INTERVIEW: 5.31.2018 - Epicenter with Matan Field


#1

In this interview for Epicenter, Matan talks about the differences between Backfeed and DAOstack, DAOs and the future of organizations, Genesis DAO, Alchemy, Holographic Consensus, Futarchy, Sidechains, Project Development, and more
Transcriptions provided below.


#2

I. ON BACKFEED AND DAOSTACK


Speaker Timestamp Speech
Intro: 00:00:15 This episode of Epicenter is brought to you by ShapeShift.io, the easiest, fastest, and most secure way to swap your digital assets. Don’t run the risk of leaving your funds on a centralized exchange. Visit ShapeShift.io to get started.
Sebastien C.: 00:00:31 Hi. Welcome to Epicenter, the show which talks about the technologies, projects, and startups driving decentralization and the global blockchain revolution. My name is Sebastien Couture.
Brian Fabian C.: 00:00:41 And my name is Brian Fabian Crain. We’re here today with Matan Field. He’s been on this show before. We were just checking before, and it was in January 2016. He was working on a project called Backfeed back then, so he can only speak about that a little bit, but mainly we’re going to speak today about his new project, which is a project called DAOstack, which is trying to build tools and frameworks for decentralized organizations. Thanks so much for joining us today, Matan.
Matan Field: 00:01:08 Thanks, Brian. Really a pleasure to be here again.
Brian Fabian C.: 00:01:11 Maybe we can start there. Tell us a little bit about how did you first become involved in the blockchain space, and how did that lead to initially starting Backfeed?
Matan Field: 00:01:26 Sure. Yeah, I’ve been working as a theoretical physicist as my profession. Done my bachelors in physics and mathematics, and then PhD in string theory. That was like one side of my career. Then prior to that, I was very interested in social entrepreneurship, and mostly around alternative organizations and cooperatives. I founded a food cooperative, organic food cooperative and a community garden, and such stuff.
Matan Field: 00:02:05 When I was doing my postdoctoral research at the Technion, that was I guess the end of 2013, and during that I had an idea about social ride-sharing, and I started to work on that idea with some friends to build social ride-sharing app. Via that project, we have quickly discovered the blockchain, we had a need for generating cooperation at scale, and I knew that we needed to somehow track values or value of people and to have some sort of token. I didn’t know about blockchain back then, and then someone told me “Look at Bitcoin. Look at this thing, Bitcoin, and even look at this thing, Ethereum.” That was the same months when Vitalik published his white paper. No, I think it was November of 2013.
Matan Field: 00:02:59 When we looked at that it was kind of instantly clicked, as the technology that we were looking for, and quickly the project became decentralized ride-sharing application on the blockchain. But that was on Bitcoin blockchain, I think, was one of the first applications of the Bitcoin blockchain. That accelerated very fast. I quickly quit the academy and focused full-time on that, but as time went by I was more and more interested in the core problem with our, how coordinating large number of people. On January 2015, I quit project. I quit La’Zooz, the ride-sharing project and founded my own company Backfeed to solve that problem, to be on protocols and platforms for coordination of large number of people or for downs.
Matan Field: 00:03:54 That was the goal for Backfeed, founded around January 2015. It was early days, and we still thought that ICO is too far and risky and all of that. We raise the regular legacy capital from angels and have been working for 18 months. Basically just ended our last work around the explosion of DAO that we’ll probably speak about later. At that point, we feel like we need to stop and hold for a moment and reassess where we are at and reiterate on the focus on the product.
Matan Field: 00:04:37 One of the most urgent, burning thing was that I didn’t have a technological partner. I didn’t want to continue further without finding that partner, and then I do the time to do some research, both finding that technological partner and focusing the product that we wanted to build after 18 months building several iterations, several products. Yeah. It took six months to make this focus and mostly to join forces with my main partner, Adam Levi, who was also a PhD in physic that I knew from the academy, but is also very highly talented technologist. Around January 2017, we founded DAOstack. In the beginning, we thought a lot whether to continue it as Backfeed or found a new company, but after some iterations and checking apps with external players, we realized it would not be feasible to continue under the same. It was like too long has been passed, and it would not be feasible, for example, to raise money to the old company. We started as a new entity, and we also started with a new strategy and new code base and everything, but the idea was similar to build the platform for decentralized autonomous organizations.
Brian Fabian C.: 00:05:57 Cool, fantastic. You worked on Backfeed, which is a similar problem, and then you started DAOstack. Are there some big insights or learnings that you took away from Backfeed? You said, okay, these things I’m going to have to pay special attention towards these things. I’m going to have to do differently this time?
Matan Field: 00:06:18 Absolutely. When I started Backfeed, I was more thinking along the interface, like how interface for DAO looks like. Only after a few months, I realized that the big problem is not even interface. The interface is a problem, but there is a lower problem of the protocol, like how DAO is operations theoretically. Already within Backfeed, I shifted focus on the interface to focus on the protocol.
Matan Field: 00:06:48 One of the lessons from that was that this protocol space is enormous, and contains a lot of big challenges, and more so that different use cases and different elements in the DAO landscape will require different protocols. One of the main understanding from Backfeed was that it’s not maybe right to focus and build a protocol, but rather it’s better to build a framework from which you can build any DAO protocol, and let those protocols evolve under economic evolution.
Matan Field: 00:07:25 If you want to get ready for building an infrastructure for an ecosystem, and then let that infrastructure evolve over time. That was one of the biggest shifts made from Backfeed. In DAOstack, instead of tackling a protocol or a use case, we firstly build a whole framework for governance. We’ll probably get back to that later, but we call that WordPress for DAO, a framework with which you can build any governance protocol. That was one big lesson from Backfeed. Maybe another big lesson was that Backfeed we started very theoretical, and first we want to solve everything theoretically, and then to start building things physically. Even we firstly build off-chain because the technology was not mature. We said we’ll get to be more on-chain only when the technology is mature enough.
Matan Field: 00:08:22 Further, in DAOstack I realized that we have to develop with the technology. We have to mature with the technology, so we started out code base on the blockchain from day one. It was really important, with a very specific aim to produce a very specific product and get it to marketed option. Later, we also built on top of that infrastructure. We also built applications, or right now one application for now. It was in a way like the order of thing was upside down.
Sebastien C.: 00:08:56 I’m interested in this approach that you’ve described to building this product. You mentioned that when you were building Backfeed that you were building specific use cases and that you shifted in DAOstack to building a more generic platform. Is that correct?
Matan Field: 00:09:16 Correct. That’s exactly correct. Eventually we go back to use cases, but we had to take one step backwards to build a more robust framework, both in order to be able to produce a vast number of products and also to enable others to build product, but also from understanding that those products will have to evolve rapidly. You need to be ready with an infrastructure that can allow you to evolve rapidly.
Sebastien C.: 00:09:47 How much of the work that you’d done on Backfeed has now been ported over into DAOstack?
Matan Field: 00:09:56 In terms of products, not necessarily applications. Like any product, the code base, protocols, or anything you can name as products, almost zero. We completely started from scratch. Code base, protocol, everything, we started from scratch, but of course I would say we started from scratch in the right place because of the lessons learned before. How you measure that in percentage, that’s for you to decide.

