Web3 Galaxy Brain 🌌🧠

Web3 Galaxy Brain

DAO Governance and the Law with Oliver Zerhusen (The Graph) and Ross Campbell (LexDAO & KaliDAO)

5 July 2022


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Nicholas: Welcome to Web3 Galaxy Brain. My name is Nicholas, and each week I sit down with the brilliant people building Web3 for a casual Friday conversation. In this throwback episode, I'm joined by Oliver Zerhuzen, Decentralized Governance Coordinator at Graph Advocates, previously Graph Protocol, and Ross Campbell, Legal Engineer at LexDAO and KaliDAO. In this episode, Oliver explains how the Graph's GRT tokenomics incentivize subgraph indexing and how the Graph's four core teams are organized. Ross explains why it's so hard to work with lawyers, and we explore cool DAO-related contracts like Radical Drips, DictatorDAO, Aragon Optimistic Governance, and Moloch's concept of the Ragequit. I really enjoyed recording this episode and bringing Oliver and Ross together for a fun discussion about everything DAO governance and the law. I hope you enjoy listening. Hey Oliver, how's it going?

Oliver Zerhusen: Hello, hello.

Nicholas: Happy Friday. Happy Friday. Nice to meet you. Is the music coming through? This is the first time I'm trying to do a little music.

Oliver Zerhusen: It comes through. A little sketchy, but it comes through.

Nicholas: A little sketchy. It's gating it, huh? All right, we're going to have to learn how to do that properly. Thanks for coming to talk today. You're in US time zone, something or other.

Oliver Zerhusen: I am, yes.

Nicholas: I've done a couple shows in the past with folks in Europe and it's still nighttime, so I guess that works.

Oliver Zerhusen: Yeah, I am from Europe, so that's where the accent comes from, but I do live in the US.

Nicholas: Got it. Hey Ross, how's it going?

Ross Campbell: Hey, pretty good. Awesome. Finally going. Yeah.

Nicholas: Yeah, thanks for jumping in just at the last minute. Awesome to have you. So Oliver, I know Ross a little bit better, but I really don't know your career or path or so much about how the Graph is thinking about DAO stuff. So I think that's what I'd love to jump into first. Maybe you could share a little bit about your journey.

Oliver Zerhusen: Yeah, so I'm actually fairly new to the Web3 space. I joined the Graph at the foundation in the summer last year. So I've been with them now for just over six months.

Nicholas: Oh, that makes you an OG at this point, I think.

Oliver Zerhusen: And started my crypto journey in 2020. I come from a product management background, but I've been in for over 10 years prior to that. And since July last year, I've been with the foundation. I'm an ecosystem manager over there. And the focus is on decentralized governance.

Nicholas: So tell me a little bit, how is the project management side of things? Is it similar or what's different?

Oliver Zerhusen: Oh, the decentralized way feels very different. In many ways, liberating. So I was used to being in a corporate environment where my day from eight to five was filled with meetings and double booked and triple booked. And in many ways, not really anymore in control of my own agenda. You were really driven by other agendas and a lot of the things that you didn't really want to be part of, everything. And that I think is different. Yes, we are in meetings and it's very diverse and driven, but it feels like you can be much more in control of the things that you're hired to do, that you want to do in the ecosystem. There is not this push from the top, do this or that. And that is the part that I really love. This freedom where you are aligned with other stakeholders in the ecosystem on the same mission, but you also have your own freedom to go about it the way you want to.

Nicholas: Yeah, I think one thing I noticed right away was that people are involved in multiple projects at the same time, part time, but they're not low level jobs necessarily, or roles. They're even very important roles, but you just need the best people who are willing to do the work. So it allows that flexibility, I guess, built in.

Oliver Zerhusen: That is a part we're going to talk about DAOs later on as well. I'm sure what I'm really excited about DAOs to me is going to be, I think this year's key topic and theme that you see across many different protocols. And I think it unlocks really a labor market beyond the tech space. For folks like me, I don't have a technical background, for example, with my product management background. That is a piece that I'm really excited about seeing unfold, this labor market space.

Nicholas: That's actually like, I feel a lot what Bross is working on with LexDAO. Are you familiar with LexDAO, Oliver?

Oliver Zerhusen: A little bit, not too much.

Nicholas: When did you get involved, first of all? What's your OG timestamp?

Ross Campbell: I guess that was around 2018. I quit my law firm out of this sort of existential dread when I saw smart contracts on the horizon. I was also an associate, I was pushing papers and it was a little bit soul crushing, to be honest. I saw a lot of energy, millennials and all these really smart people that are expected pushing themselves into the space, taking these risks. I thought it'd be a good opportunity to think as a lawyer, what I'm doing, trying to operate with people, trying to set expectations with documents. Can we do this a bit better with smart contracts and with code? I already saw a lot of transactional inefficiencies and doing cross-border deals. The use cases were obvious, but I guess in 2018, there was still a lot of froth and chaos from the ICO. I kind of bounced around as a freelancer. I eventually ended up at ConsenSys and the Open Law Project. From that point, I started working on DAOs as sort of just enhancement tools for companies to launch investment clubs, do fundraising with tokens and with Ether, and sort of just start from that assumption. I don't know if you want me to do a whole introduction of experience.

Nicholas: I'm learning things. I'm still interested.

Ross Campbell: Yeah, hopefully it's not too boring. But yeah, then I left the nest of ConsenSys, landed at SushiSwap as a sort of full-time solidity engineer and have been thinking about DAOs, both working for DAOs and also how can I make DAOs work a bit better, drawing from that sort of neurotic legal background. And LuxDAO is an association of people like me, usually corporate lawyers who sort of left that scene, but still can't turn off that part of their brain. And it's like, can we make people cooperate a bit better? Can we close gaps with legal agreements, but actually ultimately use code for most of the things that WordDoc and Excel have been trying to do for people? So yeah, there's a lot I think left to do in terms of the UX of DAOs, but I think people are actually seeing some of the efficiencies here. Just to do a fundraising and instantly thousands of people raise millions of dollars. We solved the constitution DAO. So yeah, I think it's still early days, but definitely don't want to take too much time on my intro. So you can go check it out on Friday afternoon.

Nicholas: Yeah, Oliver, if you have questions for Ross, feel free. So actually, because Ross, we were talking about this a little bit the other day. I forget what the tweet was, but one thing that we focused on was finding legal ways to split proceeds with a group of people. It's just so easy to do with a smart contract that it feels like in some way. we need to fit this into the legal system so that you're allowed to do it because it's just so easy and so useful and something that's so impossible to do at a small scale. You need to hire a lawyer to do it. You can't really do it on your own.

Ross Campbell: Yeah, that is kind of the twisted irony here. And that the SEC helps go after scams, but they also paint most of the technology with a broad brush and say most tokens are securities. But we can see clearly non-scammy ways to use the technology to reward people who contributed DAOs or are otherwise actually doing things in this space and do it at a scale that, like you said, is impossible with traditional banks and accounting systems. To pay 100,000 people a split of proceeds from a sale or to do payroll and salaries on that level, it's just not really feasible and it's terribly expensive. There's a lot of room for fraud. So yeah, it is frustrating to me that most of the things that the securities laws care about are fair dealing, having transparency, disclosure. But when you're using a public blockchain to raise money and you have people able to contribute but also get their funds back if they see any wrongdoing, a lot of those regulations plainly don't make sense to me. So we do want clarity and that's something like LexDAO and other crypto lawyers are pushing for to describe the tech, the state of the users, the levels of risk that we think are legitimate and then get them to actually clarify, can we do revenue sharing tokens? Can DAO tokens be in a safe harbor? Because yeah, it's really cool stuff and it will accelerate a lot of founders. So yeah, that's a longer term project, but something that clearly I felt the need to tweet about.

Nicholas: Yeah, it feels like the... I don't know this. What is it? Sarbanes-Oxley? I always used to hear about this and or the other regulations around like public finance reporting in the wake of the Bush Jr. administration or something. But it just became like very expensive to be a public company from an accounting and legal perspective and dangerous to be like... I remember working in the Valley in like 2011 or something like that, 2012. And a former Apple engineer is telling me that like the Pages team was thinking about if they would be... It was before they figured out this like accounting trick where you could like amortize the sale of an iPhone over the entire duration before it's obsolescence so that they could like get by some law that made it inappropriate to update software. You had to sell products and the product had to have a fixed feature set. So to do a free software update in the future, you had to justify it in your accounting as still being paid for like whatever iPhones last six years getting updates. They had to like come up with all this weird work around legal technology to... I mean legal technology in the anthropological sense, not the digital sense.

Ross Campbell: Great software.

Nicholas: Yeah. Well, it looks rare to me as one example. Obviously this technology can be used to sell scams also, but so can anything. But to be able to share revenue with a group of people who you're trying to encourage to use... I mean, it's just like a loyalty program. There's also this YouTube video going around recently about airline miles, like frequent flyer miles that they're essentially frequent flyer miles. Like the airlines operations are loss leading. They lose money running planes around the world, but they make double the amount that they lose by minting an infinite... It's a fiat currency. They just get to mint the miles and then they sell those miles to other companies like Costco to incentivize purchases at Costco. So it looks rare, kind of just fuses those two halves into one business where you just incentivize people to use the marketplace or whatever to stake. I think one thing that's interesting is that they often complain that it's like, oh yeah, it's public, but who can actually read that shit? And no one can read a contract anyway. So it's practically blocking people. It's not legible to people.

