Monolithic to Modular DAOs with Julz Rosenberg | Layer Zero

How do DAOs go from monolithic to modular? Julia aka Julz Rosenburg has the answer. Julz is the Co-Founder of Orca Protocol, a project trying to uncomplicate coordination by mirroring human coordination. How? One word: Pods! In their current state, most DAOs have coordination and hierarchical problems. However, with the help of Julz and the Orca Protocol team, this won’t always be the case. Why are pods essential for the future of DAOs and work? What obstacles stand in the way to achieve this future? Why aren’t you pod-pilled yet? Answers to these questions and so much more in the episode. ------ 📣 NOTIONAL | Real DeFi Yield https://bankless.cc/Notional ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALED ETHEREUM https://bankless.cc/Arbitrum ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across 🏦 ROCKET POOL | STAKE YOUR ETH https://bankless.cc/RocketPool 👻 AAVE V3 | LEND & BORROW CRYPTO https://bankless.cc/aave ⚡️ LIDO | LIQUID ETH STAKING https://bankless.cc/lido 🔐 LEDGER | NANO S PLUS WALLET https://bankless.cc/Ledger ------ Topics Covered: 0:00 Intro 4:31 What Julz is Here To Do 9:07 History & Summary of Governance 14:48 Trustware vs. Socialware 20:43 Innovation on the Trustware Layer 22:16 Orca Protocol 25:10 Why Pods Matter 30:30 DAO Governance Critiques 36:07 The U. S. Governance System 39:10 The Future of Work 43:34 Monolithic to Modular DAOs 48:05 DAO Metaphors 50:42 How to Get Culture to Scale Exponentially 56:03 Pod Coordination 57:40 DAO Governance Optimism 59:28 Julz’s Advice & Resources for DAOs 1:01:18 Orca’s Product & Capturing Resources ------ Resources: Julz on Twitter https://twitter.com/JulzRoze Orca Protocol https://www.orcaprotocol.org/ https://twitter.com/OrcaProtocol ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02David Hoffman?

  Welcome to Layer Zero. Layer Zero is a podcast of unscripted conversations with the people that make up the Ethereum community. Crypto is built by code, but is composed by people, and each individual member of the crypto community has their own story to tell. Cypherpunks understood that the code they write impacts the people that use it, and Layer Zero focuses on the people behind the code, because Ethereum is people all the way down, and it always has been. Today on Layer Zero, I'm talking to my friend Julia, and Julia works at Orca Protocol. And I, without expecting it, get what's called, I guess, Orca-pilled during the show, as we talk about things like DAO governance and DAO structure, and where DAOs are currently, and where they are going to be. Now, I don't know if I'm behind the

• 0:46David Hoffman?

  curve on this conversation, or ahead of the curve on this conversation, but I think we just created a new meme on this podcast called "The Modular DAO," DAOs being in their current form, monolithic DAOs. Just like how blockchains all started monolithic, and some or blockchains have then progressed into becoming modular, and modular DAO, modular blockchains becoming the new frontier level of crypto-economic research, I think DAOs are in that same state, where every single DAO right now is monolithic, as in, there's token-weighted governance governing over every single decision, and it's causing apathy, it's, you can't, the DAO can't go in all directions at once. And so, some DAOs are

• 1:28David Hoffman?

  on the, are flirting with the frontier of monolithic DAO structure, and that's really what Orca Protocol is. Julia works at Orca, and they are pioneering on-chain compartmentalization of DAOs to have more like what they call pods, but like sub-DAOs, or like an org chart of DAOs for, if you will. And so, we talk about the current state of DAOs and their problems. We talk about organizational history, both in TradFi, traditional institution org chart, and how that came about, but also its flaws. We talk about the United States of America as the original DAO, and how DAOs need to adapt from this monolithic strategy into a modular strategy, and not just get completely pilled.

• 2:10David Hoffman?

  During this episode, you can literally hear the moment it happens about this whole pod-pilled or modular DAO strategy. So let's go ahead and get into this conversation with Julia Rosenberg of Orca Protocol and get you pod-pilled, right after we listen to some of these fantastic sponsors that make this show possible. Arbitrum is an Ethereum Layer 2 scaling solution that's going to completely change how we use DeFi and NFTs. Over 300 projects have already deployed to Arbitrum and the DeFi and NFT ecosystems are growing rapidly. Some of the coolest and newest NFT collections have chosen Arbitrum as their home, all the while DeFi protocols continue to see increased usage and liquidity. Using Arbitrum has never been easier, especially with the ability to deposit directly into Arbitrum through all the exchanges, including Binance, FTX, Quobi, and Crypto.com. Once inside, you'll notice Arbitrum increases Ethereum speed

• 2:55David Hoffman?

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• 3:37David Hoffman?

  Ethereum. With Ledger Live, you can take money from your bank account, buy your most bullish crypto asset, and stake that asset to its network, all inside the Ledger Live app. Through a partnership with Figment, Ledger also lets you choose which validator you want to stake your assets with, and Ledger is running its own validating nodes, offering a convenient way to participate in network validation, and it even comes with slashing insurance. Ledger Live is truly becoming the battle station for the bankless world, so go download Ledger Live. If you have a Ledger already, you probably already have it, and get started securely staking your crypto assets. Rocketpool is your friendly, decentralized Ethereum staking protocol. You can stake your ETH with Rocketpool and get our ETH in return, allowing you to stake your ETH and use it in DeFi at the same time. You can get 4%

• 4:20David Hoffman?

  On your ETH by staking it with Rocketpool, but you can get even more by running a node. Rocketpool is the only staking provider that allows anyone to permissionlessly join their network of validating nodes. Running a Rocketpool node is easier to set up than running a solo node, and you only need 16 ETH to get started. Why would you do this? You get an extra 15% staking commission on the pooled ETH, so your APY is boosted. So if you're bullish ETH staking, you can increase your APY and get some extra tokens by adding your node to the decentralized Rocketpool network, which currently has over 1,000 independent validators. It's yield farming, but with Ethereum nodes. You can get started at rocketpool.net and also join the Rocketpool community in their Discord. You can find me hanging out there sometimes in the chat, so I'll see you there. What's up, Jules?

• 4:57Speaker 01

  What's up? Hi, David.

• 4:59David Hoffman?

  This is a very rare opportunity of an in-real-life podcast.

• 5:01Speaker 01

  I know.

• 5:02David Hoffman?

  I'm very blessed by your presence.

• 5:03Speaker 01

  Welcome to Williamsburg, finally.

• 5:05David Hoffman?

  Oh, I'm having a fantastic time being here and very bullish on the in-real-life podcast. So we're gonna see how this goes. You're gonna be my first guinea pig.

• 5:12Speaker 01

  Oh, I'm very excited to test this out.

• 5:14David Hoffman?

  So what are you here to do in crypto?

• 5:18Speaker 01

  The ultimate question. I think that I am here in crypto to figure out how we can use crypto and Ethereum, the blockchain, to better scale human coordination and how we can actually use this trust layer of the blockchain to actually better scale the better scale trust in organizations and DAOs.

• 5:46David Hoffman?

  Okay, and how do we do that?

• 5:48Speaker 01

  How do we do that?

• 5:49David Hoffman?

  Can we skip to the end?

• 5:51David Hoffman?

  Show me this solution.

• 5:52Speaker 01

  The magic pill.

• 5:53David Hoffman?

  Yes, right.

• 5:56Speaker 01

  Well, I think sadly, it's a very iterative process. I have been using this sort of framework that we created at Orca called Trustware and Socialware.

• 6:07David Hoffman?

  Okay.

• 6:08Speaker 01

  We love new words.

• 6:08David Hoffman?

  Yes.

• 6:10Speaker 01

  And basically, the idea is that Socialware is a mechanism that creates assurances through human coordination.

• 6:18David Hoffman?

  This is playing off software?

• 6:19Speaker 01

  Yes.

• 6:20David Hoffman?

  Software?

• 6:20Speaker 01

  Software, hardware.

• 6:21David Hoffman?

  Cool.

• 6:21Speaker 01

  There are different flavors. So Socialware is more of the social processes and policies of an organization. Whereas Trustware is creating an assurance mechanism that minimizes the reliance on human coordination and human relationships, which is more of, you know, codifying the trust centers of an organization, which... We haven't really had the opportunity to do yet with traditional organizations because really traditional organizations use like digitization as a communications layer rather than a trust layer. And that's something that we're very familiar with in crypto is using, you know, Ethereum blockchain as a trust layer for our interactions, whether that be financial, whether that be around NFTs, any, all of these things.