#3

II. ON DAOS & THE FUTURE OF ORGANIZATIONS


Speaker Timestamp Speech
Brian Fabian C.: 00:10:27 Let’s speak a little bit about DAO in general. Can you first of all define what is DAO?
Matan Field: 00:10:37 Sure. It’s an overstatement. That’s a quite hard thing. Firstly, decentralized organization is something that, an organization generally is something that gets input from agents, members of the organization, and then spills out product, decisions, transactions, and so on and so forth. One first difference of DAO from regular organizations that the rules of processing inputs into outputs, those rules are coded on the blockchain. They are coded on a trustless centralized technology. That’s the first difference.
Matan Field: 00:11:16 Secondly, for instance, those rules allow for an organization to grow in scale-wide while becoming decentralized, which means that this decision making process is not held by a small number of people, agent, members in the organization. That’s another criteria if you want of this organization.
Matan Field: 00:11:43 Now, you can also ask how they look like, not like the finish of it, but what is the flavor of DAO. I would say the characteristic or flavor of DAO is that since decision making is pretty distributed, one outcome is that these organizations are much more scalable. Much more scalable and at the same time remaining much more agile.
Matan Field: 00:12:12 There is actually a very well defined way to practice that. Every organization on the planet has a common factor, which is that they become less effective per person as they grow up, as they scale up. I imagine that DAO’s is something on the contrary, more similar to the way that network effects and free markets and internet work, is that these are structures that make decisions and make products and coordinate, but at the same time become more effective when they scale up. It’s kind of the opposite of the way that regular organizations behave when you grow them up. There is also the prediction that once you created that creature, it will basically grow up exponentially, explode in its domain.
Sebastien C.: 00:13:07 Can you perhaps give some examples of what are some decentralized organizations that exist today, or that have existed in the past that not necessarily in the blockchain space or that use blockchain technology, but just generally speaking what are some good examples of decentralized autonomous organizations that don’t function with the central governing structure?
Matan Field: 00:13:34 Firstly, there is no full-blown DAO does not exist. I’m claiming there is a need for that, and I think we’ll explode once it exists, but it doesn’t exist yet. However, we have many examples of things that are almost DAOs, or seem to be close, or reminding us, or hinting us how DAO will look like. Blockchain cells is in a way an organization. It’s a coordination of a large number of people producing something.
Matan Field: 00:14:10 The difference though is that it’s producing very specific thing. I cannot do anything else. The Ethereum project, not the blockchain itself, but actually the network around the project, including the developer community and all that is getting closer to something that looks like DAO but not yet. You can also look at examples, which are decentralized structure, but again, they don’t have a decision making capacity, such as the internet itself or BitTorrent or open source organizations, et cetera, but they don’t have a decision making capacity that we’re speaking about.
Matan Field: 00:14:48 Maybe the closest thing that I’m aware of right now is something like I’ve met the CEO of rLoop. I think it’s one of the most exciting projects that I’ve met. It was the team that was winning the Elon Musk competition about generating Hyperloop technology, and while the other competing team did not win the contest raised $200 million and $300 million, the winning team was building a working technology with half the speed and fifth the scale with a budget of $200,000, and 1,300 distributed engineers over 60 countries, all of which hold day jobs.
Matan Field: 00:15:33 That’s like the closest thing that I have heard of decentralized organizations, but the decision making capacity was there in terms of budgeting and all that was still fairly centralized I guess, and also was very much based on good faith, like volunteering. But if you want to reproduce these kinds of behaviors on different causes, not based on volunteering, and on a more general domains at a larger scale, you definitely need to have a systematic decision making engine that can scale up in that.
Brian Fabian C.: 00:16:14 When you think about DAO, is this something that you see as just the next form of organization? Maybe have different forms of organizations in the past. Now there’s going to be DAO, which is basically structured organizations where you have explicit processes for making this decisions, that kind of scale. You have to use network effect. Do you think that down the line most companies will be DAO, maybe countries or like large social organizations, or local organizations, and maybe nonprofit communities? Will they all start to resemble DAO? Or is DAO more of a solution to a specific problem, which applies to maybe small number of use cases?
Matan Field: 00:17:04 That’s a really good question. I think the answer is yes, or let me make it more specific. The advantage of the DAO is at large scale. If you operate an organization of 30, not necessarily decentralization is superior to centralized organization. But if you’re operating an organization of 100,000 people, then yes, I think the decentralized organization is vastly more effective than centralized organizations, and thus just like the way that internet … So internet replaced like global-wide distribution efforts completely, but then you still have distribution networks locally and inside the internet.
Matan Field: 00:17:44 In the same way that large organizations will be completely decentralized in the future, but you’ll still have companies operating in that global centralized network, but still at scale, I think the DAOs will be orders of magnitude more effective than regular organizations. Thus, just evolutionarily I think every organization will either need to decentralize itself or basically be out-competed vastly.
Brian Fabian C.: 00:18:14 Does that mean, I guess the implications of this would also be you see in the future the demise of the organizations that we know today? Whether that will be something like the US government or Apple or maybe even United Nations? All of those very large complex centralized organizations, you think those will essentially be out-competed and just not be able to adapt and respond as fast a DAO-run organizations?
Matan Field: 00:18:50 I think it’s a process. It’s going to be a long process. There are domains where DAOs are like it’s harder to decentralize them. For example, anything that its core activity is essentially physical and geographically local is a bit less fit the model I’m describing. Just because of that, naturally I think states will be much harder to decentralize.
Matan Field: 00:19:22 Also, I think that the main assets that an organization is managing are physical assets. Also, the ownership structure is like … For example, factories. Factories are maybe last to be decentralized. You need to decentralize the technology of manufacturing in order to decentralize that. I mean you can decentralize the ownership of the factories already today, but to decentralize the actual production, we require for example to be based on three buildings, et cetera, or microfactories.
Matan Field: 00:19:56 Yeah, I think it’s not like black and white. It’s not that Google will disappear tomorrow, but definitely what will happen is that those organizations will also gradually move towards greater degree of decentralization.
Brian Fabian C.: 00:20:15 What do you think is the positive outcome if this really happens like that? Are we going to have these super well working large number of decentralized organizations at scale? What will the world look like?
Matan Field: 00:20:29 That’s a really good question because it also communicates with the question of good and bad. One way to look at things is simply about efficiency. A lot of things will become more efficient. The market will become more efficient, opportunities, et cetera. That’s just one aspect, and I think not the most interesting one.
Matan Field: 00:20:50 The more interesting aspect, and I think so more so every day, if you look almost any place you look in the world the systems, when you look at the systems, how things work, what motivates agents in the system and how they behave, you feel like everything is broken. Literally everything is broken. When you look inside, you understand why it is broken. It’s broken for a reason. It is broken for the good reason, or not good reason, for the real reason that there is no good alignment of incentives.
Matan Field: 00:21:27 I just spoke about it today with a friend. Just take any topic on your mind. Take the topic of my garage. My garage owner doesn’t have the incentive to actually repair my car. He actually has the incentive for my car to be as broken as it can, or the health system doesn’t have an incentive for us to be healthy. It actually has incentive to keep us sick.
Matan Field: 00:21:52 That’s built into the economies, and then it derives the rest. Part of that problem of incentives is the ability to capture the power. The power is constantly concentrates in the hands of few, and then the interests are aligned around the interests of those individuals or centers, not necessarily individuals.
Matan Field: 00:22:16 One, I think, big shift would be that power would much more distributed on one hand. Number two is that crypto economics models will design a much more greater eye of interests. In general, I think the global neo network economy will be not only much more efficient, but also much more … I’m trying to be careful here, not to say fair, because I have in my mind the word fair, but I think it’s not just about fairness. It’s about more resiliency and sustainability and harvesting more of the power of more people because they are more involved and in greater alignment.
Matan Field: 00:22:57 Eventually, I don’t want to advocate for that, but I also think that’s the only way to actually resolve the weaker problem such as climate and other problems we’re facing. That’s actually the only way to resolve that. I think without that, trying to resolve climate while there are major gigantic corporations that have incentives to actually make our situation worse is just like fighting, Don Quixote and the windmills.

