 Cool. Hi everyone. Hi Bill. Hi. Hi. Welcome to Dev Month 5. Thank you so much for coming through for this workshop today. My name is Paul Kohas. I'm going to introduce this amazing gentleman in a second. So the topic for today's workshop is funding as a medium and a message. How we get capital and the influence that it has on what we build. The reason I chose this topic was because it became a very personal topic for me as well. I saw a lot of kind of funding scenarios involved in the ATM ecosystem over time. I think it's a really important topic to actually address when we're opening. What are the different sources of capital? Where does capital come from? What are the incentives that come with it? And how do we decide where to get it from if we need it? Cool. So just quickly, Konichiwa. Konichiwa. Our goals for today are really to foster an open conversation to explore the role of funding and capital and Web 3. Specifically in funding Web 3 infrastructure. We want to look at different sources of funding and incentive design. We're going to go from centralized model to very decentralized models of funding. And then what we really want to try and do is make this a very open platform for you guys to share your experiences, discuss the problems that you've encountered to ask questions. Yeah, so that's one of the core goals of the workshop. We really want to try and make this as interactive as we can. So please feel free to engage, ask questions, interrupt. It really shouldn't be like a very kind of front-facing workshop. Cool. Our workshop challenge for today are Andrew Keys from Dama Capital. We're going to give a super quick intro to yourself. Unfortunately or unfortunately, I've been raising money. I feel like most of my adult career first at a tech startup within consensus. I raised money for the launch of the Enterprise Ethereum Alliance. So in the open source standards world. And recently at Dama Capital where we managed, I think, the largest actively managed Ethereum fund. We've got $150 million worth of internet. And I think I can speak to some of the issues with institutional allocators, open source, grants, and venture. Next up we have Amin Soleimani. Hi, I'm Amin Soleimani. I'm the CEO of Snack Chain. I've been the recipient of grants in the forum from GEP to help payment channels and stuff. And also in the Summiter of the Mall of Dao, which helps open source infrastructure for the period. Hi, I'm Jeff Amin. Hey everybody. We're working on a project called the Common Snack, which is a collaboration between Giveth and BlockScience. And we're pushing forward open source token engineering and robust design in crypto economic systems. And the first component we're building is an augmented bonding curve, which is a funding mechanism, a continuous funding mechanism for open source projects for communities around the continent. Cool, guys. Thank you so much. I want to give a brief intro to myself as well. It's something that's really interesting often. We're going to try and cover a host of topics in this workshop. I always feel like to say, I like to say I'm not qualified to talk about any of these topics, but I've learned so much over the time. And what I'm really trying to do is really just share my experiences. A very brief background about myself. I first got into Dogecoin in late 2013. Got really interested in memetics and the first community economics that came with Dogecoin. I think no crypto presentation is ever complete without actually Dogecoin. I studied economics in Switzerland. And the Cape Towns really fell down. They became a rabbit hole in late 2015. Found a company called Little Maps. Worked on an identity project with UNICEF. Went to Denmark too. Met a lot of people like consensus. Joined consensus for the first time. Worked on Eucord. Then left consensus and founded a company called Polyco. We're aiming to redesign the way that essentially decentralized drug development for biotech in front of. We're launching our first batch. The fundraising topic for me again became very prominent. This year we got into fundraising mode. I had to kind of go through a lot of the challenges that come with fundraising as well as the good sides. So I'm really keen to share that with you. Also previously received a grant from MAKER. Been involved in a lot of fundraising initiatives with Dogecoin itself. Cool. So funding. Maybe quick question into the room. Who has received funding before in any kind of form? Okay, that's a lot of people. Which is great. So you can all kind of join in to the original round. Hopefully later on. Maybe it has a who's received VC funding? Mastery. We'll get into the structure of the workshop. We'll have to explain this again later. We'll kind of go into each funding category. So the funding categories go from VC to DOWs to grants to token sales. Maybe hands up. Who's received funding by doing a token sale? Grants. So that's interesting already. That's a lot of people that in VC, which is... Yeah, I think that's really interesting. Who's received a grant before from any kind of grant initiative? Already? Pretty good. Wow. Cool. That's more people than we had with token sales, less people than VC. Who has received funding from a DOW before? Nice. Cool. Okay. Maybe a hands more of an open question to the room. Why do you guys feel that funding often feels like a taboo topic to talk about in the world? Do you guys feel like it is a taboo topic? No. No? Okay. So funding is very openly discussed in the Ethereum ecosystem. Would we all say yes to that? Or... Can you say again? I mean, which ecosystem you're in? Part of it. So our grant funding, I think for example, it's very transparent. It's very openly discussed. Probably things like VC funding less so. It's kind of moving... It's almost moving in from the scale from non-profit to for-profit, which also changes the scale in terms of transparency. For example, for me, like as an early founder of the Ethereum ecosystem, it was really hard to understand how any of these companies got VC funding whereas the business model was the incentive of the VC. How does the round structure work, valuation, term sheet? Yeah, but maybe that's sort of one that's unique to the Ethereum ecosystem. Cool. So why is funding a core tool to build on anything? Well, you've got to pay yourself. You want to grow your team and your product, legal expenses, community building, marketing and awareness. But what's really important to realize is that the source of funding is fundamentally defined before you build. How you monetize it and in what time frame you do that. So getting a grant to fund your DAB has very different implications than trying to get to a VC to fund your DAB. And it's really important to understand what are the different incentives for those different issues you've already done. Cool. So this is kind of the general framework that we're going to follow going through each of these topics. And as I said before, feel free to interrupt. Guys, by the way, if you want to come and sit down, there's still spaces here in the front. And Paul, can we just do a real guess? In Milwaukee to come sit with us? I think you would add a ton of up. Milwaukee, would you mind coming and carrying some of your wisdom with us? Please? Come on. We had to do that. We literally did an hour before this. We said that we could have back you up here. So, here you are. Cool. Ready? Yeah. Kevin, thank you so much for joining us. Do you also, the other, we'll call them champions, have already introduced themselves? Do you want to give a quick intro? Yeah, sure. So hi, I'm Kevin Milwaukee. I'm one of the co-founders of Gitcoin. Our mission is to grow and sustain open source software, a software platform that connects funders to coders to go on access to funding and vice versa. And I guess our most recent funding stuff we did in the ecosystem was Gitcoin grants, which just around three raised, just under 300K for ETH 2.0 projects in the ecosystem. And explain the matching. Because this is so rad. Yeah, so Glenn, while in Vitalik, published this post called Constraint Capital Liberal Radicalism, which is basically you have a pool of matching funds that will be distributed to projects that get crowdfund contributions and instead of a one-to-one match, where if Andrew gives $100 to Project A, it'll get matched by $100 from the matching fund that's distributed according to the breadth of contributions, not just the depth. So if Project A raises $100 from one donor, then it'll get matched less than Project B that got $10 from 10 different donors. So both projects raised $100, but the second had much broader base of support. So with quadratic matching, which is another word for Constraint Capital Liberal Radicalism, you can have some of the projects on Gitcoin grants with a $1 contribution would get $200 worth of matching just because it's a broad base of support. So it's according to Glenn and Wile, the mathematically optimal way to fund public goods that the ecosystem cares about. And I think that's why Andrew invited me up here. Okay, cool. So as we move through these different topics, we'll look at what is being funded, what is being offered. Is this a for-profit model or non-profit funding model? Governance, who makes the decision on what gets funded and what doesn't? The incentives, who benefits from the funding? And then what are the key issues that can come with it? We have this question already, who is he funding for? I'm actually really glad that Kevin joined. So I think one of the core questions that we have in this ecosystem and that keeps coming up again is like funding, how do we fund open source infrastructure? And it's kind of the strategy of the commerce problem. Like how do we fund open source infrastructure? There's a lot of expectation that funding goes into the base protocol layer once it's deployed. But we haven't really developed, I think, good models yet to scale that up. And I think that's why we're seeing so much investment and so much kind of scaling away from the core layer to monetize on other layers like monetizing layer one and layer two and so on. And the core thing that I want to get into this is, well, this is kind of what we're trying to do. You guys can't see it, it's just the public works. And so in our current society, we pay taxes in order to pay for the roles to be done. We kind of say we have to pay taxes to use Ethereum to the miners, but the miners don't kind of invest back into continuous development of the rows and of the base layer. So if we don't kind of find good ways to invest in public works, like we funnel capital into public works, then we end up with like this, like shitty pothole roads. And this is a really big problem, I think, not just a problem that we have in, I think in the current open blockchain space, but it's a problem in open source with maintenance in general. Kevin, maybe you have, or like any of you, I know it's really, really difficult to be maintained to be paid as an open source maintainer for any kind of project. Yes, I mean, I think that our question is to ground sustain open source, but everyone up here has an interesting model that could be used to solve the coordination problem of funding our digital infrastructure, ComSAC, and PoloDAL, GICLIN grants I know are all experimenting in the space, and so, I think a diversification of funding models will make the ecosystem stronger, so I'd love to hear from the others on the panel too. Cool. Who can answer each of the funding models? Just like as a base opener. Okay, so we don't want this, so we need better funding models for the comments, which will be one big topic that we'll get to in the end. We also don't want this. So this is Tolgate in China. And so, like on the one side, we have free roads, but if they're not maintained well, they're going to end up like this. And on the other side, this kind of reminds me of some of the day one solutions that are being built up. It's like if we start monetizing scalability too hard, then essentially it becomes like using Ethereum will be like passing from Tolgate to Tolgate. That's also something that we want to afford. Okay, so, over the next kind of hour plus, we're really going to