• 7:07Speaker 01

  And so Trustware is a new concept that we're able to use in DAOs to better scale human coordination using these sort of digitized trust centers of organizations.

• 7:22David Hoffman?

  Digitized trust centers of organizations. Okay.

• 7:25Speaker 01

  Yeah, so like an example of Trustware would be like the governor contract. Like that is a small primitive that was used to better scale decision making around different proposals.

• 7:35David Hoffman?

  What's a governor contract?

• 7:36Speaker 01

  The governor contract is the contract that is used for token weighted voting. So it's something that Compound created a few years ago and it's now kind of like the standard contract for token weighted voting.

• 7:48David Hoffman?

  So when people say we forked Compound governance, that's what we're talking about?

• 7:52Speaker 01

  Yeah, that's all that they're talking about is the governor contract, which is basically the state of all DAO governance today. It's this thing that was created like two years ago.

• 8:00David Hoffman?

  Sick. I'm not sure if I should be bullish or bearish.

• 8:05Speaker 01

  I mean, it is kind of a, an interesting state that like the governor contract was created and people were like, we did it. We figured it out. This is a centralized governance, like token weighted voting. That's all we need to do. And now we're in this phase of like completely storming against DAOs and DAO processes and governance because we're like, this doesn't work. Like there's too many whales that are voting, like they can sway the vote or, you know, voter apathy. People are engaged. People don't care. Like they're not informed enough to be making these decisions. And we have all of these problems now that exist with token weighted voting, which like. We, you know, probably could have anticipated a little bit better.

• 8:42David Hoffman?

  Okay.

• 8:42Speaker 01

  But I think it's really important now because I think people are seeing how important governance is at this stage.

• 8:48David Hoffman?

  Right.

• 8:48Speaker 01

  And we are starting to see organizations in DAOs starting to iterate more on those governance processes. Because I think people understand the weight of those processes and sort of the friction that it's creating. And basically becoming like a foot gun on these organizations.

• 9:06David Hoffman?

  Hmm. So I think here's how we can like speedrun the history of the recent history of crypto.

• 9:12Speaker 01

  Yeah.

• 9:12David Hoffman?

  The recent ancient history. Compound makes its governor contract and simultaneously releases the comp token, which kicks off the bull market.

• 9:21Speaker 01

  Yep.

• 9:22David Hoffman?

  So thanks, Compound, for that. And I think like when we had all these DeFi apps, we had Uniswap that launched in 2019. And then a number of other DeFi applications came out after that, Compound being one of them. We had like, there was a lot of people who were like, these are, this is, these are the fundamentals of crypto. DeFi is like what we're here to do. And then with the Compound Governor Contract, it created the route, the vehicle, the path for all of these DeFi apps to have a token. And that's really where this bull market started. It's like, oh, we have, we have justification for tokens now. After everyone got burned in 2017 from ICO tokens that were meaningless, Compound created the Governor Contract and gave a meaning to tokens.

• 10:04Speaker 01

  Yes.

• 10:04David Hoffman?

  And so for all the DeFi people were like, yes, we solved it. Like we figured out how to tokenize stuff. It's with governance. And so we have these governance tokens and then now we've solved like DeFi tokenization. And then that kicked off a bull market and now then we all got drunk on the bull market. And now we're having our hangover and our hangover is like, no, no, no, no. You just added a, you just brought us back to square one, which is the original problem of humanity, which is governance. Right? So like, you don't solve problems by governance. You just solve the fact that we now have tokens to speculate on via governance.

• 10:36Speaker 01

  That was a beautiful summary.

• 10:38David Hoffman?

  Yeah, okay.

• 10:38Speaker 01

  But I also think that like, it's, we're not back to square one. I think that we just kind of like lost sight of it because like of this beautiful path that Compound paved forward in being able to have this token with like utility that you can quite literally see. And creating the path for many, many DeFi projects to launch a token that.

• 11:04Speaker 01

  That basically just became the path to creating a DAO. So everyone now, when you create a DAO, you launch a governor contract or you do something very similar via like Snapshot. But I think what was missing in a lot of that and was catching up to people now is that we didn't really implement the social systems to actually create meaningful governance around that. And that's kind of part of this framework that we created with Orca is like the trustware versus socialware. Is that if you over-index on either, you footgun your organization. Footgun, meaning like you shoot yourself in the foot, like you're creating problems for yourself.

• 11:39David Hoffman?

  Okay.

• 11:40Speaker 01

  And if you over-index on either of those, like you're creating massive problems for yourself. And so I think what's happened with a lot of DAOs is that they've over-indexed on the trustwares. Like, we rely wholeheartedly on on-chain governance and like the governor contract. And, you know, you may make a proposal and then token holders vote on it.

• 11:58David Hoffman?

  Governor contract is law.

• 12:00Speaker 01

  Exactly.

• 12:00David Hoffman?

  Code is law.

• 12:01Speaker 01

  Exactly. But then we're like, why is no one showing up to vote? Like, where are the people? Why is there no informed decision-making around the proposals that are going up?

• 12:10David Hoffman?

  Where's the culture?

• 12:11Speaker 01

  Where's the culture? Where's the community? All of these things. And so we started realizing that we're missing some of these socialware processes, which is just like kind of the social bedrock and social policies and processes that exist in an organization. Like, I bet if you went and asked, well, as a fun fact, even like delegates don't solve this problem. And like 75% of compound delegates have never voted on an on-chain proposal in their lifespan of being a compound delegate.

• 12:41Speaker 01

  And again...

• 12:43David Hoffman?

  What signal should we get from that? What does that tell us?

• 12:46Speaker 01

  I think that tells us, it's a good question. Well, it's also potentially, uh,

• 12:54Speaker 01

  the other side of that fact is that equates to like 80% of all delegated compound. So the majority of delegated compound is voting, because I think they understand the responsibility of it. But the majority of delegates are not voting. And I think that says more about our delegate systems is that... People don't understand the responsibility they're taking on when they become a delegate. And we don't actually have clear responsibilities, what that even means. Like when we say like, oh yeah, like, I'll be a delegate, like, sure, delegate your tokens to me, like, this fun. It's kind of like popularity contest, like, you get to see all these people delegate to me.

• 13:30David Hoffman?

  I can have a bunch of points.

• 13:31Speaker 01

  Yeah, exactly.

• 13:32David Hoffman?

  Give me the points, so I can be higher on the compound's top sixteen favorites.

• 13:37Speaker 01

  Exactly, like jewelstarteats, yeah. But then you start to realize, you're like, wait, what am I even supposed to be doing? Like, I'm not getting paid for this, like, why should I even, like, waste my time on this? Like, I'm not gonna get punished if I don't vote on behalf of all these people. People don't actually care enough to undelegate to me.

• 13:54David Hoffman?

  Right.

• 13:54Speaker 01

  So like, it's really just a broken system in that sense. And I think that's where like all of the social ware comes in, is like, you need to create these sort of policies and processes around how people operate in these systems. And I think like, makers did a really good job with that with their delegate system, is that when you apply to become a delegate, like, you have to, you know, say, like, this is sort of the platform I'm running on. And like, there's compensation involved, and like, there's a much clearer uh, relationship there of what is expected of you. And that's all just social ware, that's not, there's nothing on-chain that's saying like, you know, HAZU or MONE supply, like, if these statements actually will happen.

• 14:35David Hoffman?

  Right, right, right, it's just understood in the social layer.

• 14:38Speaker 01

  Yes.

• 14:38David Hoffman?

  It's like, social, socially, people know that HAZU is about this life, and that MONE is about that life.

• 14:44Speaker 01

  Yes.

• 14:45David Hoffman?

  And that's not codified on-chain anywhere.

• 14:46Speaker 01

  Yes.

• 14:47David Hoffman?

  So just, just to like, differentiate between trust ware and social ware just a little bit more. Trust ware is, is, what do you call it, like synonymous with the Coda's law? Like, it's on the chain, uh, token gate voting, uh, we don't really need too much more than what's the data that's available on the blockchain. And then social ware is like literally everything off-chain, would you accept those?

• 15:07Speaker 01

  Um.

• 15:07David Hoffman?

