AssangeDAO and the Problem With DAOs

The biggest crypto news and ideas of the day

Mar. 8, 2022

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Welcome to The Node.

In today's newsletter: President Biden to sign executive order on cryptocurrency regulation. Coinbase unveils "experimental" label. And Pizza chain Papa John's set to giveaway NFTs.

Questions? Feedback? We'd love to hear from you – simply reply to this email.

–Daniel Kuhn

Today's must-reads

Top Shelf

CRYPTO REGULATION: President Joe Biden is scheduled to sign an executive order this week that will summarize the U.S. government's strategy for cryptocurrencies. The order would direct federal agencies to consider potential regulatory changes, in addition to national security and economic implications. The White House has been working on the order for nearly a year, but pressure has fallen on the policymakers amid the invasion of Ukraine by Russian forces.

TOKEN TRANSPARENCY: Cryptocurrency exchange Coinbase has unveiled its "experimental" label that will be applied to assets that are new to the platform or with relatively low trading volumes. Product manager Ishan Wahi notes that because Coinbase is expanding offerings at such a fast clip, it will mean newly created assets and added risk, such as higher prices swings and order cancellations. The company however, says the new label won't affect customers' ability to send, receive, buy, sell or hold assets on Coinbase.

BETTER INGREDIENTS, NFTS? Pizza takeout chain Papa John's is shrugging off warnings from the U.K.'s advertising regulator following a previous crypto-based campaign last year. Amid an NFT boom, the Atlanta-based restaurant chain is planning to give away nearly 20,000 non-fungible tokens, or NFTs, to customers in the U.K. The collection of NFTs has been minted on open-source platform Tezos, and will take form across nine different pizza delivery hot bag designs. The NFTs will make their debuts across several dates in early March.

–Fran Velasquez

Overheard on CoinDesk TV...

Sound Bites

"Maybe with sanctions being imposed, crypto will take more and more popularity."

–Ukraine's Ministry of Digital Transformation Deputy Prime Minister Alex Bornyakov on CoinDesk TV's "First Mover."

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What others are writing...

Off-Chain Signals

Unstoppable Domains Giving Away $10M in Domains to Support Women in Web3 (Decrypt)
Estonia Calls to Restrict Crypto Amid Fears of Russian Sanctions Evasion (Decrypt)
Polychain, Pantera Lead $10M Investment in Metaverse Fashion House (Decrypt)
Binance Deal with Crypto Firm Eqonex Prompts Warning Shot From UK Regulators (The Block)
BitDAO's War Chest Quietly Grows $2M Per Day After Token Sales to Thiel and Pantera (The Defiant)
Cega raises $4.3M Seed Round at $60M Valuation to Build Exotic DeFi Derivatives (TechCrunch)

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Putting the news into perspective

The Takeaway

AssangeDAO and the Problem With DAOs

Someone recently told me that decentralized autonomous organizations, more commonly known as DAOs, have so far led to more philosophizing than building. At the most basic level, a DAO is just a way to organize people toward a collective aim. They're often called "internet forums with a shared bank account," or quasi-corporations built on blockchains or governance structures for crypto projects.

Some predict DAOs might evolve into a new type of public infrastructure: massive investment projects run neither by companies nor governments.

Considering this wide range of activity, it seems appropriate to ask: When is a DAO successful and how do you measure that? The most notable DAO to date, ConstitutionDAO, failed in its aim to buy a copy of the U.S. Constitution, despite raising far more money than the document was worth. SpiceDAO has also been stymied in its attempt to buy a "Dune" storybook and monetize it.

Last December, following a legal proceeding that opened the possibility for political activist Julian Assange to be extradited to the U.S, a collective called AssangeDAO was founded. Its explicit aim was to "free" the dissident WikiLeaks founder, who spent several years locked up in Ecuador's embassy in London before being put behind bars in a U.K. prison.

The DAO is taking something of a circuitous path towards freeing Assange. Last month it raised 17,422 ether (about $56 million at the time) to bid on a non-fungible token (NFT) project that would then funnel funds towards charitable efforts supporting Assange's legal case and (unlikely) release, run by the Wau Holland Foundation.

"This is an important moment in DAO history," Rachel-Rose O'Leary, a core contributor of AssangeDAO (and CoinDesk writer), said at the time. The NFT project, called "Censored," was created by influential conceptual artist Pak in collaboration with Assange and his family. The DAO bid on that collection's big-ticket item, a one-of-one NFT called "Clock," which tracks the number of days Assange has spent in prison.