kind of take a journey from different for-profit models into non-profit models, and then finally to the comments. The first one that we're going to start with is venture capital. One of the oldest funding models in existence, I think compared to the other one, it's not one of the oldest funding models of Ethereum. Cool. So let's talk about venture capital. I think going back to earlier, I saw the most amount of hands up for people that had previously received VC. You guys might be raising your hand again. Okay. Does anyone want to speak about their experience, share an experience they had with VC, maybe some of the issues they encountered? Yeah? The only language VCs understand is like FOMO, so you have to see them online and then watch that speak the same language you can see. So the only way I got a VC to invest in my company is basically going in and said, do I want to fold in a week or you end? They said yes, and that's money. So that was my biggest thing that I had to show, that there is a chance of missing out, or you can get funded. Your idea may be good. Your model may be good. That doesn't really cut it somehow. You have to feel the human nature. Thanks for that. One other thing that's different is like, the environment was very different. Hopefully your bill would be raised in 2017 VCs like throwing us money. It's so easy to raise in 2017, like right when the bill was starting. And when we tried to raise like this year, it was like a completely different day. VCs are like way more scared of the space. So I think a lot of it depends on the environment. You see that from the round sizes as well. I mean round sizes would like, end up now going down to like very careful. I think that speaks to exactly what the previous biggest sentence like, FOMO has decreased a lot in this phase. Yeah? I was going to say something similar, but it depends on the type of VCs. It could be in early stage, or it could be in stage VCs. And if it's proud, ideal, it could be just like a one-off type thing. So environment's performing, but also the type of VCs. Coming from the VC side, I worked at a VC that invested in open source, which was really interesting. So although I think that VCs do have FOMO, I think that also some VCs are really great in a lot of ways. The issue is that crypto VC... VC and crypto is way different than VC and SaaS, right? So venture capital works for a lot of models, but a lot of the businesses and the projects that we're building right now in crypto aren't served by the traditional venture capital return structures, investment process, and just in general like ECIS. And so we're seeing this disassociation with how venture capital can be applied to crypto projects. And that's causing us a question, like how private capital is being funneled by early second nations in the first place? Yeah. Really, really interesting comment. I think something that will be very interesting to see play out is a lot... I think a lot of companies that are being funneled at the moment, funneled at you don't have a business model yet. It'll be very interesting to see at some point if kind of like LP pressure starts rising on investments that are made that have large user bases that people are now using that have created this open infrastructure, but that now need to start monetizing that open infrastructure, which might kill those user bases. So it'll be interesting to see, really interesting to see how that evolves, yeah? ECIS pattern, actually. They look at what's been successful in the past, and then they look to apply that moving forward, and the patterns we're developing here don't matter very well. Yeah. Yeah, general speaking, some reassies on the... with tech startups. I've just heard a lot of failed stories where there's been the odd growth investor that had some power to do something wrong, and they sort of basically tried to maybe take the capital or do some dodging move, but I've just heard time and time again the odd story of the one early investor that messes it for everyone, and then there's a lot of pain and torture in getting rid of that early investor. Yeah. But that's general. I think another generalization is what we're seeing right now with entities that try to become ubiquitous, like we were in the Uber, that wanted to grow as quickly as possible and didn't necessarily consider the balance sheets, and we're seeing that kind of unwind right now, and that was driven primarily by investor pressure, and kind of balancing actually building a sustainable business with if I put a dollar in, how do I get $5 out, and recognizing that we actually do need balance sheets in the end? For everyone who's kind of more new to the topic, I want to give a very quick overview. So VC is generally a for-profit funding model. VCs invest to make money. And that's what they confuse and that's how those people can happen. If you're building this cool open-source project on the blockchain in C Center Live, does it make money? No. If it doesn't, then that's a hard bit. Unless you can convince someone that you're going to grow at an enormous user base and some will be able to monetize their user base. That was some learning for me when you're coming out of the open-source blockchain space. It's like people that make money and if you don't make the money, they get angry. It's generally an exchange for company equity. We've seen a lot of SAF models evolve over time. There's also an increasing trend back to equity and they know maybe into SAF models again. But yeah, that's generally how it works. If you don't have a company, if you're trying to raise VC and you don't have a company yet and it's a decentralized team of go-getters and you're making it work, it's going to be hard to raise VC. And even before SAF, are we familiar with why combinators save standard agreement features? So that's even more nuanced that the token part versus the actual equity that created it. Yeah, it's a great comment. So just as a company, a company normally has equity, shared that can be issued. The easiest ways to raise early-stage financing are either through a SAF, which is a simple agreement for future equity, or through something called a convertible note. A convertible note is a depth instrument that can be converted into equity at a later liquidation stage. So you could say, for example, you're now, you guys are just starting out, you have an early-stage team, you've created your company, and now, for example, you're raising $200,000 in financing via a convertible note. So that's essentially a depth that comes onto your balance sheet. And that depth, you would then say to the VC, cool, and we're looking to raise a million in a year once we fit those milestones. And once you raise that million, that depth then converts into equity. Just a little bit of background. Generally, it's based on consecutive funding rounds, based on progress. And it's kind of like leveling up, which makes a lot of sense. Imagine it's a video game, and you're moving from level to level. The bosses become harder, and it becomes, like, more and more. And generally, you go from a friends and family round to a pre-seed round to a seed round, and then series A, B, C, D. There's very few companies in the crypto space that have kind of made it into, like, this range. Like, a Coinbase would be here. Most companies are kind of at... Most companies are at the pre-seed stage. A lot of companies are at series A. In series A, you normally want serious kind of customer attraction. So, like, you're busy probably starting to work, starting to generate fresh revenue. In general, it's only really exchanges. In my opinion, that have made it into, like, into, like, further up the slide. Andrew, I don't know if you have any... That's totally correct. Yeah. Okay. Maybe to give you guys a range as well. So maybe your friends and family rounds tend to be, like, you're really just raising early-stage money to get going. Maybe up to, like, 50,000 or 100,000. It really depends on your, obviously, on your, um... on your friends and family. It's a horrible idea. It's also, it's actually... What is your friend and then your family? It's a great way to alienate your friends. And your family. I mean, your family less, if they believe in you and then they really screw up, okay. But, yeah. It's much better to raise from angels. Actually, so I forgot to add angels here. Ideally, you'd raise from an angel who's not your friends or family. Because I mean, it's right. If you're part of your company, well, then your company is going to add you plus your friends. No, it's not that bad. So a pre-seed... A pre-seed is, in general, anything that you refer to, the first thing that you refer to is your friends and family. A pre-seed is, in general, anything that you refer to, the first kind of institutional money. So this could be a very early-stage fund and a couple of angels. It could also be a couple of angels. The range would be anywhere from, like, 100 to up to a million. There's even, like, one and a half million dollar pre-seed rounds now. But this tends to be the range. Then seed now starts... It starts upward of, like, 750 to a million. And then goes up to up to four. There's seed rounds up to four to five million. A lot of this is very flexible. The numbers over the past two to three years have just been going up, up, up. So companies raised more money at an earlier stage. Which is part of, like, I think we're seeing end-to-end this really big just excess in capital. Which is also starting to flip now, as I have to say earlier with, like, IPOs kind of going classic. The timeline. So really, you want to start making money within three to five years, minimum. There's few businesses like that. I mean, there's very long-term big project companies. But that doesn't apply into, like, to crypto in general. It's very centralized decision-making. So one thing that you have to remember is selling equity means you're selling stake in your company, which means now those people have a say over the governance and how you run your company. So there's many examples, and a horror story is, like, if a VC doesn't like the way that you're leading your company or your team, they might just replace you in an upcoming funding act, or the board will try to push you out. It doesn't have. You haven't really seen that yet much in crypto, but it is something to consider just from a governance perspective. Then, VCs are really looking for 10X business models. So if you can't demonstrate how this is going to, like, 10X in terms of investment, if they invest a million, 10X in for 10 million, which means, for example, your business at that point needs to really grow to match those numbers. Valuations and term sheets. So a valuation is basically, once you go to a VC, or even to an angel, once you sell equity, you're going to try and want to get to a valuation, which means you need to now put a price on your company, which now means you need to evaluate how much money could this company make at some point. And then, ideally, you want to get to a term sheet. A term sheet is kind of the offer from the VC how much they're willing to invest at any point in terms. Cool. And then there's Besting, which there's something that is often forgotten in crypto. We'll get to that a little bit later. But it's essentially how your own shares of the company or your employees shares can invest over time. Cool. So this is really just to cover the basis. I know we didn't want to make this like an open kind of discussion round to discuss what is the role of VCs in funding infrastructure, but also the role of VCs in funding projects in the space in general. Abby just had a great comment earlier that I think for a lot of open source business models, VC funding doesn't actually work well. And yeah, maybe to kick it off, I want to hand it over to you guys in terms of experiences in terms of... Well, that's one thing we've come up in the common stack looking for funding to build the common stack. Looking at VCs and the first question is often, what's your profit model? We're building open source components for communities to use, basically like an SDK for DAOs. We don't have a profit model. We don't want a profit model. And