Ross Campbell: If you read a SEC filing, it's completely... It's difficult to understand. And lawyers have an art form there.

Nicholas: No one can understand anything. And it's like, even just like a credit card bill or whatever, everything's got so much fine print, you can't understand anything. And so really maybe one thing, like I see Denison's in the audience here and it makes me think of Tally. It's like maybe like ERCs for governance or standards around governance would be in the interest not only of composability, but also you can imagine interfaces that make that information available to people that do so according to whether they implement some solidity interface or not. And those being like a mark of like, yes, these are actually legible because they have this very easy to read interface that's free.

Ross Campbell: Yeah. I think we should try to promote things like that. And it was really cool to see that the Yearn community do their own sort of public financial accounting and making that open source. There was a way to do that like routinely on chain to sort of like store it in a smart contract, make sure it can't be tampered with. Yeah. I think that'd be a benefit. And it goes to the idea of like. if we self-regulate as an industry and among DAO tokens and these more exotic instruments, then it makes it a lot harder for the regulators to justify spending resources on enforcement when there, yeah, there are abuse and other scams in the system, but good actors will probably be elevated, I think. But anyways, I digress. But I do think having standards that we all sort of coalesce around will make it easier to have good behavior and to sort of demonstrate that. So yeah, I like it.

Nicholas: Yeah, it's true. It's true. Oliver, were you around for the RAFT token launch?

Oliver Zerhusen: Yes, that was exactly the time when I started engaging just over a year ago. So we celebrated our first anniversary just before the holidays.

Nicholas: I remember walking around the park listening to, I don't know if it was Clubhouse or Twitter Spaces or what, but listening to the podcasts when the tokens dropped. Or was it the staking mechanism? I think it was like, what time of year? You're saying the token launch now. I think I remember more in the summer, some events around the, I guess the more decentralized version. Yeah.

Oliver Zerhusen: Yeah, Testnet was in the summer before. You mean the last summer. So that was the permissionless, the curation launch.

Nicholas: Exactly. The curation launch. Actually, maybe I'm sure there's people in the audience. It's like a pretty complicated system and not everybody has taken a look. Can you explain it? And I'd also love to know about the token drop. We can get into that later though.

Oliver Zerhusen: Okay. So the graph is oftentimes referred to as the Google of blockchain. So it's the indexing protocol in Web3. And those that are technical know extracting data from the blockchain. for dApps, it's a complex undertaking. And typically not something that dApps themselves want to spend too much time on, setting up infrastructure, et cetera. And that's where the graph comes in, where we have essentially the entire infrastructure and all the dApps will need to do is develop an API that we call subgraphs. And then they have this seamless access to the data on blockchains. And we, at the graph, then index it through the decentralized protocol. So that's in a nutshell what it is. It's much more complex in the details of the design.

Nicholas: Are you able to get into the details of the staking mechanisms and stuff? Because I think it's a pretty educated audience. I think people can really grok like what's going on.

Oliver Zerhusen: Awesome. So we have indexers in our ecosystem who play the role of performing the indexing services for the query fees for our consumers. We have curators who, since July last year, are actually signaling on a bonding curve, on a subgraph level. Their task is really to identify the high usage subgraphs to the indexers so that they know which subgraphs to allocate to. So that's a stakeholder group that signals on the bonding curve. And then we have the delegator group, which is the staking group that actually delegates to the indexers and secures the network that way. And then beyond that, you have ancillary roles like fishermen. Fishermen are keeping indexers in check to make sure that they produce valid POIs. We have arbitrators who are handling dispute cases at the fisherman race when there are disputes around specific POIs. And that's essentially how the entire ecosystem is set up.

Nicholas: So what are all the different types of tokens? Maybe we can get a little more into the roles, like what each stakeholder's role is in the system.

Oliver Zerhusen: So the token that we have is GRT. And that was the token that launched per distribution schedule on mainnet in December 2020, December 17. And that is essentially the utility token that we have that consumers also pay for their queries on the decentralized mainnet.

Nicholas: Got it. So if I'm setting up a new DAP, I would have to acquire GRT in order to pay... Who would I be paying exactly?

Oliver Zerhusen: You would be paying essentially through a gateway. And you got to get on Polygon to do that. So the details on the exact payment mechanism is you set up essentially an account and you are being charged through GRT.

Nicholas: Okay. So I put up some GRT and it'll be deducted as if I was loading up an AWS or something account with a bunch of money.

Oliver Zerhusen: Correct. We have a gateway essentially. So the pricing mechanism works in a way that you as a consumer, you define your price that you know, not to exceed price, you wouldn't pay more than that. Indexers on the flip side will also set their price. And then, you know, the gateway matches essentially through the algorithm. Those indexers with consumers where price matching, you know, is working well for both the indexer as well as the consumer.

Nicholas: So it's kind of like an order book exchange matching these two interests. So is there an, I don't know, is there an opportunity for something more DEX-like there or other automated mechanisms that could be even entirely other projects?

Oliver Zerhusen: We have Denison here with us, right? So Denison actually, I think in the summer of last year came up over the weekend with a design where he identified the possibility to develop blockchains within a subgraph. Don't ask me the details of it. I don't know.

Nicholas: That was amazing. We should get Denison to talk about it. That was an awesome idea.

Oliver Zerhusen: So, but the possibilities are really endless. So we look at the Web3 space today. We want to index all blockchains in the long run, which is a big task. Every chain is different and it requires its own setup. But essentially also down the road, you can certainly envision even full-text search capabilities as well. This is not on the immediate horizon, but there are tons of possibilities. Okay.

Nicholas: So I've got my GRT. I'm a dev. I just rolled out my new PFP project and I have purchased my GRT. I've either bridged them or purchased them directly on Polygon. And then I'm paying through a gateway, which is a contract. I call a function on, I guess. And then pass some value with that function call. And then my order is listed in an order book at present, but that could be changed for maybe some other mechanism for doing this swapping. And it's matched with an indexer. and the indexer does what?

Oliver Zerhusen: The indexer is services, you know, the query. So the algorithm at the gateway, the indexer selection algorithm, takes into account more than just price. It also takes into account, you know, indexer size, how big it is in the network as a reputation score, you know, past service levels in terms of uptime. So there is, you know, it's a more complex algorithm that assigns it to an indexer, which can then also vary because you could have multiple indexers allocated to a given subgraph.

Nicholas: Okay. And then where do the curators come in?

Oliver Zerhusen: So the curators come in to signal to the indexers which subgraph to allocate to in the first place. One thing that is, I think, important when you deploy your subgraph on the decentralized mainnet, one thing that is a feature that, you know, as a subgraph developer or the DAP, you know, you can actually be the first curator to signal on the bonding curve. And that gives you economic advantages. And it also allows you to put on enough stake on the subgraph so that it actually has a strong enough signal within the ecosystem that indexers see it and start allocating to it. So that is one of the interesting dynamics that I think we've experienced over the first six months, which hasn't always worked out well, I want to say, but it is interesting, you know, just to see the dynamics, the signaling on the bonding curves is really, you know, about signaling to the indexers, here are quality subgraphs, go there and allocate to there. And that doesn't always happen when we have subgraphs that are being deployed by subgraph developers that don't put any signal on it. And, you know, a subgraph doesn't come inherently with a sort of like description who you are, meaning that curators then go out, they see there's a subgraph deployed, but it might take a couple of days to actually verify is that a quality subgraph was the developer behind it. And then it sits there for a couple of days being unallocated. And, you know, you cannot service any queries because there's no indexer for it.

Nicholas: So let's say I wanted to stake on a certain subgraph, I buy GRT on Polygon still or on mainnet?

Oliver Zerhusen: Mainnet, I believe.

Nicholas: And so I basically stake it using a contract, whichever network it's on, it really doesn't matter, just change the gas in this case, I guess. So let's say I have 100 GRT and I stake them on the subgraph for my new DAP. Is that being eaten away at or that's just dedicated signaling? It's not, nobody's taking it away from me.

Oliver Zerhusen: So you mean the stake on the bonding curve? Yeah, that happens. first of all on mainnet, that is correct. And the bonding curve has right now, I want to say it's fairly steep. So if you are the first on the bonding curve, then you are guaranteed to not make any loss. That is a stake that is with you. Now, any subsequent curator is subject to making losses on the stake if any curator before him on the bonding curve drops out. So shares go up, the more curators join and shares go down if any curator before you drops out. So that's sort of like the bonding curve dynamic. But that is just for the stake. What happens as well is that curators get 10% on the query revenues that indexes generate in terms of query feeds. So that is continuous income that curators generate. So if you have a long-term mindset, you're not necessarily too concerned about the dynamics on the bonding curve if your shares go up or down because you're more concerned about the revenue that you're making on the bonding curve.

Nicholas: Okay. So I'm a developer or even I'm just a curator. I suppose it is fairly financially advantageous to just be a curator without having your own. I guess you're saying it becomes more advantageous the earlier you are into the curation?

