set of rules and enforcement standards to ensure that people who do hold the authority, to whom the authority is delegated, that they behave in a way that is consistent and compatible with the expectation of those members and investors.  

[00:15:10] Richard: Okay. So Edmund, I actually have a few very quick follow-ups here. So you mentioned that about a century ago, there was a time when people, organizations would make decisions in a relatively democratic manner. And then at some point, these organizations decided to go with representative democracy. And now it seems like that was retrogressing going back to the full democracy. A couple of things. Number one is why do you think it's better to go to a representative democracy? And why do you consider it a step backward if we were to go back to the full democracy?  

[00:15:50] Edmund: So I would avoid the term democracy here, because I think it's quite far from democracy, both in corporations and in DAOs. But the idea that the investors should have a say in the day-to-day decision-making is something that we've abandoned. Because it's simply not in the interest of the members. So, take a company like Apple, for instance. It would be inconceivable for Apple not to have secrets, secrets from the world. And the only way in which you can have secrets from the world in an organization that is as Kain described, and I think as is true for all at least listed corporations. A corporation where the membership is something that can change rapidly and without any input by the corporation. And even if that's not legally the case, de facto anonymously, people can just join and leave at any time. It's not possible to have secrets from the world. 

[00:16:56] And, this is just one of the reasons there's also something about specialization and professional management. People may not have the information or have the knowledge that is necessary to make certain decisions. And so we've, I think naturally moved away from that as soon as we basically abandoned the general partnership as the dominant form of organizing business, because it just doesn't make sense. It doesn't make sense for any operating business.  

[00:17:23] Now, is it possible to have a business that is so simple, so simplistic in its setup that it doesn't do much harm to have the combination of a smart contract, which is very, I believe very limiting because of the complexity of the world? And then an overriding voting mechanism. Is it possible to imagine such a business? And I think, yes, it probably is. If you have a well-defined business where stuff doesn't change much and you don't really do anything too exciting. Then it's probably, and it's probably possible. But for any business where you expect the business to react in real time to what happens in the world and do so efficiently, I think it's inconceivable to construct a system where every person gets access to all information and without access to all information, you can't give people unfettered decision-making power.  

[00:18:23] Richard: So can you feel free to respond to all of that.  

[00:18:26] Kain: Yeah, please. Yeah, please. So, I think this is somewhat astounding and kind of incredible to me because every time that I attempt to have a debate along some aspect of crypto or decentralization or whatever. I end up in violent agreement with the sort of counterpart that I'm supposed to be debating. And I think in this respect, Edmund and I are actually far more aligned than maybe we initially realized. There's this idea in crypto and in DeFi that Matt Levine from money stuff at Bloomberg kind of jokingly says that crypto is kind of reinventing financial history, one century at a time over the last like 10 years. And I think that's also true of corporate governance as well. Because governance is a hard problem and people have taken like blank slate, first principles approach, and oftentimes gotten it very wrong, right. So if you look at the early DAOs things like MakerDAO, for example, they had this idea of direct token voting, and the results were fairly abysmal. Right. Which I think Edmund would kind of say, of course they were. Like, all you had to do is go back and look at the history of corporate governance. And that would...  

[00:19:34] Richard: Can you explain when you said the results were abysmal, what do you mean?  

[00:19:36] Kain: So there are a number of issues. One is, and Edmund alluded to this, specialization is really important. So you had people who had an economic interest in the outcomes of the DAO, right? But not necessarily the kind of specialist knowledge to be able to vote accurately then you had this issue of this is not a democracy, right? The votes were weighted based on the economic interest that the person had in the project. Right. So someone who had 20% of the voting power of the project was almost never going to be overruled by...  

[00:20:10] Richard: mitigate that with quadratic voting, for example?  

[00:20:12] Kain: You totally can. Absolutely. But they didn't. And it is hard to mitigate with quadratic voting because of civil attacks. Where someone can, uh, and in fact, it can create a worst result, because a large holder can split into many wallets and then coordinate, and it's not hard to set up contracts to do that sort of voting. So civil attacks on quadratic scaling of voting weights are not amazing unless you have some kind of built-in civil resistance. So, yeah. I think we've run natural experiments in testing whether the results of corporate governance historically were accurate and that this evolution towards delegation of responsibility was the optimal solution. And I think we've very clearly come to that conclusion within crypto. The examples where there were no delegation or some weak delegation, have been good. And the more delegation you have, the better they tend to be. So you have things like Compound and Uni where people can delegate their voting rights to some public figure or whatever. 

[00:21:09] And they tend to work a little bit better. Because you do get a bit more specialization and people tend to have a bit more awareness. But when you have direct token voting with no delegation, the results again have been pretty bad. The interesting thing is that Synthetix, starting very early, how to view that this idea of rough consensus, right? Which is the same principle that the Ethereum network operates on, was actually a more optimal solution than direct token voting. But eventually we needed token holders to have some way to express their desires, because if there was no way for token holders to express their desires, then you were really kind of constraining the decentralized component of a DAO. 

[00:21:49] Right. So, you need to find a way to allow people who have an economic interest in the network to express their views. But then you also need a way for some group of people to make day-to-day decisions. The interesting thing, as we kind of iterate towards this and, this is again what I kind of alluded to in the beginning, we're not there yet. And that's why I think there's a little bit of confusion around what a DAO is and how they should be governed. But I think we are getting closer and we're seeing practical examples of things that are operating effectively. And so in Synthetix you have a quasi board, right. Which is called The Spartan Council. Has eight members. 

