Paper 36: The DAO Danger
Why you should think twice before participating in DAO governance
Contents
This Week in Crypto
This Week in NFT World
The DAO Danger
Thought of the Week
Meme of the Week
Hello hello - hope you are doing well.
I’m slowing down a little as I start to sort taxes (that time of year again), some legal stuff, and administrative stuff around setting up these media plans (the amount of equipment you can buy now is ridiculous!)
Still going to keep bringing the weekly papers though.
If you’ve got any plans to broader your own media output, give me a shout.
Have a great week!
B
1. This Week in Crypto
CFTC charges a DAO and its token holders - The Commodity Futures Trading Commission has charged the DAO tokenholders who have voted on governance proposals because the DAO itself was an unincorporated association engaged in illegal activity. If nothing else, the CFTC has made it clear that merely organizing as a "DAO” does not exempt participants from abiding by existing regulations.
Stripe enable USDC payouts. With Stripe, freelancers are now able to receive funds via USDC in minutes. With the addition of USDC, Stripe cross-border payouts extend to more than 4.4 billion people in more than 110 countries—a majority of the world’s population.
FTX in talks to raise $1 billion at a valuation of about $32 billion - Crypto exchange FTX is looking to raise more money as the company seeks to expand its portfolio during the market downturn.
SEC claims all of Ethereum comes under US jurisdiction. Because the majority of Ethereum nodes (approx 45%) are run in the US, with the next most in Germany (approx 19%), the SEC consider Ethereum to be operating in the US. As such, it claims Ethereum falls within their jurisdiction.
2. This Week in NFT World
Apple App Store allegedly impose 30% commission on NFT sales. A typical NFT marketplace will take a 2-3 percent commission. However, according to a new report from The Information, Apple is looking for a whopping 30 percent commission from any NFT deals conducted through iOS apps.
Tyler Hobbs & Dandelion give minters share of royalties. Whoever mints the QQL NFT will receive 2% of secondary royalties any time that NFT is sold. There will be 999 NFTs by Tyler Hobbs, the creator of Fidenza, and Dandelion.
Deekay Motion $150,000 and Fewocious $290,000 sales - Another huge primary sale for Deekay and another monster secondary sale for Fewo.
The ENS 1k and 10k Digits Chart Best In the Market - The ENS Digits continue to perform very strongly.
3. The DAO Danger
You like DAOs because you can participate in upside without taking any responsibility for if things go wrong?
This is how the founders of the Ooki DAO - who offer leveraged and margined retail commodity transactions in digital assets - presented their move towards a DAO structure to their holders.
It’s really exciting. We’re going to be really preparing for the new regulatory environment by ensuring bZx is future-proof. So many people across the industry right now are getting legal notices and lawmakers are trying to decide whether they want DeFi companies to register as virtual asset service providers or not – and really what we’re going to do is take all the steps possible to make sure that when regulators ask us to comply, that we have nothing we can really do because we’ve given it all to the community.
I am going to repeat the most important part again for you: “when regulators ask us to comply… we have nothing we can really do because we’ve given it all to the community.”
In what world do people think that a DAO is some sort of shield from law enforcement?
By giving governance to the community, no-one needs to comply with anything? Is that really the thinking?
The way the CFTC is arguing this in the US is that - if you have given over governance to the community - and if you are not properly legally established - it is not only YOU as the founder on the hook, but also ALL community token holders who have participated in governance.
As such, the net effect of distributing governance has been to rope in active tokenholders into the legal mess.
Now - it should be stated that this not definite law yet, nor was it an argument agreed upon by everyone. One commissioner believed that, whilst it was right to sanction the founders, it was not right to extend this sanction to tokenholders for the following reasons:
Dissenting Statement of Comissioner Summer K. Mersinger
So what does this mean for you?
It means that you should be very wary of “unincorporated associations” who masquerade as properly established entities.
It means that you should always ask yourself - who is responsible by law for these activities if something goes wrong?
It means that you should keep an eye out for how this story develops, because if it is held to be true that active tokenholders are in some way on the hook for “official” DAO activity there will be huge ramifications.
4. Thought of the Week
This is one of the most useful (and painful) things I have learned in the last year or so.
Whenever you start feeling too braggadocious, sell.
5. Meme of the Week
Keep buying the dip friends!. Shoutout @DrewOden
Have a great week,
B
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Disclaimer: The content covered in this newsletter is not to be considered as investment advice. It is for informational and educational purposes only.
I hold some of the NFTs mentioned in these newsletters.
I miss feeling braggadocious :(