  Definitions.

• 15:08Speaker 01

  Yeah, I sort of like the comparison of like a lemonade stand versus a vending machine. Like a lemonade stand relies on social ware of like you, the vendor, like are asking for payment. And I'm agreeing to those rules.

• 15:21David Hoffman?

  Sure.

• 15:21Speaker 01

  Whereas vending machine is like, if I literally don't put the money in, like I don't get my output. I don't get my lemonade.

• 15:27David Hoffman?

  Okay.

• 15:28Speaker 01

  And I think that is the key difference is like the reliance on human coordinations or humans to execute on the decisions that remain.

• 15:35David Hoffman?

  Okay.

• 15:36Speaker 01

  Yeah.

• 15:36David Hoffman?

  What do you have any examples for us of organizations or things that have, uh, cause you talked about over indexing on either one or the other.

• 15:44Speaker 01

  Yeah.

• 15:44David Hoffman?

  Do you have any examples of a DAO or org that over indexed on one versus the other? Any stories around that?

• 15:49Speaker 01

  Yeah, well, I mean, this is something I love to talk about and shit on is, uh, traditional organizations generally is, um, them basically over indexing on social ware. And so, uh,

• 16:01David Hoffman?

  Not on purpose though, right?

• 16:03Speaker 01

  No, again, like I think it's something that they've done on accident and sort of foot gun themselves is, um, a lot of these things are actually really, really productive over time. Like in what's really interesting in the United States is over the last like a hundred years, productivity in the United States has been on like a crazy upwards trajectory. Like every year we just become more and more productive as a workforce. And obviously there are like things in there that created massive gains for us, like the industrial evolution. And then like telecommunications and the internet and computers and all of these things. But what's really interesting is that in the last 10 years, like when

• 16:43Speaker 01

  technology and digitization is at an all time high, is that we've actually plateaued in our productivity rates. Um, and we're not, we're actually becoming increasingly less productive and efficient. Um, as like a workforce, which is, I think, um, a very interesting thing to think about. And like my sort of thesis on it is that. A lot of it is that the sort of improvements we're trying to make is really mostly in digitization, like more software, more technology, like, you know, let's just add another SaaS tool to this organization. Or, you know, what's the next thing we can do up?

• 17:24Speaker 01

  And where traditional organizations have failed is that they increasingly add more friction via these sort of socialware mechanisms. So add a better expense, like, reporting software. Add, like, you know, some trad fi, like, software that-

• 17:46David Hoffman?

  Generic project management tool-

• 17:48Speaker 01

  Exactly.

• 17:49David Hoffman?

  That we have a meeting about to update every, like, three days.

• 17:53Speaker 01

  Exactly. And so that's a big part of the problem, I think, is that we've basically over, uh, like indexed on the social processes. So like, this is something I go back to all the time is Reed Hastings, like, culture, like Netflix culture presentation that he did in, I think, 2008, where he really de-emphasized bureaucracy and creating these types of processes. Like, he felt very early on that the key to success in corporate culture is autonomy and freedom and flexibility and sort of self-responsibility, which I think is-

• 18:30David Hoffman?

  The opposite of what I associate with corporate culture.

• 18:33Speaker 01

  Exactly. Which I think is really interesting. I think there's a lot to learn there and like very synonymous with some of the values we see in DAOs.

• 18:41Speaker 01

  And-

• 18:41David Hoffman?

  Real quick, like, side quest. Why is something like a project management tool or like some expense tool, some trad web two software? Why is that trustware not, or is, why is that socialware not trustware?

• 18:52Speaker 01

  Because we're not relying on it for the execution of these things. Like, it's really just a means of analyzing things further. And I think that's where some of the- Efficiency or productivity plateau has come in is that our digitization isn't around making things happen quicker or faster or better. It's actually analyzing how people are working and

• 19:14David Hoffman?

  Talking about the problem.

• 19:15Speaker 01

  Exactly.

• 19:16David Hoffman?

  Not doing, not fixing the problem.

• 19:17Speaker 01

  It's like measuring the problem rather than executing on the problem.

• 19:20David Hoffman?

  Okay.

• 19:20Speaker 01

  And so like all of these expense software that we see in like traditional companies is really just measuring like how much is David spending every month like and you know through all of these layers like that put like a person further away from David to make a decision based on like if he's spending too much and if we should approve these expenses.

• 19:40David Hoffman?

  Okay.

• 19:40Speaker 01

  Rather than

• 19:41David Hoffman?

  So somebody like three degrees away from me is saying that like David is being a degenerate and we need to fire him or something, not knowing that like I'm actually doing allegedly really good stuff.

• 19:52Speaker 01

  Exactly.

• 19:52David Hoffman?

  Right.

• 19:53Speaker 01

  Exactly. And so those are the types of things that really slow down people and organizations. And on the flip side, like I kind of pointed to the example of over indexing on Trustware when like some of these DAOs solely rely on like the governor contract or other on-chain mechanisms to like build out their governance systems. And again, that doesn't really like leave us in a good place in terms of how us as people are supposed to operate in a system. And so I think that where we're starting to converge with some of the like outcries I think we've recently seen around centralized governance is that we need to meet somewhere

• 20:32Speaker 01

  in the middle and that like Trustware independently isn't, can't be successful without like layers of Socialware around it and vice versa.

• 20:43David Hoffman?

  Is, so there was this recent meme going around a couple of months ago, uh, right during the peak of like private market hotness. It was like DAO tooling, like DAO tooling, like this DAO tool raised this much money, this DAO tool raised that much money. Is DAO tooling like part of this trying to get at the Socialware layer of DAOs? Is that, is that kind of similar?

• 21:04Speaker 01

  That's a good question. Um.

• 21:08David Hoffman?

  Or where are we innovating at the trustworthy layer?

• 21:11Speaker 01

  Yeah.

• 21:11David Hoffman?

  What does innovation on the trustworthy layer look like?

• 21:13Speaker 01

  I think that's where we're still really struggling. And that's something like I'm obviously working on with Orca is like we're in the business of basically building trustworthy. So our key trust primitive are pods, which is the ability to group like small stakeholders based on their expertise and empower them in governance.

• 21:34David Hoffman?

  When you say group them, in what capacity? Like you put them into a room together? Or like, how are we grouping these people?

• 21:40Speaker 01

  This is the new web three Airbnb, actually.

• 21:44Speaker 01

  No, so we're basically creating like a permissions layer around these groups of people and saying, you know, based on X, Y, and Z criteria, or based on, you know, this stakeholder mapping that this organization has done, you have the permission to execute on high functioning governance parameters.

• 22:04David Hoffman?

  We're talking about on-chain at this point?

• 22:06Speaker 01

  Yes, completely on-chain.

• 22:07David Hoffman?

  So the group of people is a group of Ethereum addresses on-chain that are approved to do something?

• 22:12Speaker 01

  Yes.

• 22:13David Hoffman?

  So is Orca trying to make like an on-chain org chart?

• 22:17Speaker 01

  Basically, yeah, like what Orca enables is sort of mapping your stakeholders in your organization. And as a result, like helping define your organizational shape.

• 22:26David Hoffman?

  Okay.

• 22:28Speaker 01

  And that, in a way, also creates like this like decentralized permissions layer that you can better interact with all the tools that you're operating with.

• 22:38David Hoffman?

  Okay, so it allows, is it optimizing for like more user individuality and autonomy by breaking one DAO up into

• 22:45Speaker 01

  Yes.

• 22:46David Hoffman?

  smaller DAOs?

• 22:47Speaker 01

  Yes.

• 22:47David Hoffman?

  And allowing those smaller DAOs to move faster by the nature of what smaller organizations do? Because they're not held back by their bigger DAO? And then the bigger DAO just votes or by governance determines what the smaller DAOs actually are?

• 23:01Speaker 01

  Yep, 100%. Vitalik created a good framework around it a few years ago of bulldozer governance versus vetoocracy, vetoocracy governance. And vetoocracy is basically just like vetoocracy. So it's really just pointing to like stakeholder governance, which is Everything that we know into centralized governance today. And then bulldozer governance is more around giving specific individuals like high amounts of autonomy. Um, with like, you could think of it more as like optimistic governance is like, we're going to assume that David's going to act benevolently on behalf of this organization.

• 23:35David Hoffman?

  It's a good bet.

