🎙Ex SushiSwap CTO Joseph Delong on Why DAOs Fail

Joseph Delong is the former CTO of SushiSwap, one of the biggest decentralized exchanges, and the founder of Astaria, a recently created NFT lending protocol. Joseph has been heavily involved in building and managing DAOs. With the recent controversial proposals surfacing on MakerDAO and Lido, we are once again reminded of the importance of DAO governance. We begin by talking about Joseph’s analogy on what would happen if a lemonade stand was run by a DAO and reflect on some of the DAO experiments that occurred over the last couple of years.

We go on to speak about the different factors involved in forming hierarchies within DAOs and how individuals assume leadership roles. Joseph also shares insights into his experience at SushiSwap and the difficulties he encountered as the CTO. Joseph goes on to share his thoughts on reward models across different DeFi projects. He believes yield farming in the long term damage projects as costs of liquidity incentives become greater compared than revenue. A major discussion in DAO governance has revolved around token holder concentration. Joseph also discusses the current 1 token = 1 vote model and shares alternative governance systems.

Podcast audio and video was edited by Daniel Flynn and Alp Gasimov. Transcript was edited by Claire Gu.

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👀 Only paid subscribers have access to the full interview transcript below.

Camila Russo:

Joseph Delong is the founder of Astoria, a recently created NFT lending protocol, and the former CTO of SushiSwap one of the biggest decentralized exchanges. Joseph is heavily involved in building and managing DAOs. He recently wrote a Twitter thread satirizing how it would be to run a lemonade stand throughout DAO. Can you go over what you meant with that thread?

Joseph Delong:

Yeah, this lemonade stand [is] run by little Jimmy and a thousand token holders of this lemonade stand. He has a profit margin of 80% on the lemonade. And it's just all the random things that happen in a DAO that are trying to influence the product. Much of those are around these absurd tokenomics, and then secondarily it's around product features and roadmap, which is difficult. So for me, this is more of an explanation about DAOs that are building products. So MakerDAO would be an example. I really don't see any major problems with ones that are doing like investments as a collective.

Those seem to actually go really well, just a good way to pull money. Maybe the user is generally gonna be more sophisticated, but for the ones that are building products, it's really problematic because you have so many cooks in the kitchen and the reason that the corporations don't take the advice of every stockholder's opinion is that's impossible. What they do is hire the management team and then they build the product together and they do a bad job-- they get fired, right? In DAOs. this weird volunteerism mixed with token valuations. It's insane. I think most of it's insane, especially VE token models. I think long term, what we'll see is a drift away from tokens. I think what we'll see is people making normal equity companies.

CR:

Can you explain a bit more what are VE tokens and how have they been implemented in DAOs and why do you think the space will move away from tokens in general?

What are VE tokens and how have they been implemented in DAOs

JD:

Yeah. VE tokens are this: I provide an asset for the DAO to use as an investment. And then I get this VE token. That's like my claim on the underlying assets that are non-transferable. And this is like that same madness that started. I'll go point out like SafeMoon. This is in the same realm of tweaking the tokenomics in such a way that gives it magical properties so that people can't transfer when we saw that with Ethereum too. Right. The Ethereum too has been nontransferable, but, you know, Lido and Rocket Pool exist. And if that's the case, then how come it's non-transferable? It's like people just naturally take riskier positions because they don't hold the thing. They use an intermediary. So the VE tokens in particular were just like an asset that I can't sell on the open market. And therefore it's gonna be valuable. This is just the sort of stuff just kind of bugs me. But generally you just say DAOs are like a collection of people that are trying to accomplish a goal and if that goal is building a product it's very difficult to do inside a DAO.

CR:

So there's the question of whether this VE token model where you're kind of placed staking tokens in a DAO so that you're linked to the DAO long term because the idea is that you can't withdraw these tokens after a certain period of time has expired. So that's one aspect of it, but I thought it was interesting that you mentioned that you think DAOs will move away from tokens in general. Is that true? And how can that [be]?

JD:

No, not DAOs. I think people building products will move away from the DAO model. Here's an example. I was working in a DAO before, and I was basically making a salary to do that, but talent like myself, or any of the other people who work at a lot of these DAOs is valuable and DAOs aren't really necessarily treating talent [a]s valuable. And so what they do, and this happened in a lot of the DAOs I've been in, [is that] they just break off and start working on like side projects where they get poached by other startups or they just leave and start their own startup, which is what I did.

CR:

So do you think DAOs will be mostly used to pull money together and invest? Will they serve as mainly investment clubs, I guess, or decentralized or semi-decentralized VCs, but it seems like you don't think they can be a viable alternative to companies, to corporations.