Oliver Zerhusen: On the bonding curve, only given subgraph, right? So we have a feature that we've implemented in November. We call that publish and signal. It was a feature enhancement following curation launch where we provide the opportunity for a subgraph developer who deploys their own subgraph to also be the first one on the bonding curve because that's the best place to be. And we wanted to naturally incentivize subgraph developers with the ability to also economically participate in the success of their own work.

Nicholas: That makes sense. So, okay. So I go to deploy my new subgraph, pop up. Yeah. Do I want to stake GRT on the bonding curve associated with this subgraph? Yes. So that means if I'm the first in, I'm going to make the largest portion of the fees also. You mentioned that the first person in can't lose money. How does that work?

Oliver Zerhusen: No, they won't lose money on the stake, right? So the stake that you put in, say you have 100 GRT, that translates then into a number of shares. So say you are the first one in, 100 GRT, you get a thousand shares. Say the second one comes in with the same amount of GRT, 100 GRT, wouldn't translate to a thousand shares, they would probably get 800 shares.

Nicholas: Got it. Okay. Okay. Okay. Well, that's very convenient that you didn't discover in the first year that the mechanism is fundamentally counter-incentivizing starting your own. That's good.

Oliver Zerhusen: So what then happens, obviously, the first curator would get 1,000 out of 1,800% of the query fees, whereas the second one would get 800 out of 1,800. So that's because of the different number of shares, they would get a different proportion of the query fees.

Nicholas: But the only danger in curation is the, I guess, impermanent loss of not having something other than GRT. if the price of GRT drops, but you can't lose your stake. You just, the later you get in, the less of the 10% fee you receive.

Oliver Zerhusen: No, you can't lose stake. So the share, shares go up when curators get onto the bonding curve and the share price goes down when two curators drop out. So say you are the third one on the bonding curve and then after that, no one else jumps on anymore. Now curator number one drops out. Now there's only two left. The share price for number two and number three will have dropped. So it goes down from like 100 GRTs to say 80 or 60. So it can drop. It will just not drop for the first one because there's nobody in front of them.

Nicholas: Oh, okay. I'm going to have to think about that pricing mechanism a little bit. So if someone goes in for 100 and then I go in for 100, I get, let's say, 20% less shares. But when I exit or there has to be three people for it to matter. Oh, you're saying, so let's say the first person exits before me, a thousand shares disappear and I'm stuck holding 800 shares. But can I exit with 800 GRT or whatever? was a tantamount to 800 GRT when I went in or no?

Oliver Zerhusen: Yeah, you can always exit, but the share price would be lower. So the 100 GRT that you've had that translate to 800 shares would now be worth, say, 60.

Nicholas: Wow. Interesting. Okay. So Ross, do you have any questions for Oliver about that? Do you know this all super well?

Ross Campbell: It's very illuminating. No, I can't count myself as an expert on this, but yeah, that was helpful.

Oliver Zerhusen: It is a very interesting design. I think we've gained some learnings, good and bad. Honestly, I think one thing that we realized is that the bonding curve multiplier, so to say, is a little steep right now, meaning that the share price, you know, delta change is a little high, could be a little flatter. You see that there's a bit of a consensus in the community as well. And then we've had some technical issues in terms of front running on the bonding curve as well, MEV attacks. And that's something we're looking into right now too.

Nicholas: That's super interesting.

Ross Campbell: There is this sort of conversation right now in DeFi and wider Web3 on how much governance is actually necessary to run these sort of protocols or software products. And from the description, at least what I heard, there seems to be well-designed incentive mechanisms to allow the services to be provided for indexing and all these sort of good things that happen sort of automatically. But I did notice when I was looking at the graph earlier today before joining this space that there is a concept of governance, but it seems more in the stewardship model. I'm wondering, Oliver, if you can elaborate a bit on how you see sort of governance happening with the protocol, with the graph, how well the foundation and council models working, if there's any relevance to sort of include GRT token holders in that equation, or if it ain't broke, don't fix it sort of idea. But yeah, just wondering a bit more about that.

Oliver Zerhusen: Yeah. So let me just give context for everyone. So as we launched Mainnet in December 2020, at that point, the initial company GraphInc and their founders have sort of relinquished protocol control and we've implemented the Graph Council. And the Graph Council is essentially a decentralized governance body representing all the core stakeholder groups we've been talking about. We've got indexers in there, we've got core developers in there, we've got consumers in there as well. And we have 10 council members today. And I think after the first year, looking back and see how well it worked, I think we're pretty happy with it, the way it's been working in the first year. And we have also a process in place where we've really changed everything into a transparent way where GIPs, which is protocol enhancement ideas, are being first published on the forum. You see the discussion taking place there in the community. We have community snapshot voting prior to council voting. that takes place for GIPs that have sort of differing viewpoints. So some of them are slam dunks. You know, even within the community, we don't go through community snapshot voting, but wherever we feel we should have a quantified signal, we have community snapshot voting. And community members in the network, then we have a voting strategy that weighs network participants higher than the average token holder. And we essentially then generate a signal for the council to take into consideration for their final decision. The council then also votes eventually on snapshot for every GIP. And then, you know, it takes it on chain from there. I think for us, it works very well. And at the same time, I also think that there is fairly broad consensus that we have room to further decentralize or enfranchise more and empower more in the community to be part of the decision making process. So if you're asking me if the council in its current form will be the end state that we see decentralized governance to work at the graph five years from today, I would say probably not. We're going to see a model that looks a little bit more delphite.

Ross Campbell: Great. Yeah. And that's helpful to know sort of the journey there and how it's working for you. I guess in sort of DeFi where the protocol is more aligned with providing financial services, there is this sort of regulatory or social strategy to have sort of a distribution on chain of power and control. And I think that's a lot less relevant and more burden for promoting sort of social goods like the NS Foundation or running a protocol like yours. But that's a whole nother topic of like how sort of the regulation of the space has forced inefficiencies and how we're governing these sort of protocols. Because we do see a need to sort of avoid any sort of aspect of centralization of the system, even though it is kind of rearing its ugly head right now in the space. We could talk about that. Yeah.

Oliver Zerhusen: In the DeFi space, you oftentimes have the token to be a governance token, right? You know, union and com, you know, GRT is not a governance token. It's a utility token. So we don't use, you know, GRT for on-chain governance decisions in that sense. And I think, you know, for us that works that way. Also, when it comes to the idea of when I said DAO-ifying earlier, you know, we do have a very complex protocol design and we have so many different stakeholder groups within the ecosystem. You know, I think what we're hearing in the community. when we talk about ways to, you know, DAO-ifying, we don't necessarily think of like the graph DAO as one body and voting entity in itself, but rather, you know, the idea of, you know, meaningful sort of sub-DAOs where, you know, we might see, you know, one for the indexers, one for the curators, and they all come with their own mandates and handle, you know, the area of expertise. So these are the types of discussions that I see, you know, emerging within the graph ecosystem more, and those make a ton of sense to me as well.

Nicholas: I'm curious about the algorithm for assigning weight to voters. What is it called? The voting process that the results of which go to the council?

Oliver Zerhusen: The community snapshot.

Nicholas: Community snapshot. So the community snapshot, the weight of a person's vote or of an address's vote is determined not by how much GRT they hold. Is that right? It's determined by some process about their participation within the network?

Oliver Zerhusen: Yeah. So I want to stay away from the current voting strategy that we have in Snapshot because it's pretty complex. We actually have a proposal out there right now that modifies it. So let me tell you how the modified snapshot strategy will look like, which has actually gotten broad community approval already. So going forward, we have delegators, curators, and indexers in the network that we can quantify essentially by stake on, you know, towards indexers, self-stake in terms of indexers, and also then what's on the bonding curve. So we can quantify that and we assign a weighting per that strategy where the average GRT holder not engaged in the network at all will get one vote. Then a delegator will get three votes, curator five, and an indexer seven. So we simplified the current strategy to something that is actually easier to digest for the average person because the current strategy is fairly complex. You never know how much voting power you actually hold on any given snapshot vote because it recalculates every time. And so we simplified it to that sort of basic formula and we give credence to also the sophistication of, you know, the network participants that we have in the network. So the delegator is a non-technical role. You stake in the network and off you go. You don't need to concern yourself necessarily with what's going on in the graph ecosystem. It's a rather passive role by design. As a curator, you become much more active. You have to go out and find out, you know, is that subgraph of quality? That behind is there going to be query volume in the future? So there's a lot more activity going on. So we give a higher weighting to a curator and then the most advanced and sophisticated function that we have is the indexer. They really make up the backbone of the graph protocol by servicing the actual queries to the consumer. And they're typically also the most technically skilled stakeholder group that we have in the protocol. So they get the highest weighting. And that is something that, you know, in our community is actually pretty well received.

Nicholas: Can you take me through? I didn't understand exactly. So if I'm a DAP developer, I'm buying, I'm curating and then hoping that indexers will be matched. What does the delegator do exactly?

Oliver Zerhusen: Delegator is just staking, right? You know, in, you know, to an indexer. So you go to the, to explore, you find an indexer similar to like, you know, similar to a validator, right? On Solana, for example. You find a validator and then you stake there.