• 23:35Speaker 01

  Until he,

• 23:38Speaker 01

  until he proves otherwise. And then we slap him on the wrist for it. Um, and we don't.

• 23:43David Hoffman?

  Go, go crazy until they F it up. And then as soon as they F it up, it's like, and then pull the plug.

• 23:48Speaker 01

  Exactly.

• 23:48David Hoffman?

  Yeah.

• 23:48Speaker 01

  But we don't really have like mechanisms for that today. Like, again, the only like widely adopted primitive that we have is the governor contract. How many times will I say the governor contract in this podcast? Um, but that's like really the only widely adopted primitive that we have. And the only way we know how, and I think people have had a really hard time with bulldozer governance and again, giving um, individuals or groups of individuals, high amounts of power or autonomy. Um, because we haven't really had the accountability systems to ensure that they act benevolently. Like, we are all too familiar with malicious actors.

• 24:24David Hoffman?

  Yeah.

• 24:24Speaker 01

  Um, and again, like we're putting a potentially a lot of power in these people. And so that's again, kind of like what Orca enables is creating these more flexible and modular permission systems. So that, um, when we, you know, put David in a pod and delegate to the pod, like some essential governance functions. Like, let's say even some like protocol parameters, like you get to mess with, um, the contracts even.

• 24:50David Hoffman?

  Hmm.

• 24:51Speaker 01

  We need to make sure that we can pull back those parameters at any moment or pull back you from those parameters at any moment. And to this day, we really haven't had mechanisms like that to create better accountability systems around individuals that want to um, fill into high performing roles in organizations.

• 25:09David Hoffman?

  Okay. Okay, so at one level, I'm like, well, this makes this makes a ton of sense.

• 25:14Speaker 01

  Yeah.

• 25:14David Hoffman?

  There the general state of DAOs, I would say they're for every like 100 DAO people. There are like three that do stuff and get stuff done and move the needle. And then there's 97 people watching.

• 25:28Speaker 01

  Yeah.

• 25:28David Hoffman?

  And so all about putting more power and resources into those three people. But where I'm still confused a little bit is like, why does putting them into a pod change anything? Like, cool, we have like on-chain permissions and on-chain org charts. And maybe we can just put capital from the big org into their smaller pod. So that they have the resource to go and run with it.

• 25:52Speaker 01

  Yeah.

• 25:52David Hoffman?

  But like, what does actually compartmentalizing them inside of a pod like they're they were gonna go and build stuff anyways? What do we really unlock by putting them into a pod?

• 26:00Speaker 01

  Yeah, so you're basically creating this flexible container that's able to actually interact in the governance system. So like, we all know that that already happens with like multisig is like, you know, people set up a multisig and then they get funding and then they go and do their thing. But they're not really part of the governance system or part of that ecosystem. So what Orca enables is the ability to create sort of like principal agent relationships within these pods. So you could basically delegate what we call an admin key to another address. That could be a specific person, it could be another pod or even like a smart contract. For example, the governor contract. And the admin, as a result, has the ability to manage the members on that pod.

• 26:44Speaker 01

  So potentially in the future, also manage like the rules or requirements that they're beholden to. So, for example, like we could put you in a pod and say, like, we're delegating the admin key to the governor contract, meaning that the token holders have direct control over who sits on this pod, not the decisions that they're making specifically. So again, it's just kind of breaking up some of those decision-making like powers and creating these checks and balances systems within a more dynamic governance system.

• 27:15David Hoffman?

  Okay, so like the governor contract has like access over the treasuries. And so, and they also can determine who is going to be in this pot A. And so they can say like, all right, since the whole entire Dow, the big Dow through the governor contract says, let's give pot A ten million dollars of resources, put ten million dollars in their treasury, and they also get to update the contracts. And so they only, they don't get to rug the entire treasury, but they do get to upgrade the software that the Dow runs, like if this is Urn, for example. So we've got Urn core contributors, give them ten million dollars for their salary for twenty twenty-three. And then they also can like update the strategies. And but they can't do, can't rug the entire treasury.

• 27:57David Hoffman?

  And maybe there's some other stuff too, but like I'm on the right track here.

• 28:01Speaker 01

  Yeah, I think like a good example is what we just did with Tribe, which I know is very contentious right now. And there was a lot of drama around some of the recent votes that happened, which I think was also potentially like misdirected. Because it actually worked exactly as it was intended. So an implementation we just did with Tribe was creating Noke Dow, which is basically Tribe created a few pods for each of their products specifically to hold like contract powers over. And those pods are, have the autonomy to make decisions over those. But they're wrapped with a time lock contract, meaning that token holders have the ability to veto decisions that they make.

• 28:44Speaker 01

  So again, we're assuming you're acting correctly. But, and like, it's kind of an optimistic governance implementation. But if we disagree with a decision that you make, like we have the opportunity to veto that and participate in these sort of governance decisions. And that's what recently happened.

• 29:01David Hoffman?

  So the pods can do whatever they want, but the meta, the big Dow can veto that.

• 29:05Speaker 01

  In this specific example, that Tribe did of Noke Dow, that was, yeah, that was the case.

• 29:10David Hoffman?

  Okay.

• 29:11Speaker 01

  Yeah.

• 29:11David Hoffman?

  Cool. Cool. And so like it'll the if the in this particular case tribe will or the the one of the smaller DAOs, one of the smaller pods will go and do something and it'll do something again and then build something again and hopefully they keep some working and then they do something stupid. And then the DAO is like, no, we don't like that one.

• 29:27Speaker 01

  Yep.

• 29:28David Hoffman?

  But up to that point, they had the total freedom and sovereignty to do whatever they want. And they still have freedom and sovereignty to do whatever they want, but the DAO still gets the ability to say, say no.

• 29:36Speaker 01

  Exactly. And so that's creating these more dynamic governance systems. And also, I think what's worth calling out is that behind the scenes, like that, it could be argued that that's how a lot of this runs regardless, like and a bunch of the big protocols is that, um, you know, we all know the meme of like the core contributors and investors run everything, like they can basically sway the vote in any direction that they want. And potentially behind the curtain, that's already what's happening.

• 30:04David Hoffman?

  Right.

• 30:04Speaker 01

  But I think that's a really dangerous game to be playing is like if we're not honest about the power structures that do exist, then we can't actually grow those systems. And so I think it's really important to be like a lot more honest about the structures that do exist in these organizations. Because then we can meaningfully scale them and continue to, um, grow them beyond just like, you know, a group of 20 insiders.

• 30:30David Hoffman?

  Cool, cool. One of the critiques that uh, of DeFi governance, DAO governance is that like there's so many inactive participants in DAO governance.

• 30:41Speaker 01

  Yeah.

• 30:41David Hoffman?

  Um, and this was, this has been true, this has been true since MakerDAO. So even before we had called it DeFi, there was DAO governance because there was MakerDAO and even at best, there would be like 20% MKR participation. And that was back in 2018 when MKR supply was super concentrated. I don't even think we're anywhere close to that now.

• 31:00Speaker 01

  Yeah.

• 31:00David Hoffman?

  My, my, in defense of that.

• 31:04David Hoffman?

  An abstention or a non-participation of MKR voting in that in or just in DAO voting in general could also be implied as if you're not getting up off of your butt to go vote with your tokens in a DAO, it's because the vote wasn't controversial enough to get you to get it up off your ass, or or you just were down for it to go through anyways.

• 31:27Speaker 01

  Yeah.

• 31:28David Hoffman?

  Do you agree with that take? And how and is that a good state for DAOs to be in?

• 31:33Speaker 01

  Um, I agree with that take, but I don't know if it's a good state for DAOs to be in.

• 31:38David Hoffman?

  Okay.

• 31:39Speaker 01

  Like, I think, again, you're leaving it up to like the whim of the of the few engaged participants to decide if this is meaningful enough for them. And so as a result, you leave like a lot of power on the table to be taken by whoever that whoever that is.

• 31:57David Hoffman?

  Mm hmm.

• 31:58Speaker 01

  Um, and

• 32:04Speaker 01

  I think, again, like

• 32:07Speaker 01

  that is like a super fair outcome is that there is a group of like specific people that feel that they have the expertise to vote on maybe the most boring proposals that no one cares about.

• 32:16David Hoffman?

  Mm hmm.

• 32:17Speaker 01

  But why are we not empowering them further in the organizations to just make those decisions freely?

• 32:24David Hoffman?