that makes the VC a very difficult road to walk for an open source project like the common stack. The projects that seem to have had some success raising from VCs are projects that they might have an open source and constructed from it, but they are going to then figure out a business model on top of that. Two come to mind that raised money recently. One in both our Ethereum projects. One is Uniswap and the other is Instadap. So Uniswap raise your hand if you know what Uniswap is. Very cool. It's about happening. It's like one of the coolest exchanges on Ethereum. It's bonding curves and it's an automated maker. Those words mean nothing to you. It doesn't matter. Just means that you can always trade against it and it will always trade back with you. You can put money there. It doesn't actually take any fees in its current implementation, but the team is building services around it and they're able to raise money on the premise that those services would be valuable. Instadap on the other hand it allows you to better manage your CDPs. So who here knows what maker DAOs are? So you can take a loan and you'll be paying some interest, but maybe there's a compound which is another platform where you can take a loan and that gives you a better interest rate. And the process of moving your debt over one of those platforms. The other is actually quite annoying and like prone to error. And so they provide a valuable service and they take a fee if you're doing that because something like 0.5% for being able to migrate your loan over and that's then an investable business model and they just close it down. Nice. So to answer this question I don't necessarily think there has been a role for VCs in funding decentralized open infrastructure. And I think that the notion of a decentralized open infrastructure being funded by a small gatekeeper really just opposes the notion of what we're trying to do or what that infrastructure is trying to do. And I think that is kind of the aha moment with, I would say, the Ethereum token sale. It was that it wasn't a bunch of people on Sandville Road that were the gatekeepers to this. And I think that was kind of the aha moment of the token sale. Although it got a little silly token sales in general. But I mean this, the future of finance is we're witnessing it where you don't need the VCs for everyone to come to VC. How do you guys feel though I think we've gotten to token sales just now as well. I think we've largely seen token sales disappear. And now there seems to be a big gap as well in terms of, because now a lot of people are going back to the VCs, for example projects like the comments that I think you guys would totally go for the option of raising from everyone as a VC but the market isn't there anymore and the liquidity isn't there. I think I forget who tweeted this just a couple of weeks ago and they said the internet turned everyone into micro bloggers and the blockchain will turn everyone into micro investors and we see at the common stack a future of kind of community subscription models or community investment models where you are paying a subscription fee and you receive a token and asset which gives you governance in that community and provides capital to that community to continue doing good work so kind of merging these for-profit and non-profit and actually going back to the point you made earlier about public works the way we get things done as a human society is we pool the capital and allocate it towards what's best now we do that through taxes, that isn't necessarily efficient, we do that through the stock market, global capital pools to provide liquidity or for-profits to do work and grow the value of what you gave them but we don't have this for the non-profit open source infrastructure that doesn't have a revenue model so I think we're really on the cusp of figuring that out and that's what we're really excited about at the common stack is basically creating that capital pool for a non-profit open source infrastructure to survive and thrive I have a question so even if you say that the internet blockchain has the potential of creating making people micro-investors right most people are conditioned that if I'm going to invest my money I want this to make a return so they are thinking like a VC they are thinking how can an open source generate returns for me so how do you I don't know this by the way so I'd like to appreciate your views I appreciate it it's like VCs often work for 100,000 extra turns they're doing what Andrew's saying they're pushing you to go to the moon or explode fast, get their money out stop wasting your time and move on to the next project but if you're trying to build a community you might not want to go that way you might want to focus on like 2x returns or like something that might pay you back over maybe a longer timeline but it's also potentially less risky right so there's different ways of thinking thinking like a VC is sort of a box where it's like you can think like a capitalist but not necessarily a VC thanks any burning questions about VC funding I would just say one thing about corporate structures in this case I came from consensus and I think with respect to venture capital of consensus it's no surprise or secret that they have tried or are trying to raise capital and when having these conversations there were lots of businesses where the value essentially improved to the protocol of a theory things like education things like the funding research but that didn't fit into the box of if I put a dollar in I get five dollars out so I think one other piece that I would say is that when we are talking venture capital if there is in many cases kind of like product market fit modeling if I put one dollar in how do I get this five ten dollars out and there is not too much in what I've experienced room for creativity and I think that one has to have a serious conversation on if my business is going to approve to a token to be enterprise value of maybe a personal experience from my side as well I found the experience of interacting with VCs at least the ones that are more generous not like super deep crypto small team very small fund so they are more general big VCs I always found that they are very disillusioning experience like VCs can be very smart but they can also just be extremely like close minded you come in there and you have this big vision and you're like cool this is what we're trying to do this is all the cool things and you get boiled down to this very narrow set of questions or a very narrow view on the world that also doesn't fit I think with a lot of these new business models that we are trying to build VCs are also the bulk of VCs are historically late to the party tend to be on the wrong side of the spectrum there's really very few VCs that actually outliers in their respective fields every time being a VC like a partner or an analyst I don't know why but for some reason it's such a prestigious job title to have so there's also this very elitist feel that comes with the culture of being a VC being funded by a VC, interacting with a VC that's yeah I found it a little bit always disillusioning to be interacting with I guess the hard experience like if you guys ever get to the point and also the hard experience to like pitch to someone to like give them money and kind of to go through those continuous pitches to refine your pitch yeah it's actually really interesting to see if I compare like early slide decks that I made to like going through the experience and then like later stage slide decks you'll see how you keep boiling it down to like those core questions like cool okay yeah any experience related getting support from where to capital but from the big corporations like offer to them impact instead of 10x return of economic money has been any experience with them I don't know make them have proposal and say hey you know this impact and you're going to have to do that in the big corporation platform where you will have benefit from that and it's not necessarily economic so I think most Fortune 500's now have corporate entry and you're seeing a lot of it in the financial sector where with things like Dodd-Frank most banks are just kind of keeping the lights on their budgets and they have to acquire and with that to your point it has to solve a specific problem for that entity and really they're very digital so if you are building the next best thing for oil and gas maybe ExxonMobil will help but it has to be very specific to the industry that they're solving problems it also ties you very specifically to that company which might not mean that you essentially become that company's product rather than and it might then mean like if you get in front of ExxonMobil for example that Chevron or anyone says we won't touch this AWS, the Azure okay and there was yeah I'll hit you up later I also last question I'm surprised by the comparison that's being grown between traditional VC and token sales as they're being defined on this panel which seem to be just ICOs and utility tokens but there's no mention of token ice securities and how that is actually a more digitized form capital raising whereas ICOs community building since they don't actually offer people equity in those companies what does the panel feel or how does everyone feel about token ice securities and their comparison to sort of traditional VC great question I don't think we even started talking about tokens but I think that right now the capital markets don't necessarily have the appetite for them we're seeing them as basically glorified key sheets where maybe $5-10 million raised what I do agree is the future of finance I would just like to see corporations or investors be able to hold them easily on their balance sheets and things like custody or hurdles to that right now it also doesn't seem like they're doing it for equity right like the securities that are getting tokenized are like you know real estate you know some sort of real asset that's generating revenue or something so it's not quite like a VC would go and buy that if they're looking for that workshop I think it's important to differentiate you can have tokens and then you can have tokens representing equity which fits just as well into the venture capital kind of field those exist great comment last thing venture philanthropy is basically like LGT that will have people willing to put money behind something from venture capital perspective maybe just capital recycling as opposed to getting something back you also have these donor advice funds you're kind of like an EC approach and all they want maybe is to recycle your capital and that's a huge subset of the kind of money that goes to these open source also like UNICEF they have a venture capital type fund which is focused on open source and they're the only problem with that they want to hold the IP and then you have to show them that but a great financial comment maybe I think to contextualize it's very easy to bash VC but I think VC can add a ton of value to your startup you just have to know that you fit into that box so that you don't move too far out of the box and then it's going to add a ton of value in terms of like I've seen like very young inexperienced teams get VC funding and where the VC really tries to help you out do executive coaching make sure you guys stay on track really rebank marketing think about your go to market so VC is also I think especially to the Ethereum space and to the servers that can fund it have added an enormous amount of professionalization into the space I think that's specifically common in DeFi of professionalization because we can't build everything open source and all like decentralized if we want to serve as real customers like real people then we need professional product and VC do an enormous amount to like push us there as an ecosystem as well and then I think without VC funding the Ethereum space in terms of growth would have struggled enormously over the past one and a half years just as like any other form of financing essentially fell into the trough into the venture that we've seen cool next up tokens who has I saw less hands up than from VC who has received