Nicholas: One thing that I noticed about the graph token is that it's, it's really not a governance token. As you say, the graph feels more like infrastructure. Like it reminds me of Ethereum, talking about the securities law stuff a lot lately, researching and things. It's like Ether really has this advantage of very much having a practical application. that is not governance. You do need Ether to transact. So if the graph became, I mean, it already is basically dominant in this way and everybody loves it. As long as they can get it to work, everybody loves the idea, loves the whole thing. So it, it already, I mean, once it's the scale of something like Amazon, it will feel like a public good that you need this utility. I mean, not to call it a utility token, but it is a token that's required to make the machine go.

Oliver Zerhusen: Yeah. We tend to look at it as a utility token ourselves. And it's interesting that you bring up Ethereum because it's, Ethereum is another sort of model that, that we look at as well. So we look at decentralization in so many different ways, right? So we talked about governance, but there's a stake. decentralization, you know, that's really a big topic, you know, at the graph. So is stake in the network decentralized so that we don't have too much stake at any, you know, one given indexer, because there are many different dynamics where, you know, a large indexer can, you know, insert influence in the protocol in many different ways. And another piece also is the core development piece. So I talked about the initial founders who have since become a core developer, no longer in control of the protocol, it's Edge and Node now. And just last year, in addition to Edge and Node, we've added four more core developers. So we've got Streaming Fast, we've got Semiotic, we've got Figment in there, and now also the Guild. And that is a trend that will continue. And that this follows very much like the Ethereum client model that is out there, you know, we will see unfold at the graph as well, where from a development perspective, it becomes very decentralized.

Nicholas: So how are they funded?

Oliver Zerhusen: Funded through grants from the foundation.

Nicholas: And the foundation is, Treasury is controlled by the council for now, and maybe something even more decentralized in the future.

Oliver Zerhusen: Yes, yes, exactly. The reporting line from the foundation is to the council.

Nicholas: Yeah, it's interesting. I guess Ethereum, I actually don't know where the origins of the foundation's funds come from exactly, but like, how is GRT minted?

Oliver Zerhusen: Well, we have, you know, through the staking contract, we have a 3% inflation rate, which is also set by the council.

Nicholas: Okay, got it, got it. Okay. So there's this rate could be changed. It's interesting, I kind of haven't wrapped my mind around how L1s are different in that they don't have voting. Because this is the graph, could the, I guess the decisions made by these four entirely independent core teams that are being funded, they can make decisions, can they diverge in their decisions? Or are they all, they're not all implementing the same stuff, but a different version. They're also doing different things.

Oliver Zerhusen: Yeah, so everyone has sort of like its own capabilities. Now, Edge of Note is sort of like, you know, they know everything, right? Because they were the founders. And it's also the largest core developer that we have. But when you look at Figment, for example, Figment is very much focused on expanding the graph protocol to multiple chains, right? So they are currently leading the efforts to expand indexing services to Cosmos, for example. Then you have Streaming Fast, it's, you know, the former Defuse. They are heavily innovative around indexing performance. For example, they've introduced something like called the Firehose, which improves indexing performance speed, which is important for protocols like Near and Solana, which were in the process of integrating with as well right now. Then you have Semiotic AI, and they are really into cryptography and artificial intelligence. They're looking at things like ZKS-NARG and verifiable indexing. So, you know, they're a research arm, really. And then the recent acquisition of the Guild, they are, you know, GraphQL, which is about subgraph composition and a lot of the things, how to get web 2 development into web 3. So you're right. There is a lot of different types of expertise. We want it to be complementary and not necessarily being on top of one another in that sense. And in that sense, they do complement each other in terms of what, you know, as a foundation, we are engaged in providing or facilitating alignment across the core devs. But naturally, every core dev, you know, works on its own. And, you know, it all depends on rough consensus and, you know, working together, you know, in a civilized way, right? In many ways, everything that is non-protocol related, for example, expanding, you know, the services to Cosmos is not something that goes to the council, right? Because it doesn't touch the protocol in itself. It doesn't create a GIP that needs council approval. So there are things that core developers can implement by themselves as long as it doesn't touch the core functionality of the protocol.

Nicholas: So there is like an improvement proposal process.

Oliver Zerhusen: Yeah, absolutely. And that is centered around the protocol improvement. It really is a version that works for the graph that is based on the EIP process.

Nicholas: And those decisions are made by developers at these organizations and outside if they choose to volunteer for the running the improvement proposal process.

Nicholas: Got it. Okay. It's interesting because Ethereum, they're kind of the same process, at least from what I understand of it versus, I guess, Bitcoin. There is only the process of the development teams and what software the miners choose to run, I guess. Maybe Ross, you even know about this better. I don't know too well.

Ross Campbell: I can't count myself as a Bitcoin expert, but I would at least say that the Ethereum foundation was funded by a crowd sale. And there was, I guess, that initial centralization that has seemed to work out. But it is interesting that many, you know, within the legal field and the SEC have sort of hinted that that was initially a security offering. But yeah, but it's all water under the bridge, as it were, with like the whole sufficiently decentralized argument. But yeah, it is a very different setup. in that, you know, maybe similar to the graph, there is a foundation that has this sort of endowment and sort of a statement of purpose, a mission to improve the protocol. What's been interesting, though, with Ethereum and layer one governance, there is technically a snapshot that allows anybody with Ether to make proposals and vote. But there hasn't been any energy to sort of engage in that activity. So it is kind of this interesting aspect with all these protocols that even if you provide an opportunity to govern, you don't necessarily see that playing out. With Ethereum and sort of the merge and moving to, I guess, like ETH 2.0, where sort of running the protocol will redound to how much you stake in Ether. I guess there will be a sort of consensus and a way to govern the protocol in terms of like, what transactions are you allowing to be included in blocks? So I think we will see sort of more discussions of like how we should govern the protocol. What are the responsibilities of like the ETH holders? And it'll look a lot more like a jurisdiction, I guess. But that's a whole nother topic, I guess.

Nicholas: What do you mean when you say jurisdiction?

Ross Campbell: Kind of that's the whole meme that lawyers like me and Lex Dow kind of trend towards of like code is law, that if you have effective control over financial assets and like sort of a ledger, you're effectively exercising sovereign or like traditional legal powers. So then when you have that sort of power, concerns about governance, about fairness really do come into play. Right now, we are essentially trusting the miners to sort of follow sort of the consensus that any valid transaction should not be reversed. There's only been one major case of a reversal, and that was at the very early stages of Ethereum right with the hard fork to recover the exploited DDAO funds. But I can see sort of more discussion of jurisdiction come into play when it's like, whales will have sort of an extra increased influence over the protocol and what sort of transactions get validated. and what are the responsibilities of these people? They might be docs or not. What sort of charter are they following or what kind of principles are at play? So yeah, it will resemble a jurisdiction, I guess, just in effect of the power that people will have in sort of governing. It's not like casual, right? When you're running billions of dollars of value through your pipes. So yeah, I think we'll see more lawyers get intrigued by Ethereum about who's actually holding power and effectively what are the rules for exercising that power. But yeah, it's early days, but it feels inevitable to me that we'll try to apply legal principles and constitutional ideas about private property and rights.

Nicholas: So you're saying any system that can enforce rules about, what did you say, financial, the possession and transfer of financial instruments or something like this?

Ross Campbell: Yeah, just like property rights.

Nicholas: Property rights, right.

Ross Campbell: Who owns what? Can Bob get money back from Alice if it was sent in error? or is that effectively the transaction that should remain? because we're following this private law notion rather than having?

Nicholas: I mean, really law doesn't do that. Law is not irreversible like that. Everything is appeals.

Ross Campbell: Oh yeah, exactly. Once a judge issues the verdict or a judgment, I should say, it's usually irreversible. There are channels to appeal these things, but they're very expensive right now to go through. And I guess arguably we'll have on chain appellate process and that'll be a lot more efficient and fair for people. But more to the point, when you have a settlement of a transaction by the miners, it's effectively like a judge saying this is the transaction and that's how it should have occurred.

Nicholas: It's better. It's like the universe saying it. It's like there's no getting out of this. This isn't just some old person's opinion. This is real life.

Ross Campbell: Yeah, and it's helpful that we can all see it happening in real time. So that is sort of like a hybrid of like, we're not only running software, we're running like a legal process over people's property. Should probably be a whole nother call about if you're in a jurisdiction.

Nicholas: I'd love to do that. Yeah, we can talk, bring on some lifestyle folks for sure. Yeah, so GRT is very interesting because first of all, one thing I feel I have to say is everything about the way the graph moves. I know there were some uptime issues. People aren't happy with whatever they moved to the decentralized network. But in the long arc of things, I kind of see it. It'll get figured out.

Oliver Zerhusen: But that's the message though, right? So the uptime issues, we had some, I think in October, that was on the hosted service.

Nicholas: Oh, it was on the hosted service. Really? I didn't realize.

Oliver Zerhusen: If you look at uptime, that's the entire case about the decentralized mainnet. I don't think we've had a second of downtime yet on the decentralized.

Nicholas: Okay. I guess there's maybe in advance of the development of this new thing that lets you stake immediately or curate immediately in any case, like whatever. But there's things to, of course, there are things to be ironed out. And actually that was the caveat. What I was really trying to say was that the way the graph moves is so mature, so professional. It's like another level. It's a rare breed.