  Okay. Hmm. Um.

• 32:29David Hoffman?

  Is that?

• 32:30Speaker 01

  Cause.

• 32:31David Hoffman?

  That that doesn't unlock everything, right? That I feel like this is one small.

• 32:35Speaker 01

  Yeah.

• 32:35David Hoffman?

  One small thing before we get to a much larger vision of highly sophisticated DAO.

• 32:41Speaker 01

  One hundred percent. Hundred percent. But I think that's like a key part of it is that we really haven't seen like that much innovation or experimentation happen in DAOs in the last few years. Like, they've all been following the same formula, and I think that's really problematic. It's like, we need to be continuously iterating and like testing out new frame like implementations of of how we're executing these decisions and growing the organization. Um, but unfortunately, I think governance has been like too high stakes to for anyone to like have the balls to do that, basically.

• 33:14David Hoffman?

  Mm hmm. Do you think we do too much voting like it shouldn't the idea for DAOs to not to do minimum viable voting? As in only the biggest things should really go to vote. And the smaller things and medium things should be kind of figured out in other mechanisms that don't require the signing of a ledger and should be like more broken down into its subcomponent parts and like let smaller pockets of the DAO make those decisions in a more centralized fashion rather than it I feel like the long term of DAOs should feel a little bit like a court model like where if some if a really big important decision is contentious.

• 33:53David Hoffman?

  It goes all the way to the Supreme Court, which is like actual token vote at the at the whole entire DAO level. And then a smaller, more minutia thing as in like, do we accept marketing firm A or marketing firm B? Is not token vote, but like done at the the like a county level where there's like, you know, only a sub fraction of the DAO. Are we should DAOs just ultimately be that same sort of structure of just like trying to answer decisions as quickly as possible on the as mostly on the periphery as possible?

• 34:28Speaker 01

  Um, yes, because I think again, then you're taking the weight off of the token holders. So like, if we have an ops pod that is strictly tasked with like approving, you know, different payment forms, like, yes, we choose marketing firm A versus marketing firm firm B. Like that immediately frees up bandwidth from the rest of the token holders to vote like you argued on things that are actually contentious and actually important. Um, and I think you kind of were just like podpilled in what you were describing.

• 35:00David Hoffman?

  Yeah, yeah.

• 35:01Speaker 01

  Because that's basically like what we're envisioning is like you need to be able to create these systems to delegate power away and create these checks and balances systems. Like I was a politics major, like love political systems, like love studying all this. And however terrible the US government is like.

• 35:20Speaker 01

  They were on to something and at least the theoretical implementation.

• 35:25David Hoffman?

  One, at one point in time, they were on to something.

• 35:28Speaker 01

  Long, long time ago, um, in the theoretical implementation of like a three branch government. You know, like the different branches of government act on different things and that they all hold each other accountable in different ways. Um, and I think that is like a, would be an interesting model for people to work towards. Not necessarily in copying the US government.

• 35:52David Hoffman?

  Right.

• 35:52Speaker 01

  I'm absolutely not supporting that message. Um, but I think more just in creating a like multi stakeholder group governance, rather than just this one bucket we have of token holders.

• 36:07David Hoffman?

  Right. So for, for what it's worth, like if you tally up all courts inside of the United States, there's probably like a pretty good number of decisions done per day.

• 36:17Speaker 01

  Yeah.

• 36:18David Hoffman?

  Per second.

• 36:18Speaker 01

  Hundred percent.

• 36:19David Hoffman?

  Like, and, and, yeah, and it's like some of, some of them are bigger, more contentious. So they funnel upwards and upwards and upwards. And then like when it makes its way, the few things that do make their way to the Supreme Court, like it starts to get like national media attention and people start like gluing their eyes to it. And it sucks away the, the attention capital of everyone in the United States because it actually like Roe v. Wade, for example, the entire country puts down what they're doing to pay attention to that. So like resource, highly resource consumptive when something goes to the, the Supreme Court. And so the idea is like, and we've used this line on Bankless a number of times. The United States is like the original model of a DAO.

• 36:57Speaker 01

  Yeah.

• 36:58David Hoffman?

  It is the, the OG, let's push decision makings towards the margins. Let's have a representative democracy, uh, and like we'll have the central government, but then we'll have also have state, state rights and states governments and the states are like, well, like we're also kind of big too. So we're going to go down to the counties and the counties go down to the cities.

• 37:15Speaker 01

  Yes.

• 37:15David Hoffman?

  Uh, and, and so like, is this, is this like the, this tree structure? Is this, is this what you call getting orca pilled? Is this this whole thing?

• 37:22Speaker 01

  Yes, 1,000% you're officially orca pilled. Congratulations.

• 37:27Speaker 01

  But it would be like, think about that if we actually created a system like that within a DAO. Like, think about how much more productive and efficient we would be. Like, rather than everything rolling up to like a single body right now. Like, that is our only option that we have currently.

• 37:42David Hoffman?

  Yeah, that's kind of ridiculous.

• 37:43Speaker 01

  It is, it's crazy. But I think that's also just saying that like, we're really early. Like, the other favorite line of pink. We're so early. And these are so, so nascent.

• 37:56Speaker 01

  And I think again, it takes a lot to like, unlearn what we know. Like, the corporate model is so ingrained in us. Is like, the only way that organizations can be built. And that takes like, a lot of unlearning to think about how we can decouple that. And so, I think we're like, just at the beginning. But like, I truly believe that in the future, DAOs will be more efficient than traditional organizations. Because the most important part is you're putting people as close as possible to the decision-making, like, meat space of that organization. Like, with the use of like, Trustware, you are quite literally giving people the execution power to perform what they need to do. And that is not something that's available in traditional organizations.

• 38:39Speaker 01

  If you want to make a decision in a traditional organization, good luck. Like, send it through the chain of command, get that budget analysis going, like, start doing all those things. And those, I'm not saying that those aren't things we should practice in DAOs. Like, we can still, I think, learn a lot in terms of implementing some of those practices. But I think the key part is that you're bringing people who potentially have like, the most expertise and excitement to work on those things as close to the decision meat space as possible.

• 39:10David Hoffman?

  Right, the, the vision that I'm getting, picking up on a little bit, and this is a theme that I've noticed throughout the space. Like, uh, one of the first times I kind of figured out this pattern was with Justin Blouse's platform Royal, where like, if you have a creator, and the creator can have a token, you give the audience or the fans a way to reverberate the value that they see from the creator. And, and so like, it's a two-way flow of value. From like, the, the creator creates the creation, and then he gives it out to his fans. And then the fans are like, we really like that, here's our feedback. And that feedback comes through the voice of the token. And what I'm seeing with like, uh, Traditional orgs, traditional hierarchies, it's only one way.

• 39:49Speaker 01

  Yeah.

• 39:49David Hoffman?

  It's top down, you are bestowed your duties.

• 39:53Speaker 01

  Yep.

• 39:54David Hoffman?

  And then you do them and you don't really have a way to like give you feed, give feedback back up to the top.

• 40:00Speaker 01

  Yep.

• 40:00David Hoffman?

  You just, you have, you receive your inputs, you give your outputs and your outputs are the product of your labor, but not the outputs of your opinion.

• 40:07Speaker 01

  Yeah.

• 40:07David Hoffman?

  Your opinion kind of stays fixed. So like, if you have the opinion of, we should change this, I have an opinion about how we should do this differently. That, that part doesn't flow back up. That part just stays in your brain and starts to accrue resentment. And then you quit your job and go into Web three.

• 40:21Speaker 01

  Exactly.

• 40:22David Hoffman?

  And so like, if we have this flow of, this org structure of DAOs, which is a little bit more just like back and forth where information does flow both ways. That is, like, that is in line with the pattern I see in Web three, where like you actually get to have feedback and autonomy and agency much more fluidly than just like a top down organization.

• 40:44Speaker 01

  A hundred percent. And I think that's speaking a lot more to the future of work and the future of like labor markets and economies. It's like, no one wants to be like a corporate, like, person their whole life anymore. Like, that generation is like, very outdated at this point. Like, people are changing jobs like every few years now. They want to level up. They want to get closer to the decision, decision space. Like, a lot of people are just quitting their corporate job entirely and going freelance. Like, these are all the sort of labor trends that we're seeing and how people want to participate in these organizations and make meaningful contributions that isn't just creating like, you know, labor liquidity at these massive corporations.