[00:22:25] The difference between the Synthetix DAO governance and typical corporate governance is that the people who are operating a company or a corporation. So you know, the CEO and those people on down are effectively appointed by a board. Right. But they have a lot of discretion. Within Synthetix, those people have minimal discretion. The governance power really sits at the board level. So the board makes decisions on protocol changes. So in corporate governance typically, a board will appoint managers, right. CEO on down, and they will have some kind of a hierarchical structure about how day to day decisions are made. But the board's not typically making day-to-day decisions. There'll be some corporate charter that sort of structures how. You know, what decisions cannot be made by managers. Obviously, and Edmund knows this much better than I do. But there's some hierarchy of decision-making that's kicked up to the higher levels of the board, et cetera. And potentially even shareholder votes, in the case of, some kind of, buyout or something like that.  

[00:23:29] So I think the difference that we have in Synthetix governance is something that Edmund kind of alluded to, and maybe I'll stop here and we can explore this a little bit more, is this idea of not being able to have recourse to some external court of law, because contracts are going to be incomplete and there will be disputes and there will need to be some kind of discretion applied and therefore you go and request a judgment on some dispute or some aspect of a contract or corporate structure. 

[00:23:58] In the case of DAOs, the fact that the managers are highly constrained in what they can do. And the decisions they can make somewhat mitigates the need for that, I would argue. Now we haven't yet seen examples of that being wrong. Right. And I'm not saying that there won't be examples that definitely could be. But in the example of Synthetix, we've really structured the governance process to be fairly rigid in what the managers in the case of Synthetix, they are the core contributors who are paid to go out and do the things. But they have no decision-making power. They cannot decide what to do. They can only be instructed by the board. And the board obviously represents the wishes of the token holders collectively, and there's structure around how the board is elected. And, we don't need to go too deep down that rabbit hole, but I think it's quite an interesting thing to explore the differences in corporate governance. And what boards can do. What shareholders decide, et cetera. Versus some of these DAOs that use a form of like delegated democracy, I guess. 

[00:24:59] Edmund: So I find that very interesting. I think we have to distinguish two elements here. There's one aspect where I believe if I understand you correctly, what you're saying is, really there is some innovation in governance itself. And I agree that what you described is somewhat different from how most corporations are set up. But if you look at it comparatively, so if you don't just for instance look at Delaware, but you look around the world. I'm in the UK and the UK Corporate Law there's no mandate whatsoever to delegate these powers first to the board, and then the board delegates on... Yes, this is how companies typically do it. But UK company law would allow you to reserve any matter for shareholder votes. Reserve any matter for the board without the right to further delegate. 

[00:26:02] If it's really about innovation in governance itself, then there needs to be a I think a stronger reason to convince me that this is somehow connected to DAO. Then I'm just saying, you know, most other corporations don't do that. It's true that in US corporations you have a board and then management is delegated. There are countries where shareholders will directly vote the CEO. Quite a few countries actually. There are countries where there's a rigid hierarchy as you described. Countries where hierarchy is up for choice by the shareholders. And there's a rich literature on convergence of the systems across jurisdictions. 

[00:26:46] And I think we're certainly not at the end of history of corporate governance. Certainly not. And there will be new innovations. We'll try out new stuff. I'm not sure that the system you described because it is available under fairly traditional and not some niche system, fairly a big legal systems allow this sort of governance mechanism. We don't see it. That doesn't mean that it's not right. I just think, to the extent that innovation is to be found there, it's just not clear to me that it would be connected to the DAO. What I would certainly separate from that is what you said about jurisdiction and the availability of external dispute settlement mechanisms. 

[00:27:36] So if you look at the history of corporations and if you look at the history of our current dispute settlement mechanisms. This has all been born out of cases where people didn't behave in a way that people want them to behave. And so if I understand the system and please correct me, if I understand the system that you've described, the Synthetix system correctly, then whereas managers can not make decisions, the board thus have this delegated authority. And so I'm sure that the current board members have the best interest of the DAO in mind, but there's no guarantee for that always been the case. And so then the question for me is who actually benefits from the absence of an external dispute settlement mechanism? 

[00:28:30] And I think in addition to that, how can you actually be sure that you have this insulation from the legal system? If they have just mandatory rules that would probably be applied in cases where board members behave outrageously? So, yes, we haven't really seen those cases. We haven't seen a lot of of them at least. But if this phenomenon is to grow, I think there's little doubt that we will see a system that has to be built up, I believe. Maybe it's my lack of imagination, along the same lines as our current system. Namely, that you define some high level principles that define the expectations that people have as to the behavior of people they entrust with power over essentially economically speaking their money and, that you cannot predefine exactly what behavior you expect. So that's why you resort to these high level statements. You have to act in the best interest and so on. And then you need somebody to decide to judge whether the behavior fell short of that expectation or not. So I'm not sure that, except for in the very short term that you can actually, and that you want to have this insulation from the legal system. 

[00:29:51] Kain: Yeah. Those are all very, I think very cogent arguments against why this is a dangerous thing. Right. And why it may not necessarily work out the way that we hope it will. And maybe I'm too idealistic. But I do think that the biggest thing here that we have is the concept of smart contracts. And the concept of smart contracts, if we ignore for a second hacks and bugs and all that sort of stuff. If we take them as the pure form of the expression of a set of rules that is enforceable by the blockchain by consensus on Ethereum, for example. And we take inputs from people who have an economic interest in the form of token holders. We can set up a system that is flexible enough, but also rigid enough that it doesn't need recourse to some external arbitrator. And again, maybe, maybe that's just very idealistic. And we haven't seen examples of this yet go wrong. Where I think they've been set up correctly. We've seen examples where things were not set up correctly and the disputes have gone to courts of law between parties that were normally operating a DAO, but they weren't really, which goes back to your point about they weren't really decentralized. Right.  

[00:31:08] So I think the fundamental question here is can we construct a set of rules that will provide enough structure to ensure that the people who are operating a DAO on behalf of token holders and that includes contributors who are building code or performing some other function. The board members who are making decisions about changes to the protocol. Potentially people who are allocating funds out of a treasury. So some kind of treasury council or grants council or something like that. Um, can we set up a system that is self-contained, that is autonomous, that doesn't require recourse to an external court of law? And what are the checks and balances that we need in place?  