Oliver Zerhusen: So we're trying to put so many things together. User experience is one of them and it's tough to get it always right. You know, we get the question a lot when is the hosted service going to sunset, right? And we don't have a timeline for it. And part of that is about the user experience. Right now, we have essentially Ethereum enabled on decentralized mainnet on the hosted service. We have over 30 chains that we support. We have different features that we have on the hosted service that are not yet available on the decentralized mainnet. We have quite a bit of legacy on the hosted service where you have a ton of tabs that have sort of like been playing around with their subgraphs. And they did a subgraph for every single use case and they ended up with like two dozen of them. And it worked for them on the hosted service. Now when they think about migrating over to the decentralized mainnet, where also query fees kick in, now they're thinking about ways, okay, we can't deploy two dozen different subgraphs. It's nonsense. We've got to streamline that and that takes development time. So, you know, all that stuff is things that we want to support, you know, at the graph to make sure that it remains a good experience for everyone involved. And we don't want to do a knee jerk reaction to just push things out to the decentralized mainnet and then break the user experience along the way. So we see this really as a long journey. And we really wanted to build the infrastructure for Web3 and we want to do it right.

Nicholas: Ross, have you used the graph stuff in things you've been working on?

Ross Campbell: Oh, it's unavoidable. It's completely necessary to have a web application at scale. So yeah, I have had to buy GRT. Kudos, sir.

Nicholas: Yeah, it's very exciting. So back into the governance stuff a little bit more, I guess. So now we know how the graph works, more or less, and something about how the current governance system works. It does feel like it's of a breed that's different than, I don't know, like I spend a lot of in these kind of NFT DAOs or NFT aesthetic DAOs, at least. There are different parts of the DAO ecosystem right now, and they're all experimenting with different types of governance and community. You said the graph is in a forum somewhere?

Oliver Zerhusen: Yeah. So much like many of the other projects, too, we have the forum where the governance discussions begin and where the meat of the discussion takes place. And that's also what the council looks in when it comes eventually to their decision. They look through the forum discussions to make sure that they understand how the community looks at different governance proposals. I think when it comes to DAOs, let's take developer DAOs. We've got another here with us, too. I think it's a great example. It is a DAO that was, it's sort of like a native DAO. It was born as a DAO, not as a protocol that was developed, but it was a DAO from day one. And when you see now you've got thousands of folks coming together, you have the need to organize and structure yourself. And you see guilds being produced and working groups essentially, and they're thinking about scale already very quickly in order to make the collaboration within the DAO meaningful. The graph came in from a different perspective. We had a different origin in that sense. I think when you look at synthetics as an example, they're maybe probably six to 12 months ahead when it comes to governance model. They have different councils and they've got it broken down. Enzyme Finance is a similar project where they've just recently announced a breakup of their current council into three different sub-councils. When I look at those projects, I'm seeing a lot of use case there for the graph to progress in a similar way when we think about it from the perspective of how we progressively decentralize, even though the term progressive decentralization is a term that lawyers don't like anymore these days because it means that at some point you weren't decentralized. My point is that you find ways to continue to distribute power to the outer rims of the ecosystem. That is something that we feel strongly about at the graph and it's a model that feels good in my view and makes also sense in a way where you can continue a merit-based approach to empowerment because we were born out of a small group of contributors that has really grown over the last 12 months and multiplied, but in a way where it was merit-based. For a protocol like the graph that is so highly complex, it feels so critically important. It's difficult to envision that one day we have highly complex protocol decisions go up to a vote to this regular GRT order. who has really no idea what is the context at all of this proposal and cannot really make an informed decision? that doesn't seem to fit well. The merit-based and progressive way of decentralizing is something that we've seen happening over the last 12 months and makes sense for us to continue as well.

Nicholas: Yeah, absolutely. It's also just for efficiency. It doesn't make sense for questions that don't need governance type decision-making to require governance decision-making. Nothing could get done if you had to do that. Rost, how does LexDAO operate? There's no token for LexDAO, right?

Ross Campbell: Yeah, that's basically the case. We operate on a combination of membership NFTs, which are seasonal for each year. We have a snapshot for that. We also have a Moloch DAO v2.

Nicholas: Wait, how do I get one of these NFTs? How do I...

Ross Campbell: I guess there's a process. We have gotten a lot more organized over the last couple of months. When we started, it was a bit of chaos. It was kind of migrating from chat rooms of crypto lawyers and saying, let's deploy on Aragon. Let's just try all these different DAO formats and contracts and drink from the fire hose, if you will. But more recently, we've found a lot of benefit in moving from Telegram to Discord, having working groups along the lines of what Oliver was suggesting to make it a bit easier for people to contribute and to get value out of this network of crypto lawyers. So it has been emergent, though, I would say. And largely, it's just whoever has the most energy and passion for a topic and this duocracy, whoever is putting in the work, gets more access to channels, gets a Discord role, other vanity titles and stuff like that. But yeah, I think lawyers are generally not the most cooperative people, but they, like any group, are able to align on incentives. So the working groups, like I said, have been able to produce those incentives. Today, for example, we were able to do a CLE. That's a great revenue stream, but also a really good opportunity for lawyers to showcase what they know about crypto. And trying to find these opportunities and curate them has been the focus recently for LexDAO. But yeah, I would say we are a DAO in the sense of there's no strict hierarchy, who's in control, whoever puts in the work gets more out of the system. And it is more merit-driven sort of organization. And yeah, it's totally open. We do try to select for lawyers, but we also have non-lawyer coders who have joined the DAO recently as well. But yeah, it is a process, I would say.

Nicholas: LexDAO has a super legit membership and is also, it's by the sounds of it, one of the more guilty of using DAO without having the, what you think of as a DAO in your head. But it seems like it's for a good cause. I think bringing together lawyers to think about this stuff is so important. And you also, I see you using the phrase legal engineer a lot. And to me, that's what LexDAO is all about.

Ross Campbell: Yeah, that's what we're optimizing for in terms of the meme, but it's more than a meme. It's like a practice that I think is going to be more relevant. Lawyers will be asked to be key signers of multi-sigs, will be asked to sit in arbitration of smart contracts or funds that are inside smart contract acts. And being able to at least understand these things has been relevant and has created opportunities for our people to get engaged on client matters, to be a lawyer. But for me, I definitely take the longer term vision that lawyers will be very good smart contract programmers because all we do is think about risk and how to control risk and how people try to cooperate.

Nicholas: I heard you saying the other day that... You went back to write something legal. You were writing something that was posted on the GitHub, I think, a template kind of contract or something. And you were like, I forgot you can just say anything.

Ross Campbell: Yeah, you can just riff. If it comes across as reasonable, you can get away with it. You can't BS your way through code. The computers will call you out. They'll say, no, I'm not running that program.

Nicholas: It's like differently rigorous. It has much tighter constraint, but at the same time, it lets you do things that the law sort of isn't able to do right now. It's a funny mix.

Ross Campbell: Yeah. And it's basically like mediating between the sources of power right now. It's like judges still have a lot of power, right? We don't have like blockchain controlled robots that can enforce property rights and seize and repo things off chain, like a house or a car. We have to rely on the legal system to get people to do what they're supposed to do. And to write scripts that judges will understand, there is a format that you are trained through law school, how to read case law, how to cite precedent, how to write in a reasonable and logical manner. And even to use legalese and flowery language like Latin to impress people with your acumen and all that good stuff. But yeah, it's less relevant when the judge is effectively a smart contract or network of computers, right? So then you sort of have to adapt and change speeds and write for that format. If you can write for both, then I do think you try to like, or you can cover more of the risk associated with people like entering into deals with each other. Like anything that people do with money over a long period of time invites risk and the risk of default, of lawsuits or other sort of funny business. Like you run bad code and the risk is also just like an inherent and having a smart contract break. So if you can do it all, I do think that'll be a sort of like value add and an interesting sort of like a practice. So that's sort of like my stump speech for legal engineering. I won't say it's easy. I've lost like a lot of hair over this, you know, but that's life.

Nicholas: In talking with lawyers, I've found that often there is a tendency to try to find the near, I mean, maybe it's the whole discipline in a way, but to find at least in North America, but is to find like the oldest, something you can reuse. Okay. Sorry. Two things, obviously, just precedent, but also to find something you can reuse kind of off the shelf for the problem, the entrepreneur or whatever is asking you about for a number of reasons. Like, is it market? I hear a lot, like not wanting to deviate from what the market is already used to seeing, ironically called a market, or am I using the right word? It is market, right?

Ross Campbell: Yeah, totally. Like market forms, market templates.

Nicholas: But the other thing is like, nobody wants to make a clear statement on, like, basically nobody knows what the consequence of any action is unless it's well constrained by case law. So lawyers don't want to go out on a limb or even like, it's even difficult for them to answer questions where the law is not clear. Like the function is sort of like guiding you towards solutions that are clear, like Delaware, for example. It's very interesting. It makes it very difficult to deal with Dow stuff with lawyers, I find.

