INTERVIEW: 4.22.2018 – IvanOnTech Exclusive with DAOStack

Video Interview with lead architect @matan for the youtube channel IvanOnTech discussing the DAO stack, why decentralized governance is needed, the mechanics behind $GEN, and use cases.

Transcript provided below for convenience.


Speaker Timestamp Speech
Ivan: 00:01 And we are live, guys. Welcome to a sponsored interview with DAOstack and currently we have Matan from the project. It is going to be very exciting to learn about their project, and to learn about the challenges and the issues they are facing, and how they are tackling those challenges. Also, what they are trying to achieve, how they are trying to change the world, and how they are trying to change the industry of blockchain. So Matan, very welcome to the show. Very welcome to the channel. We are pleased to have you here. Can you please tell us a bit about your background, how you got into blockchain, and why your project is important?
Matan: 00:36 Okay. Thanks, Ivan. Very good to chat with you. So yeah, a bit about myself. I have been mostly educated and working as a theoretical physicist. I have done my PhD in string theory and then post-doctoral research, so that’s one line of my biographic. And then, part of that I was very interested for many years about alternative economic structures, alternative cooperative structure mostly. I’ve also experimented with that in the real life by founding an organic food cooperative and communal garden. And the idea behind it was to explore how more effectively cooperatives can be. And behind that was the desire to find the cooperative structures that would work at scale, so how millions of people could cooperate better. That was like two different pilot routes of my life.
Matan: 01:42 And then, around 2013, I had another idea for doing in pilot to my post-doctoral research to build a decentralized ride sharing application. We call it La’Zooz. I started working on it with a few friends, and during that we discovered the blockchain and it was just the same months where Vitalik published his paper. And BitShares, if you remember, they were speaking about DAOs, or they called it DACs, back then. Decentralized autonomous corporation. And everything that I’ve thought about for two decades kind of collapsed to the same point, and I was really mind-blown by the opportunities that this technology brought to my consciousness. And pretty quickly thereafter, like after six months, I quit the academy. And since then for the past four years, I am full-time developing protocols and platforms for decentralized autonomous organizations, and that’s what brought me [crosstalk 00:02:40]


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Ivan: 02:39 Right. So I think people in the blockchain space kind of know what DAOs are, but for people who don’t know, can you please give us a crash course about decentralized autonomous organizations, and why they are so important when it comes to blockchain and why they couldn’t be achieved before the blockchain technology?
Matan: 02:55 Right. So yes. So firstly, when we say decentralized autonomous organization, we are hinting that this is something like organization. So in what sense it is like, and in what sense it is not like organization? So it’s like organization in the sense that yes, there is a group of people who are coordinated to achieve some shared goal, some shared mission. Maybe they build something together. Maybe they produce some economic situation desired for all, maybe they maintain some database or whatever. They can do anything together. So in that sense, it’s like organization. In another sense, it’s actually very far from being an organization.
Matan: 03:34 So firstly, it’s not closed. It’s not like you are in, or you are out. No, it’s kind of more like in that sense, it’s more like the internet. It’s a protocol that anyone can participate, so it’s an open organization by definition. In that sense, it’s also open kind of more like markets do, like free markets are, and we can touch more about it later, but that’s also touching of the one quality of DAOs, which are they are scalable. Usually, I say the one common factor of all existing organizations today on the planet is they become less and less effective when you grow them. They become less effective, and DAOs is of a completely different nature. It actually becomes more effective when you grow it, just like the network effect based applications are or just like the internet, or just like free markets. They become more effective when they grow. So it’s kind of like this new coordination of individuals. Maybe the difference is that it’s indirect coordination, economic indirect coordination rather than structured direct coordination that produced large networks that produce together shared goals, products, and so on and so forth.
Ivan: 04:46 All right. So it’s a group of people working globally, and having blockchain as a way to organize themselves. And so, why isn’t this possible without DAOstack? What are you guys bringing to the table? Why can’t we just do a DAO on plain Ethereum with smart contracts, what is stopping us from doing that?
Matan: 05:03 Right. So firstly, why do we need blockchain? Yes, we need blockchain for their rules to play, right? And then, I’ll tell you why with DAOstack. Now, it’s all relying on cryptoeconomics. So cryptoeconomics is this idea that you can design incentives at the individual level. So basically, design desired actions in the individual level that then lead to the desired collective behavior. In this case, of cooperation.
Matan: 05:34 Now, the tricky thing is those rules. It’s very hard to come up with the right rules. So maybe there is no right rules. Maybe it looks much more like a complex mesh network just like the internet and different cells in this mesh have different rules. And more so, these rules constantly evolve because they need to fit to conditions, to environmental conditions, and become better and better. And basically, you need to have these kinds of rules that are both. I usually say that decentralized autonomous organizations must have three qualities. They have to be decentralized, of course. They have to be scalable, so we can grow the number of people, and still remain effective, even more effective. And thirdly, they have to be resilient. Because once you are operating on an open protocol, then the system by definition can be manipulatable much more easily. So that’s the real challenge, how to design protocols which are decentralized, scalable, and resilient, and that’s a missing element. That is what’s missing right now, and what we realize is that it’s not just designing a protocol. It’s much more than that. We need to design a framework for a whole space of protocol that can emerge and self-improve themselves and become better and better. So this is exactly what DAOstack allows you.
Matan: 06:58 Basically, it’s a second layer framework on top of Ethereum, and then the stacks. So it’s like actually several layers. The second layer is just the protocol, but then you have also more JavaScript and then interface layers that allow people to self-organize very easily and intuitively, and more so to improve their organization structures through economic evolution.