In this limited ambition, AssangeDAO was clearly effective. It raised a significant amount of capital to be put towards Assange's case. It drew support from a number of high-profile figures, including Ethereum creator Vitalik Buterin and Gnosis founder Martin Köppelmann, as well as hundreds of small donors. Assange's fiancee, Stella Morris, and one-time collaborator, whistleblower Edward Snowden, showed their enthusiasm for the project. And, after all, the DAO did buy the NFT – achieving its goal.

Leaderless

But AssangeDAO quickly came up against roadblocks. In the run-up to the NFT auction, I began speaking over Telegram with a number of its key stakeholders – including some that held part of the multi-party key to unlock the DAO's treasury and other founding members. They were ebullient, enthusiastic. They called themselves a "leaderless organization" that sprung up "spontaneously" to free Assange. Early bitcoin proponent Amir Taaki was there, along with pseudonymous developer McKenna and notable crypto lawyer Silke Noa.

They were an anarcho-collective with a utopian dream, and they'd seen some early success. That private channel has since been deleted, perhaps an indication of the group fracturing soon after.

According to O'Leary, there was a "fairly major disagreement" about how to spend the DAO's millions – it raised far more than anyone anticipated. There were two camps, she said, those that wanted to "maxbid," or spend its entire reserves buying Pak's NFT. Others wanted to keep some cash on hand to finance future campaigns looking to free Assange "by all means necessary."

"The tension emerged in the keyholders first," O'Leary said, who placed herself in the camp against maxbid. She, like some of her colleagues, was inspired by FreeRossDAO – a similar project that raised charitable funds to bid on an NFT benefiting the founder of the Silk Road online marketplace – and wanted to keep AssangeDAO as a going concern.

Being diplomatic, O'Leary said that maxbid was the "default strategy." Both Pak and Julian Assange's brother and a core contributor of AssangeDAO, Gabriel Shipton, wanted that option, and their voices carried a lot of weight, even in a supposedly leaderless organization. The key holders began posting on the AssangeDAO forum, leaving documentation of the organization's disassembly.

"All of the key holders had this much in common: We wanted to execute the will of the DAO. However, the interpretation of what this … differed, and we lacked the mechanism to properly measure it," O'Leary said. "Resolving such differences is difficult in a low-trust environment," and it ultimately "tore" the community apart, she added. Notably, few of the DAO's founders had ever met in person.

Soon, concerns spread through the AssangeDAO community. Low-ranking members began posting proposals to return ETH to donors. That led to further concerns about when a "snapshot" should be taken, or the moment on-chain that they can revert back to – like turning off a game and resuming at your last save. This itself was complicated by the fact that founding DAO members decided to exit the project.

The DAO is still operating. It has approximately $600,000 in crypto in its treasury. People are posting proposals to clean up the community's website, to set up an annual reward for freedom fighters called the "Julian Assange Award," to host a hackathon to build a "censorship resistant" blog. It may even donate crypto to fund Ukraine's defense. But the fundamental problems of running the DAO have yet to be resolved.

Just this morning, someone posted a "fourth snapshot proposal." Yesterday, there was a call to elect a community "administrator" and a "moderator." Almost all of the founding members of the so-called "leaderless" project have stepped back, leaving the community to try to chart its course alone. Further fractures between the "Chinese community" and the rest of the DAO have formed.

Decentralized organization

O'Leary says there are a few hard lessons to learn. First, the DAO's non-leaders should have "clarified the bidding strategy" prior to the auction. She also said they should have launched the DAO's governance token, JUSTICE, to "collect community opinion on the bidding strategy." (JUSTICE has since distributed to ETH donors and was trading on open crypto exchange Uniswap but is currently unavailable.)

"Token voting necessarily would have reduced conflict – it would have exposed the conflict, give it voice and definition," she said. "As multisig holders, we needed this community feedback to make a decision."

But the DAO, despite being a little pocket of protest, was not a democracy. Assange's family was given veto power over proposals, and certain voices always carried more weight. There was a founding collective that was in a privileged position, despite calling themselves "cypherpunks" and anarchists. Community members raised concerns about transparency and leadership early on, and it's possible these tensions would have remained had the DAO stayed together – even with a token.

"DAOs are unproven to the vast majority of the world," Amir Taaki wrote in a post before stepping down. AssangeDAO's ultimate aim – freeing Julian – was always unlikely. He faces extradition and up to 125 years in prison. He's accused by the U.S. government of sedition (never mind that he's an Australian citizen).

In all, O'Leary still thinks the movement was a major achievement. The DAO was quickly able to assemble and raise funds.

"In my view, a DAO is a DAO when it captures community sentiment and enables large-scale coordination around a topic," she said. It might not matter if DAOs are any more democratic than nations, any more organized than message boards, if they can just stay almost undefined.

–Daniel Kuhn