Ross Campbell: Yeah. So that's all. the whole conservative nature of the legal practice is we're trying to like, understand like, what are the gaps or what could possibly go wrong with any transaction? If you sort of like, hew to like the well-trod road, you can sort of tell your clients that like, yeah, like. judges have seen this like thousands of times before. Or it's like well-understood law like Delaware, and they have good judges on the chancery court. If they're going to do something novel or try to like give advice in an area like Dow's, they will be more uncomfortable. They'll be more uncomfortable with the notion of like malpractice risk. If you do something that's like out on a limb and more unpredictable, then it's easier to make a claim that the lawyer defaulted, that they committed malpractice versus if they did the thing that nine out of 10 lawyers do. So lawyers, they love consensus. They love doing the same thing over and over. But what frustrates me with lawyers is like, they pretend that that's not what they're doing. They try to act like it's mysterious when really it's like all the same forms essentially. A lot of the same advice being like recycled. But they, because it's not an integrated system in terms of like the legal services, they can sort of create this sort of arcanum or mysterious nature to the practice. But yeah, I think, you know, lawyers that take risks for clients that try to do something novel, they deserve to sort of be, you know, paid a bit better because there is the risk of losing their license. Like the license for a lawyer is like their collateral in any of these engagements.

Nicholas: That's what I was going to ask. Why is it that they don't want to take responsibility for giving advice outside of well-known law?

Oliver Zerhusen: Maybe it's because of the Wyoming law, right? Dow, I mean the Wyoming Dow. It's like everybody's waiting on the sideline for the first one to come out and see how it goes and then take it from there. And last year, the one, what was it, American Crypto Fed Dow, which was kind of haunted by the SEC and that didn't go anywhere. So, okay, back to square one that we're waiting for the next one to come.

Nicholas: So, the lawyer taking on a client like at the edge of known case law is essentially like a World War II pilot or something like flying into a storm. That's a good point.

Oliver Zerhusen: Yeah.

Ross Campbell: Yeah. Like Red Baron stuff. But yeah, you're open to more fire if you're out on your own versus you're like in the pack and you can hide in a pack and say, you know, judges, what I did was by the market. But that's also why it's so hard to work with lawyers, right? Because they'll charge you an arm and a limb to do anything actually interesting.

Oliver Zerhusen: There should be a reward system for being the first one out and not getting punished too hard.

Nicholas: Well, or the lawyers shouldn't be directly responsible. They shouldn't lose their right to practice law if a case goes bad where they were trying something. It seems like you need some kind of counterbalance to keep them from giving bad advice, but I'm not sure that threatening their profession every time is the right way.

Ross Campbell: Surely there has to be a better way, right? Because people need quick answers and to understand legal risk without lawyers like clamming up and saying, oh my God, I'll have to charge you to do all this research, even though they generally understand. I mean, transactions will be different in different contexts with different technology, but largely you're just trying to understand common law notions of fairness, fair dealing between parties, what is negligence? It's usually just what is reasonable under the circumstances. They can shoot from the hip a bit more, but they're reluctant to do that in gray areas because they don't have a bunch of law firm memos to point out on the internet. They don't have a lot of cases to say, obviously what I did was reasonable. And that's sort of the difficulty of the training. It's like ultimately we're trying to convince people. It's a persuasion practice. It's easier to persuade people if you have a bunch of examples and you have this sense of consensus. What's interesting though, with what I call the jurisdiction of Ethereum, is we are sort of establishing a market for reasonableness in terms of when do devs bail out users, what transactions have actually been reversed by miners. And we can point to that as in the amber of the code and the blocks as a sort of case law that everyone can read, everyone can understand and machines can read them too. So I can see notions of reasonableness and what should be settled on chain actually augmented by AI and other cool things in the future. And it less being this weird sort of persuasion game where nobody actually knows the answer, but they're just trying to argue about it. Markets don't do well. People are just arguing all the time, in my opinion. So I don't know if they'll lead to ruthless minimalism in terms of human rights, but we have to try some things a little bit differently.

Nicholas: It's funny that our bureaucratic systems have resolved to maintaining the status quo through bureaucracy or something, or through punishment for experimentation. It's not like you want everything to be permitted necessarily, but just the customer servicization of every aspect, like healthcare, law, education has rendered everything like Kraft Dinner.

Ross Campbell: Yeah. It's like this industrialization aspect of. we want almost a factory system for how we deal with each other and what gets made when we know that the best things are made through experimentation or accidents, happy accidents. I'm pretty sure that penicillin was invented by accident because this guy was like, oh, what's going on with my orange? Maybe I should just try this mold out. But to apply that to more of the capitalists, entrepreneurs just going on a limb, trying out new things. Not so much like the Theranos model of you're totally making up claims about your product, but to try weird products. We'll see more experimentation there, even with biohacking and things that I think should be less regulated in the future. We can create a lot of value if the law isn't necessarily in the way, but it comes in after the fact and allows people to get remedies if something actually went wrong. And that's more like civil litigation, all that good stuff. I'm more of the mind that regulation as constructed isn't super relevant to how people are trying to exchange ideas, work together online, which is pretty instant. People can come to their own understandings of risk. They might not even know who their counterparty is, even if they wanted to sue. And what do we do then if most people are trying to build businesses as a nonce? So it's a different context and lawyers aren't as relevant. I think I had a whole rant the other day about that. But yeah, it is interesting.

Nicholas: Actually, I want to ask you, do you know anything about the difference between what are the two legal traditions in the West? What are they called?

Ross Campbell: So there's civil law and there's common law. And common law is more judge made and civil is more like reading the books and how the legislative body is trying to talk about rights and remedies.

Nicholas: So like in France or something, tell me if I'm wrong, my understanding is that in the US, which is based on British law, is that right?

Ross Campbell: Yeah, correct.

Nicholas: So in that system, everything is referenced to case law and the application of laws are decided by the history of how prior trials have been decided versus in like, is it civil, continental legal system? It's more like, it's less this like prosecution, like everyone is working to find the, what the law states, but the judges aren't like, everyone's on the same side. I don't know, like a tribunal or something is, and maybe that's not correct. But in any case, that the laws themselves are decided more through the legislative process and the judges are like bureaucrats. They're not given like judgment rights.

Ross Campbell: That's more or less it. And I guess there are some benefits to the civil idea of like, we're not held to other judges. Like the judges can like try to take a new eye to law and be more receptive to like social conditions and like sentiment and politics. But I do like the common law tradition of like, everyone should be treated the same and judges need to self-regulate. So like they don't make really crazy decisions or something. And we do have the power to remove judges. But like, I think generally that also applies. like lawyers, like we do try to self-regulate. So we'd like remain in power or something. But yeah, I don't know, like either system doesn't seem like that relevant or perfect to me. What is interesting is like systems that can be like almost a hybrid of like the judicial system and the political system. And like, maybe we see that with like these like crypto networks, like the users can actually like govern and they can sort of also influence the. like judicial enforcement of. like property rights. If you like vote, you say like, yeah, let's like remove this person or blacklist this person or let's restore the Dow funds or something like that. That is a hybrid of like both politics and like actually having results in execution. So I don't know if like the same sort of like norms should apply here or if it's like sort of like almost like our world resembles like a forum or something like an internet forum. Like, I don't know if that's like as ideal for governing like your livelihood, but maybe it is. I don't know.

Nicholas: Well, at the very least, it seems like there are some mechanisms that the world is going to have to grapple with, like just at the very least, like a split, an online split rather than having some kind of contract. And only one person is custody of the money at any time until the split is affected. Like to be able to do it directly off the back of a sale just makes so much more sense. And obviously, it's the need for so much. Given this Ethereum jurisdiction thing you're talking about, it's there's no chance the transaction will be undone. So there's no need for a contract.

Ross Campbell: Yeah, I mean, that largely applies, I would say. In terms of like what people should do for signing a transaction or not signing a transaction, we still need like human readable rules and agreements to say like, please sign this if the state changes on the contract from true to false. We expect something to happen then. But we will see oracles kind of play those roles, I guess. We won't need to have as many delegates or multisigs and representatives managing protocols if we can have a script that can read events from other contracts or say it rained on Saturday and therefore we have to pay out for deflooding a smart contract. I don't know. That's a really random example. But we will automate more and more and reduce the need for agreements, which are largely trying to get people to do what they're supposed to do. If people all they're supposed to do is just like sort of like collect UBI and like create art, like maybe that's like the ideal situation. And like less people should be involved in like financial services or things that are purely digital amongst ourselves. Right. So that's kind of where I see this going.

Oliver Zerhusen: Main net faucet.

Nicholas: That's what we're waiting for.

Ross Campbell: Yeah, basically. Yeah. Yeah. Libertarian socialism. It's a hell of a drug.

Nicholas: Yeah, it'll be interesting to see what happens next. I'm sort of baffled by this. If anybody wants to come up and ask a question, we can open it up to the audience to come say hello. Yeah. What a crazy thing. It does seem like things will have to change given the abilities. I'm just thinking about like some kind of wolf game insurance where I don't know if Cryptodes, Grampland in CryptoVoxels floods, some contract issues. I don't know, some kind of reimbursement to people for fixing the flood in Grampland.

Ross Campbell: Crimpland?

Nicholas: Yes, Cryptodes themed.

Ross Campbell: The Metaverse place?