#4

III. ON BUILDING ON TOP OF THE STACK


Spearker Timestamp Speech
Sebastien C.: 00:23:30 In the white paper, it says that DAOstack is WordPress for DAO and that one will be able to create a DAO just as easily as one can create a blog on WordPress. Can you explain what this means and what this will look like for the end users, so whether these are developers or entrepreneurs or actual users of the DAOs that would be built on this platform?
Matan Field: 00:23:57 Absolutely. When you say a DAO, you can look at it from several different levels. Let’s see at the first level. The first level is the level of the game. When you say DAO, you say there is a game. There are certain rules. People can play. People can input whatever they want into those rules, and things happen. That’s the game.
Matan Field: 00:24:20 Now, of course the rules is that is one layer. By the way, there’s a layer below the rules, which is the blockchain of course. This is the layer that facilitates those rules. There’s the blockchain, and there’s the layer of rules, and then you also have higher layers such as interfaces, the way that people actually interact.
Matan Field: 00:24:38 If you zoom in for a moment at the layer of rules, when I say you can establish a DAO and operate a DAO easily, like you would build a blog in WordPress, the meaning is that you already have that. You have a framework of rules. It’s a framework of rules for coordination of people that you don’t need, if now I want to establish a new DAO with its own rules, with its own governance protocol, I don’t need to code that from scratch. Rather, I have many modules of rules for coordinating people, and I can build a few modules one to the other like plug-and-play, combine them, and boom. I have a decentralized organization. I want to have a site of different rules, great. I can pick up a different module, plug it in, maybe configure some parameters, and I have another organization, and so on and so forth. I don’t need to code the rules each time in the beginning, but that’s also why it’s very easy to upgrade the rules and evolve over time. That’s at the rules level.
Matan Field: 00:25:50 At the same thing, you can imagine the interface level, but our focus right now is on that level to enable other and also ourselves, but mostly enable other to build their own interfaces. Then we can think about the same ideology at the interface level. You have certain components you can put inside and build an interface for a DAO.
Sebastien C.: 00:26:12 **As a user, if I’m building a DAO in DAOstack, I would have access to interfaces through which I could very easily as you mentioned plug and play, build this DAO sort of like with Lego blocks, and bringing all the different rules and components and governance structures and schemas that I need for an organization. I think maybe where the challenge is, and where I’d like you to address how DAOstack would address this, is as a user building a DAO perhaps I need some guidance as to what types of blocks, which plugins do I need basically that are better suited or better adapted to the type of organization that I’m building? **
Sebastien C.: 00:27:04 Let me maybe give you an analogy. If I’m building a company that’s meant to scale to many employees, hundreds of employees, spread out across the world with some venture capital from different places around the world and certain types of corporate structures, there are established ways that you can start a company for that. If I’m starting a small business that’s only going to operate in one country, while perhaps there’s a certain type of legal structure that I need. If I’m building a DAO, well maybe I want to have a Swiss foundation and a company in Delaware. Similarly, for any type of decentralize organization, one can presume that there will be certain structures that would be adapted to certain organizations. How will DAOstack or how would a user be educated and gain the knowledge necessary to build the right type of DAO for his organization?
Matan Field: 00:28:04 Great questions. The whole idea of the stack is to provide different solutions at different levels of different level of users. For example, if you start from top-down, if you start with the average user, then instead of working with module and plugging them in, you’ll have completed templates. You’ll have one, two, three, four templates with names for different use cases under different conditions, and then you can just click a button. That’s it. You have a template; you just need to feed in the parameters. For example, the founders of the DAO. The voting power that each of them hold, or something like that. Token distribution, et cetera. You’ll have completed templates.
Matan Field: 00:28:47 Then for a slightly more advanced user that want to play themselves and like to experiment with different governance protocol, you’d have modules. They can play with modules they can combine and get a DAO. For slightly more advanced users like developers, you have the library of modules, but then it’s an open source library, and then any developer can come up and add yet another module, a new rule, that you can play with, and so on and so forth. Yeah, we have solutions at different levels for different audiences, for the advanced users or for the early users.
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#5

IV. ON THE DIFFERENT LAYERS OF THE STACK & UNDERLYING BLOCKCHAIN


Speaker Timestamp Speech
Sebastien C.: 00:30:25 Can you walk us through the different layers of the platform? The different layers of the stack and role of each layer?
Matan Field: 00:30:33 As I mentioned, there is of course the blockchain. Then above the blockchain there is the rules for governance of an organization.
Brian Fabian C.: 00:30:40 Maybe just a question on that, so blockchain, does this mean Ethereum? Or like a new blockchain, or will DAOstack be able to operate on many different blockchains? How is that going to work?
Matan Field: 00:30:55 Good point. Right now, we are all coded on the Ethereum blockchain. Thank you for that over Solidy. In the future, there is no reason why not to be interoperable over several blockchains, but right now, the only blockchain that makes sense for that is Ethereum, so that’s the current situation for the foreseeable future.
Matan Field: 00:31:18 We have the blockchain there. We can also have a centralized database there such as IDFS. We actually, our earliest version was coded on IDFS as well, but right now we are still database-wise, we’re using centralized servers.
Matan Field: 00:31:31 Then we have the rules of it. We call it Arc. Arc is a framework for governance which is to basically architecture different governance protocols, basically any governance protocol. Like somewhat analogous the way you’d say, with Ethereum I can program any smart contract. Then we Arc, it’s a higher level framework or facility with which you can program any governance protocol. This is the next layer basically. Yeah?
Brian Fabian C.: 00:32:09 Question on that. If you say any governance protocol, do you mean like, let’s say, different types of voting systems? Or maybe something else where you have some kind of …
Matan Field: 00:32:19 Right, so what I mean by any governance protocol? I would say that any governance protocol, as I mentioned, governance protocol is simply that logic that collects input of agents and translates that into decision outputs. Whether the decisions are transaction of funds, budget, or whether decisions are registering results on databases or yet operating yet another function.
Matan Field: 00:32:42 Generally, this engine of collecting inputs and making decisions and that’s what we call governance, you can break it into two categories of rules, two kinds of rules, the dos and the don’ts. The dos mean that if certain things happen, then we do such-and-such. On example for that is voting systems. If someone makes proposals, and then certain number of people say yes, then under some condition, let’s execute that proposal. This is a voting system, voting logic, and that’s a dos kind of rule.
Matan Field: 00:33:19 Another kind of dos can be a token set. If someone is sending such-and-such Ether with that contract, under some conditions, the contract will automatically print new tokens saying that. That’s also kind of dos.
Matan Field: 00:33:33 Then the other family is the don’ts, which means let’s, for example, crystallize the organization with the statement no matter what will ever happen, the organization will not print more than 100 tokens. That’s a don’t. No matter what, this organization that manages $1 million will not spend more than $50,000 a month as a burn rate. That’s another don’t.
Matan Field: 00:33:54 The architecture is as flexible as it can get, so you can actually combine the dos and don’ts. For example, no matter what, you will not burn more than $50,000 a month, but scheme number six that can approve in the voting with majority of 70% of reputation can change myself, can change the don’t. You can combine those things, and basically create any sort of logic for those rules, or if you wish any governance system. That’s the layer for rules. It’s called Arc.
Matan Field: 00:34:31 Then we realize that if we want to be in an ecosystem, if we want to DAO to allow for thousands of front end developers to work with this engine and to build collaborative decentralize applications, we need to make it much more accessible. Then we’ve built Arc.js, which is a JavaScript library over Web3 that allows you to basically operate Arc, build organizations, configure them, operate them, vote, anything, directly with commands over JavaScript.
Matan Field: 00:35:05 There are some other layers that are maybe secondary in importance, and then of course at the end you have the layer of the applications. Many different applications that’s due to the fact that are all riding over the same open protocol that are interoperable. Different DAOs can use different interfaces.

