▹ Week's Top Signal
▹ Terminal by Forefront
▹ Jack Dorsey launches Web5
▹ Vitalik latest on Blockchain
▹ Nickelodeon NFTs on Polygon
▹ Celsius Pausing Withdrawals...
▹ ... much more
Plus: Market Pill, Member Spotlight, What else is Poppin'
Let’s get into it.
DAO Legal Framework. Towards Clarity... Last week, we shared a16z’s “DAO Legal Framework,” where they developed a flowchart to help DAOs understand what legal entity might be best for them. This week, Paradigm followed up with their “DAO Entity Matrix,” an extremely useful tool to help DAOs decide on a legal entity based on their desired org chart, member permissions, and much more.
Even as DAOs become more familiar to a wider population of legal professionals, there is still immense uncertainty around how they should be handled in the eyes of the law. On one hand, true DAO maxis believe that DAOs should not have legal entities at all, as this removes their ability to be truly and fully decentralized and autonomous. Many others believe that DAOs need entities, but struggle to move further in the conversation.
This confusion is not helped by the fact that the limited DAO legislation that does exist in the US is… not great. For example, this article from The Defiant explains how legislation like the Wyoming DAO laws are very misleading, and don’t actually accomplish what would be expected based on the name.
All of this is to say, these resources from a16z, Paradigm, and others like them are extremely helpful in a time of such crazy uncertainty. As we head deeper into a bear market and as regulation looms, DAOs will need to think more carefully about what they look like in the eyes of the law, ensuring protection of both communal and individual assets.
Every DAO should be taking a look at these resources and, if you haven’t already, be constructing a gameplan (either for now or down the line) around a legal entity. Paradigm and a16z’s research and essays are a great place to start.
Web5: An Extra Decentralized Web Platform. Jack Dorsey’s Bitcoin-focused TBD, a subsidiary of Block, announced that it is building a new decentralized web: Web5. Web5 is based on the assumption that web3 has the right ideas but the wrong tools. As such, Web5 will be built on Bitcoin, with a heavy focus on identity and DIDs. Many folks in the web3 community see Dorsey’s announcement as a slap in the face, clearly mocking the work that has been done in web3 on Ethereum and other non-Bitcoin blockchains. The proposal is certainly well thought out, though. The deck breaks down the core ideas of Web5, leading up to what they call PWAs (progressive web apps). More development in the broader ecosystem is certainly a win if the goal is to bring crypto to the masses as quickly as possible.
Where to use a blockchain in non-financial applications? Yet Another Vitalik Essay™. In this piece, Vitalik explores many of the non-financial uses for the blockchain, likely in response to the loud criticism that crypto is simply a hyperfinancial technology. Taking inspiration from the Decentralized Society paper that he coauthored, Vitalik lists of a wide range of use cases. Interoperability and account management are the most promising, he says. Account management specifically is catching on, taking inspiration from the blockchain, as Apple and other companies have began to roll out passwordless technologies. He also mentions negative reputation as a promising use-case, although much more immature than others mentioned in the essay. Definitely worth the read if you’re looking to explore non-financial use-cases for the technology we’re using every day.
Governance in Review. Governance nerd? You’re going to want to read this one. Simona Pop of Gitcoin dives into her takeaways from Gitcoin DAO Season 14. She begins by asserting that the complexities of coordination are all about balance. She dives into four key areas of takeaways: Standards, Engagement, Equilibrium, and Responsibility. They are all interconnected, and not too verbose, so you’re definitely encouraged to give the post a read. Specifically, standards such as the Steward Report Cards have proven extremely helpful in Gitcoin DAO, and are already being forked by ENS and others. These standards, according to Simona, are “about creating sound habits - habits are the invisible infrastructure of daily life - that make change possible by freeing us from making a million micro decisions on minutiae.” Good read for anyone working on building governance frameworks for their DAO.