funding from a token launch again do you guys want to does anyone want to share an experience what was the like right through that maybe at what point did you launch what is it like engaging with that community of investors is it public is it still pilot token I would like to share a little bit we we go through the VC first and then we realize you know which is a it's a very mixed experience it's a chaos at the time it was in February 2018 which is a very good timing so the console went pretty well but there's come the last game a lot of games going on yeah so for the other running a startup do the product so no matter if it's from the VC or from the ICO if you need the real money it is good money so there's money for you to find a product going on but at the startup dealing with ICO I would say definitely cost a lot of a lot of energy to be dealing with what can you worry about after you worry about what those gamers will defer the reputation of the project and I think that even worse later on you have been dealing with a lot of token holders most of those token holders not necessarily understand or have any visions for your project they just because of the time they just want to make quick money but when the whole market is going down we and me myself spend a lot of time trying to kind of comfort them and try to communicate with them so this is I have to say this is too much for the startup so really really good time so anyone interested to discuss with me about this so luckily I think we're doing good with that so far there's no problem so far I wonder if there's been like self help group for like no I mean I had a friend who did they did a token sale and he got like death threats like from multiple different accounts and when the whole market is crashing and you're getting death threats from like your besties and that's an enormous amount of and then you don't even know if like the SEC is going to come after you like he said that's an enormous amount of psychological pressure which I think is a lot at that stage I thought it will remain silent but I decided I guess for some insight so I'm from Golden so we did one of the early token sales back in 2016 and honestly but then I thought this is a very natural path to find out that type of project exactly because there is like a very deep conflict between funding and infrastructure part open source part of the stock and venture funding like to me it is obvious and I believe this is sealed like that of course you can do a venture funding on the higher level like I can perfectly imagine like a consumer oriented project building on top of blockchain infrastructure project that has like a venture funding but not for the lower level projects but then of course like the idea of token sales of that type of funding products got derailed in 2017 when we had a dating app tokenized projects doing ICOs and other things like that to me it was especially painful to look at that because I felt like oh f**k this and now I'm part of that while really we did the sale in November 2016 that looked like really the way of collecting very very special type of funding for very special type of projects like that an easy tool for everyone to get money for whatever and at the same time I believe that that's really pitted at what happened in 2017 like discredited the whole idea because exactly because of that we have a problem we mentioned of the funding for ethereum ecosystem other parts of the central ecosystem and then that VC funding cannot solve I believe that even today we can see maybe not exactly in the current Euron community but in a broader blockchain space that I have a feeling I don't have heard data on that maybe someone from analysts could comment on that statement but I think we started now the race it kind of like a blockchain maximalism but driven by the VC funding that now the approach is that the real dachma will be for a VC funded project that will build a closed solution that everyone will use using that the kind of technologies that we work with a lot to summarize I believe that token is a great way to finance a very special type of project also I don't think this is really in the scope of the meeting today but I think that we have a problem with the token projects in general so we need much more exciting ways tokens can be used I think that the whole idea of fact protocols is not really working maybe apart from a very special low level cases like Ethereum for example but not for the many projects hiring the stack and I think that really things like for example discussing radical markets there are a lot of ideas in funding, in reputation in governance that can be used built around tokens and I think we are only at the start of that way so that for sure needs to be taken care of to move on with tokens and of course cool ideas that compare with the ICO approach and you have some control over how the money is spent you can terminate the funding if the teams cease to do anything that's also important I don't really know about VC how that can be referred and moving so yeah I think you, I'm talking to Doug so I will stop here I just wanted to thank you so much I think that was a really great comment say with the previous speaker I want to add to that so specifically those early token sales I think fully followed the ethos and what we were trying to do and then later on we got dating apps and all kinds of stuff I still think if the DAO the original of the DAO would have survived I think it would have put a stop to a lot of the madness that was going on because the DAO would have been this could have been this collective efficient capital allocation mechanism into good projects forcing them how they spend their funds, all of that rather than everyone just slapping a small contract on to mainnet and sending funds to this address we decided to do the token sale after the DAO collapse before that we were preparing a proposal for the DAO I just think in terms of the madness that we saw I think if the DAO itself was complete madness but if it had worked then I think it would have been a great filter Gryff, I saw you nodding you had a lot, do you want to add anything so Gryff is actually one of the original let's say collaborators or like I was one of the five one of the five employees of Slop It so you know yeah I was there yeah and it definitely changed it everyone kind of had an excuse to not put some kind of accountability on chain it's like we'll hold the DAO effect so put the money in my multi-sale and yeah that became an excuse kind of to do what was in your best interest so there is an interesting evolution that I think is happening there's a group out of consensus called Coven which takes the concept of a 2 in 20 carry or let's just say the fees that would accrue to a venture fund and basically by the person who sources the deal could receive 10% of the 2 in 20 the people that do the technical due diligence the business due diligence the legal due diligence could receive part of that 2 in 20 and if you source the deal and no one wants to fund it you could actually lose your stake so there are these kind of next generation game theoretical models that are kind of creating a hybrid with venture and tokenization which I think are kind of the evolution of what could happen and with that you have this broader sense of due diligence where you can see in a future state anybody could do that technical due diligence and you could have reputation and if you're great at this you get a score and then become someone that sought after to do technical due diligence so you can really kind of decentralize the concept of venture funding can I try to get a sense of the room who bought tokens who bought tokens in 2017 who in 2017 or 2018 thought that like tokenization was the future and that we were like totally owning the BCs right who still thinks that I think the tokenization it was also pretty case specific people launched a lot of different kinds of tokens many of the tokens made absolutely no sense from an economics standpoint you said you were at Gold so your token was a two-sided marketplace that was used to transact makes no sense thank you and some people launched token sales that were like super exploitative and tried to get as much money as possible maybe this guy who's trying to comfort his you know ICO buyers I launched worse than the dating token I brought up porn company it's called Spank Chain so I launched ICO and I raised six and a half million dollars in the global public auction for spank tokens and the premise behind spank tokens is that you can stake them in the spank bank which is our algorithmic central bank that mints booty tokens based on our fees so it actually powers a circular economy that makes sense right now the execution you know falling market whatever like it's been hard for us to get traction but like as you know as we continue to grow as a company the token holders like will benefit from the growth of our economy like that there is value capture present in the protocol right and further the way that we launched that sold the token specifically was not intending to capture as much of the possible value on the table I actually launched the most fair ICO ever and I can say that it's true if you look it up so the way we designed it was it was a single round blind option and so you would submit a series of bits so we actually sort of used state channels for this as a state channel guide census so you would deposit much of your either onto the contract and afterwards you would place bits which would have the price and the quantity and so it would be the amount of spank that you wanted and the price you were willing to pay for it and so you could submit any of those up to the total deposit that you placed or demand curve and so then what we did is we got all of those bits together and we had our own supply curve which was the amount of tokens that we were willing to sell at each price we figured out where those matched we picked a strike price and then we gave everybody the same price and so we we sold 30% of the tokens and raised 6.5 million dollars and the benefit of doing it that way is that even in the best case the token was up 30x from the sale in the worst case it's down about 4x you have some token sales that were so exploitative that they're down 99% from the point of the sale and so you know when you're talking about these don't try to lump everything into a category even if it is a dating app or porn just to add on that I was going to innovate on twitter about 2 months ago about how all tokens are not equal and we really need a decentralized rating agency to rate the AAA shitcoins from the worst shitcoins and so the problem with that is when you create a ratings agency well how do you prevent capture of that ratings agency to you know you give them a bribe and they rate your your shitcoin higher and so so I think it would be interesting to see a trusted community source that can separate the worst shitcoins from the best ones and you know I think it means the way it means framed it as being down 4x is way different than being down 99% and I agree with that someone I was talking to someone at D4Lin who was saying oh multi-collateral die with makers is going to be that so basically right now the collateral in maker that makes die into a stablecoin is ETH and that's single collateral die and in the future we're going to have auger or I forget what tokens are going to be launched in multi-collateral die but you can basically look as more tokens are stakes to create die in makers economics at the different attributes of those markets and then you can use that to approximate a rating for each of those tokens based off volume and the flow of the tokens in multi-collateral die so I guess to some of my points decentralized rating agency will be important and making sure that it's not captureable will be important and maybe multi-collateral die couldn't do that you're already starting into this really decentralized but it was two weeks ago Coinbase et al is creating a rating to define if something's utility or security and I think that's a step in the right direction last comment that was ridiculous now that he's