#6

V. ON GENESIS DAO & ALCHEMY


Speaker Timestamp Speech
Brian Fabian C.: 00:35:26 Do you mind speaking a little bit about the Genesis DAO. What is the role of the Genesis DAO in this ecosystem of different tools?
Matan Field: 00:35:35 The idea was we will have to experiment. We have to eat our own dog food. While we have a company that works on further building effectively right now the DAOstack platform, we want to have also a parallel experience, a parallel decentralize experiment, that aims at the same goal, same mission. The Genesis DAO, maybe it’s here a moment to mention we’ve done a token sale initially privately, and eventually some of it was publicly, and we’ve raised back then at day it was $30 million. The idea is that majority of that fund in addition to majority of token distribution will be managed by that decentralized fund.
Matan Field: 00:36:35 Genesis is that decentralized fund that operates on top of DAOstack. Majority of that capital in that empowers and engines, if you want, the growth, establishment of the growth, of the DAOstack ecosystem. Rewarding and investing and supporting projects that support the DAOstack ecosystem in one of three ways, either projects that build infrastructure components of the stack, more tools, more plugins, more models, more governance modules. Or projects that are building more interfaces of the stack, more applications.
Matan Field: 00:37:18 We built the first application, the native application, Alchemy, and now there is a bunch of other applications integrated with the stack, so companies are building interfaces and application integrated with the stack. Finally, projects that are themselves DAOs that are using the stack in order to yet do something else, maybe build something else, or organize or manage collectively managed assets or collectively curate databases or whatever. That’s the idea of the Genesis DAO.
Sebastien C.: 00:37:49 This first application that you’ve built, this Alchemy application, what does it do precisely?
Matan Field: 00:37:55 Right, so Alchemy, initially we wanted to build the first interfaces for DAOs. How do you make a large number of people organize and build something together? But then we decided to focus, to make it slightly more focused and answer a real need that people have right now. It’s a decentralize budgeting and rewarding system, which answer the following pain.
Matan Field: 00:38:18 Today, you have in the blockchain space many examples of projects that have very large capital. For example, the flagship example, would be the Ethereum project itself. The Ethereum project, let’s say managed, just throw in any number, managed a $1 billion in capital. One billion in roughly infinity. It’s much more that you can spend in a short timeframe, so it has infinite capital. Okay, so there is no limiting factor in terms of capital.
Matan Field: 00:38:53 Now it also has thousands of developers, tens or hundreds of thousands of developers to do work on the ecosystem, so there’s also no shortage of human capital. What is the limiting factor? What is the actual limiting factor right now for solutions, for producing solutions? Like why haven’t we solved yet the scalability problem? Do the Ethereum Foundation lack capital? The answer is no. Do the Ethereum Foundation lacks developers in the broader ecosystem, the answer is no.
Matan Field: 00:39:22 The actual answer is the decision making capacity to wisely deploy capital and human capital and produce solutions. That’s exactly the role for Alchemy. Decentralizing that function, the decision making function. People can get into the system. They can make any proposal to use that fund, and people can vote on that proposal and produce decisions in large numbers and effective in capacity and efficacy.
Brian Fabian C.: 00:39:52 Yeah, I’m super excited about that because this is one of the things that concerns me a little bit is that all of these projects have started, and they raised money in maybe into foundation, and now they meant to launch these decentralize networks, but they’re actually operated or controlled in a very centralized way. Now, I think that is not the fault of these people, it’s not the fault of these projects, it’s just that the tools aren’t there yet to build in a decentralized way from the ground up. I’m unsure how well it will actually work to over time transition to a more decentralize organization, or whether this will not be fatal for many projects. That they will never be able to decentralize anymore. I think when projects from the very start deploy funds and manage and grow in this collaborative decentralize way, I think that will be extremely powerful.
Matan Field: 00:40:52 Yeah, I agree with you, but I have to admit that it’s quite surprising by the big projects how seriously they are desiring to decentralize themselves. Most are willing to do real live experiments with real funds to shake that up. I think a lot of the biggest projects in the space right now sincerely look for DAO solutions to manage their hundreds of millions of dollars and just are waiting to see that technology come up. One the technology is ready, and it’s almost ready. We are launching the pilot these days, and then actually experiment with project, such as Gnosis for example.
Matan Field: 00:41:32 I think then we can explore, maybe not with a hundred million dollars, but maybe with $100,000 first, and a million dollars then, but once we can show that we have a technology for producing a large number of decisions effectively by the professional crowd, and then we produce much faster growth in innovation. I think once projects will see that, you will see massive adoption.