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Ivan: 07:22 Mm-hmm. Right. We have some questions in the chat. And guys, please ask more questions in the chat. Give us all the questions. We have a question from Akash. He asks, " What is the difference between eInc and DAOstack?" And he also continues, “I read about DAOstack and found they are doing Lightning Network thinking for voting,” and he is concerned that this will become centralized. Can you please explain to us who don’t know what is … Do you have parallels with layer two solutions on Bitcoin, and what is the difference between you and your competitor, eInc?
Matan: 07:57 I am not sure who eInc is. Maybe I am not …
Ivan: 08:01 All right. So it’s a project for decentralized organizations on Ethereum, but let’s just rephrase it. So what about your competitors that you do know?
Matan: 08:07 Yeah.
Ivan: 08:07 What kind of competition do you have in this space?
Matan: 08:11 So two things. Let me firstly comment on the comment I’d made before. So yeah, I say that often that there is another analogy between the protocol that we produce and the off-chain layers of Ethereum, but it’s an analogy not in the sense that we are producing off-chain solutions. We don’t. Currently, we are fully on-chain. We will become off-chain, but we are not producing off-chain solutions.
Matan: 08:33 The analogy is the following. So we need to realize the problem is the problem of blockchain and the problem of governance is the same problem. The problem is that consensus by definition is not scalable. When you say consensus, you mean that every node on the network agrees about something, right? So whether it’s consensus of machines that produce the blockchain, or whether it’s consensus of human beings that get decisions done. Then, when you say consensus, you mean that everyone are looking at everything, and then that’s by definition not scalable. So when you say off-chain computation, what you really mean is that you are introducing economic gains that allow you to get results on the blockchain or results to be accepted by the blockchain, while those results are actually derived off-chain, which means that they are derived not by a consensus and their trustfulness is supported by economic games.
Matan: 09:28 So in the same way, we allow for protocols that lead to decision-making of large organizations. While those decisions on one hand are not conducted by a full consensus, so you do not require everyone to look at everything and that’s why it’s scalable. But at the same time, we introduce economic gains that guarantee the trustfulness of those results, so guarantee that the decisions that those little groups make are actually in line with the coherence and thinking of the greater majority. So in that sense, it’s analogous to off-chain computation, and that’s not only, but that’s one of our unique value propositions. So these kind of protocols that can actually … I know no other protocol today that can actually facilitate the effective interaction of meeting people around any shared goals. So this is one of our unique value propositions.
Matan: 10:25 The other unique value proposition is the extensiveness and generality of the governance framework. So we’ve basically made up a language from governance from which you can build any sort of governance protocol. The modularity and upgradability of that language. And the third thing which is unique is the stack, which means beyond just developing that governance framework, we also developed the JavaScript API to the real world. And then, there’s actually a few more layers, and eventually the application there. So there is a whole stack you can easily integrate with and gain collective decision-making out of the box. It’s a sandbox basically.


