Future of Onchain Organizations

Hi everyone, yes, welcoming you to the panel on the future of on-chain organizations. We want to talk a little bit broader about on-chain organizations, not necessarily only about what we see right now as DAOs, but actually how organizations that work on chains evolve. We see more and more organizations that choose, for instance, the IPO route, we see like a Coinbase going IPO, we see M&A happening in it, like recently like a Privy being acquired. So maybe like how we think about on-chain organizations right now with like a token or DAO is not anymore just the only route how things are developing. So I'm welcoming kind of like my fellow panelists here.

We have Alice from Carpati, we have Azeem from Meiden, and we have Denison from Telly. And starting maybe quickly from you, Denison, with a quick intro, kind of what is Telly doing, what are you doing, and how do you support on-chain organizations, organizations that are on-chain, and we go through and kick it off with questions. Yeah, awesome. Thank you so much. So I'm Denison Burkham.

I'm the CEO and co-founder of Tally. We started originally as a DAO tool, helping teams vote on things, so we've also evolved into this like complete management application for really institutional-grade tokens that includes governance, that includes things like launching, that includes things like staking, that includes things like compliance. So we're working on really the full stack of making sure these organizations are successful at scale with, you know, billions of dollars and, you know, potentially hundreds of thousands of contributors and participants. Hi, everyone. I'm Azeem.

I'm the founder of Mine. It's a new ZK blockchain focusing on client-side execution, so interested particularly in bringing large-scale institutions on-chain in a way that allows them to have compliance speed and particularly privacy. I've been in this space for a long time and done things like deals with Shell Oil, the UNICEF Crypto Fund, the American Cancer Society, brought all of them on-chain, among other things. I consult with the UNICEF Crypto Fund at the moment as well. I'm Alice and I work at KPC.

We help organizations with on-chain asset management and we work with leading DAOs in the space and foundations, including SAFE and Gnosis downstairs, as well as ENS, Aave and others. So why am I so excited about this panel is because I think you have like different elements here together and like different aspects to hopefully the questions that we're talking about. Maybe kicking off though with DAOs as like the fewest form of on-chain organization, we see more and more DAOs actually centralizing or working more as a traditional company. What would you say are like the development, what are like benefits or also trade-offs of this sort of movement? Yeah, I would say that there are trade-offs of efficiency versus being inclusive.

So on the one hand, clearly like more centralized organizations tend to be more efficient just because you have like a smaller group of people that need to agree on something to make a decision, while on the other hand, the more decentralized an organization is, the more inclusive it is. So you have benefits from different perspectives and people from different backgrounds, but it's tricky, you know, to find the sweet spot between those two aspects. And I feel like today, most DAOs are either too much on one side or too much on the other. And we haven't really yet found like the good balance, but hopefully in 10 years, we will. Dennis, I know you're working a lot with DAOs together, you are very involved in them.

How do you see the development in this balance that has to be struck between efficiency and different views? I think first of all, something that people love to talk about is like trying to find what a DAO is and then they try and define what decentralization is. I think actually the interesting point that's sort of emerging now, especially in the US regulatory market, is that decentralized is actually going to end up being a legal definition. It's not going to be some physical abstract notion, it's going to be actually a legal state. Either you've reached these like, you know, thresholds as described by some law as being decentralized, and then you are decentralized, and that will sort of like define you.

And how that's going to actually shape up is going to be maybe different than what we've done in the past, right? Because even, I would argue, in the past four years, a lot of our ideas of what decentralization was, was actually driven by a need to sort of like obfuscate our organizations in front of a very hostile regulatory regime. So you had things like people doing airdrops to hundreds of thousands of random people with the hopes of saying, oh, there's so many people here, like clearly it's decentralized, right? And that of course brought along with it the operational inefficiency that we tend to see with these organizations, because you have so many non-aligned, disinterested, you know, not informed participants, simply because the larger organization is under this pressure to sort of like create this like cloud of decentralization through just like sheer numbers, right? So I think that is changing a lot, and that should also bring a lot of regulatory and efficiency gains to these organizations, as they are able to say, well, decentralization maybe looks like this, and this also happens to be a little bit more efficient.

Something I've said for many, many years, especially when, you know, first started Tally, was if something like a lending protocol is decentralized only for the banks, it's still decentralized, right? If it's decentralized for the core users or dependents of infrastructure, it doesn't actually need, you know, hundreds of thousands of people like participating. And that, I think, goes to the heart of like efficiency, like are the number of actors who are needed to participate aligned with what efficient decision-making looks like? And, you know, certainly a DAO of like four people doesn't sound very decentralized, but if you look at SAFE, you know, in many ways, most of these are DAOs of like you need to get the decision-making of these people who are materially affected by the operation of this smart contract, and thus, yes, it is decentralized, because, you know, it's not just one person making a decision. So I think that, you know, sort of like long story short, that like we will see changes in the efficiency of these organizations, and we will be able to see these organizations becoming more adept at getting things done as the definition of decentralized begins to match a little bit better their operational needs and like efficiencies.