#7

VI. ON HOLOGRAPHY CONSENSUS & FUTARCHY


Speaker Timestamp Speech
Sebastien C.: 00:41:59 Let’s talk about consensus. The white paper states that DAOstack uses a consensus model called holographic consensus. Can you describe this consensus model and how it’s different from the ones that we know like proof of stake or proof of work?
Matan Field: 00:42:17 Right. Firstly, just a word on proof of stake. It’s a different kind of consensus, so basically there are two families of consensus. Actually, we can discuss more than two, but let’s focus on two. You have consensus about I call them objective realities. Blockchain is a consensus engine about objective reality.
Matan Field: 00:42:40 Objective realities are realities that a computer can decide, say yes or no. For example, whether the block is legitimate is an objective reality. Program can read that and say yes or no. Objective consensus are falling under the title blockchain. That’s what a blockchain is. It’s a decentralize consensus engine for objective realities. Then you have proof of work, of stake, and so on and so forth.
Matan Field: 00:43:11 Now, the interest stuff, or the next interesting stuff is about reaching consensus about subjective realities. For example, whether this claim insurance should be handled or not, whether that article is good or bad, whether we want to approve budgeting with $10,000 this or that task. This subjective because a program cannot read that and say yes or no because by definition the decision is subjective. It’s not objective.
Matan Field: 00:43:39 The first step was to build consensus engines for subjective realities, and that’s what falls under the title decentralize governance. What is the problem with decentralize governance, and it’s actually the exact logic problem to consensus of objective realities. It’s the same problem, which is the scalability problem. Just as we have scalability problem with blockchains, you have scalability problem of decentralized governance systems.
Matan Field: 00:44:06 What is the scalability problem? It’s very easy to understand. Let’s make it easy. You have one million voters, one million agents in an organization, and let’s say that they are equal voters. Each of them has equal weight, voting one. Naively if want to be resilient, if you want to make sure that the system is not manipulated by a small group of people, that the system is well represented by the majority, the decisions that are made are in line with the majority, you would need to require that each and every decision is approved by a majority of the organization. That of course doesn’t completely make sense. You wouldn’t be able to produce a single decision and definitely not many decisions a day and many decision a month.
Matan Field: 00:44:58 You see there is a strong tension with scalability that will be able or produce decisions effectively and resilience, the incorruptibility or non-manipulability of those decisions by small minorities, and even more so having those decisions be representing really the mind, this hive mind of the DAO. To solve that problem, I think that’s was the biggest problem of DAO’s up until today.
Matan Field: 00:45:29 To solve that problem, we’ve designed holographic consensus. There are some other solutions. On of the hottest, I think, of them is TCRs, token curated registries, but then we can also dig in to why I think those pure economic governance models will not work well. The root of holographic consensus is basically combining two different system inside the governance system. Once system is the reputation system. Votes are weighted. Agents votes are weighted by their reputation. These systems are highly resilient and not very well manipulated, but they have problem of scalability.
Matan Field: 00:46:15 On the other hand, markets, like prediction markets for example. They’re highly scalable, but their problem is they’re highly manipulatable. We combine those two systems together. You have a prediction market and reputation system, and together you can show that you can generate both scalable and resilient interaction at the same time. You’re basically translating the tension between scalability and resilience into an economic problem that you can always grow if you are willing to pay more costs.
Matan Field: 00:46:47 Basically, the prediction engine, so the people who are placing the prediction, they’re not answering like a futarchy for example, they are not answering what is right answer, like they want to be the result. They’re actually placing predictions about what they think that the reputation system will decide. That’s the core essence of holographic consensus.
Matan Field: 00:47:09 In essence, maybe to say what it allows you, it allows you to make fast decisions by small minorities, but at the same time ensure that those decisions will be in line with the greater majority, with the DAO majority. The way that it ensures that is that you’re basically creating a crypto-economic incentive to identify possible mismatches. Anyone that can identify a mismatch between a process that seems to go that way, and what people think that the DAO will vote will be that way, anyone that can identify that mismatch can make profits by predicting that mismatch.
Sebastien C.: 00:47:47 This is actually quite interesting. Could you elaborate a bit more, maybe walk us through how decisions are made with holographic consensus? Like give us a concrete example of how you marry this reputation system and this prediction market, and who are the actors basically taking part in this consensus?