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Ivan: 11:05 And so in your community currently, who are your number one users? Are you talking with organizations with existing corporations, companies, political organizations? Who will be the first users of your platform? Who will be the early adopters?
Matan: 11:20 Yeah, that’s a good question. So right now, we actually already have them. So our first partners, Gnosis. The company Gnosis. And we identified a real pain that we can solve today, and that’s exactly what we are doing right now with Gnosis, and then with others.
Matan: 11:40 But let me give you an example. Let’s take Ethereum actually as an organization. Let’s look at it because it’s like the best use case ever.
Matan: 11:46 So there is a really unique phenomena happening right now with the blockchain space, and again, let’s look at Ethereum. So why can’t we solve the problem that we have right now? So Ethereum has this problem of scalability of blockchain, right? That’s like the number one problem, by far. Now, solving that problem worth an enormous money, right? Whoever will solve that problem.
Matan: 12:12 Now, usually in an organization, you take capital and then you take human capital. You put them together with management, and you produce solutions, right? That’s the meaning of an organization, so let’s see how it works in Ethereum.
Matan: 12:25 You have infinite amount of capital. You have billions of dollars accessible. Billions of dollars you can deploy into action. Then, you have hundreds of thousands of developers, so you have all of the human resources you want in the world. So what is the limit? What is the limiting factor to take those two and making them a solution to the scalability problem? The only limiting factor is actually decision-making capacity. There is no decision-making capacity right now in the structure that we have right now. There is no decision-making capacity to take billions of dollars and deploy them to hundreds of thousands of developers effectively, quickly solving those problems. And that is exactly what we are offering. We are offering a system where you can take a large amount of money and deploy very effectively to a large number of people, quickly, effectively. And by that, scale up your innovations and solution in a way that was not available before.
Matan: 13:11 Now, this problem exists almost in all big [crosstalk 00:13:14]
Ivan: 13:15 So Matan, can we just get more detailed. So if you had to sit with Vitalik and you told him, “You know, Vitalik? You have capital. You have people. Now, use DAOstack to make this a reality.” How would Vitalik do it? how would the Ethereum community do it? Is it voting? How do you make this progress you are talking about? That you are able to make all of the decisions that a management team cannot do? How is that suddenly possible with DAOstack?
Matan: 13:40 Great. So I will just describe that, and that is exactly what we are going to do with Gnosis, which is already subscribed to this experiment. And by the way, we will be our first pilot.
Matan: 13:51 So how it’s happening, so firstly, that’s happening through the first interface with the stack, the application we call Alchemy. It’s an application for decentralized allocation of resources, which is exactly what I mentioned. And the way that it works is that it’s like an open protocol, just like the internet. Anyone can come up with a proposal. Literally, anyone can come up with a proposal. And then, there is a voting system, which made by reputation holders, which can be a large number of reputation holder or a small number, whatever. You can also grow that gradually. And then, those reputation holders vote about proposals that are being executed immediately under some conditions. Now, the uniqueness of this offering is that through this extra layer that I’ve mentioned before, through this extra layer of economic gains, prediction gains, through that layer, there is a way to scale up the number of decisions that the organization can make effectively while without harming the effectivity of those decisions. So you can make not just 10 decisions a week, or 10 decisions a month, or 100 decisions a month. You can basically scale up indefinitely the number of decisions that this organization makes while still maintaining the coherence of those decisions with the alignment of the reputation holders. And yeah, then just scaling up that decision-making capacity is just translated into economic equation, or economic, if you want, faculty. So the more you put, basically, economic value inside the system, the more you can produce good decisions. And the way that you ensure them is by incentivizing external agents to basically I would say maybe curate the process of decision-making and flagging up bad and good decisions. And by that, better navigating the collective attention.


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Ivan: 15:45 Mm-hmm. So, that’s interesting. So let’s say I have a lot of reputation in one field. Let’s say that I have level 99 in programming, but then I have maybe level 10 in economics. How do you weigh different decisions with different reputations, or do I just have one reputation for all decisions? Because in some cases, my reputation is very high for technical decisions. But maybe in other cases, like for marketing, my reputation might not be that high. Do you have some kind of division between different players voting on different decisions? Are decisions weighted? They vote, do they have weight to them, or how does this work?
Matan: 16:24 Yeah. So decisions are being weighted by your reputation. So your reputation basically equals your influence power. Now, right now, the way that the system is structured is that reputation is not by topicality, but reputation is by organization. So when you say there is an organization, it doesn’t necessarily mean that there is a single homogenous organization. It may be inside that there are many sub-organizations and sub-sub-organizations, and sub-sub-sub companies, each of which has its own reputation system.
Matan: 16:50 So maybe you have a lot of reputation in the developer’s company inside this larger DAO, and you have very little reputation in the marketing company, and there is also reputation of the greater organization. Which by the way, the companies themselves are agents that are holding reputation in the larger company, et cetera.
Matan: 17:09 Now, you might also happen to be in a situation where there is a vote that you don’t feel qualified to vote on that proposal. So actually, you have incentives not to vote. You don’t have to vote on each and every proposal. And those who feel that they have the knowledge to vote on it, they can vote on it. And overall, the reputation distribution, again, pair organization not pair topicality, although you can also add pair topicality. Right now, it’s just paired organization. This reputation distribution basically describes or materialize the truth, the mind of this collective. So you will put different people with different reputations, you will get different mind.