[00:31:55] And I think one of the things that this enabling technology in the form of smart contracts does is allow us to have things like immediate dilution of power. And time locks and, things like that. An example would be, if a board, an existing board within a DAO, unanimously votes to do something that all the token holders know is detrimental to the protocol, those token holders need a mechanism before that change can be implemented to actually step in and dissolve the board. Now we have things like that in the real world, obviously. You know, votes of no confidence and those sorts of things, but typically those sorts of things are after the fact. And in meatspace you just have a lot more discretion about what you can do. I think in the smart contract world, you can put very rigid enforcements around what powers people have and what powers they can exercise. And I think that that is probably the biggest change here. And that is what I think may enable us to create something that is genuinely autonomous and doesn't really require recourse to an external arbitrator. 

[00:33:03] Richard: Okay. So Edmund, can you just hold your thought for one second? I think that we been going around this concept of whether there's going to be a need for external arbitration or not. And we can come back to this point, but I have to say that I thought when Kain was debating his point, he was going to bring up multiple other benefits. And I'm not sure if he's reserving them for later as dry powder. But I'd like to enumerate them now. And maybe both of you can chime in as to whether these are true benefits or just purported, but actually fake benefits. Right? So I've been gathering a list of things that were supposed to be the advantages of DAOs over traditional organizational structures. 

[00:33:43] Number one is anonymity. Number two is frictionless-ness, meaning you can join and leave at any point. Number three is transparency, meaning things that DAOs do are fully known on a real-time basis to its members. Number four is programmability. Meaning the rules that govern DAOs are restricted by the smart contracts. So I think this echoes the last point that Kain was making, and number five is what Kain said, self-contained-ness or the lack of jurisdiction. So I feel that we've probably talked about the fourth and fifth point quite a bit, but we haven't really touched upon the first three. So I reiterate the first one is anonymity. The second one is frictionless-ness meaning coming and going easily. Number three is transparency and operations. Does either of you want to start going down the list and saying whether this is actually a true benefit and not a true benefit.  

[00:34:35] Edmund: I'm happy to start. And then, um, if that's okay with you Kain, because it's more natural for me to start.  

[00:34:41] Kain: Yeah, go ahead.  

[00:34:42] Edmund: Because I don't buy those benefits really. So I'm not sure what it means to say anonymity is a benefit. Now, you have to define what you mean by anonymity. If I buy Apple shares, you won't know that. And Apple won't know that. So who will know that? Any intermediary I use my might know that. I don't see that as big as a disadvantage. If you compare it with the multiple disadvantages that flow from true anonymity or pseudonymity. So Kain actually mentioned something earlier about that, right? 

[00:35:21] You have exposure to civil attacks. And the problem with civil attacks in DAOs and with smart contracts is not so much that they are only possible there. Whereas we always know what's going on in traditional corporations. There are numerous cases of people setting up entities, asking somebody else to be the secret trustee, whatever, where this happens. The difference is that if you have rigid rules, this works both ways. And I think most stackers would agree. That one of the beauties of, not just smart contracts, but any algorithmic system is the rules are known. And once you find a way to break the rules, you've broken the rules. That's it. That is not true in meatspace. Right. And you could of course say that this is a disadvantage. It's also messy. It also offers very significant advantages. So take for instance, a typical agreement for somebody to lock up shares immediately after an IPO. Of course, people have tried to get around it, right. They go to the investment banker, they set up, synthetic short positions, and into some sort of cash settled swaps or whatever, or write options. Right? Any number of things. The advantage in meatspace is that you don't really have to worry too much about these because if you break the rules, as they're written, it doesn't insulate you from liability. You may still be liable and you will be liable, even if you do something that was not foreseen at the time. And so I would see that as more of a disadvantage in practice in most situations. 

[00:37:10] That was at least my, reaction to what Kain said earlier. I think we should also talk about what DAOs are supposed to be. What kind of business are they supposed to run? And I think that is really important in deciding how important is flexibility, how, valuable is flexibility versus rigidity is. With friction and getting in and out easily. I don't think for most corporations. There's an advantage here that thous can offer. I can get in and out of most, traditional meatspace investments, Shay investments, probably much easier, than in, cryptos. I'm not sure. Maybe you can expand on that a bit. And then when it comes to knowledge again, this is, not something that we just didn't come up with. 

[00:37:57] The problem is that there's a trade off. Yes, giving people more information will tend to make the decisions better. But the very act of conveying that information has unfortunately, in real businesses an impact on the value of that information. So it's not that we can't give information to shareholders to vote in a traditional company. It's just that we don't want to do that because it wouldn't be in the interest of the business and therefore it will not be in the interest of the company to do so. It is good that shareholders have incomplete knowledge. And shareholders acknowledge that. They fully understand that.  

[00:38:41] Richard: You're saying being opaque on the company's part actually can be beneficial to shareholders.  

[00:38:45] Edmund: It's not just become opaque. I mean, it's I think it's undoubtedly efficient. I would go in and listen to any of Apple's investor calls. Like investors will always try to ask about, you know, when will you release the new iPhone. And the board will say, Tim cook will say, you know we're not telling you that. And everyone understands. Of course you won't tell us. You're not just telling us you're also telling Samsung. Right. Why would you do that? It would destroy value for us the shareholders. Right. And so, I think it, oversimplifies and kind of argues away the fundamental fact that information is complicated and costly. And conveying information can impose all sorts of costs on the corporation can change incentives and so on. And this is really at the heart of what we've been doing for centuries. So I very much sympathize with Matt Levine's view on that. I think a lot of it is really just trying out stuff that was tried out. That was rejected long, long, long ago. 