not in the room I feel like I can say that kind of become a high level and interesting just opposing against a previous discussion of BC and how can they find a model that is open source and not necessarily have a profit model driven I think it's interesting to talk about token prices like value capture and the token model I think that really goes against what we're saying where the token or some sort of crowdfunding is good for finding open source projects when really impact people who are funding that for return which brings us back to the BC model or smaller BCs across money and so I think it's very important to think about why you're raising money and if you're raising money other people will need to invest expecting a large return if you are and you can't sell BCs then you're just pretty much pleasing people with less utilities than BCs and I think from that model it's important to note that you're not wrong I think it's a great comment as well just let me talk about the question how does Ethereum fit into that model like do Ethereum crowd sell do you want to answer I don't personally I don't think layer 1 should have a common token that is fluctuating when we talk disabled by bringing a set of gas fees that all layer 1 should adopt a SaaS model that you don't pay for you can play a drop-off sword and say you pay $10,000 you want to learn the transactions I think in that sense I think owners of nodes should be paid an actual percentage of the time if you're doing that that means $10,000 if your protocol depends on the stable value of the dollar then you can never operate independently that's all I'm just saying there's no need for that that's possible okay okay for the same time can I move on we kind of went through a lot of this so this is what we saw about in 2018 I just love this meme I wonder if that's the same I wonder if that's the same the white paper what was the purpose of the white paper what was the production I think we saw a ton of this which also discredited the whole blockchain space unfortunately I think a lot of enterprises have kind of made the 360 circle come to realize explore this space, be very disillusioned but then come to realize okay there is actual value to be to be delivered cool and yeah and the hype cycle and we saw a lot of this as well like what is the value of the token I think 95% of tokens that are on-point market cap like you don't have like there's no working model that is beyond like there's a limited supply and it's listed somewhere okay we went through a lot of this I'm not going to delve into depth again maybe some of the important things to differentiate with token models I think there's both for-profit and non-profit accepted models something that Andrew mentioned earlier I think we need to strongly differentiate in token models or in token sales of tokenized business models between an application layer token and a protocol layer token Andrew I think that's fair one thing to go back to the Ethereum crowd sale that I think triggered me was that there was no investing the fatality is still running away just nine tenths of the other people that got what 15 million ether are off to raise another token or run a competing protocol etc baking that type of behavioral economic incentive makes a lot of sense I think Blockstream is an example of Bitcoin where they invest time-released points and obviously that's a little bit of a different for-profit entity but baking in typical concepts like best thing in a corporation and I think if there's a huge tragedy of the commons issue think about all the people that are working on E2.0 versus Gav or Jeff Wilkie who I think added value to E1.0 but top 300,000 ether at a penny so I think thinking about those types of tragedy of the commons issues is very important I think there I think there was a lot of like misraised funds by token sales at the application layer which fundamentally these should have been maybe like ideally like maybe even cash for positive businesses which would strap more VC funded if they had tried to get VC funded probably a lot of that space a lot of the coins that we see listed wouldn't exist in protocol layer I think is a great example just some generalizing things in in general we do a token sale to exchange for network stake or an asset so that goes into what was raised with the security area it's often in the past when the lump sum financing also comes with a lot of issues so here's $20 million how are you going to how do you disperse that out of time with that there hasn't been the same experience as with VC which is the kind of leveling up aspect kind of a more decentralized decision making about funders like Oroki said like everyone's a VC there's various business and operating models that run through that I think the key problems that a lot of companies have faced is like the legal incentives are the funders and then the token models cool maybe as a last question before we close the token topic to come back again, what do you guys feel is the role of tokens in funding decentralized open infrastructure projects are loading yeah, do we got it? this is our topic especially of utility as well in this token area like get morning to view the utility and then after one year to review the utility instead of using the utility first then raising the token yeah and I mean if you can build the utility without raising a token then you probably shouldn't integrate a token into the model later on unless it solves a fundamental problem I guess I'll chime in and say that several months ago I authored an EIP that talks about using inflation funding on the Ethereum mainnet and the current controversy is progged out I guess five months ago the controversy was block rewards funding and you know the whole problem is if you create inflation funding and that layer one of a protocol then how do you prevent capture of that inflation funding by by people who just want to be the oligarchs of the network basically with proof of work you can prove that miners are adding value to the network because there's a consensus algorithm that says that miners are adding value to the network but with software development the value proposition is inherently abstract and software developers are sometimes not great communicators and I don't even know if the project that I worked on for the last month that I'm going to launch at that point is going to have any value to the community because value propositions are subjective and so there's the room for capture of funding of open source infrastructure via inflation funding Vitalik sums up really nicely in his blog post on collusion which is on his website there is a inescapable trade off between failure to fund legitimate public goods and the enabling of plutocracy and I think that that's why block award funding on the Ethereum project mainnet that you know he's dead and maybe we'll see it on a side number or maybe an incentive test that has value or some other platform but we're not going to see it on Ethereum in terms of you know I think May we show that who's for inflation funding but in what context in the context that you just described so I mean like the picture of the horse that you had of being drawn out progressively is sort of relevant here my VIP was broken up into three sections the first is that software development is valuable the second was that current methods of funding open source infrastructure are not working and the third is we should explore block award funding and it was designed to be a gradient of fully bakedness and controversy where I don't think in this room people would how many people agree that software development is valuable to Ethereum how many people think that current mechanisms are not working how many people think that we should use inflation funding to deploy capital to ETH 2.0 clients there you go so that's the gradient right there sure that's the can of worms yeah this is like a really fun conversation having the abstract and Kevin props to just like bulldozing ahead and putting it into practice and so people like it's a can of worms we're like let's just take a look so like we looked and we found the worms we made a telegram group there's a couple hundred people in it a bunch of people came in and started being well I think the core devs should be responsible for distributing funding because we know best and then like Aragon comes in it's like well we should put the money in an Aragon now you know and then I'm like well I should clearly be in charge and you know I'm right but that's irrelevant the point is by the virtue that nobody else wants to give me the legitimacy to spend the money even if I think I'm right it's the same exact way I'm thinking about other people trying to spend the money and so it's a deadlock and it's devolved into this sort of like political power struggle and that's when I bridged with that whole thing and I was like I'm out of here I see the worms this is what people are arguing about right it's that the whole thing could lose legitimacy because people can believe that it has been captured by some special interests and that potentially is more damaging to the project than the value that the funding would provide I will say that the architecture of Mullipdale where the amount of influence that you have is only relative to the amount of tokens that you've was it like staked or I guess you're called the tribute in Mullipdale and so basically no one will ever have more influence than the value they brought to the table in the first place whereas with block rewards funding the funding is being created out of thin air by inflation and therefore you don't have that sort of mechanism I want to copy up this too we started the conversation with the goal of become a noble goal it's like long term how are we going to sustain this forever right like in five years how are we going to fund debt it runs out of money whatever we still want to keep doing this so that part I'm still in favor of I believe that we should I'm optimistic that we'll come up with something and maybe be able to do it but I think that the bar is really high so earn legitimacy to be able to drive that conversation right and we're like the proposals are like let's just put it in a doubt you guys remember what happened last time and like we as a community haven't even participated in doubt so we're not used to this like we haven't learned from through experience of managing funds this way we haven't made mistakes right so my take on this was like let's run a bunch of control experiments and so I we can talk more about that later but like it's still possible for this to be involved in a direction where some doubt like structure does inflation now other people wanted to like use the money to pay for contracts immediately and the situation there was like ETH was like a hundred dollars yeah front way was like you know shaky and people were rightfully concerned but then like at ETH the immediacy of of the need was sort of faded away right and it means that like we shouldn't take an insane risk we should we should try to work up to it right and that's that's what I thought so um I think you know it's still an important thing to continue so very slowly maybe if we open the can right we'll figure it out speaking of experiments here we are experimenting with different funding levels and we will work our way out I love it I think this is the perfect segue into our next topic we talked we talked about investing maybe one last thing that we haven't talked about at like Andrew actually mentioned it at like VC token launches and just something like to quickly mention here it's a very common problem of like private capital versus public capital variations and we now see this with companies like Google we work as Andrew mentioned going public I think with there's many recent examples in crypto where a VC extremely recent funded coin tries to go public and then loses the majority of its valuation to the public market so maybe it's the last caveat here there's too many things to bring up just one is Ccash the other is green who here knows who here knows that Ccash has 20% inflation funding so they put that in at the beginning they said we're going