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Ivan: 17:52 Mm-hmm. We have a question from Pax Augustica in the chat. How big is your team, and what sort of legal regulatory structure have you had to face? Basically, legal challenges, and what sort of other challenges are you and your team currently addressing at this point?
Matan: 18:10 So in terms of size of our team, it changes rapidly. We started as two people up until six months ago, and we grew up from two to roughly 20, or between 15-20, part of them freelancer, but between 15 and 20 in the past six months. In terms of regulatory structures, we faced … Firstly, we are very serious about regulation. We are not taking any risk on that front. We are working with three law firms in three countries in three continents.
Matan: 18:44 Yeah. And of course, there is the usual regulatory challenge of tokenization and the definition of tokens, that everyone are familiar with that. Of course, there is an additional regulatory challenge that we will process that as we go along with the definition of those structures. Those structures, how would they be defined as companies, or not as companies, and so on and so forth.
Matan: 19:12 In terms of other fronts that we are facing, there was a major challenge to build the implementation of that framework on top of Ethereum. We had a code base of 16 months, and that’s starting after two years of research and development. So we have a heavy code base, very, very matured. That’s one.
Matan: 19:33 Secondly, I think the biggest challenge was to solve that … You remember I told you in the beginning. I told you that consensus is by definition, not scalable. So to find consensus protocols or decision-making protocols that can scale up and remain resilient, that was the biggest challenge. It took us years of research and development to get those solutions. That was the biggest challenge.
Matan: 19:56 Right now, we are interfacing with the challenge to fastly grow the awareness around the project because we’ve been working for more than a year as a stealth mode. And then, we went out from complete stealth to almost crowd sale, like in two months. So this was a major challenge to sustain all of this community challenges and all that.
Matan: 20:19 Yeah. And right, the next challenge to come, which it’s actually the most exciting challenge is to bring that product into real experimentation. So we have real organizations with a lot of capital that are willing to experiment with that technology. Actually, not just willing, excited to experiment with that technology, and the next challenge will be to actually test it on the ground. We don’t have the illusion that the first situation will be perfect. We want to have rapid iteration of the product, and we want to show already this year that decentralized organization can work at scale and be much more effective than legacy alternatives.


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Ivan: 20:56 We have another question from the chat. Guys, ask more questions, and smash the likes if you find this interview interesting. And so, the question is from Akash Kumar. He asks, “Can one organization interact with another organization on DAOstack?” What kind of interactions can we have?
Ivan: 21:11 So one way we can interact, as I understand, is that we can form a larger organization together with two organizations. And so then, I guess, this large organization can form a new organization with others, so it’s like kind of recursive organizations. Would that be correct? But what other interactions can we have?
Matan: 21:28 That is totally correct, but it’s much, much more so. The beauty of it, and that’s really the power of the DAOstack. So the power is that we had a framework. Now, anything you can imagine, we can code into that framework pretty easily and modularly. So now, two organization, yeah, they can have a joint large organization. They can be part of a large organization, but they can also have a joint venture. So you mentioned that they just invent this joint venture. They both control together, so it’s not the large organization. They can also have business relationship. They can decide that if such and such happens, then they share such and such, maybe in a different way. They can have agreements between them.
Matan: 22:07 At the end of the day, it’s all about aligning interests effectively and easily. So today, if you want to cooperate in large numbers, if you are want to cooperate 1,000 people, or even in two companies. No, forget about two companies. If you want to have 10 companies cooperating, it’s almost impossible, right? But what if have a smart contract that defined the condition of the interactions, and the up sides, and the down sides, and the risks, and the takes, and the gives? And then, any company that want to play the game just plays the game, and then you have 10 companies instantly cooperating. So that’s the real power of that, the ability to cooperate easily, smoothly, effectively, at scale.