Matan Field: 00:48:06 Right. Let me give you a concrete example. By the way, I also need to say that this holographic consensus is really a concept just as much as blockchain is a concept, and off-chain computation is a concept. Actually, there is a close analogy in the off-chain computation and holographic consensus. I’m saying that to explain that once you understand the concept, you can have many different protocols that falls under that type. It’s not a protocol; it’s a concept.
Matan Field: 00:48:36 Nevertheless, let’s go through with an example. Let’s focus on the simplistic version, which you have a DAO that makes a yes/no decision. Anyone can throw on this DAO a proposal. I propose to do such-and-such. You propose to do such-and-such. The DAO, the collective mind, just saying, “Yes. Yes. No. No. Yes. No. Yes.” Anyone can open a proposal. Then there is the reputation system that weight the voting power of agents. Now, when a proposal is being opened, is it opened into a queue. Just a list of proposals. Now, by default if a proposal is on the list, in the queue, if you want to execute that proposal you need to have absolutely majority of reputation holders supporting it. Actually 50% of the entire reputation of the DAO needs to say yes in order to execute the proposal. This is completely resilient, very coherent, and unmanipulable. The probably of course is that it’s not scalable.
Matan Field: 00:49:44 The next step is that you would like to allow to boost, to accelerate the process of decision making under some conditions. What I mean by that is that you would like to allow decisions to be open for finite time of voting, so let’s say I want to boost the decision, which means that I open that decision for one week. Then whoever votes on that decision within one week makes the decision. If the majority of those voters says yes, it’s being executed. The majority says no, it’s not, it’s rejected.
Matan Field: 00:50:19 That’s of course very scalable. You can process any number of decisions you want, but of course then again it’s not resilient because now I can attack the system by opening millions of boosted proposals, and then most of them would remain unnoticed because the collected attention would be completely diluted. How do you fix it?
Matan Field: 00:50:40 Now there is this second system come in play. While those decisions are in queue, there is a second thing that you can do with that is to make predictions about the fate of those decisions. I’m proposing a decision to budget my task of producing the next feature. I need $20,000, and I’m proposing to allocate to me $20,000.
Matan Field: 00:51:03 Now you’re coming and looking at that decision, and you have familiarity with that DAO. You’re basically making the prediction. You’re saying, okay, I know that these guys have a reputation. I know these proposals make sense, so I know that the way that the people here think. I know some of the reputation holders. I predict that this decision is going to pass, and I’m also willing to stake some tokens over that decision. I’m willing to stake $1,000 that this decision will pass in the DAO if enough people look at it.
Matan Field: 00:51:35 Now, basically when you do that you are putting your capital at stake. If eventually you’ll be right, you’ll gain more capital, more tokens, and then if you will be wrong, you will lose your stake. Now, the way that these prediction engines connects with the voting system is that the only condition, the only way a proposal can be boosted is if enough predictors are predicting that it’s going to pass. That’s the first instance, without too much challenge. Without too much of others predicting that it’s not going to pass. The relative people that think the it will pass with respect to those who think it’s not going to pass is crossing some threshold.
Matan Field: 00:52:32 Then once it did cross some threshold, then the proposal is being boosted, and then people are voting on it, and still people can always predict against the status. If the status of decision seems to be passing, you can bet against it by predicting it’s not going to pass. If it seems it’s not going to pass, you can bet against it by predicting it is going to pass. Then those who placed the prediction, they also have incentives to hold the process and make sure that those who needs to vote in order to reflect the truth that they think exists to make sure and call them out and remind them that they need to vote because it seems that the reality right now is correct.
Matan Field: 00:53:17 Then of course, the voters place the votes, requiring the subjective majority, and if it’s being approved, the thing is executed and rejected otherwise. Now, we can get into details and the game theory and show actually this system. Also, I skipped a few parameters and so on, but you can see that this system is fully resilient to manipulation, and you can also see that you can process more and more decisions, in fact, indefinitely providing some cost. The cost comes in the fact that the DAO itself needs to put a bounty that is basically distributed to success of predictors for successful proposals. You’re essentially translating the tension between scalability and resilience the cost of the DAO management cost, if you wish.
Brian Fabian C.: 00:54:09 Yeah, this is great. We did a podcast before on Futarchy. I think we did multiple before with Ralph Merkle and Robin Hanson as well. It’s a really cool concept, but it seems hard to make work and maybe not so realistic in the short- to medium- term, but this, to use prediction markets to manage the priorities and manage the scale at which a DAO can process proposals and decisions, I think, is really great and very eloquent and seems quite simple. Yeah, that’s great. I would be very interesting to see this in life with an actual DAO.
Matan Field: 00:54:58 Cool.