[00:39:52] And, of course you look at the product of centuries of discussion about that. And then you say, well, it's not perfect. And. The answer I think should be: Yes, of course it's not perfect. That's the problem, right? It's not perfect because it's really, really hard. It's really, really complicated. And so that's the best we've come up with. 

[00:40:13] And I'm very open to what Kain said earlier. Maybe there are innovations and I'm sure there are innovations in governance that can provide us with better points on the different trade-off lines that we have. And I'm the first to acknowledge that some of these trade-offs may have made sense in a world of telegrams and don't make a lot of sense in a world of fax. And, certainly don't make a lot of sense in the world of Telegram App, right? And so this should constantly be evolving and the information how costly it is to convey information changes, and we should react to that. But I think it's dangerous to believe that we can look at the system say, I don't like it. It's not great. So let's build it from scratch again. 

[00:41:00] Richard: Okay. Yeah. Kain, feel free to provide your rebuttal. By the way, Edmund did you addressed the frictionless argument though? The fact that people can...  

[00:41:09] Kain: Yeah...  

[00:41:09] Edmund: Yeah. I mean maybe you can explain that further. I just don't see the friction that we do away with.  

[00:41:15] Richard: Yeah. You were saying that's easily rebuttable. So go ahead, Kain.  

[00:41:21] Kain: So, I mean, maybe just to address that quickly. My assumption is that the people who been advocating for DAO saying that the low barriers to entry or low barriers to participation are valuable. I think we all accept that there's very low barriers, not perfectly low, but very low barriers to economic participation in the form of purchasing equity, right? Like you go to Robinhood, two buttons and you know, you're Yolo'd your way into Apple shares or whatever. Right. So I think in the modern world that's pretty easy. It's not globally easy. In a way that getting access to an economic interest in the DAO is. So I think that from that point the friction is lower. Obviously there's slightly different issues because, you need to get into crypto. But certainly if you are a crypto native person anywhere in the world, regardless of whether you have a broker or whatever. Getting access to participate in the Synthetix DAO is probably easier in aggregate than it is to participate on an economic basis with Apple. 

[00:42:19] If we then look at actually participating and contributing to Apple, that is very hard, right? That's not an easy thing or Google or whatever Apple and Google and these large corporations have very thorough filters to ensure that it's very hard to participate in the organization itself. So you can get an economic interest, but you can't necessarily contribute. As opposed to a DAO, which, you know, they're typically much smaller in fairness, right? And we haven't seen a DAO with 500,000 members or something like that. And it might be much harder to participate or break into it. But even within the Synthetix DAO, you could argue that there's somewhere on the order of a hundred thousand members, right. Who are, participating in some form. Either holding tokens or staking or exchanging or whatever, that they are interacting with that system. And it is very easy. 

[00:43:05] There's an open forum. You can turn up, you can suggest an idea. You can, put in an SIP, which is a, an improvement proposal. And that improvement proposal will be viewed on its merit. Not on the merits of the individuals proposing it, but on the merits of the idea. So I think in that regard, the friction to participate in a DAO, not just on an economic basis, but on a sort of collaborative basis is much lower. And I think that's powerful.  

[00:43:29] And I think that also ties into the anonymity or pseudonymity component as well. Because you could be an eight year old. Living somewhere in Southeast Asia, right. And you could be a genius and you've studied all the open source software. Right. And you decide that you're gonna turn up and you've got some solution to some problem in a DAO, and you're going to write up that solution. That solution will be again, reviewed on its merit. So the fact that you can set up a pseudonym, and, uh, one of my favorite books of all time is Ender's Game. And there's this kind of whole thing where Andrew's brother and sister kind of drive global discourse about the way that the government should approach these very like critical geopolitical questions and they're like 10 years old. Right. But no one knows because they're on the internet and they're able to do it under pseudonyms. And I think that that is a very powerful thing that just would not fly in a typical corporate setting.  

[00:44:22] So do you think there is some advantages there in terms of both friction of participation and pseudonymity of participation? I guess on the transparency front I probably agree with Edmund. I think that one of the very powerful reasons for allowing delegation to a set of managers or directors or board or whatever corporate structure you want to say that can keep some measure of secrecy around planning, is very powerful. Now it's powerful for the corporation itself. I would argue that it maybe is less powerful for society. If you look at it from a sort of market efficiency perspective. If every corporation knew everything the thing that every other corporation was doing the market would probably be far more efficient, arguably, right? I think you could make that argument. 

[00:45:12] And so the fact that all of these DAOs are doing things in a much more transparent manner. Not everything is open. There are definitely things that are kind of held, certainly in Synthetix there's things that The Spartan Council is aware of in terms of its own decision-making that are not publicly available. And I think that that does have some benefits. But on the continuum of transparency, the Synthetix DAO is far more transparent than Apple or Google for example. And I think that as we move up that continuum towards more transparency, that's quite beneficial because even Synthetix competitors leverage information that Synthetix publishes open source. Whether it's research and development or governance structures or specific contracts that are open-source, to then go and implement their own functionality. And it creates a far more efficient market. Now that's bad I guess, directly for Synthetix token holders who have an economic interest only in Synthetix. But it's good from a sort of societal perspective or an ecosystem perspective in that it's propelling the overall ecosystem as everyone puts these things out into the public domain.  

[00:46:18] So I'm kind of, I'm agreeing with Edmund I guess, on the transparency side. I think that there are things that you do want to keep secret. But I think maybe corporations are a little too opaque on the continuum of transparency versus opacity. I think you could shift things globally without necessarily being perfectly transparent and it probably would be a net benefit to overall market efficiency.  

[00:46:42] Edmund: And can I just come in on this point?  

[00:46:44] Richard: Yes, go ahead.  