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Ivan: 22:48 Right. And so what about your token? Why do I need the token, and what do I get from owning your token?
Matan: 22:55 Right. So that’s always the hardest question. It’s hard, not because it’s not clear, it’s hard just because to explain that, I need to explain something about our unique solution, which we call holographic consensus.
Matan: 23:06 So I told you there is a magic. So I told you firstly that the consensus is not scalable. Okay, let’s forget about it. Either we have a consensus, or we have scalability. Bad day.
Matan: 23:17 So now, we want to say that there is a solution to actually make a scalable consensus, and we call that holographic consensus. So holographic because holograms, if you know, each little piece of the image of the holographic image actually contains the information of the entire picture. So in the same way, holographic consensus is the situation where a small amount of people of the organization or relatively small can make decisions on behalf of the majority but in a way that guarantees that those decisions should be, has to be in alignment with the greater majority. That’s the only way to actually make scalable consensus to work.
Matan: 23:53 Now, I also told you that this magic relies critically on some sort of prediction games. So the prediction game is that anyone external to the DAO, just like investors and traders and arbitrators in the free economy, in the free market, when they place investments, trades, arbitrators, they basically produce signals to the market of inefficiencies. They identify inefficiencies, they think they can prove them. They put stake on those inefficiencies and if they are right they make profit. In the same way, predictors in our network, which are kind of like the miners of the DAOstack network, predictors, they can identify social inefficiencies. They can identify a proposal in a DAO that is under-evaluated, and they are estimated under-seen, under-observable. And they can flag that and say this proposal, I am willing to place $200 to say that this proposal, if well looked over, will actually pass in the DAO, and I’m staking. I’m putting my money where my mouth is, and by that, I am producing signals to the network.
Matan: 25:04 On the other hand, the DAOs in order to attract those predictors, they actually need to place some sort of bounty pool to actually pull the predictors in to them. And all of this prediction game is being done with the GEN tokens. So the bottom line of that is that the only way, just as Ethereum is the gas for consensus machines, in this case, GEN will be the gas for large scale consensus of individuals, and that is thanks to this prediction game that is done with that token.
Ivan: 25:40 Mm-hmm. All right. And so what are the terms of your ICO, then? Do you have a max cap, man cap, and for how long will this ICO go on?
Matan: 25:49 So we have, basically, where we are selling 40 million tokens in a series of sales. We started six months ago, and we are finishing in the coming weeks. So we had a long, long private sale. We are moving next week on Tuesday, May 1st, we are doing community presale for 48 hours. And then, one week after on May 8th, we are doing a public sale. Altogether, we are raising up to $30 million, and we are selling 40 million GEN tokens. In addition to that, 20 million tokens are allocated to the nonprofit DAOstack company. Half of it is going to the existing team, the broad team, the founders, employees, freelancers, and advisors, everyone. And then, another half is for future contributions, and ecosystem expansion.
Matan: 26:48 In addition to those, we are going to found a DAO, we call it the Genesis DAO, on top of our old system, and that Genesis DAO will manage an additional potential 40 million GEN tokens over the years and majority of the funds that we are going to raise. So this is the condition of the sale. Yeah. Again, like there is a presale on May 1st, 48 hours. By the way, which means we need to be white-listed up to 48 hours before the presale.
Ivan: 27:17 All right. All right, Matan. So is there anything else that you think we should discuss that we haven’t touched upon? Any topic, or any part of your project that we should discuss that we haven’t yet?
Matan: 27:28 So the only thing is that I think the most exciting part would be to actually test it, and play with it. So we are going to launch. Well, actually it’s ready for launch. It was supposed to be launched already, and everything is ready. The only reason we are postponing the launch of the application on the mainnet is that right now, we are so focused on the sale that we don’t have the capacity right now to make a quality qualitative pilot. So we will start the pilot, right after the sale, and we will invite everyone in the community, everyone to literally play with it.
Matan: 27:58 So there will be a real fund, a real Ether fund to which anyone can make a proposal how to build the DAOstack project, how to build the DAOstack ecosystem. And people will vote on it, and people will make predictions about those proposals, and then that engine will just produce decisions. And again, the number of decisions could just rise and rise, the more people participate in that game, and we want to show it actually works. So we are inviting people to play with it. We are inviting people to break it because I think that’s the only way to make it better. So there is no more community engagement than that, so I am just inviting everyone to play.
Ivan: 28:35 Awesome. Well, Matan, we wish you good luck with your project. And thank you, everyone, who has watched and asked good questions. We always appreciate your contribution and your interest. That was amazing to hang out with you as well. And that’s really it, guys. That’s really it. Thank you so much, Matan, and thank you, everyone. I will see you very, very soon, and goodbye, guys. Goodbye.
Matan: 28:56 Thanks, Ivan.