So just a follow-up question to that, like the DAO setups were a lot driven by like regulatory needs, right? So it seems that this is still the case, but maybe it's not anymore how we thought about DAOs beforehand, just a bunch of token holders, a bunch of delegates. So you think that will change? Yeah, absolutely. I think that's going to change.

I think like the previous, you know, in a weird way, we built on what we sort of thought decentralization was, and didn't maybe entirely realize that like what the previous administration's requirement around decentralization was actually maybe intentionally convoluted to slow us down and make us less efficient on purpose. You know, I think we've seen a lot of this behavior in the prior administration of things when it comes to like meme coins. Meme coins aren't security because they're so dumb, so everybody just builds meme coins. Right? Like it seems like, oh, that's like a really wonderful innovation for the industry, but actually it was intended to sort of like discredit what we're actually building here, trivialize while also punishing the really legitimate applications that people are building.

So yeah, I think we're going to see what these DAOs look like change, and I think we're going to see a lot of clarity come around what the word DAO actually means. If you look at the sort of writings of like Miles Jennings of A16Z, and so this idea in the Clarity Act of like what an absence of control or what like the definition of control of an organization is going to be, we're going to have a clear idea of like what the regulatory definition of decentralization is. And maybe that's not going to align fully with like the cypherpunctuation of like what decentralization might be, but of course I would argue at the same time that definition is like maybe intentionally unclear from the beginning. Have you heard one quote of yours on Twitter space where you said if Apple were to act on chain and they would do some treasure management or a big investment, if it's all transparent how it's being governed right now, they would basically have to put every single time a press release out and explain why they're doing X, Y, Z, why they haven't informed, Like where do you see like where organizations that move more and more on chain might have like blockers, how things are currently done, what actually, what are benefits for them moving more and more on chain when it comes to investments on chain, their operations on chain? I think it's going to be interesting to see them move on chain.

So much of it to me depends on like where the regulatory framework for it goes, because I think that there's consistently been appetite to move on chain, but risk mitigation tends to be one of the most important things for any of these organizations. And so there was the Coinbase report recently that said 50 or 60% of Fortune 500 companies at this point are either exploring blockchain or already have explored doing something with blockchain. So it's to say that they're very much so interested in seeing like what are the opportunities to generate yield that go far beyond the like 4% that JP Morgan will give you and do it in a way that's safe. But for them, making sure that it's done in a regulatory safe way is the most important thing. And when they look at, you know, lack of privacy and then lack of compliance, which ties to like regulations, I think that it keeps everyone sort of at bay.

But I've consistently for years now been chatting with orgs who are very interested and just consistently like, yeah, but we just have to make sure we don't get sued. We see kind of like a convergence, right? We see to the traditional market investing more and more in DeFi growing there. Many investing in DeFi are also putting crypto on their balance sheets. On the other side, we see also like DeFi protocols, putting RWAs on chain and actually are generally like these both worlds converging closer together.

How do you see like from KPK development or like this convergence happening? And what does it mean actually when TradFi and DeFi starts to be like invested in one another? I mean, I think in the long term, it makes sense for the two ecosystems to eventually converge in the sense that DeFi was born as, you know, an alternative to the traditional financial system. So, in many ways, we've seen improvements to the traditional financial systems. And I mean, stablecoins are a great example of that to improve like Forex plus, for example.

But at the same time, I think there are some elements in the traditional financial system that are still valuable and that we could leverage or integrate within DeFi. And so, RWAs are an example of this where that's a model that works and DeFi can actually benefit from that and improve over the system that we had before. So integrating it and like having these two worlds converge, to me, it's a good thing and it's a thing that we will see more and more in the future. And at the same time, I think on the other side, we also have like a problem of distribution. So we've seen Coinbase and Circle do IPOs.

That's because I mean, they're already leading players in the market. And so it's not really saturated, but they clearly already have a strong position in the crypto market. So if they want to go beyond, they need to reach like a larger audience and IPO are a way to do that. While at the same time, it's a different level of maturity. I don't think they're like abandoning crypto values or anything.

I just think that those are companies that have actual revenues. And so they want to be seen as serious companies that are evaluated also for their revenues. While, for example, if they were to just distribute a token and remain in the crypto market, the distribution would be less. And at the same time, it would be hard for them to be compared fairly with other projects that, for example, don't have revenues. So I think the two systems can coexist and will eventually merge.