DAO ethos of industry-wide transparency

[00:46:45] Edmund: So I don't think the argument about market efficiency really works. Simply because, I mean again, it depends on what you want your DAOs to do. But if you look at corporations, especially in kind of an information centric society as the one we're currently living in. The problem with full transparency is that a one time disclosure of all information may well have beneficial effects. No question. The problem is really the incentive effects that follow. And so, dramatically more transparency would automatically have to mean dramatically reduced incentives to create private information. So you have kind of this public goods problem that we've been solving very imperfectly with intellectual property rights and perhaps somewhat less imperfectly with just structures where people have an obligation, make a promise to keep things confidential. I don't think that we can make the world a better place by removing the option to keep secrets, to be bound to keep secrets. Not because I'm opposed to transparency, simply because I know that economic incentives work.  

[00:48:06] Richard: Okay.  

[00:48:08] Kain: I agree with that. I think a perfect continuous transparency would likely have some unintended consequences, I suppose. I guess the kind of open source software ethos of, you know, making everything open and not having proprietary intellectual property and putting everything out open source. We do have this weird proxy that I think allows us to hold that cognitive dissonance. Like if I was purely optimizing for the success of Synthetix at the expense of all other competitors in any other thing that could capture attention within DeFi, I probably would do things very differently. But we do have this weird proxy for like all of DeFi, which in the Ethereum ecosystem is ETH. Right? So there's like this idea that you hold an asset that accrues a benefit as everything gets better. And I think that is personally something that kind of allows me to feel more comfortable. The idea of being further along the transparency continuum.  

[00:49:04] But I'm by no means arguing that like perfect transparency is ideal because we do have the council, the council does have proprietary information. It's probably less secretive than a corporation, but it's not perfectly transparent. It does leverage that information to try and get a competitive advantage in the market, et cetera. So I think we strike a different balance, right? There's a different kind of equilibrium within DeFi. And I think one of the components of that is the fact that we do have this overarching network that we have an economic incentive to build towards.  

[00:49:35] Edmund: Interestingly, that is something that is also kind of controversially being discussed in traditional corporations where you say, you know, if you have a bunch of large asset managers who hold shares in every company, maybe they are interested in doing things in a way that isn't necessarily optimal for the specific company, but has an overall benefit across the portfolio. So there is I think a certain similarity there. And the way it works in DeFi, as far as I can tell is that the space is still relatively small. And so, you can have this even as a kind of small player in the field because the field itself is not so big. I think it's natural to do what. You just described. Namely kind of saying, I'm also taking into account what is good for the ecosystem as such, which makes sense given that you naturally will have, also economic exposure to the prosperity of the space as a whole.  

[00:50:41] Kain: Yeah. The whole, you know, should index funds be illegal argument that Matt Levine makes all the time. Which I think is quite an interesting, it's an interesting question.  

[00:50:50] Richard: Matt Levine is questioning whether index funds should be illegal?  

[00:50:54] Kain: It's a joke. Like it's a tongue in cheek sort of thing. That's uh, like recurring trope in his newsletter. But it basically talks about like this idea of if all of the assets are controlled by old white guys who run index funds, you know, BlackRock and what have you. What does that do in terms of like distorting market incentives? Does it make the market less efficient? And those examples of like COVID vaccine, right? If some company discovers COVID vaccine the optimal price for that COVID vaccine for the perspective of BlackRock should be $0, right? Because you don't care about the individual profits of the COVID vaccine manufacturer. You only care about the profits of all of the other things. Airlines and tourist companies and basically everything. The entire economy, right? So it creates this like weird economic distortion. 

[00:51:41] So I do think we've got like a proxy like that, which is Ethereum and a lot of people in crypto tend to have a lot of different assets and a lot of different projects. And so, you can kind of have this mindset of like lifting all boats. I do think there is also an ideological component where a lot of us are crypto-anarchists and not necessarily a hundred percent ideologically aligned with like some laissez-faire capitalistic mindset. I think a lot of us believe in markets. But we might have different takes on it. So, there's a lot of things that we could, there's a deep rabbit hole we could go down there I think in terms of ideology. But broadly, I agree.  

[00:52:15] Richard: Yeah. I think one other benefit of DAO that you guys have both touched upon is the global nature of this. So Kain mentioned the fact that a 10 year old in Southeast Asia that's a code wiz can make a dent in the Ethereum network by studying diligently about Ethereum or the open source classes and studying the language and influence the future of the project. Right? So that does seem like an impossibility in the corporate structures that I'm familiar with. So, and I think this does take on a global aspect because I think that on the one hand, some of these corporate structures might have been very much in place for a long time and they seem to be working well. And then there's legal arbitration around them. And it just seems to be the norm in developed countries.  

[00:53:09] But in developing countries, undeveloped countries, they might not have the legal structure or the tradition of having these sorts of companies, right. The corporate structures. And that's why I think one argument in favor of DAO would be that the DAO framework could be, would serve better in places where liberal democracy, where the rule of law and so on, and the corporate structure set up isn't the norm. Such as in the US or the UK. Any comment on that Edmund?  

[00:53:41] Edmund: Yeah. So, I mean, look, credentialism sucks, right? No question about that. The problem is that for every 10 year old, super brilliant kid with a great idea, you have about a million crooks with idiotic ideas. And so the difficulty I think is, and will be in, in any space that it is very costly to evaluate proposals for change in whatever form they come. And so I think every system will gravitate towards a filter that allows people with limited time and resources to focus on evaluating a very limited number of high expectation value proposals. And we see that everywhere. And we see that in crypto, right? I mean that when Vitalik says something, it has a different weight than if I say something. And there's a good reason for it. People don't have time to read the thoughts of every nobody on where we should go next. Right. 