to give the developer fund 20% of the protocol rewards to pay for the development that works when you do it at the beginning it doesn't quite work when you try to add it later as we're seeing it's kind of like a social contract in the beginning and then you leave it but once later if you try to change the contract later on then you get forced the other thing is green raised a bunch of money and it was touted by all the VCs who here knows what green is and they had no inflation funding for devs everybody who makes money off this has to mind and what happened was like the most predictable tragedy of the commons ever which is like one all the people who are operating your portfolio are VCs who are greedy and two you have no money set for devs so the devs were broke and trying to plead with the VCs to pay them to continue doing work and they just wanted to do it and I don't really know how that went I stopped following it which fundamentally doesn't make sense but that's the classic tragedy of the commons problem yet a bunch of VCs that invested it to the miners but no one's willing to continue funding the actual protocol development doesn't make any cognitive sense but like it's this yeah it's like from a single act from a single act perspective you're like well let somebody else fund it why should we fund it in the logical place you saw the creation of of these community funds like a lot of big of the bigger projects simultaneously also raised their own VC fund to support their community which now obviously operated under much less kind of narrow minded focus but before we get too deep into the bigger things I want to talk about grants so this is actually the last few commons actually a great segue from from tokens now to grants as a funding option after tokens we're going to go into the house and then kind of hide it all how's everybody doing with like should we take a pretty break or should we just keep it rolling I fear if we take a break I won't disperse too far cool that's so far grants who has received a grant who wants to maybe someone in the back here what was your experience it was nice to have support but difficult to align everyone's incentive quite difficult to prove the decentralized process that you're always delivering and it can become quite so like we got a grant for the doll so it was even a more practical process right and I think going forward there should be clearer mechanisms for the same mouse of these grants and also some accountability so using those will also help with that process because often people are saying they want to see the value of what they are paying for I find maybe just to touch on that I think almost like I've seen some grant funding processes be like more stringent much smaller amounts but much more stringency in terms of the decision making process in terms of the mouse don there is a very different accountability layer as well because there is no investment being made so it has to be a general investment does anyone else want to add something their experience yet to grow grants are like pandas they give you like okay I have a problem I don't have any economic model I want to produce value but the value isn't valued by the market give me some money and I'll do it for a while until the grant funding runs out I have to die it's a sad thing that's why I love get point grants because they're not like grants it's like a continuous funding and you can start making plans when you rely on bulk grants at the beginning it's like you have to use that money to figure out how you're going to get your next money it's almost like it's kind of wasted just on playing the grant circuit if you can actually have residual income coming in and you can count on that you can hire a developer and you know where they're getting paid every month until of course that runs out but it helps a lot this is the opportunity cost of the non-profit space in general grants are a time-consuming process you have to conform to each different grant making body and fill out their application and do the whole thing that is time spent applying for money that governments and for-profits have supplied to them in spades in capital markets or in tax pools so this is where the non-profit has a huge opportunity cost in continually trying to find these grants and donations rather than just getting to work changing the world I think as a business being dependent on grant funding on a continuous level must be extremely stressful fair like being EC funded is stressful actually probably any type of funding if you're not running a sustainable business is insanely stressful but yeah that's a story for the day yeah great thanks so much for that comment quickly going into like a recap again it's clear it's a non-profit funding model for me grants are normally in exchange for services for like a community so build something to deliver a specific service normally it's payment on delivery it's like very milestone based payments not on full delivery but it's like you do the one thing you got to pay them to do the other thing in general fund open infrastructure community initiatives it's generally very small amounts compared to BC and tokens and I think maybe that's where the whole model again of like how can we fund this open source infrastructure falls short for pumping so much money into the one direction for for-profit models not like nearly enough into the other direction however a lot of value accrues to the protocol later here it's centralized decision making and centralized governance in many cases what it feels like even if it's a premium I've heard it can take a really long time to like to hear from the grant funding authority we go to grant once ourselves and to this date still haven't received the second payment of the grant and just being like yeah when is it coming when is it coming and just be like oh yeah it'll come out in the next batch and this is like a very without grant funding company and a foundation in these name space we still haven't gotten it and if we were relying on that as a business and I mean the grant was approved like nine months ago and then the first payment came a month after and we still didn't get the rest it's not like we're super dependent on it but like front to emails anyway I might interject that good point grants is pushing to decentralized decision making grants to an algorithm on the CLR stuff so it's not all of them are decentralized or are centralized and I'd also say the Mall of Dow has a decentralized grant decision making process so people are pushing that down here okay that's sweet as a kind of not really a grant funding model but I wanted to give another chance to talk a little bit about consensus I think consensus did so much in the ATM space early on and really invested a lot at the protocol there it's definitely been a grant funding model although they have a grant funding yeah do you want to talk a little bit about that I already kind of said it but basically we're here to traditional venture we're here's our product market here's our traction consensus had lots of different tentacles and some of them the value would accrue to the Ether token things like consensus diligence things like education and things like risk marketing for awareness and those wouldn't necessarily be something that would be venture investable so just kind of defining that but I think that consensus did usher in the economy to a certain extent I think grants are an important part of the ATM ecosystem because if you have a vested interest in something succeeding you will be willing to put up on it and help it do so like if you spend money because they want a further Ethereum same with consensus we I received a grant from the EF it was $420,000 for payment channels work playing this back there the connex team we work with them to deploy it and that's like open source infrastructure for the whole space some of that work because we're the first ones to do it and it's hard to take that kind of risk if you aren't being supported in any way whereas like they're still making a venture funded business out of that but we're able to build a better product for Ethereum because of the grants that we received I also received an Andrew Keys grant so this was I was broke in working consensus and Andrew let me crash this house for a month and send money for consensus you know people are really helpful if you're also trying to help them succeed too something that I've noticed with grants as well like personalities still matter a lot and building a good relationship with a grant funding authority it may seem like you're applying to a for example to the EF and it's a very technical thing that absolutely must be funded and someone else gets funded for you and it is still very good relationship because the space is small yeah I was super broke for example what are you on now thank you either yeah I think we can answer this question for ourselves cool let's talk about DAOs it's getting so we're kind of moving through this whole like for profit other models into like for profit models into nonprofits and now into like new nonprofit models they can be for profit too exactly they can be for profit too and we'll get into like the last section of the workshop just discussing new hybrid models so slapping a bonding curve onto DAOs see what happens but yeah let's talk about DAOs more generally initially I want to open it up to the audience again audience this workshop do you guys want to raise any specific point about it and have you received funding from a DAO I say that I'm a bad DAO actor I am part of the mall of DAO and I think and I haven't voted yet and I think that with respect to these let's say common utilities governance is not necessarily prioritized or incentivized and you know I'm a proxy vote I just kind of trust a mean kind of sort of himself and I think that it's in the issue with public utility like the DAO governance I think proxy voting I mean you just raised I know I got personally in 100 ether into the DAO and then from I see 500 ether into the DAO but then I reached for that mark because I need to focus more on this thing and talk to people about okay can you talk about like the proxy voting or talk about all this stuff so who here has heard of the mall of DAO alright cool it's this thing sure I got a grant from the F I was a little frustrated about how inefficient that process was so I decided to launch a competing grants organization or you know so the way mall of DAO works is you can put money in and you buy shares you have to be voted in by the existing members and you get voting power proportional to the amount of money that you put in and the only way that the DAO can spend money is to mint new shares and so if you want a grant from the DAO you will say I want X shares and the grant will mint those shares and that proportionally dilutes all of the existing members so that the money comes from everybody who is in right if you if the DAO has for example 1000 ether you want the 10 ether grant it will if it has like 1000 shares it will mint 10 shares then you'll get those 10 shares you can then rage quit so two other mechanisms there's a 7 day of voting period and a 7 day grace period so during the voting period everybody can vote and that vote is final and before the money is actually spent everybody who didn't vote yes has the opportunity to withdraw all of their funds basically everybody else to pay for it it makes it so that if you disagree strongly enough the way that the DAO is going to spend your money you can take your money and leave so the thing is it's not really a bad actor it's just like implicitly trusting the people who are voting to make decent decisions and if he's ever made aware of the people who are actually voting to spend the money not making decisions that he thinks are reasonable he has a week to pull out his money before that money gets spent and that's pretty powerful because it means he always has sovereignty over his funds unlike some DAOs where like if you want to take out your money you actually have to submit a proposal and get everybody else to vote to let you pull out your money so if that DAO gets captured you can potentially never