• 41:29David Hoffman?

  Labor liquidity, nice.

• 41:30Speaker 01

  That's my new favorite word.

• 41:32David Hoffman?

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• 43:02David Hoffman?

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• 44:12Speaker 01

  Tell me, yes.

• 44:13David Hoffman?

  Or the modular versus monolithic?

• 44:14Speaker 01

  Yes, okay.

• 44:15David Hoffman?

  Right.

• 44:15Speaker 01

  Yeah, yes.

• 44:15David Hoffman?

  So like, we're now in the state of monolithic DAOs?

• 44:19Speaker 01

  Yes.

• 44:19David Hoffman?

  And we need to become modular DAOs?

• 44:20Speaker 01

  Yes. Exactly.

• 44:22David Hoffman?

  Nice.

• 44:22Speaker 01

  Exactly.

• 44:23David Hoffman?

  Modularity's tight.

• 44:24Speaker 01

  Podpilts. It is. It's the most important.

• 44:27David Hoffman?

  How do we, how do we go from monolithic DAOs to modular DAOs? Cause you know Ethereum's been trying to get modular to, to extend the metaphor. Ethereum's trying to be modular for years now.

• 44:35Speaker 01

  Yeah.

• 44:36David Hoffman?

  Uh, is, are we gonna have a hard time turning our monolithic DAOs into modular DAOs?

• 44:40Speaker 01

  I mean, that's a big part of what we're doing. Like, I think one of the answers is pods. Is like, how do we start to break down, um, some of these governance systems? Or start to delegate power away from this monolithic structure? Um, and I think we feel like very impassioned with helping DAOs do that. I think the biggest part is that you have to operate within the faulty coordination systems to

• 45:11Speaker 01

  to implement the improved coordination system. So it's a bit of a

• 45:17David Hoffman?

  Chicken and egg problem?

• 45:18Speaker 01

  Yeah.

• 45:19David Hoffman?

  Yeah.

• 45:19Speaker 01

  Yeah. Um.

• 45:21David Hoffman?

  A coordination problem?

• 45:22Speaker 01

  Yeah. Which we're very familiar with. But I think generally, like, most DAOs are, are moving this direction. Like, we have been memeing the pod very hard for a while. And I think we're starting to see that in, um, basically every DAO. Like, has their own implementation of pods or their own aspirations?

• 45:42David Hoffman?

  Flavor.

• 45:43Speaker 01

  Or flavor towards pods. Like, and we've seen it with several DAOs too. Like Maker has core units, Urn created Y-teams, um, Synthetic created like the Spartan Council. These were all like early forms of delegating power towards, um, smaller committees or, you know, fewer individuals to give them.

• 46:00David Hoffman?

  So we've already been doing this?

• 46:02Speaker 01

  We've seen the early implementations of it.

• 46:05David Hoffman?

  Okay.

• 46:05Speaker 01

  I think the biggest problem though, is again, those accountability systems. Is we haven't had A way to include that in our governance systems is that we kind of just have to like rely on human coordination and social trust to like send off these funds into a multi-sig that is not captured by our organization.

• 46:24David Hoffman?

  Ah, right.

• 46:25Speaker 01

  And then just hope they do what they're doing.

• 46:27David Hoffman?

  For, just to pick synthetics, on-chain, there's like this DAO vote that puts money into a multi-sig, but that multi-sig has no on-chain association with the actual org, other than the fact it received money, not any sort of like backwards flow of communication that's on-chain.

• 46:45Speaker 01

  Yep.

• 46:46David Hoffman?

  And so we need to build flows, like the multi-sig is formally part of the synthetics protocol, or like whatever DAO, and not only does this pod, this multi-sig did receive money, but it can also control other things about the protocol itself.

• 47:04Speaker 01

  Yep, exactly.

• 47:05David Hoffman?

  Tight.

• 47:06Speaker 01

  Tight, tight, tight.

• 47:09David Hoffman?

  I am Phil, I am Orca Phil.

• 47:10Speaker 01

  We love it.

• 47:11David Hoffman?

  No, this makes sense. And like the modular idea, I think fits really, really well.

• 47:15Speaker 01

  Yeah.

• 47:16David Hoffman?

  Well, one of the arguments that we make about like the Ethereum modular strategy is that it seems to be the logical conclusion of blockchain. So like you reroll the dice about the universe 10,000 times, maybe it wouldn't be called Ethereum, but it would be a modular blockchain with like a data availability layer and multi-clients and all this stuff. And I feel like you could make the same claim about DAOs in the future. It's like you reroll the dice a thousand times and very, very, very, perhaps never would you ever end up at a monolithic DAO outcome. It's probably always going to converge on modularity. It's just a matter of how we get there.

• 47:49Speaker 01

  100%.

• 47:50David Hoffman?

  Would you say like Orca is like, is Orca primitive?

• 47:53Speaker 01

  Yeah, I would say it's a primitive. Like I think of pods as sort of like the nodes of this contributor graph and Orca, the protocol manages how all of these nodes are interconnected with each other. So that's sort of the way I would break it down.

• 48:06David Hoffman?

  So after like the first DAO starts to, oh, it's also kind of like cellular division, right? You have like one monolithic cell and then it divides seven times into like smaller cells that each start to optimize for different things. And all of a sudden you can grow a body. I love nature.

• 48:22Speaker 01

  There's so many like nature comparisons, technical comparisons to this, like just like human comparisons to this. Like it's amazing.

• 48:31David Hoffman?

  Right. Not to, not to speed run through that metaphor, so let's go into that.

• 48:35Speaker 01

  Yeah.

• 48:36David Hoffman?

  Instead, we have, right now, we have the monolithic DAO structure.

• 48:39Speaker 01

  Yes.

• 48:40David Hoffman?

  As like the status quo.

• 48:41Speaker 01

  Uh huh.

• 48:41David Hoffman?

  Uh, and it's inefficient, can't really do anything. It's trying to get pulled in all directions at once, but it's just a cell, so it can't.

• 48:49Speaker 01

  Yeah, like it's a red blood cell. That's all it's supposed to do.

• 48:52David Hoffman?

  Yeah, it's got one thing.

• 48:54Speaker 01

  Yep.

• 48:54David Hoffman?

  Uh, and so in order to go in multiple directions at once, it needs to create parts of the overall cohesive structure that are optimized for that. So the cell starts dividing, um, from one cell to two cells and two cells to many cells. And then we start like a growing appendages. And so we have like.

• 49:11Speaker 01

  And copying that DNA as it goes, like the DNA of that organization, the purpose, the mission, the vision.

• 49:17David Hoffman?

  The social contract.

• 49:18Speaker 01

  The social contract.

• 49:19David Hoffman?

  Is built into the cellular division.

• 49:21Speaker 01

  We would hope.

• 49:21David Hoffman?

  Ooh, I would hope so.

• 49:22Speaker 01

  Yeah.

• 49:23David Hoffman?

  That's a different conversation.

• 49:24Speaker 01

  That is a different conversation.

• 49:25David Hoffman?

  I don't think you have the assurances of that.

• 49:27Speaker 01

  Socialware, trustware pill too.

• 49:29David Hoffman?

  Oh my God, wait, what? There's another half of this conversation? Okay, but just to, just to tie off the metaphor.

• 49:36Speaker 01

  Yeah.

• 49:36David Hoffman?

  Uh, this DAO starts growing like eyeballs to understand its own metrics and KPIs.

• 49:42Speaker 01

  Yep.

• 49:42David Hoffman?

  It starts growing, uh, its own hands and fingers to go and reach out to other agencies to get stuff done, to, to grab more tools.

• 49:50Speaker 01

  Yep.

• 49:50David Hoffman?

  Uh, and so like different parts of these DAOs start specializing and optimizing in different directions. And over time, we have like different organs with different sensory inputs and the ability to create outputs. Because we have modular DAOs that are optimized in many different ways, many different flavors, but they're all tied together by this one meta DAO. And the meta DAO, the actual DAO is like the prefrontal cortex of the damn thing.

• 50:14Speaker 01

  Done.

• 50:15David Hoffman?

  Tight.

• 50:15Speaker 01

  Beautiful. I actually love that too.

• 50:18David Hoffman?

  Yeah.

• 50:18Speaker 01

  Like imagine if we relied on our entire bodily capacity on one organ in our body.

• 50:23David Hoffman?