I think this growth aspect, like distribution, like what you want to tap into is super interesting. I think from the perspective of Maiden, I think you're thinking a lot about institutions and they coming in and like where does growth happen? How do you see that? Who needs it more? Does crypto need the institutional angle to grow?

Does the institutional angle need now the crypto rails to grow? I think it's a little bit of both. When I look at how the narrative has been, it's always sort of been seen as like crypto versus TradFi. And I just think like it's FinTech 2.0 in so many ways.

Like here's new rails to do interesting things that you can't already do with TradFi. TradFi is interested in doing them. And so we're offering opportunities to be able to do that. And it reminds me a lot of like in the early 2010s when large tech companies would just go and start buying like, I don't know, Waze and everything, Instagram, WhatsApp, to be able to figure out we're not going to be able to do this. And it's sort of like a product and distribution issue where if you work with the Franklin Templeton, the access to distribution that you have for whatever it is that you might be doing increases exponentially.

But Franklin Templeton's ability to be able to figure out how to build that tech is completely different. And so in working with and already chatting with a lot of these institutions, what I continue to find is that we need to come together because there's almost an arrogance that crypto folks have that they think they know what it is that needs to be built that TradFi needs. And then at least TradFi, from my understanding, has been like they get that they don't have any clue how to build any of these things, but they're interested in the potential profits that they can generate. Do you think this convergence, crypto companies, IPOing, maybe going more the M&A route, is that something that we'll see more and more? Absolutely.

Yeah. Absolutely. I can't see it being any other way. The more conversations I have, the more I hear with each institution that huge appetite for doing stuff with zero idea how to go about doing it, for the most part. And so the same way tech founders did, they'll go buy a company, they'll force the team to stay on for two to four years to vest everything, and then they'll give them a Kush title, they give them a million dollar a year salary, and they'll tell them that they have to go out and build the team out.

Because can you imagine going to someone at J.P. Morgan and being like, to find the best developers for what you're looking for, you need to figure out how to scour crypto Twitter and people are like bears in the pickles. Seriously, right? But for us, that's completely normal, you're like, oh no, that pickle is actually one of the best developers in the world.

There's the pickle. Denison, we talked also about it shortly beforehand, will we see maybe a first DAO being acquired by a Fortune 500 company, or? Well, we've seen DAOs acquire each other, right, so that's happened a number of times. I'm not sure if a Fortune 500 company directly will acquire a DAO, you'd have to have a DAO that brought a lot of value to it, because again, a lot of DAOs today, they're constituted under a framework that was deliberately created to be inefficient and structurally have issues, and that often poses a lot of challenges on buying them. Great example is, a lot of organizations don't know who the token holders are, maybe it's North Korea.

It would be very difficult for a company to take the risk of buying North Korea and then allowing the North Koreans to trade their tokens freely, right? That represents a serious, serious danger and risk to organizations. New organizations that are created, actually the chance is quite higher, right? If people build out these decentralized orgs in a very compliant way, well then I think traditional institutions will have a lot more visibility into understanding what they're getting into. I think additionally, something that we'll see a lot of is a lot of decentralized organizations actually IPO-ing their lab entity, right, where we actually have this world where you have this token, which caps at some sort of value ideally, but you also have the equity portion of it.

The equity portion is very ripe for IPO-ing. Even if you look at something like Circle, which you don't consider as a DAO, it is an equity company that has a token, right? If you look at Tron, which has announced that they're going to IPO, it is a token, and Adam now will have an equity organization too. I think we'll probably see this weird hybrid coming forward where you have these large, especially finance, DeFi kind of institutions that'll probably go the route of having a token as well as IPO-ing. So they're going to kind of double dip and get the best of both worlds, but these two things are actually going to merge.

The equity and tokens, we'll tokenize equity, and we'll equityize tokens, and then we'll have both of them, and they'll come together, and they'll be separate things. So I think we're going to see a lot of new innovation from these sort of organizational structures coming forward in the next four years. I'll follow up to that for any of you who wants to take it up. We do see it like going full circle, right? Like yesterday, Coinbase announced they want to bring on-chain stocks.

So now we have a crypto company that went IPO, that's awesome, might have a token. They tokenized it again, and now we trade everything in the same system. Do you think tokenized stocks next to governance token, next to different, like, can all coexist kind of for investors or for owners of companies in the same system, or like, what challenges does that bring to, again, put it all into one basket? Yeah, so I think, again, with like the Clarity Act, there'll be like very clear definitions here which are going to be very useful. The protocol is actually going to, tokens are actually going to represent protocols themselves, and protocols are going to exist in a little bit of a different class of like the entity org, even though in many cases for, you know, based on Clarity, like the first four years, the protocol may be directly controlled by the equity entity.