get your money I don't think that was safe so so far that's like the mechanism of Molek but we launched it in February we raised right now it has about a million dollars it was about 20 of us that were crazy enough to put in 100 ether at the beginning we have no idea where this is going to go seems like a good idea let's try it and then eventually we proved that we could coordinate and fund grants for we funded ETH2 reports we funded ETH2 development we funded a mixer recently we funded a bunch of core infrastructure audits for the payment channels that connects this building and sort of the highest moment of this was when Vitalik and Joe and Contensus and the F each decided to put in 1000 ether also and really give us a lot more firepower to be able to not only engage people in the community to potentially execute grants that we wanted to see see done but also just the amplified amount of value that we have to spend and so far that's been going really well I think one of the key things that's really cool about it is just how efficient the whole process is right from the time that you submit a proposal you will get your answer in a week and you will get your money in a week after that if it passes and so there's some due diligence going back and forth negotiating process before you submit it but that whole thing, the fastest we ever ran this was like I told you we need a ETH2 test runner so that the client teams can run tests against their builds to make sure that if something changes you know they know it broke something and the next day the guy was like I'll do it we're like alright we interview him the next day after that we're like alright well he seems good and so we submitted a proposal $20,000 now we worked with him to form the proposal because it was our idea and Antoine is now the CTO of White Block he came on to help execute it was like a one month project the key thing is a one month contract where it's not even worth doing it's not even worth thinking about going to the EF for money because the amount of time and effort you have to spend just to get the proposal through is more value than the whole grant and so being able to have fast efficient grants is a nice complimentary aspect to EF grants and I think that the model has taken off also because we're seeing the same code being used for Yangdao which is like a super pack to fund Andrew Yang memes and Meta Cartel which is a bunch of application layer developers coming together in the structure and like charging out to the hard collective sort of different sort but I think that it also presents a model for the EF to credibly decentralize their funding so they get criticism because they they're like how do you guys make your decisions how do you decide where to spend your money all this stuff and it's like when you get into these gaps for like specific areas of the ecosystem then they would be engaging the other ecosystem stakeholders and being able to collaborate on making these decisions and do it in a transparent way so all of this stuff is on chain all the votes the funding so that's the model primer I think it's one of the biggest contributions in the space that I've seen in like I think the amount of one of the things that I love most about Moloch is the way that their actual contract starts it says like please steal this code which is like one of the guiding principles of open source but like since Moloch came out we've seen so many iterations of that and so quickly like the space is literally exploding with ideas and that's something that is really important at this point that we iterate and that we test quickly I think even beyond what Moloch itself is trying to achieve the code itself has taken on its own life form in things like Meta Cartel is anyone from Meta Cartel here? yeah Peter Pad which is the summer of Meta Cartel basically got rejected by Moloch tried to get a grant from Moloch or join as a member I tried to get him in and the rest of the members were like no so like he got rejected and he got pissed and he was like right I'm gonna have forked the code and so he's got the text on the background so it's really more in the application layer the UX and so Meta Cartel is basically just saying primer as Moloch but to fund the application later but that's a different story than Moloch because Moloch since it's funding 2 it's still grants given but Meta Cartel makes more sense to maybe switch to for profit and so it's going to take an ongoing discussion and it's going to probably like finalize because the first wave of grants for instance like we fund in Basin keep back which are like event ticketing NFTs or staking or any kind of thing and basically they're like starting to incorporate and so maybe we're going to do another DAO structure to kind of get maybe system investors or other people so anyways regarding business models Moloch which is still like a charity and we might switch to for profit so yeah basically it's like Moloch for the application layer Super cool and like now great to have segue into the next topic as well but like we're seeing like a lot of experimentation and people actually moving from non-profit models again into for profit models which is really cool and really good so I think I think what we'll see over the next six months and years as well is like the reinvigoration of models like what the DAO were originally trying to do and I can't wait for like a VC to actually for a real VC to come along and say well actually let's allocate capital into the sub DAO that will then invest into like these these set of projects which is going to be really exciting to see actually we're also planning to experiment with cohort based funding so kind of like going towards like a mini white combinator kind of thing coming next year awesome and some really great experiments so far with DAOs but I think we're still in the very early stages of this experimentation as you pointed out and I think centralization and decentralization is still a spectrum you could have DAO being more decentralized but I've also heard I mean say if there's something he doesn't like he'll make a couple calls and like that's not going to pass so there is some kind of centralization in DAOs depending on how they're set up with DAOs where governance is one question of how do we make decisions so that you know they're representative of the group how do we address on-chain voting issues with people who are not voting and is that really a representative decision or are these stakeholders actually checked out and not really paying attention to these voting systems also long-term sustainability and scalability mall like Medicare tell these are great examples but they're still continuously deflating the state of everyone involved so if you carry this out to its logical conclusion once malloc has spent all its money the next person to come in puts in 100 E and they suddenly have a very small proportion of governance over their money and meanwhile everyone who was in malloc before who spent all of malloc's old money now has an equal say over the new money coming in so if you take this to the long-term malloc still has a question of sustainability and scalability of funding which is I think the problem that we're here to discuss these are all valid criticisms by the way I think one thing to remember with all of these decentralized models is that humans in human nature naturally tend to flock or look for leadership and you tend to look for leaders even in decentralized systems so you can say what you want but you're kind of the leader the same way that there's a lot of things I've wanted that didn't happen also just to be clear there's a couple things where I had to bring all my shares to bear there's a lot of people who didn't want yangdao to get funding for malloc and I really wanted yangdao to get funding for malloc so I voted with every single one of my 601 shares to make sure to make sure that yangdao went through and some people were so upset about that that they almost raged with and took their money and went home but then they decided not to and that's interesting because they had that option and so you can say maybe I anticipated that it would piss people off just enough that they wouldn't leave but that's how it ended up and I think actually most of the members are in retrospect happy with that decision because the people who joined are people who, like Peter Pan who now runs Metacartel who was doing the coordination for yangdao and Ben just who is the yangdao since it uses the same code actually what we were funding was the mobile app mobile UI for mallocdown which mallocdown could eventually use also right and he's also building DAO house which now you can spin up your own mallocdown and see all the dashboard of all the mallocdowns I think that's maybe one aspect of DAO is that in this blockchain space where there's a large ethos of code as law we often forget that there's a cultural aspect to these as well and having a mean as the steward of malloc if you could call it that and I mean each DAO kind of has this leader or group of people that the community looks to to steward these DAOs in the right direction and that's not necessarily a bad thing that's a decentralization as a spectrum and we're at one point on that spectrum and hopefully we can move further towards that decentralization that there are certain puzzle pieces we need before we can continue moving down down that spectrum so also one more thing is just like I'm actually taking a step back from my sort of active participation in mallocdown in terms of just like a lot of the coordination work due diligence and stuff like that and we're excited to see how it's going to evolve as other members step up and fill the role that we were that I was doing before so I'm going to be it's not going to be just me there's a lot of people who would help make this happen you know build the sites and like talk to the teams and bring ideas to bear I think giving them more platforms is going to be important cool I want to move to the I think we've kind of discussed this again I want to move to the last topic which I think is really exciting and guys thank you all for bearing with us I hope it's been entertaining through this pretty long workshop cool the last thing to really talk about are new hybrid models that are emerging personally something that I think is really really interesting and I just want to ask into the audience is anyone will explain a little bit as well is anyone already familiar with models like the ConStack or the Ergon fundraising app or something like continuous organizations that's how it came about half of the room cool maybe to open up the question then to those people who raised their hand well why don't you explain it to the rest of us simple things yeah actually so for me when these two models really come with these two models really combined are now combining governance and our structures with fundraising and token sales I think the key difference between these two is that these are now they're looking at continuous financing mechanisms and a lot of them are looking through financing mechanisms through bonding curves which are instead of just issuing a lump sum of tokens you really issue them continuously over time according to supply and demand of the market in exchange for funding there's taxation mechanisms that we can build into the curves yeah so for me the hybrid models are kind of our continuous fundraising models for DAWs which is DAWs plus token-based financing who here doesn't know what a token bonding curve is you know what I'll do it I'll ask who knows who knows what it is I'm assuming most people know but I'll just explain for accurate it's essentially an autonomous market maker so normally the previous token launch that we seen someone makes the smart contract and issues all of the tokens at once in this case the tokens are continuously issued through kind of a market maker and what this means also it's not just a token issue but it's also an exchange and liquidity provider and this is the most stereotypical design that you see a lot of design will just pitch it to representatives where they represent a bonding curve but it's