  Right. Now it's time to beat the heart.

• 50:28Speaker 01

  Be the brain, heart, kidney, and bladder all in one day.

• 50:33David Hoffman?

  And if you forgot about anything else, those things stop working.

• 50:36Speaker 01

  We will self implode in one day.

• 50:40David Hoffman?

  Oh, my God. Okay. So how, so like part of TradFi, TradOrg's hierarchies is that the culture doesn't extrapolate, like extend, or doesn't permeate throughout the org.

• 50:52Speaker 01

  Yeah.

• 50:53David Hoffman?

  Like, one of the reasons why we have been at Bankless very, very intentionally slow to scale is that we need, right?

• 51:00Speaker 01

  Love that.

• 51:00David Hoffman?

  We, everyone's got to tie into the culture before we add in another person.

• 51:04Speaker 01

  Yes.

• 51:05David Hoffman?

  You don't add 13 people at once, because how do you scale out culture to like, when we are literally a team of 13-ish or so, and you double the size of your org? How do you get all those people to add in to join the culture efficiently? So like, we're very intentionally slow to scale, and that's worked out really, really well for us. If we're trying to build out DAOs and have like one DAO be like fucking massive excuse the language, how do we get culture to also like scale out with all of these cell divisions? Because cell divisions is a, what is it?

• 51:36David Hoffman?

  Geometric growth, right? Like, like exponential growth. How do we get culture to scale exponentially?

• 51:42Speaker 01

  Yeah, this is my other favorite topic is that you really are hitting it all.

• 51:46David Hoffman?

  I'm tapping into this.

• 51:48Speaker 01

  Organs, people. But I think this is like also one of the biggest potential failures that we can tap into is that more people does not equal more productive. And that's something that like you have beautifully discovered as a leader within Bankless and growing your team is that, like, sure, we could, if we wanted to, hire 30 more people and just build this machine, but like, how would that, you know, how would that DNA copy from each person to the next?

• 52:18David Hoffman?

  Right.

• 52:19Speaker 01

  And it wouldn't.

• 52:19David Hoffman?

  Lots of, lots of bad mutations.

• 52:21Speaker 01

  Yeah, exactly. We would have some cells die on themselves. And I think that's something that we have to be really aware of. Like, I, I always forget if it's Trake or Zaku from Coordinate that said this, but you can only scale at the speed of trust. And so that was a big part of like our early pod thinking is that like the most basic primitive or like the smallest unit of an organization is just small groups of people. And um, like, that was a big part of how I sort of landed into Orca was just thinking about consumer behavior and that we have this like obsession in web two,

• 52:58Speaker 01

  like internet culture and also like corporate culture that um, it's just a game of the masses. It's like the more people, the better, more subscribers, more followers, more, you know, people in the community, like, let's just grow this thing as big as we can get. And what I saw so like aggressively happening and um, was just that it actually degraded those systems really, really quickly. Was that, you know, if you had this, like, let's say, special internet community and you decided, like, let's get to a million followers is like, it was actually way more powerful when it was like a hundred people.

• 53:35David Hoffman?

  Right.

• 53:36Speaker 01

  And that path is actually really dangerous. And you start to lose sort of like the value alignment and integrity of that thing.

• 53:45David Hoffman?

  Right. So the followers are like, why are we here?

• 53:47Speaker 01

  Yeah. Or they're like, I don't really care to show up in a meaningful way. And like, um, I think the same thing has happened with corporate companies, like, in building this concept of like labor liquidity. Like if we just hire as many people as possible, that creates some type of moat for us that, you know, we're safe because we just have all these people to build meaningless shit for us that will never make it into production.

• 54:09David Hoffman?

  Right.

• 54:10Speaker 01

  Um, and so that was like a really big part of our early thinking with pods is that the most functional unit of an organization is just a small group of people. And as soon as you've scaled beyond like maybe eight people in that single pod, like you've, you've lost it. Like you've basically lost your optimal like window of effective coordination, communication, collaboration. And that is really what we need to be optimizing for. So I think it's.

• 54:45Speaker 01

  That is kind of the way that you have to think about it. Like our, the Orca team is now 11 people and we just recently split it up into two pods. Cause we're like, this is no, this isn't too big to have a single group of people on a meeting, talking and trying to connect with each other like, and we'll likely probably like break it down even further because I can only like effectively communicate or collaborate with like a kumbaya like circle of people. And that is, applies to everything, like our friends, our like corporate team, our like yoga class, like whatever it is, is that's just kind of how we naturally operate as people.

• 55:26Speaker 01

  Um, like the DAO world is obsessed with this Dunbar's number.

• 55:32David Hoffman?

  Right.

• 55:33Speaker 01

  And I think it's really relevant. It's just like, the internet has created this new version of Dunbar's number that like every circle is actually thousands and thousands of people because of our digital networks. But at the same time, like, how are we actually meaningfully showing up and participating in a meaningful and engaging way in those circles? And that still looks a lot smaller, like again, eightish people.

• 56:01David Hoffman?

  Right. So when you break up your pod into two pods, how, how does, how do those two pods coordinate? Like, how does that happen?

• 56:11Speaker 01

  Yeah.

• 56:11David Hoffman?

  Cause do you need a third pod to get that done? Or like, what, what, what, what happens with this?

• 56:16Speaker 01

  Yeah, I mean, I think it depends on the group. Like, I think that's what's sort of beautiful about the way Orca operates. It's like, we're not opinionated about how you coordinate or how you do the work that you need to do. Like, a lot of that lies at the social layer is.

• 56:31David Hoffman?

  The answer is just figure it out.

• 56:33Speaker 01

  Yeah.

• 56:33David Hoffman?

  It's not that hard. That question's actually not that big of a deal, David.

• 56:37Speaker 01

  I mean, it is a big deal though, because I think that is what a lot of DAOs are struggling with right now is like, okay, you know, the ops team is saying that we need to reduce our burn rate and like, oops, we're accidentally spending $50 million a year. Like, how did that happen? Um, and then the marketing pod is still just pumping out like money for ads and all of these things. So I do think it's really important and I think that's where we sort of rely on social ware systems. Like, how, um, do we create like a pod?

• 57:08Speaker 01

  That maybe is a source of truth for funding and how we're allocating budgeting and funds. But that's actually a pod of pods where every pod has a seat at the table to advocate for themselves or create proposals that are aligned with, you know, how they want to proceed. So I think it's a combination and I think it is important to be very clear about

• 57:36Speaker 01

  where there are failures in those communications.

• 57:39David Hoffman?

  What about the current state of Dow governance makes you optimistic?

• 57:46Speaker 01

  Um, actually, the current, I think the thing that makes me most optimistic about the state of Dow governance is that people are as bearish as ever.

• 57:57David Hoffman?

  So we're in like problem solving mentality?

• 57:59Speaker 01

  Yeah, like I think people are finally realizing like, oh shit, this isn't working. And like, this is creating massive ripple effects if we don't figure this out. Like, there will be massive liquidations, there will be financial repercussions, like we will not control our burn rate. Like, all of these things are rising, like, I told you so, not gonna lie.

• 58:23Speaker 01

  But I think that's really important is that we are sort of in this like storming phase of doubts where people are like, it isn't working, like, why are we doing this?

• 58:30David Hoffman?

  If you look at the P and L, we are dead.

• 58:34Speaker 01

  Exactly.

• 58:35David Hoffman?

  It's all we doubt.

• 58:36Speaker 01

  I actually have like, I really think that, um, I'm like very bullish on Dow's during a bear market. Because, um, you know, cash is tight, like, things aren't insane anymore. And I think it really pushes Dow's to figure their shit out and think very critically about the systems that,

• 58:57Speaker 01

  they're adopting as an organization. So, um, I'm actually like very optimistic for, um, this sense of frustration that's happening in Dow governance.

• 59:07David Hoffman?

  Right, right. Yes, because we only move forward if we actually feel pain. Unironically, that is absolutely true.

• 59:14Speaker 01

  Exactly. I mean, people are looking at their treasuries and they're like, huh, why didn't we do a treasury diversification like 10 months ago? They're like, we just couldn't get the proposal through. Sorry, guys.

• 59:24David Hoffman?

  Our token, our token sound bad.

• 59:29David Hoffman?