[00:54:47] And so I think there's a romantic and very attractive component to this idea. I just don't see it as particularly realistic. Simply because you will have those filters that will tend to affect the same people in traditional and in crypto economics. I'm pretty sure that this is more or less true. And who this filter affects in detailed will change over time. Right? So, people looked at Bill Gates or Steve Jobs or perhaps even Mark Zuckerberg or Jeff Bezos. Here are the kids who nobody would ever have listened to. So there is some shift in any space and you will have those newcomers and new skillsets and filters that just apply differently. But there will be filters. And I don't see any evidence for those filters being systematically more just in crypto than anywhere else in the world.  

[00:55:51] Kain: My counterpoint to that. And it's a very strong counterpoint is literally every one of those examples that you gave or, you know, white males that came from fairly affluent backgrounds globally, if not even within the US right. And I think that we have seen many examples of people who have turned up to a community. Started to participate, right? These communities are very open. There's no way to vet someone when they turn up in terms of credentials or whatever. You can only vet them on their performance and input. And they start working with the community. They add a lot of value. They produce good content or produce good ideas or whatever it is. 

[00:56:31] And then oftentimes those people go on to having built a reputation within that individual community to doing really interesting things later. So, Jordan from Synthetix published something recently on Twitter. A big tweet thread of I think something like 20 or 30 different projects that had emerged out of the synthetics ecosystem. And I would argue that the vast majority of those people had they not had a place like Synthetix that they could have turned up and kind of proven their value, would have really struggled to raise capital for a lot of those ideas. Some of them were hedge funds. Some of them were crypto projects. Some were on protocols. There's a range of different things that people went on to found.  

[00:57:11] Now I know you can do it by joining Google and being an ex-Googler and then going out to Sand Hill Road and raising funds. But the getting to be a Googler part is far harder than getting to participate in the Synthetix discourse, I would argue. And certainly you can do it remotely. You don't need to move to the valley or whatever to do it. So I just think there's like demonstrably lower barriers to entry for participating in crypto. Maybe that changes over time as it scales up. Maybe it's just that it's a nascent thing and there's not that many people. But I suspect that we have codified a lot of the processes and norms to allow those barriers to entries to stay low. And I think that that from a sort of market efficiency perspective is incredible. The open participation within crypto from anyone in the world is something that I don't think we've seen in any other industry historically ever. And it's pretty amazing. So I think that that's a big kind of advantage that DAOs have over traditional corporate structures.  

[00:58:08] Edmund: Yeah. So, I mean, I'm not sure that this is a DAOs specific point really. I think yes, you have a system that has grown in value terms so quickly in such a short period of time that I think you get the wrong illusion that it is very open because people who join early almost necessarily have much, much better chances of getting somewhere than somebody who joins fairly stable or even stagnant system, there's no question about that. But I think if we normalize growth rates, if we assume that this is comes to a steady state. I don't see a mechanism by which you could have a world with constantly low barriers to entry because the barriers to entry are necessary given the evaluation costs for any new idea and any new proposal. 

[00:59:09] Richard: Okay. So in the interest of time, I'm going to move on to the next question. So we have two more questions from my side. So the first question is actually for Edmund and it's about the LLC/DAO Law in Wyoming. And in fact, I, sorry, I think it's just called the Wyoming DAO Law. And can you talk a little bit about, to what extent the Wyoming's law helped legitimize this new structure for capital formation and governance? And what do you think is, say, the practical benefit of it? And if there's no practical benefit, why do you think this law was passed? 

[00:59:48] The second question is, Kain, I would love for you to think about one DAO that you really liked. A DAO that is doing very positive things in a very innovative way. And somehow you just don't think that it can be done with regular corporate structure. I'd love to have you describe it for us and then Edmund can opine on why it actually isn't a true DAO. Or there is actually dangers lurking in every corner. And why say, a corporate structure can easily replicate it. So I'm going to hand over the mic to Edmund first to talk about the DAO Law in Wyoming.  

[01:00:23] Edmund: I have to admit, I looked at it. But rather briefly. And the reason I didn't dig much deeper is that, from what I can see, the Wyoming so-called DAO Law, it doesn't fit the description or our kind of working definition of a DAO in any conceivable sense. It's an LLC that is called a DAO. It is fully subject to the jurisdiction of Wyoming. The Corporate Law rules that the LLC rules apply to this so-called DAO. They are rules basically describing how the smart contracts have to be changeable by members. Yes, there are... There's a way not to have a board. But ultimately you can have that with most LLC certainly, most LLCs in other countries. So, I think this is more of a branding exercise. It is, I understand politically, it's always the Wyoming's. Right. If you are a state like Wyoming and somebody tells you, there's this super exciting new movement out there...  

[01:01:33] Richard: Is Wyoming the El Salvador of the US? No offense to anyone from Wyoming.  

[01:01:38] Edmund: When I say, you know, it's always a Wyoming, I simply mean it is not a state that has been very successful in, has already been very successful in convincing people to choose that jurisdiction to do business, if there's no natural reason of doing so. So it's kind of the opposite of Delaware in the US, or perhaps Luxembourg or Ireland or something like that. So you have jurisdictions that have been successful in the marketplace if you want, for legal structures. And there are many reasons and some of them are terrible, for that to happen. But countries where this is not the case, countries or jurisdictions, like perhaps Wyoming. Perhaps Malta. They look at this and I think their politicians are rationally convinced that it may be a good move to do something that looks very open and friendly towards something that is new and exciting and where a lot of capital is being invested where a lot of talented people go at the moment. So I think it's not difficult to explain why legislators would want to pass a law like that. But in terms of its legal significance, I would say it's basically non-existent. And I personally, I doubt that this will be used by any, um... nobody can predict the future. I'd be surprised to see well folded out successful project adopting this form. Because from my perspective, it just doesn't make any sense.  

[01:03:20] Richard: Okay. So Kain, unless you have strong words about the DAO Law in Wyoming...  

[01:03:26] Kain: We are in violent agreement there. In fact I'm not even going to, I'm not even going to go any further because someone would probably get angry at me if I were in agreement.  