JD:

I don't think so. I think if we do, there has to be an understood hierarchy and governance process for installing and removing that hierarchy. I think a lot of the DAOs start not knowing that they'll be successful, because people are just running experiments. I don't wanna bash any of this experimentation either because I think that that's like really valuable for the ecosystem, but they have these imperfect births most of the time. And then because of that, they're not allowed to have explicit hierarchy. And when you have explicit hierarchy, you have a transparent system for how the hierarchy works. But the counterpoint that I think a lot of people want to believe is that if we don't install a hierarchy, [or] that there is no hierarchy. But there's a short story written by a feminist called the tyranny? Hmm. I have to remember the title. But the point of that story was that having no hierarchy doesn't create no hierarchy. Having no hierarchy creates an opaque hierarchy. And so I don't know who I'm responsible to, who is calling some of the product direction, et cetera. Is this problematic?

CR:

Yeah.I saw this. The Tyranny of Structurelessness.

Joseph:

The Tyranny of Structurelessness. Thank you. Yeah. That was in the talk I did at ETHDenver.

CR:

The Tyranny of Structurelessness explains how leadership and power can be ceased when left in a void. We go on to speak about the different factors involved in forming hierarchies within DAOs and how individuals assume leadership positions. Joseph also shares insights into his experience at SushiSwap and the difficulties he had encountered as a CTO.

JD:

So on December 27th, I was, I was working part-time at Dapper Labs on the Flow protocol. I had come from Eth2 research. I had done that for about two years-- Eth research and implementation. And then I was working at Dapper Labs and Maki whom I had known from DeFi Summer called me and asked me if I wanted to be CTO. And it's like, oh, okay, that's interesting. Because I thought sushi was a really fun experiment at that time. I had some like tokens, not very many, but I had some and I said, yeah, okay, I'm interested. And I talked to my wife about it and she said I should go for it, which actually shocked me because she generally is pretty conservative and trying to work at a thing that isn't a thing is difficult. So then I said, okay. I called them back and said, okay, it has to be CTO because it's gonna be, you know, beneficial for my career. None of this is made-up role kind of stuff, the ed chef of blah, blah, blah, something.. And he agreed and they wrote up like a proposal and that proposal passed on January 5th. And then I was helping build out products and roll out products and manage a team and work on technical architecture.

CR:

And then what happened that you left? I know that this is very much tied to how DAOs are structured. From the talks you've given, it seems like that was a big part of why in the end, you decided to leave.

JD:

Yeah. The team was fighting a lot. There was this continuous infighting. The ability to build anything, which was the whole reason that I was there, to build something interesting, became diminished and almost eliminated. And so I just said, you know, this isn't for me anymore. Like, we would have these kinds of long group calls that would just lead to nothing. It would just be everybody yelling over everyone. And it's like, insanity. And I've experienced this not only at Sushi. I've experienced this at other places that are decentralized. There's no hierarchy. I came from the Fortune 500 world. I was working at a bank, [and] it's like if you want to go for the polar opposite. I always anticipated the goodness in people was the reason that things like banks and DAOs themselves would be somewhat functional because there's a limit to the level of human cruelty.

But yeah, I've found out the opposite. There's kind of no limit to the level of human cruelty. And that makes DAOs really impossible in my view without some sort of structure. So we were fighting a bunch and I could feel it that Trident was never gonna ship at this rate. We would have to offboard a bunch of the team. We would have to onboard a bunch of new team members and I didn't have explicit power to fire, but I only had some explicit power to hire. So I just figured I would go take a break and then found my own company, which is what I did. I went to took a month's vacation, went to Hawaii, went to Dubai, went to like everywhere, [and] then started Astaria.

CR:

So what are the, the main lessons that you took from Sushi and are now implementing in Astaria?

Explicit hierarchy

JD:

Yeah. Explicit hierarchy is a big one, like how everything is laid out. What else is there? Well, I'll tell you one thing. Building is a lot faster. I feel like I'm on super speed with a team, a close-knit team. Another thing that I learned that is probably not necessarily related to DAOs, but was premature scaling. I think Sushi was definitely premature scaling the team. We were I think at the top 24, 26 team members, and 18 of those were developers. And fast, small, effective teams are a lot better. Counterparty risk, you know. Where the control for the thing you're holding is what the Bitcoiners always say is, not your keys, not your Bitcoin. Something like that. Not your ownership, not your GitHub. Not your keys, not your multisig, et cetera.

CR:

So do you mean team members should, should have ownership over the thing they're creating? Like there should be accountability, is that what you mean?

JD:

Well, has to be somewhere. There has to be ownership of something somewhere. Like somebody has to own a domain name. Right? There has to be a legal entity of some kind. So be a person or a company, someone has to be the admin or the owner for a GitHub repository or GitHub organization. Somebody has to be. So there, there are all these touch points of control and that wind up being a disaster when things start to unwind it's like, that is where the literal control rests. I think like one thing that I thought about at ConsenSys is, ConsenSys was another one of these leaderless organizations. And my time working at consensus was... by the way, I love ConsenSys, but it was a bit chaotic. And when it's leaderless, this counterparty risk that I was talking about, where the control of something actually lies wound up being financing. So can I ask you to write me a check to let me do X or Y or hire a new person, or build a new software. And that's where the explicit control comes from.