Nicholas: Yeah, CryptoVoxels, Grampland. Well, Cryptodes. Oh, nice. Yeah. Cryptodes X CryptoVoxels. It was made by a member of the Cryptodes community, or actually it makes more sense if you think of like on-chain games, like, I don't know, something loot or something wolf game. Like if they, you know, taking out insurance on losing some gambling game where you have some, you know, some poker match on the blockchain, whatever it is, some on-chain game.

Ross Campbell: Yeah. It's harder in the digital context. Like we usually like take out insurance to protect ourselves because our property becomes unusable. Like legit, your house like burns down. It's no, you might have the deed to the house, but the property is unusable and you need like money to replace that property or do something else. Like ideally you move away from a place that keeps getting flooded or, you know, has a bunch of like wildfires. But in the digital context, I think like nuisances are probably more relevant. You know, if I like put up a billboard next to the Grampland, like CryptoVoxels plot. that says like F Grampland or like has an obscene image. It's like, what is the insurance? or like what is remedy system to like get people to like not do that thing that like devalues and makes it harder to enjoy your like property rights. And like, yeah, it's all visual at that point when you're like in the metaverse. So it's like most of the harms will be visual harms. and it's like, we'll lend to censorship, but it's like, how do we create like censorship systems that are like transparent and a bit more cooperative, you know? And maybe that's kind of the agreement of like, if you join sort of a plot or neighborhood, this is almost like CCRs and like, you know, neighborhoods like covenants of rights and restrictions, like cut your lawn at a certain height or a certain frequency. We'll probably see more of that in like these digital places where it's like, just like be chill. Like, don't be weird. Don't do weird things that make it harder for people to hang out in digital spaces. And then because people opt into these things, we have the right to remove them and it's fair, right? Because we don't want to have like systems where like arbitrarily our digital property rights get like removed, but we can also recognize that people can kind of be assholes and they will make it harder to enjoy things. in the metaverse, you know, if we don't have some rules or something like a legal system. So that's something that I think will be relevant. But yeah, insurance for like metaverse, like. I'm not sure how that will work. I think insurance will be interesting for like, you know, if we expect most people to be paid in stable coins and use smart contracts to receive money, we should have ways to like reimburse ourselves or to have payouts if something happens to OpChain. Because like we are still very corporeal. We still do things like in the real world, like we eat food, but we probably want insurance to be a lot more convenient. It'll be a lot more streamlined if we have like Oracle systems that can like report on things that are happening to our OpChain property rights. So that's more the angle I see. But yeah. Yeah, it's complicated, but like these things will happen because the incentive to build these things just like feels obvious once you have like the automation potential of something like Ethereum. So it's like we'll see a lot of startups and things like building these things.

Nicholas: I think it makes a lot of sense that you're applying the what you can observe in physical space for how sort of neighborhood watch

Oliver Zerhusen: kind of, you

Nicholas: know, I don't know, regulate, like self-regulation of communities, which will then become higher value parcels because they have a certain kind of person building there and a certain kind of aesthetic. And it makes perfect sense. It sort of, I feel like you're drawing on the legal. I mean, I don't even know if you would say it's legal, but just the way that people self-organize and including legally in physical space to sort of complement the availability of like the natural financial instruments of NFTs and fungible tokens that create these, create the possibility for some more legitimate 3D metaverse. I mean, frankly, I think I'm more interested in the LexDAO, GRT metaverse than like strictly 3D physical ones, but it does come up as soon as you start living in them a little bit. Like yesterday we had this launch party for the Juicebox V1.1 in the CryptoVoxels parcel for Juicebox called the Juicebox Learning Center. And right away I was like, the Voxel architects who created the space had created these really cool wearables, which are 1155s on Polygon. And they were like giving them out to people address by address. I was like, CryptoVoxels should be paying us for having 29 people in the same parcel. Like we should be getting some token of some kind, maybe revenue share. I don't know what, but it seems obvious that like the heat map of the location of people, even if that stuff isn't truly on

Oliver Zerhusen: chain,

Nicholas: nevertheless could be communicated on chain by a trusted party

Oliver Zerhusen: and

Nicholas: maybe better yet in the future on some L3 or whatever, that's not even necessary. But once you have that data, you do start to want to financially incentivize the behaviors that are conducive to good neighborhood building and popularizing the protocol. or what have you.

Ross Campbell: Yeah. It's like if Facebook gave people tokens for creating good Facebook groups and stuff like that. Because like you said, a heat map or activity, the users are creating the experiences and content for each other. And that makes it better to go to CryptoVoxels or wherever and to buy parcels. That helps CryptoVoxels. But yeah, I think those incentives have to play out. There will be a fork of CryptoVoxels if they don't start doing that. That's almost like the sushi swap model of like, these things are inevitable. Don't blame us.

Nicholas: It looks rare also.

Ross Campbell: Yeah, exactly. Yeah. So that's something I could see playing out. And it's more like the reckoning of like. if value is being created on the internet and now we have the tools to reward that value creation. The incentive is so obvious to just do that as a competitive strategy because code can be forked. It's all copy pasta. So it's like whoever's really coming up with the clever incentive designs will sort of do well in the market. That's an experimentation that just makes sense because people want these things and there's no friction to providing them. It's like just deploying an ERC20 token. So yeah, it's not very hard.

Nicholas: It's so easy to do. I do wonder, we don't need to speculate on what will actually happen, but I do wonder how something like Looks Rare will handle sort of the law surrounding what it is that they're doing. Because what they're doing seems ethically fine. But as far as I understand it, it's not permitted. But it does seem ethically fine. I think people who understand what they're doing, I don't know the details of their project or what their plans are, but just giving people a share of a fee revenue for doing some action that you want within the ecosystem, being a good citizen, that seems like something that's pretty reasonable. And really, I used to think more about social networks and smartphones and things. And like the top 10 apps, I think there's maybe one company that didn't exist 10 years ago in the top 10 apps, maybe two, like Snapchat and TikTok, something like that. Snapchat did exist. Yeah, Snapchat's within 10 years. But like 20 years ago, it's just Apple, Microsoft, Facebook. There's nobody else. There's no Google, whatever. So there's so little movement in the market that it's just impossible for anybody to do anything. And these token models do seem to sort of, I mean, if anything, like Web3 or crypto, whatever you want to call it, the velocity of entrepreneurial movement is, it actually makes machine learning development seem slow. Like it's so every day, there's new stuff every single day.

Ross Campbell: Yeah. That's the fun of having a financial component that's also purely digital and anyone can spin up their own currency. But yeah, I would say, this isn't legal advice, but like when users are creating value in a system, like it's less of a speculative idea or an offering, if you will, if they're getting some sort of like reward points or like loyalty token related to that system. And if they can also help govern that system as a result, that's almost like, you know, LPs and AMMs that they can get fees, they can get rewards because they're providing, you know, the value of their capital and their time to the system. The issues are usually like selling something for a return. And I guess there will be interesting questions in terms of like how that token's traded and like how the central team might have been related to. like getting that token to secondary markets versus like a DAO voting to unlock the tokens or make them transferable. Those are facts that I think are relevant. But at the core, though, it's like a very different dynamic to have tokens minted and awarded based on participation, you know, putting in work and also, you know, like I said, creating the value and not being a passive speculator versus just selling a claim against the treasury. Right. So those are things I think people should consider. But yeah, if you're going to try to do a token launch, like definitely try to talk to a lawyer or like do your research. Don't YOLO because this space is being watched. But definitely think about the dynamics of rewarding users, but also giving users the control to decide how these things could be traded in the future.

Nicholas: Just might be traded in the future. The things that they're receiving as rewards or which.

Ross Campbell: Right. Yeah. So I think a comfortable format. Again, this is not legal advice is adding value to a system and getting something that's like non-transferable, you know, kind of reputation or like loyalty points. What gets tricky is like if people are like buying these tokens in secondary markets and a central team has a large amount of these tokens, like they probably might expect to rely on that team or like a sort of core group to continue to provide the returns and create the value. But if the token is more like to mark contribution, like it's less in that sort of trouble area. I hate that this is even a trouble area, to be quite honest. But I can't turn off that part of my brain, though.

Nicholas: Once you've seen it, it sort of affects how you look at the situation, what's going on.

Ross Campbell: Yeah, exactly. So yeah, it's are you creating opportunities for people to make bets on others or are you providing access to a system where they can contribute? That's the sort of the thematic split that I see without getting too specific. Now I have to be like a lawyer.

Nicholas: Does anyone want to come up and ask a question? If you do, please request. Oliver, I don't know if you have any thoughts on everything we were talking about.

Oliver Zerhusen: Yeah, no, many. I was thinking almost like more of a grassroots model, right? Thinking about grants, for example. This was on a demo of Radical Drips. It's a new product that they've launched.

Nicholas: Oh, yeah, that's cool. Can you summarize that?