#8

VII. ON CIRCULAR TOKEN ECONOMIES & GEN


Speaker Timestamp Speech
Brian Fabian C.: 00:55:01 Let’s move to another topic, which is a little bit about these economies and economics of this. One thing that is written about in the white paper is that the DAOstack is based on this concept of circular token economies. Can you describe what that is?
Matan Field: 00:55:20 Sure. It’s actually not that fancy of a concept. It’s quite trivial and you all know it. We just added there for readers that are not familiar with options space very well, but basically it’s just the regular adapt economy, where you have a token economy where on one hand you’re printing and distributing tokens to contributors of value. For example, in the blockchain, it will be miners, but now since you have a general purpose decision making engine, you can distribute those tokens to any contributor of value.
Matan Field: 00:55:57 Right now in the Bitcoin, if someone is writing a code and place a pull request, it says for pull requests, he will compensated by coin-based Bitcoin, additional Bitcoin. You can actually make a DAO that print new tokens for any sort of contribution of value just to agree about what is value and what is not.
Matan Field: 00:56:18 On one hand, tokens are being produced to contributors of value, and then on the other side of that loop, tokens need to be consumed to consume the value that is being created. For example, if it’s blockchain and the value that is created is the blockchain itself. Then if you want to use the blockchain, you need to spend the same tokens that were distribution to miners. Then you need spend them in order to use the network effect that is created by the miners, which is blockchain.
Matan Field: 00:56:47 That same circular economy, it’s critical to have that circular economy in order to build a network effect correctly, and I think that every DAO economy should have that circular economy in place. If it doesn’t, it has a broken model. Yeah, now we may ask what is the circular economy of DAOstack? Is it correct?
Brian Fabian C.: 00:57:10 Yeah, let’s speak about that. The Gen token and how that works in this circular economy?
Matan Field: 00:57:20 I think that’s really interesting, and to be honest it took us a lot of time to crystallize that model, and I think it’s quite hard to build a really robust model. The idea is that identifying what is valuable right now? In our ecosystem, in the DAO ecosystem, the claim is that the hardest thing is coordination at scale. That is the thing. Of course, you need contracts and all that, but if it’s not enough.
Matan Field: 00:57:53 Then I told you that there is a core problem to generation coordination at scale. The core problem is that there is a tension between scale and resilience. I’m arguing it’s a universal problem. It’s not problem. It’s any product will try to tackle that front will enter the same problem.
Matan Field: 00:58:12 Then I also told you that I think there is kind of a universal solution to a universal problem. This universal solution is not a protocol. It’s a concept. As much as I would say there is a scale problem for blockchain, and there is a universal solution that we call today off-chain computation. It’s a universal solution. It’s not totally universal as an on-chain solution. There’s an on-chain solution, but it’s kind of like almost universal.
Matan Field: 00:58:35 In the same way, I’m arguing that there’s a universal concept of holographic consensus, which allows you to make decisions in small numbers, but then maintain resilience or make sure that those decisions are in line with majority by creating economically incentivizing identifying the mismatch. That’s holographic consensus.
Matan Field: 00:58:56 I also told you that this holographic consensus requires you have certain prediction games. The prediction game of the entire system is done with a Gen token. While you can have many different applications on top of the stack, on top of Arc, and you can have many different DAOs using those many different applications, all of the prediction games that is critical to facilitate, to enable large-scale decision making processes is being done with the Gen token. Somewhat analogous, but in a very different way, to the Ethereum being the gas for consensus over the chain. Here, Gen is the gas for large-scale decision making, or it’s basically it’s the staking token for the prediction game over the DAO ecosystem.