  For all of the Dowers that are listening to this, whether it's a Dow community member or a Dow leader, what would you say, and they're already pilled. All right, like, I understand the modular Dow vision. My Dow is super too monolithic. I need to make it more modular. What should steps should they take? What needs to happen first?

• 59:49Speaker 01

  That's a good question. I think just thinking about the biggest pain points in their organization, like where are the biggest failures happening? And then also, what type of structure do you want to create? I think that's like also part of the problem right now is that

• 1:00:07Speaker 01

  everyone just sort of looks to what's been done and people really want like a template or a mental model to adopt. But I think you just have to think very critically about, one, like, what are the essential governance functions that you have in your organization? And two, who like should basically be responsible for those essential governance functions? And that's how you start figuring out like what your organizational structure should look like.

• 1:00:33David Hoffman?

  Cool.

• 1:00:34Speaker 01

  Yeah.

• 1:00:34David Hoffman?

  Cool. If people need resources to access these tools, where should they go?

• 1:00:39Speaker 01

  We're actually building out a ton of resources at Orca right now. Obviously, all of our Trustware product that we're building, but we're actually building out some cool social work templates, too. Chase Chapman and Frog Monkey on our team. And Chase is obsessed with like holocracy and sociocracy, co-op models, and trying to take a lot of learnings from some of those systems and think about how we can incorporate like productive processes and policies. So we actually are coming up with some really cool resources. So check us out on Twitter, Orca Protocol. Come through to the Discord, all of those things.

• 1:01:17David Hoffman?

  So like, what is Orca, though? Because, cool, you guys have this cool Dow structure.

• 1:01:24Speaker 01

  Yeah.

• 1:01:25David Hoffman?

  But like, what's the point? Like?

• 1:01:29David Hoffman?

  Do you get it? It's just like, like, Urn DAO makes a yield aggregator, Maker DAO runs a credit facility, Orca DAO is governance, but governance over what?

• 1:01:40Speaker 01

  You mean like, what will Orca Protocol, the DAO, be?

• 1:01:44David Hoffman?

  Yes.

• 1:01:45Speaker 01

  Okay, yes.

• 1:01:46David Hoffman?

  What's the product? Other than being really good at governing, what are we, do we have to govern over something?

• 1:01:52Speaker 01

  Well, so, basically, it's kind of what I was saying, it's like, the product that we're building with Orca are pods, that's like, our key primitive that we're building, which is-

• 1:01:59David Hoffman?

  Kind of like how Gnosis makes Gnosis multi-sig?

• 1:02:01Speaker 01

  Yeah.

• 1:02:02David Hoffman?

  Okay.

• 1:02:02Speaker 01

  And so, we're building this permissions wrapper around multi-sig to create more modular governance systems.

• 1:02:07David Hoffman?

  Okay.

• 1:02:08Speaker 01

  And we will be continuing to, I think, create interesting features in that sort of governable surface area there. So again, like, pods are sort of like the nodes of this permissions graph, and Orca, the protocol, helps manage the relationships between those. So, for example, something that's, like, a feature that's upcoming with Orca, is that you can actually assign, like, arbitrary rule logic to gatekeep membership. So you could assign, you know, very basic things, like, let's say, you know, you must hold 20,000 bank tokens to sit on this pod, or you must be X amount active in, like, on-chain

• 1:02:53Speaker 01

  proposals to maintain your position in the meta-governance pod. So you can start to create sort of little parameters to ensure that people are acting, like, benevolently or in good faith on behalf of these orcs. And I think we'll help create some more, like, complex agreements, so that, you know, you can build out, I think, more interesting use cases of that. So like, those are examples of protocol developments that, like, will be happening in the next few months. So eventually, like, that protocol, like, Orca, the protocol element that is helping manage the relationships between pods, will have, like, a ton of meat space in terms of what can be explored in helping, you know, these small units interact with each other,

• 1:03:38Speaker 01

  and- Again, just build more dynamic governance systems.

• 1:03:42David Hoffman?

  And how does how does Orca capture resources from this?

• 1:03:47Speaker 01

  It's a great question. Just also as an FYI, we are not a DAO yet.

• 1:03:50David Hoffman?

  Oh, okay.

• 1:03:50Speaker 01

  Yeah. So you were asking?

• 1:03:52David Hoffman?

  No, so well, like, I mean, every DAO captures resources in one way or another, right? Like Uniswap captures trade fees, Urin takes a percentage off of their yield aggregation.

• 1:04:03Speaker 01

  Yeah.

• 1:04:03David Hoffman?

  Orca DAO gets money from like.

• 1:04:06Speaker 01

  Borka Protocol.

• 1:04:08David Hoffman?

  Protocol.

• 1:04:09Speaker 01

  Yeah. Um, I think it's still very much to be determined. I mean, I think the sort of permissions layer of DAOs is one of the most important things to be working towards. Like, I think the financial element is very commoditized. Like, and that's that's the easiest thing to do in crypto is send money. It's very difficult to move people and move people around. And that's what we're simplifying with our product is

• 1:04:41Speaker 01

  basically the creating this sort of orchestration layer for DAOs and organizations to better manage.

• 1:04:47David Hoffman?

  Orchestration.

• 1:04:48Speaker 01

  Orchestration layer for DAOs to better manage the relationships, the contributors and permissions that exist within their organization.

• 1:04:57David Hoffman?

  Cool.

• 1:04:57Speaker 01

  Yeah.

• 1:04:58David Hoffman?

  One, one last question that might be off in a different direction, but like, say some DAO org just like, just kills it with a pot structure. And they make like this template where like the very basic template of that kind of how like everyone forks a compound, the government contract. Well, after if if we the the compound governor contract is like the monolithic DAO. Or perhaps just like the prefrontal cortex of a DAO, which is actually where where DAOs you would think would start is like, okay, if we're gonna make. If you're gonna make a whole entire body, you gotta start with the brain. Because the brain has to think about how to create the body. But then some DAO is successful in going from monolithic to modular. And they create this ba- basic, uh, chondra-like system.

• 1:05:43David Hoffman?

  Like that is totally copyable. Can like other orgs just just cop, take that off the shelf? And just like start spitting out DAOs and have like a, a bull mania for DAOs?

• 1:05:53Speaker 01

  Yes, that's what's so fucking cool is that, um, we're like going to help also build out those templates. So we're in the process of building what we call the Podarchy Builder. So Podarchy, Pod, Hierarchy.

• 1:06:06David Hoffman?

  Nice.

• 1:06:07Speaker 01

  Little map system. We were gonna call it Podography, but it sounded too much like pornography.

• 1:06:12David Hoffman?

  Yeah, that's pretty close. Yeah. Podography.

• 1:06:15Speaker 01

  You approve of our word choice?

• 1:06:19Speaker 01

  Um, where you can actually like go and explore other like DAO implementations. So you could go and see like tribes, nope DAO implementation and say like, that's really cool to like. You can have this time lock contract around the pods and blah, blah, blah, blah. You can quite literally like duplicate that and it.

• 1:06:35David Hoffman?

  Plug it, plug it right in?

• 1:06:36Speaker 01

  Exactly.

• 1:06:37David Hoffman?

  Cool, like build a block, uh, institution?

• 1:06:41Speaker 01

  Yes, exactly.

• 1:06:43David Hoffman?

  Oh, my God. Well, I mean, this fits right into the whole idea that crypto just does everything that we've already done before, but faster and better. And forkable and replicatable.

• 1:06:53Speaker 01

  Yes, all the things that we love.

• 1:06:55David Hoffman?

  Cool.

• 1:06:56Speaker 01

  And I'm so excited.

• 1:06:57David Hoffman?

  This is making me bullish on DAOs.

• 1:06:58Speaker 01

  I love it. See ya. I know I'll get you there.

• 1:07:03David Hoffman?

  Jules, thanks to you for coming on Layer Zero and pilling me about Orca.

• 1:07:06Speaker 01

  Of course. Thanks, David, for having me.

• 1:07:07David Hoffman?

  Podpilling?

• 1:07:08Speaker 01

  Podpilled. Hundred percent.

• 1:07:10David Hoffman?

  All right, listener, you just got podpilled if you listen to this podcast. Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcasts, and community as a Bankless Premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive content, and even the Bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless Premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders,

• 1:07:54David Hoffman?

  Ask Me Anything's, and weekly rollups where we summarize the week in crypto and other fantastic content. Thanks everyone for watching and being on the journey as we build out the Bankless Nation.