[01:03:36] Richard: Okay. Yeah. That doesn't diminish your position though. I mean, it's just one state trying to do something to seek attention here. I said it, you don't get the hate.  

[01:03:46] Richard: So Kain, why don't we go back to the other question. Talk about your favorite DAO or a very cool DAO that does something that is truly innovative that you don't think can be replicated in traditional corporate structure. And let's have Edmund deconstruct it. Go ahead Kain.  

[01:04:03] Kain: So the DAO that I have the best understanding of outside of Synthetix is probably Yearn. It's also I think one of the most interesting. It's definitely not perfect. And I think the way that it was launched, created some friction and some path dependency on it, that I think they're working to unwind. But my sense is that this idea that Yearn has of independent cells that are sort of self-organizing and not part of like a larger hierarchy, is going to be very powerful. 

[01:04:38] And Synthetix is even iterating towards this, but I think Yearn does a much better job of it. There are other examples like MakerDAO has individual cells that operate. Their risk committee certainly is a very good example of that. And so I think that the ability to have a self-contained group of people with an individual mandate to work on a specific process that is independent and not kind of subservient to some hierarchy, but is ultimately kind of controlled by token holders directly is a very interesting organizational structure.  

[01:05:15] It's a little bit like Holacracy, but without a CEO and instead, all the shareholders are controllers. Now I might be laughing because that sounds like the craziest dumbest idea he's ever heard. But I do think that there is something very powerful in having small groups of people that have a lot of autonomy. Can be very agile and very responsive to very specific problems and a lot of specialized knowledge without necessarily having them embedded in some eight-tiered hierarchy, like a traditional corporate governance structure. 

[01:05:47] And I think that this again comes back to this idea of smart contracts as like this new enabling technology in the same way that the internet was this new enabling technology where you can experiment with and implement different structures that just would not have been possible if you're reliant on the fax machine or something like that. And so I do think that Yearn for me is probably the best example of a very novel structure and it functions, it works, for now the system is working. You know, obviously it's kind of iterating and adopting new functionality and new systems and processes over time. But certainly for the scale that it's at now, which is a multi-billion dollar organization. I don't think we've ever seen anything at that scale that operates with a governance structure like that. And I think a lot of people would have said that they didn't believe that something like that would even be functional or possible. And yet we've got kind of in the real world, a real world example of something that is somehow managing to operate, in spite of the kind of challenges that you might expect.  

[01:06:51] Richard: Okay, Edmund, do you want to critique this DAO?  

[01:06:56] Edmund: I don't know enough about it. Well, I don't know anything about it to be honest. From how it sounded, I don't think that this is a governance structure that would be unachievable. I'm not sure it's necessarily desirable. Right. But this is open to debate. Perhaps just to end on this I think what's really important to understand for people discussing that. Certainly I feel like I don't know enough about that is, what the vision is for those DAOs. So what should they ultimately do? And from what I can tell, most of the DAOs, in a way, it's kind of a self-contained system where the DAOs only operate in the very kind of DeFi crypto space in which they exist. 

[01:07:48] And I think the real litmus test, and that is something that I would love to hear Kain's folds on is, is there any future? Is there any way in which these DAOs can operate, where the main purpose of the activity is to interface with meatspace? To interface with non-crypto business? And I will actually concede to that, that as long as a DAO is in a way an investment vehicle for something like a more sophisticated trading strategy within DeFi, it might well be the most efficient way of organizing the interests and wishes of a large number of people in this space. But this is kind of a circular view of what this space can be. And so, my biggest problems are to imagine a world where DAOs have relevance outside of that. And so I'd love to hear weather Kane views that differently.  

[01:08:55] Kain: No, I think that's very fair. Yeah. I think that's very fair. I think Edmund point stands. Certainly the status quo and where we're at now and the evolution of DAOs. They are only really functional when they don't touch meatspace. And again, this comes back to I guess the initial point that we spent quite a bit of time on. Which is as soon as you interface with meatspace, meatspace has a you know, the real world kind of imparts some requirement to start to I guess, erode this autonomy. 

[01:09:29] Because the real world is governed by legal structures and regulatory structures, et cetera. So as soon as you start to interface with that, that's when you run into problems where it can no longer be autonomous, right. And once you lose the autonomous component in the sense that all of the rules is contained within the organization itself, I think it starts to break down. And that's why I have very large concerns about things like MakerDAO. Some of the other DeFi projects that have attempted to bring real world assets into DeFi Centrifuge, is another example. There are these hybrid organizations that I think maybe lose some of the kind of DAO magic.  

[01:10:07] In my view, I think what we would get to is something like pure DeFi DAOs that operator as protocols. And then interfaces that act like middleware, which are probably going to be traditional corporations of some kind. This is kind of short to medium term. Right? Next two to five years or something like that. This is my view. These middleware interfaces that find a way to wrap protocols and wrap DeFi in a way that allows the real world to interface with them, but are still subject to some jurisdictional regulatory framework or whatever. And then you have the rest of traditional corporations that are just a pure corporation versus these hybrid things that have found some way to bridge the gap between corporations and DAOs.  

[01:10:52] The question I guess, is will we see some jurisdiction that will allow DAO rules to kind of supplant the existing legal framework of that jurisdiction. Right. That's where I think it would get very interesting. Now, I haven't necessarily thought through exactly what the process of that would look like, but I think until we have something like that where there's kind of a DAO sort of absorbs the existing legal infrastructure somehow. Or subsumes it. It's hard to see a DAO interacting with the real world in a way that doesn't undermine the value problem. 

[01:11:32] Richard: Okay, great. So let's go to the concluding remarks, unless that is the final word from either Kain or Edmund. I'm happy to give either of you final words. 