Move Fast and Experiment on Things. Samantha Marin begins this essay with the argument that “move fast and break things,” the old Facebook motto, doesn’t really work for DAO governance. Playing with governance models and organization design creates an unstable, volatile working environment, she says. This will lead to contributor churn. Instead, Samantha proposes the need for “low-stakes, small-group governance testing.” For example, if a team wants to try a new voting mechanism, they can do it within their own working group or pod, and report out the results to attempt to try it with the larger DAO (if successful). However, she warns that even this can become tiring, and that documentation and building on existing research is absolutely critical.
Web3 Network Effects: Designing for Forkability. Sangeet Paul Choudary begins this piece with a conundrum: composability and forkability are two sides of web3 strategy, but they seem directly opposed. It’s tempting for projects to design for composability over forkability, but Sangeet disagrees. Designing for forkability, he says, turns future forks into collaboration opportunities, instead of viewing them as competitive threats. He argues that the only scarce resource in web3 is developer engagement, and that web3 companies should be optimizing for attracting that engagement over protecting resources that will inevitably be proven abundant or forkable anyway. This is an incredibly interesting perspective for all web3 builders to consider.
Token Vesting and Allocations Industry Benchmarks. This analysis outlines various token vest and allocation benchmarks across the crypto industry. Some of these insights are fairly straightforward. For example, token allocations have shifted from 'Public sales' to 'Community and Ecosystem incentives.' Other insights are more interesting: projects allocate 19% of tokens to investors WHEN they raise capital from private investors, and those investor lockups are usually 2 year vs. 4 years for the core team. These analyses are not digging into what the best allocations are, simply what we see throughout the market today. However, it is definitely interesting to ensure that your project’s distribution doesn’t stray too far from the norm – at least not for good reason.
How We Can Encode Human Rights In The Blockchain. Nathan Scheider argues that blockchains can be “better than immutability machines. They can enable new strategies for establishing and enforcing rights that, unlike the current regimes, do not rely on the assent of military-backed nation-states.” The promise that blockchains can enforce social contracts amongst humans without the need for violent regimes is as ambitious as they come, but it’s certainly not impossible. However, Schneider argues that today, the opposite purpose is served. The delta between what a technology could become vs. what it is today is an interesting space to play in. We have a responsibility to further explore the opportunity that Schneider outlines in this piece
Crypto lending firm Celsius pauses withdrawals and transfers. Crypto lending firm Celsius said Sunday that it would pause withdrawals on its platform, citing market conditions. The price of Celsius's native token Celsius token fell sharply on the news, falling 45% to $0.21 per coin. With the fall of Terra and struggles throughout the broader DeFi space, it is very likely that we’ll see increased regulatory scrutiny in the coming year and beyond. “Bank runs” like what we see with Celsius today are inevitable in bearish market conditions, and thoughtful regulation might actually be useful in these cases to ensure that providers have enough cash on hand to meet customer needs.
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Member Spotlight — Julia | @julia_pepper23
This week’s Forefront Member Spotlight is FF DAO contributor Julia.
What got you into web3?
I was drawn to web3’s potential to accelerate social impact projects and definitely credit Dream DAO with helping make the web3 onboarding process less overwhelming! It was amazing to work with a group of builders who share my values and are such amazing community organizers and leaders..
What community are you keeping an eye on?
Thirsty Thirsty! In their own words, they’re “an ancestral remembrance project disguised as the coolest food and wine club on Earth.” I love their mission of celebrating ancestral agriculture while regenerating the planet and helping people build closer bonds over good wine and good food! They recently graduated from Seed Club and launched their membership NFT - go check them out at thirstythirsty.org!
Who’s one person you look up to?Parker (@parkerjayp)!. The work she’s doing at Boy’s Club and Fintech Collective is so inspiring and I love her energy 🙂 I feel really blessed to have such amazing women builders to look up to in this space!
What’s next for the space?
A bigger commitment to uplifting underrepresented voices, and more businesses that use web3 components to build community in physical spaces (as a main component of their business, not just as a part of experiential marketing).
What are you excited about?
Continuing to build the FF Media Guild this summer!
The information in this newsletter is not intended to constitute legal, financial or investment advice and should not be construed or relied upon as such. Any opinions reflected are the opinion of the author(s) of the newsletter only and not necessarily of Forefront. Please DYOR.