A For-Profit DAO (And Its Goblins) is Coming

Also, the second-most used Ethereum client is migrating to a DAO, and its all or nothing with Ethereum users

Hello defiers! Here’s what’s goin on in DeFi,

  • We’re getting closer to the first for-profit DAO since The DAO

  • Parity is migrating its Ethereum client to a DAO

  • Ethereum vs. Bitcoin use polls

Ethereum Devs Betting a For-Profit DAO is Now Possible

A group of Ethereum community members on Sunday released the whitepaper for MetaCartel Ventures, which would be the first for-profit decentralized autonomous organization since The DAO, arguably Ethereum’s most traumatic event ever.

The MetaCartel Ventures DAO will invest in early-stage decentralized applications and profits will distributed among its members. While in the past year there has been a resurgence of DAOs, they have all been non-profit organizations. Participants have been wary of for-profit structures after U.S. regulators said the sale of DAO tokens in 2016 –when an attacker was almost able to get away with a third of the funds in the contract, resulting in the split of the Ethereum chain– violated securities laws.

This attempt at creating a new for-profit DAO suggests Ethereans are confident enough in the new structure to give it another try. The organization will be a Delaware limited liability company, and members –called Mages, Goblins and Summoners– will consist of a combination of general mangers and accredited investors.

Image source: MetaCartel Ventures whitepaper

Reminder: A Decentralized Autonomous Organization, or DAO, is a company that leaves as much of its management and funds to smart contracts as possible. This means money is held on-chain and governance rules are prescribed in code, with the goal of increasing transparency and participation, and therefore, reducing corruption.

The DAO Renaissance

After a break in experimenting with this structure after The DAO in 2016, Moloch DAO sparked a new wave of interest in this structure this year, leading to forks including MetaCartel DAO. The technology half of MCV is an instance of the Moloch v2 smart contract standard.

Since July, MetaCartel DAO has had over 60 participants, 800+ community members, has raised over 1,100 ETH and deployed $44,450  to over 13 projects. But for a model like this to be truly successful, it can’t continue to rely solely on charitable giving. A for-profit fund was the logical next step.

Unlike traditional venture funds, investors in the DAO are expected to be active participants and source, do due diligence, propose and vote on investments (they’re not hands off LPs), but they can leave and cash out whenever they want. Unlike in the original DAO, not anyone can join as existing members approve new members.


Parity is Offloading its Ethereum Client Into a DAO

Parity Technologies is planning to move the Parity Ethereum codebase to a DAO.

Developers and organizations who depend on this Ethereum implementation, which is the most used after Geth, will take over maintenance of the project called OpenEthereum. Parity Technologies will transfer the client’s license to the DAO and move the codebase to its own GitHub page. Parity’s role will be limited to onboarding and advising DAO members.

The OpenEthereum DAO will be controlled by a stake-weighted token system. It’s unclear how large a stake Parity will have, but it may be incongruous for them to retain a large say in governance while they’re deliberately taking a hands-off approach in development.

“Legacy Technology”

Parity has been gradually reducing its Ethereum focus, as it dedicated most of its efforts developing Polkadot, a protocol to connect multiple blockchains. By design, Polkadot depends on a world where Ethereum is one of many chains, which means that Parity’s and Ethereum’s incentives aren’t necessarily aligned, as Ethereum community member who goes by the pseudonym DCinvestor says in this Reddit post.

Parity’s announcement says,

As we move to a multi-chain future based on technology that is far more modular, maintainable and interoperable, we find it increasingly difficult to explain to our stakeholders why it makes sense to dedicate our expertise to maintaining legacy technology.

In addition to offloading its clients, Parity won’t continue work towards receiving $1.2 million left of its $5 million Ethereum Foundation grant, which it had been awarded to develop Ethereum infrastructure.

End of an Era

It’s All or Nothing for Crypto People and Ethereum

I did a poll on Twitter asking my followers when do they use Ethereum; Daily/Weekly, Monthly, Yearly, or Never. With over 2,200 votes, the answers were as follows:

My followers likely skew towards Ethereum users, but also broader crypto people, and also people from my Bloomberg days, where I covered emerging markets and other non-crypto stuff. This explains why 40 percent say they’ve never used it.

Among the ~60 percent who say the have used Ethereum, it’s interesting that most of them do so Daily/Weekly, fewer use it monthly and even fewer use it yearly. This is the exact opposite to the poll which inspired this one, which asked the same questions about Bitcoin:

In this poll, those who do use Bitcoin, said they use it less frequently, than what Ethereum users use Ethereum. This is a reflection of how the platforms have evolved, with Bitcoin becoming “digital gold,” to be held as a store of value and hedge against economic doom and/or corrupt institutions —not actual peer-to-peer cash to be used daily— while Ethereum is slowly but surely becoming the “world computer” it set out to be, able to support many different kinds of applications.

With an increasing number of people using applications to lend out or stake their crypto and gain interest passively, decentralized finance was surely responsible for most of the Daily/Weekly votes.

Tweet of the Day: DeFi During Yesterday’s Market Dump

This was an underrated tweet. That flat line, showing DeFi was as protected as ever during a day when ether slumped more than 6 percent, is pretty remarkable.

Basically, #defidontcare :)

The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access, while free signups get only part of the content. Click here to pay with DAI.

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.