[01:11:40] Edmund: I'm happy to just wrap it up. I actually found that very, very informative and I hope Richard you're not too disappointed. Given that there isn't that much that we really disagree on. And I think there's some, some of the stuff Kane said about governance and as I interpreted really the idea that it is an additional space for experimentation is certainly interesting. I didn't get a chance to argue what I usually have to argue, namely that DAOs are not some magical unicorn that will change everything and solve everything. Which is very refreshing, but I know it makes perhaps for a less vibrant debate. And so, yeah. I've really enjoyed it, Kain.  

[01:12:26] Richard: Kain. 

[01:12:27] Kain: Yeah, thanks. So did I. I think where I'll leave things is my very strong view is that there are a lot of people like Edmund in the world who have deep domain expertise about corporate governance and legal structures and all of the reasons why those things exist. In the same way that I think 20 years ago, there were a lot of people who had deep domain expertise across a number of industries, and then this weird internet thing turned up. Right. And some of them, I think were curious enough to lean into it and engage with it in a genuine sense. Some of them rejected it outright because it just didn't fit within their worldview. And I think a very similar thing is happening here. And so I think it's beholden on us, the ones who have drunk the Kool-Aid to be conciliatory and really operate from an attempt to kind of educate people and provide a nuanced take.  

[01:13:18] If you turn up and say, DAOs are amazing. Corporate governance is shit. You're all idiots. You have no idea what you're talking about and we've invented this magical thing that solves all the world's problems. You're probably not going to get much engagement from the people who actually have the domain expertise to probably help you, right? Like, yes, you stumbled upon this magical tool, but there's people who have hundreds of years worth of information in their heads about how that tool might be very effectively implemented. 

[01:13:44] Right? So I think it's beholden on all of us the crypto anarchists and crazy DeFi people or whatever. To really take a humble approach to these sorts of conversations and say, look, we don't know everything about corporate governance. I certainly don't. But we do know that we've stumbled upon something that is really powerful. And we want to collaborate with people and in working out, is this something that can actually take some intractable problems and make them tractable? Like, have we found something that is genuinely a phase shift in terms of coordination and governance. And you know, let's all work on it together. I think that's the key. And I think we need to do that from a place of being fairly humble about what we know and what we don't know.  

[01:14:25] Richard: Okay. Sounds great. Yeah. You guys were agreeing a lot. I felt that I had to fan the fire a little bit to get you guys to disagree, but I fail. But it's all good. So thanks for joining the debate today Kain and Edmund. How can our listeners find both of you starting with Edmund? 

[01:14:39] Edmund: I'm on Twitter on @Edmund_Schuster.  

[01:14:43] Richard: How about you, Kain?  

[01:14:44] Kain: Yup. You can find me on Twitter @ kaiynne. You'll see. I'm a [inaudible] PFP. So, that's me.   

[01:14:53] Richard: Yup. Sounds good. Great. Thank you. So listeners, we'd love to hear from you and have you join the debate via Twitter. Definitely vote in the post debate poll and feel free to join the conversation with your comments. Look forward to seeing you in future episodes of The Blockchain Debate Podcast. Consensus option of proof of thought required. Well, thank you, Kain. And thank you Edmund for participating. This has been great and educational for me. 

[01:15:12] Kain: Yeah, it was really fun. Thanks.  

[01:15:14] Edmund: Great.  

[01:15:14] Kain: Thanks very much.  

[01:15:15] Edmund: Thanks a lot.  

[01:15:16] Richard: Thanks again to Kain and Edmund for coming on the show. As usual, I try not to take sides, at least not on this show. But allow me to capture some of the debaters' thoughts here.  

[01:15:28] One of Edmund's views is that no contract is ever complete. Therefore human intervention and interpretation is inevitable. And this will dilute the purported power of smart contracts. 

[01:15:40] So this very much defeats the supposed value-add of a DAO, which is the idea that democratic decisions can be somehow, fully programmatically enforced. 

[01:15:50] And one of Kain's points is that DAOs allow whiz kids in underdeveloped countries to partake in governance of billion dollar projects of global scale. This is not currently done in the corporate norm. I think it's fair to say that these new DAO paradigms do take out credentialism, and lower the barrier of entry for opportunities. 

[01:16:08] So, what was your takeaway from the debate? Don't forget to vote in our post-debate Twitter poll. This will be live for a few days after the release of this episode. If you like the show, don't hesitate to give us five stars on iTunes, or wherever you listen to this. This will help me reach more people. And be sure to check out our other episodes with a variety of debate topics, Bitcoin's store of value status, the legitimacy of smart contracts, DeFi, POW vs POS, and so on.  

[01:16:32] Thank you for joining the debate today. I'm your host Richard Yan. And my Twitter is @gentso09. Our show's Twitter is @blockdebate. See you at our next debate. Oh, and don't forget to check out my new, five-minute weekly news satire show, "Crypto This Week with Richard Yan." So head over to YouTube and search for "Crypto This Week with Richard Yan," the link will also be in today's show notes. Thank you.

Guest Bios
Kain's opening statement: Defining what a DAO is
Why DAOs organization stricture is better than corporations
Edmund opening statement: Why DAOs are not better than corporations
Why not having delegated authority to repressent the majority in governance is a step backward
Why direct token voting is abysmal in corporate governance
Differences in corporate governance structures and mandates of the board in US vs UK
Legal disputes and the real danger of a weak governance structure
Are the benefits of DAO (Anonimity, Frictionless, Transparency, and programmability) real benefits?
Argument against market efficiency as a benefit of transparency
Is the the global nature of DAOs a benefit: Arguments on credentialism, what is a low barrier to entry, etc
Commentary on the Wyoming DAO Law
Kain's favorite DAO and why it intrigues him
The argument about the functionality of DAOs in the real world
Edmund's concluding remarks
Kain concluding remarks: A call to be conciliatory and collaborative with domain experts in building DAOs
How to find Edmund and Kain on Twitter