what the industry has been invested in so this is a supplied demand curve for a market economy you have the price on one side and then the supply to the bottom and then you have a curve that governs the issuance it's essentially a function a mathematical function it can be exponential, it can be sequoidal that gets encoded into the smart contract and so as more tokens are issued the price increases according to that curve if people can also burn tokens by just sending them back to the contract and then the price decreases again so essentially people are always trading along this curve doesn't mean though that the actual trading looks like that, the trading can look very much like a normal chart so remember that this is their supply and not its kind of time so it's a really interesting mechanism because it provides liquidity instantaneously and it provides really great feedback loops to whatever that token issue mechanism represents so a lot of these, let's say hybrid funding models or hybrid organizations are looking at the token model representing membership but then obviously membership could also, for example equate to returns that are generated by that continuous organization and we have Jeff here from the Comments Stack as well as GRIFF and I think the Comments Stack is one of the most exciting projects that I've seen in the space come about doing these hybrid type models and specifically interesting in the context of funding open source infrastructure Jeff, Jeff, you want to give it? Yeah, it's true so I think we've touched on these topics multiple times throughout the day and I think that we really need to close the loop from raising funds allocating those funds making decisions as a group and then measuring impact and without that full loop we have a really hard time basically governing how we're going to raise and allocate those funds so we look at Malik Dao we see this as an amazing community of people who have come together basically contributed their funds into a pool and then make decisions based on the amount contributed on how those should be spent awesome, the issues with it long term, the funds slowly deflate so you have more people joining contributing funds there's less funds to be spent over time because those funds are continually being spent when you introduce something like Bond and Curve and the basic Bond and Curve that Paul described here a lot of people have criticisms of it in that it could be considered a Ponzi scheme basically people put money in when someone else puts money in that first person can sell and make a profit so this is an issue but if we give that token multiple forms of value so in the common stack we have a token Bond and Curve model we're calling the augmented Bond and Curve and that token is not worth just a claim on the collateral pool like in Malik if you rage quit you take your portion of what's left of it out but we also give it another value in the governance of how those tokens are spent so when you go when more people buy in the price of the token goes up some people may want to sell the traditional Bond and Curve comes in but with the augmented Bond and Curve as people sell out if you're the last person holding tokens in Malik you're holding the bag basically and the augmented Bond and Curve you are holding all the governance power of that community so we have a special mechanism called the exit tribute when people exit the curve you pay a small tribute to the community which is kind of like we talked about before the opt-in agreement if you are going to join this community you understand that when you sell this token you're going to pay 5% or 10% to the community this goes into a communal funding pool and then if you help hold all those tokens you basically have governance over that funding pool so this also encourages an opposite pressure of more people to buy so you have this interplay of people wanting to sell to claim returns people wanting to buy for governance over that collateral pool of volatility on the curve and that creates continuous funding for the project through the exit tribute so this is just one type of mechanism Bond and Curve are a very new concept the solution space is very open and I think we've designed the augmented Bond and Curve for a non-profit model you could have all sorts of different mechanisms included there, you could include quadratic voting or CLR matching you could, and this is kind of the approach of the common stack modular component approach so you can have all sorts of different mechanisms that you could build into those Bond and Curves to suit that to each niche use case on top of that we are working on some novel governance processes that we see a lot of problems with on-chain governance mostly apathy or people being busy or people not following up how many dows are you a part of are you checking in with each of them do you know when each of those votes is going on the user interface isn't always great in these early experiments so we're working on a governance process called conviction voting which is less of a voting system but more of a preference broadcast you're always signaling what you want to see done in the ecosystem and that conviction grows over time so this also gives long standing minorities more weight over a last minute whale that comes in and shows how the vote should go which we also see in on-chain governance if there's a certain vote maybe in Molek maybe there's someone with a lot of tokens who doesn't want to see that go through and last minute they come in and just quash it I mean there are protections against it but we just want to see this balance of a long standing minority having some weight against a late whale coming in and saying in the small ecosystem that we're working with today we do want these safeguards, these people who know what's best for these communities but when we're looking at long-term scaling this into larger ecosystems we want to make sure that there's proper community representation in the governance so yeah so that's basically the long and the short of the common stack we're basically looking to build a library of components that can be used to build DAOs for all sorts of different use cases there is no one answer to how do we govern economies you know an economy around ETH 2.0 may be very different from an economy around trash cleanup may be very different from community economy so we have all sorts of different components that you can basically combine and create your own DAO suited for your ecosystem and one other really important part of the common stack is the simulation has anyone heard cat-cat here? show of hands quickly so this is a simulation tool that is just from just open source through the common stack a month ago and the cool thing about the common stack components is all of these will be rigorously designed from mathematical first principles so you can just take them off the shelf, combine them, plug them into the simulator and see how your token network will respond to stress test before you start coding and we can go away from this whole idea of I have an idea, I'm going to write a white paper and I now launch this economy and then we'll see what happens which could have disastrous consequences when we're talking about billion dollar public infrastructure which is really what we're building here one of your co-workers is Sarga he told me it's really fun watching you play out the explorer part of my explorer exploit algorithm because I didn't do this I didn't start malloc to save the world we just wanted to fund the two stuff that continue to fund it so we I try to practice mean driven development so with malloc we have memed the doubt we made it cool again people want to join them and we've all been able to learn from this experience and we're all sort of inspired by it and everybody who's in the doubt will be able to take that with any other doubt that they join and have that knowledge and bring it to other projects as well so it's fun to have this kind of there's like there always needs to be somebody who goes first like just try something you're not doing it for all the use cases and then other people use that as like a research project in order to learn from that and hope something that might then be able to be taken to the broader market and markets that we might not have even anticipated that being used for so excited for what you guys have coming yeah it's interesting that kind of cat cat doesn't attempt to simulate human behavior in terms of purchasing and enhance the exploration of the scenario I'm just wondering how sort of how does that work in terms of getting that input sort of based on theory or just greedy algorithm so cat cat stands for complex adaptive dynamics computer aided design so economies are complex systems when you embed humans and actually it's a cybernetic governance system and also second order cybernetic governance system where we are part of the system that we're trying to govern so it makes it a really tricky problem and I mean we definitely get a lot of skepticism when we say we're simulating economic behavior because humans are predictable that it is not a rational economic actor that we can predict behavior but when we put human behavior on a blockchain you only have a certain number of allowed actions so in Bitcoin for example very basic network in other networks there might be governance there might be voting there might be different things but still you have a very well defined set of actions and because on a blockchain economic code or the code is what you have to follow in our real economies we have gray markets we have black markets we have cash transactions this can be captured but when you put it all on a blockchain you kind of get this economic big data and you can define agents that pursue a profit extractive behavior for example and when you run Monte Carlo analyses and parameter sweeps you can get a pretty good at least envelope of behavior you can see where your system fails systemically before you start coding so it's not necessarily predictive saying someone is going to do this it's saying this is the list of allowed behaviors and if we throw in 10,000 agents with 10,000 different objectives and run Monte Carlo analyses and parameter sweeps we really use the big data crunching algorithms and say this is where the system could fail it's not saying we're going to capture everything I mean when we started simulating bridges you know someone forgot to include harmonic resonance until Tacoma Narrows and now we built that into our model so this is turning crypto economic design into an engineering discipline basically that we can continue improving that model the more we learn Thank you so much Jeff that was a great comment I think maybe the last comment for me we're at the end of the workshop we did kind of a full almost like a 360 round of going from traditional for profit models into the token ICO craze that we saw then into grant funding for public infrastructure always guiding with this question like how can we fund the comments what model is right for which business case I think if we are to ever see kind of like a revival of like very large scale open source funding like we did with the early ICOs it will probably be through models as like Graf is describing which are incredibly new thoughtful ways of really using simulation design to build these economies and using kind of I think these moniker type models are much closer in incentive design as to what you might see in like venture capital funding really like levelling up going from stage to stage to stage so I think we're making like the best of two worlds together at this stage I'm really really excited to see keep an eye out for all these initiatives good things organization to have much fundraising and comment section specifically as they are really kind of pushing the space forward and then I want to give a huge thank you to all of you for sitting in this two hour workshop and for bringing all these amazing contributions and thank you so much Graf thank you to Kevin who got last minute thank you so much for very good Master thank you to Andrew, Jeff and Amin for all of their insights thank you so much