#9

VIII. ON SIDE CHAINS


Speaker Timestamp Speech
Brian Fabian C.: 00:59:40 If you’re going to have these different DAOs on, let’s say, Ethereum. Let’s say you have different Plasma chains or different maybe on Cosmos differ the Ether main chains that run some of these different DAOs because of scalability. It probably won’t all run on the Ethereum main chain. How could you still use the Gen token across all of these different? How would that work?
Matan Field: 01:00:08 That’s not critical. Firstly, you can still have the prediction game on the main chain, but I think you need to because you can have many different subtokens on the subchains. When you work on a subchain, it doesn’t mean that you cannot use Ether. You can use tokens on the subchain that reflect the Ether or reflect some other tokens. It’s not that the off-chain layers would not be interoperable with the token economics. I don’t see [crosstalk 01:00:35]
Brian Fabian C.: 01:00:35 Or could you have like one chain where it’s like a prediction market chain, and all of the predictions and economics, and all of the different DAOs, and they live on different chains, take place there?
Matan Field: 01:00:51 Yeah, sure. Fully transparent, this current version is already on the main net. This current version of the stack is full on-chain. It’s not scalable in terms of blockchain scalability. While I think you can already use it for some level of organization, maybe not millions of people, but maybe thousands of people, and maybe not daily decisions, but maybe weekly decisions. Then already the next version, we are planning to completely optionize that platform.

#10

IX. ON PROJECT DEVELOPMENT


Speaker Timestamp Speech
Sebastien C.: 01:01:22 Let’s talk perhaps a little bit about road map and where the project current stands. You mentioned earlier that you’ve done a crowd sale, and that you raised at the time around $30 million. Where are you currently at in terms of project development, and when should we expect to see the DAOstack platform launch?
Matan Field: 01:01:48 Right. We are launching the stack and Alchemy, the first application, literally these days. It’s ready for launch. We’re just postponing a bit just to reorganize after the sale. We have a lot of things to wrap up. Then right away after that, we are launching the pilot, the first pilot. June, it will be already running, the pilot of the Genesis DAO, so the first use case will actually hold the real fund in there and let a large crowd to comment on that fund around the DAOstack project. That’s the pilot of pilot.
Matan Field: 01:02:29 Then we want to have a few iterations on that pilot, and also include pilots with some other teams, such I will tell you about a few use case in particular, Gnosis, which are close partners of ours. Actually, Gnosis, we are running two experiments. One experiment is that Gnosis themselves they are launching their decentralized exchange, DutchX, and want to have that DutchX completely managed by a DAO, so that DAO will run with DAOstack platform. The second experiment is Gnosis itself. They want to rework and incentivize developers to build on top of the Gnosis platform, application on top of the Gnosis platform, using their prediction market, and then we reward them with Gnosis tokens. That reward process will also use Alchemy or at least partially use Alchemy in experiment with that.
Matan Field: 01:03:20 Two experiments with Gnosis, and one experiment in-house with the Genesis fund, firstly in alpha. Later in a public beta. Then we have a few other applications already in process of integration. The idea is that the first on Q3 will be dedicated to piloting firstly our own Genesis DAO, but then also a few other, maybe two, three, other projects. Mostly piloting, stabilizing the system in terms of operation, gas costs, scale, protocol parameters, attack vectors, and so on and so forth. Stabilizing systems.
Matan Field: 01:04:05 Then in Q4 actually launching real, full products. Again, including the Genesis fund, but much more significant amount of funds, as well as Gnosis experiments. Then few, at least one other, application is already in process. That’s in terms of like, I would say, six month timeline. I would say we’d like to have a few live experiments by the end of this year.
Matan Field: 01:04:36 In 2019, our focus will be on one hand to a widespread the usage of the system, and by that we’re not going to develop many applications ourselves. We are putting a lot of efforts and focus on building the technology in a way which is very easily usable and interoperable by others. Whether you need the whole DAO for yourself, or maybe you have your system, but you just need component, centralized component, then you can easily integrate with the stack. Yeah, the idea is to build horizontal platform and ecosystem for many different integrations.
Matan Field: 01:05:19 While one front to proceed with in 2019, next year, will be to widespread that adoption, the second will be to iterate heavily on the technology. Right now, the gas costs are still high. Everything is on-chain. We want to optimize that. Everything is on-chain. We want to off-chainize everything, or most things. Integrations with other tools such as identity, uPort kind of thing. Integration with decentralized databases, such as IDFS. Integration with external services such as Slack and Trello, and so on and so forth.
Matan Field: 01:06:03 Maybe you can actually separate them into three categories. One would be like market adoption, like massive adoption. DAOs are potentially would be the killer apps on Ethereum, so one would be massive community adoption. Another would be heavy iteration on the technology, and third would be I would say UX. Like integration with existing tools and so on an so forth.
Brian Fabian C.: 01:06:32 Cool. Thank so much, Matan. That was super interesting. I’m really excited about DAOstack, where it is, and where it’s going to go. I totally agree. I think finding new ways of collaborating, of organizing, of building structures and organizational systems is one of the most exciting applications of blockchain. I can’t wait to see how this is going to turn out in real life.
Matan Field: 01:07:00 Thanks, Brian. I’m also really looking forward to see this take shape in reality. Thanks, guys, for having me here.
Brian Fabian C.: 01:07:09 Yeah, absolutely, and of course we’re going to have links to a bunch of resources about DAOstack, so if people want to check that out, then they can check out the show notes. Otherwise, thanks so much to our listeners for once again tuning in. We’re putting out new episodes of Epicenter every week. You can subscribe to the show on iTunes, on SoundCloud, your favorite podcast applications, or you can watch the videos on YouTube.com/EpicenterBitcoin, and if you want to support the show, you can give us an iTunes review, and it helps new people to find the show. It helps us to keep this going. Thanks so much, and we look forward to being back next week.