Oliver Zerhusen: Yeah. So two key features that really stood out to me. One is you can set up essentially continuous funds to ongoing contributions. So if you have a admin role and you want to set up continuous contributions, you can do that fairly easily and very, very cost effective as well and stay in control of the funds. So it's not like a vesting contract necessarily that this is a little bit more complex, but you set it up in a very streamlined way. The feature that I saw was like really makes a big impact. The way we've seen it the graph is the concept of sharing someone's funding receipts with other wallets. So we have, for example, grantees where we don't just have one contributor being part of the team that completes a certain grant, but it's a team of six or maybe 10 people. But typically we have one wallet that we interact with, that we provide the grant funds to and then we kind of hope that they figure it out in a way that works for them. And imagine you have a wallet that says, this is my team. I'm the main guy, I'm the recipient, but I share 10% with that guy, 20% with that guy, 10% of that guy, of everything that comes in. And it's all verifiable on chain. And it just becomes now a team contribution that you then set up and provides more transparency, visibility for everyone. And it's just a way where teams can be set up to be compensated in a way that removes the friction of relying on one guy, sharing the stuff with you. So it's sort of like an associated topic based on what you talked about, coming at it from a bit of a different angle, not necessarily thinking about having a share of the project, but just in terms of how can you reward people with contributions in a way that it becomes more pragmatic and practical.

Nicholas: So this is radical drips. Yeah. This is like last week, two weeks ago, something. Yeah. So this was announced. It's very cool. I didn't take a super close look, but so essentially for splitting funds, you can create one of these, I guess you instantiate a contract or something, clone it, I don't know what, and it'll, and you can split between people. It's immediately available on Ethereum and Polygon is launching in the next few days. So that's probably already out by now. Yeah. Drips.network.

Oliver Zerhusen: And another thing, you know, we haven't really been talking about much about voting system, but maybe we have a few DAO platform developers on the line. You know, one thing, it's totally unrelated unless we want to, unless we still have stuff to wrap up, but just wanted to talk a little bit about, you know, DAO platforms, been doing some research on that. I think they're doing some great work, you know, to really get to the next, you know, level of configurability in terms of what you're able to do on chain, et cetera. Voting delegation to me is one of the big themes this year. I think it's such an important part of what we need to establish when it comes to governance. We talk a lot about voter apathy and that is a topic in itself. Don't want to go too much into that. But to me, having DAO tooling, being able to incorporate in a configurable way, you know, the concept of voting delegation is one of the key features that I see being really important, you know, across so many different use cases that we see out there.

Nicholas: It is very cool. It puts a lot of pressure on that UI for like, I think of the ENS drop where you would, I think it was great that you would in the process, delegate or vote on a first proposal and delegate or something like this. But that it puts so much pressure on that UI for delegation. I think the ENS one, which was a fantastic airdrop and delegation rolled into one. But I think it was ranking them based on how many people had been delegated, at least initially. they might've updated it during the process, but it was ranking them by who had the most delegates. And so naturally this created a power law distribution of how many people were delegating to these handful of people at the top of the list. So it's a interesting, it's a challenge. There does seem to be something about just delegation in general in DAOs. Like we were talking about earlier with putting the burden of voting on absolutely everything, technical matters included, doesn't make sense to the entirety of the DAO. So some level of delegation to either, like I see the graph is doing these very big financing rounds for these four parallel core dev teams, like tens of millions, 50, $60 million, something like that to each of them. And in that way, delegating the responsibility to those teams to make those technical decisions. So it's interesting to also delegate on the other side to where there is voting that actually very few people are probably going to follow through with the voting based on what we've seen so far. So better to give power to people that are trusted within the community. It is interesting. It does seem like bandwidth and governance is similar to like bandwidth and discord. Like you really can't pay attention to more than two or three of them seriously.

Oliver Zerhusen: I mean, every protocol is different. Not every proposal is equally complex, right? We certainly have maybe more complex proposals in the graph network, but here's one thing that is not discussed enough, I think. And that is the fact that I think the average person engaged in Web3 and crypto is engaged in more than just one protocol and project. Yeah. Right. From an investment perspective or whether it's from a contribution perspective. But, you know, everybody's kind of like hopping, you know, back and forth and left and right. Right. And so it's almost a byproduct of Web3 that you, the masses don't necessarily can get too deep in any given protocol because, you know, they're interested in many, but can't get too deep in any. And that is, you know, for governance, sort of like is the first one to feel the impact of that because governance is the least sexiest part. Right. Let's be honest about that. You know, going to a forum and reading, you know, through pages of discussions, going back and forth, you know, that's not how the average person feels like time well spent. And that's why I think, you know, voting delegation is so important. I don't see voting apathy as a problem. I see, you know, voting apathy just sort of as a reason why voting delegation is so important.

Nicholas: Ross, do you have any thoughts on delegation?

Ross Campbell: Yeah. I mean, I probably have a lot of thoughts here, but it is necessary to counter the insane gas costs of having on-chain governance. Like I would rather have a delegation system than say, you know, if you want to participate, you have to spend a lot of gas. What has been a bit discouraging though, is even if we have, you know, delegation systems, there's still not a huge amount of participation. And I'm not sure if that's like a social issue, a sort of UI UX issue, you know, people like Tali are helping visualize, you know, voting and making it a bit easier to do sort of compound style delegation. But yeah, I do wonder if we're seeing some issues in the sense of like the emperor has no robes and kind of what Oliver is saying, like nobody wants to vote. Nobody wants to have an on-chain record of making decisions. So they're kind of being shy about participating, you know, even these delegates and representatives. That's something I've seen, you know, I saw with Rari, there were some like dev payment votes that didn't even reach quorum. And that was discouraging to me, but it's, you everything that alleviates some of the burdens and at least it provides people an opportunity to have on-chain governance versus saying like everything should be a snapshot and multi-sig. So I'm definitely, you know, a fan of it. I'm wondering, you know, if, you know, layer two and even making it much cheaper for delegates to participate will like make this a bit easier for people, or if we have like better relayer systems so people can like swap a credit card and have like a vote, you know, posted through their signatures, like if that'll work. But I do kind of have a vibe that like, even though we have all these great technical solutions come down the pike, it's still like not terribly hard to participate, but people just aren't doing it. There are some formats that I've seen out there in terms of like design and game theory, like Dictator DAO that Barchilema, a boring crypto on Twitter has put together where basically like one person is the operator for a treasury and they can be fired at any time by a DAO, but they are able to accelerate and execute much more rapidly than what we even see with like multi-sigs or delegates. So yeah, I think the more experiments, the better, because like what we have is still not quite working in my opinion.

Oliver Zerhusen: Concept, optimistic governance that you're just hinting on, right? I feel we're going to see more of that. I like it because not all needs to go through the mixer of three weeks of discussing it in the forum all the time. And sometimes it is better to empower, do optimistic governance and then have sort of like, you know, the veto power, you know, on the back of your pocket, you know, for the community to react when it makes sense. I like that approach in many ways.

Nicholas: Ross, do you think courts or regulators would be capable of perceiving that as decentralized?

Ross Campbell: Optimistic governance.

Nicholas: That's the model behind this dictator. DAO?

Ross Campbell: Yeah, I guess it's very similar. I think so. I think they would prioritize the ability to veto. You know, it's like, is the person actually in complete control or do they have sort of a lease of that power or this sort of representative that's at, you know, the behest of these people? So not to reuse the word, but I am optimistic that this could still play out and still reflect the DAO. It's more that like inevitably, you know, people have managers, they are able to share responsibilities if they want to cooperate and be efficient. There are domains of expertise. There's the lack of ability to pay attention. But what I think matters the most in my mind is like protection of people. When regulators care about centralization, they usually care about consumer and user protection. And if you can sort of protect yourself at all times, like just behind your wallet by saying, you know, let's oust the dictator, then I think it kind of gets us to the same point of like, you know, you can have complete decentralization protection because everybody's the same or you can have still some level of decentralization because everyone has the right to remove a representative. So I think it could work. I don't have any definitive answer here because no one's actually brought this to a court yet.

Nicholas: So there would be in this optimistic governance mechanism, like a veto period where the DAO could potentially vote down the dictator before any action, on-chain action were to take place?

Ross Campbell: Yeah, I think that was Bart's design. You know, there is a sort of ability to review and remove through a sort of positive vote. But I think the design also involves like very similar to like Moloch where it's like permissive. You know, you make a vote and if people really care, they can try to veto it. But generally, there's no quorum requirement or anything like that.

Oliver Zerhusen: Or you can also have a rage quit, right? You know, the thing and then...

Ross Campbell: Exactly.

Oliver Zerhusen: I don't agree with that, then I just leave.

Ross Campbell: I think that's robust protection. that like we don't really see in any other company because like we don't have the integration of like common stock and like banking and financial rights like in Trad5. So it is different and we'll make these cases to the regulators. Hopefully we'll front run any case law. Just say like this isn't an issue. But yeah, we'll see. Be kind to your lobbyists or something. I don't know.

Nicholas: Yeah, I used to say airdrop your senator. I mean, yeah, come on. We got to get these people some NFTs. We can't let Jimmy Fallon have all the NFTs.

Oliver Zerhusen: Sounds like Ted Cruz has received a few.

Nicholas: All right. Well, we've been talking for a while. This has been great. Thank you so much, Oliver and Ross. It's been really fascinating talking about DAOs and I hope you'll come back and chat on the show in the future. My pleasure.

Oliver Zerhusen: Thank you for having me.

Nicholas: All right. Have a good evening. Thanks. Web3 Galaxy Brain airs live most Friday afternoons at 5 p.m. Eastern Time, 2200 UTC on Twitter Spaces. I look forward to seeing you there.

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