But if you think about most labs and fees that have built out protocols and launched tokens, a lot of them don't only do that thing, right? Like Uniswap labs build a lot of other products that aren't Uniswap protocols, things like the wallet, for example, right? These things monetize, they have cash flows, and they are not at all related to the token, right? So I think we will see that in many cases, like some of the labs and fees that launch L2s, right? Like once they launch the L2 and they have the token, well, they could go launch a whole new L2 with a whole new token, right?

So you start to see the token as related to the product or the protocol itself, while actually the labs entity, the equity portion is actually free to build a lot of other things. So I think we're going to see all of this happening together, those definitely coexist, there'll be a lot more options and opportunities for investors. Ideally, there isn't like a crazy amount of confusion around it, but there's definitely going to be opportunities also to intermingle these things in one way or another. Yeah, I also think they might be slightly different financial instruments. So for example, like the crypto market is open 24-7, the stock market closes on weekends and things like that, and also the crypto market is generally a bit more liquid, so it moves faster.

So I think that even the nature, like even if it's the same company, the fact that you have it in different markets means that you have different financial instruments with different scopes as well. I'm going to be curious how, you know, if stocks come on chain, the flexibility of how trading works and the lack of compliance with how trading works, how that's going to honestly affect things. It's been one of the things I've been thinking about is like, how do you make sure that the Lazarus Group isn't the one that's buying AT&T on chain and figuring out how to make money on it, and that turning into a big story. And so I think in the beginning, it's probably going to have to start out much slower so they can figure out what they really need to do with that. Eventually, it'll mature, but I've been chatting with teams who now are talking about trying to figure out how to generate yield on tokenized stocks too.

I'm wondering, like from your perspective, if one looks five to ten years down the road, like what is the biggest blocker for like on-chain organizations or to move more on-chain? What do you think has to fall in place in the next five to ten years? I would say regulation, because right now it's still, it has improved, but it's still a gray area and like many DAOs, many organizations like don't really know how to do things in a proper way. So we find workarounds, we have like time and entities and things like that, but that's not how you reach mass adoption. So I think regulation and having clarity is definitely like one big element.

I think it's simply going to be so much of what we've seen with DAOs and everything around it has been around ideas of inclusivity and fairness, and it's almost intentionally been ineffective. But I think the big thing will be showing that these actually can be more effective and more efficient as compared to traditional things. And so I think by then we will, but yeah. I think sort of like echoing like what has already been said that, you know, I think the regulatory part of it is the important unlock going forward. So, you know, while we can speculate a little bit right now, I think in the next, you know, what it's going to look like going forward.

Thank you very much for the panel. We have time for one quick question or two from the audience. There we go, there's the question. You just have to wait for a minute. Yeah, I mean, like you were discussing how basically we'll see like last entities launched several tokens and the token being more related to a specific product or protocol.

But I guess in the early stages of startups, there have been many organizations that are still in their early stages. You should expect them to pivot. And so like if you're an early investor that's invested in the last entity, great, you're participating in all the pivots. But like it's kind of like a bad story to tell for all the public token investors. Like one of the issues, like people saying, okay, actually tokens should trade at a discount to equity because of that.

So do you see also like having more rights being given to token holders to participate in pivots for the tokens that are being launched and actually kind of, right? Maybe that's just onto insecurities after all then. No, no. So I think what's going to happen is that the token holders definitely are not going to have any rights in the last entity. And I think when you go to right now, you sort of expect the lab density to launch a token and the two things to be the same thing forever and always.

And that's probably not going to be the case, right? If you hold UNI token, you don't have any piece of UNI wallet. That's probably going to be okay, right? Like, you know, I'm a UNI token holder. I like UNI token and I think Uniswap is great.

I'm not interested in investing in a wallet business. I love UNI, Uniswap, like the protocol, but I'm not interested in wallet business. If the wallet had its own token, like UNI wallet token, I would evaluate UNI wallet token on the basis of like that product itself. You know, would you, you know, is that a bad thing? I think, you know, there's an assumption there that the token has to represent the lab density and they definitely will have to pivot.

So, you know, the token represents probably the protocol specifically. And does that protocol survive and work on its own? That's going to be, you know, a big question. Token holders themselves will certainly have some rights and like capabilities around that network in and of itself. But I don't think that we should expect going forward that by default, the token represents the equity and the equity represents the token.

Because really in the sort of like new regulatory future that, you know, we're probably going to get, that's going to be very strictly separate. So you just won't have any like labs sort of relationship to the token. The token will be specifically for the network. And then, you know, your purchase decision or your investment decision or your participation decision is going to be on the success of that network versus the success of the labs activity. Thanks so much.

We'll be back in a minute with the next panel.