Importance of Communication

CR:

And that's, I guess very much tied to hierarchy, just like having a specific and explicit structure for the team and who's in charge of what and who responds to whom and so on. So I guess the main lessons are having that structure, that hierarchy within the team. Having explicit control, explicit ownership, scaling gradually, or scaling according to the project's growth. I guess that's a matter of efficiency as well. What about communication? I wonder the fact that there are so many contributors in doubts coming and going and this picture... It has to make communication pretty hard. Different time zones. What kind of lessons did you learn from that?

JD:

Totally. I think that communication is a very key one that I didn't touch on at all. So I think for Astaria, one of the things that we did was early we picked like our channels for communication, which for us it's slack for another team, it might be something different. Like with [the] DAOs I've been in, I'll be stretched across Telegram, Discord, sometimes Signal if somebody wants to use that, and Twitter DMs. It makes you all over the place in terms of communication. Your communication graph is just huge. Yeah. Picking a venue to communicate. I also think the way people communicate with each other is really important, right? I think we always equate professionalism to suit and tie and well-mannered not cursory et cetera, but I think I have an alternate definition of professionalism, which is this idea that you commit to something and you hold yourself accountable to that thing that you're supposed to do. As well as your communication should be with your team and your coworkers should be at least polite. I think that's really easy to have a polite conversation with them about something, because none of this at the end of the day matters super deeply. I mean, we're all just trying to go home to our families and trying to be the most successful organization. So, regardless of whether you are feeling one way or the other about the way an organization should go, the conversation should be polite. And I‘m probably guilty of not always being polite in those instances. So again, as a general matter of fact, I think that we should endeavor to be more polite with one another,

CR:

For sure. Where do you think token holders have a role in organizations? In DAOs the way that things have evolved is that there are these instances for governance to give power to investors and users of the thing that you're managing the protocol. And I think that's a very inspiring idea for the future of organizations, like democratizing decision-making to the users of web3. And from what you're saying, this makes organizations less efficient, but I wonder if you think that there could still be a role for that.

JD:

Yeah, totally. I think governance tokens are critical, but I would say that it is a governance token and not a management token. Right. So we should use it as a governance to install management, install hierarchy, and remove hierarchy. And then the first few proposals should be explicit about that. I also think governance tokens are nice, but there are problems with some of the mechanisms. One of them in particular is yield farming, or what do they call it? Token distribution, staking, staking rewards, et cetera. This style of token emission is so problematic. The whole design is essentially to get people in the market to be buying the token, to get people using the token. And then now the ability to emit these tokens has some sort of value, right?

And so in instances of some of these protocols that emit tokens for liquidity, that makes sense to do it in a bootstrapping sense, like to get people interested in a project and amid some tokens. And then many of these projects are making revenue, but they're not making profit because they're emitting tokens that are, that are far exceeding their revenue in the protocol. And the expectation is that sometime in the future we're going to succeed. And now all these tokens are gonna be worth a lot more, but that's not generally how it works, right? Because we're emitting tokens that aren't exceeding revenue, and then we continue to emit and emit and emit emit until they're completely diluted. A lot of these teams, aren't getting tokens, like a significant portion of their tokens for their work. Just like I was talking about earlier, talent flees. Talent will go where their talent is respected.

CR:

One of the biggest challenges, DFA projects face is onboarding users. Typically users are incentivized through liquidity mining and yield farms. However, in the long term, these mechanisms damage projects as cost of liquidity incentives or far greater compared to their revenue. Joseph goes on to share his thoughts on reward models, across different DeFi projects.

Reward models across different DeFi projects

JD:

I always said that it was habit forming. Like the token emissions are habit forming. There is a very specific narrow band of when you should use it. And I think that is to get initial flywheel effects for something. And there should be a very short window that it's using, because if you continue to emit, and your revenue is not even crossing the threshold of your token emissions, then you're just paying people to use the platform, and it becomes a shell game. So you'll see this with Spell, you'll see that with Sushi, you'll see some of these protocols that continue to emit because this becomes a shell game of where is the actual value being accrued.

So I completely disagree with this model. And I think people are coming onto that. Now the alternative is, when it first started and I've come like 180 degrees on this. They used to be the DAO maxi, token maxi kind of person. But if you look at Yearn. Yearn was really successful because they had a really great product. And then Sushi was successful, I think, partially because they borrowed a really great product. And then after those two really good use cases, the staking rewards [or] the notion that people had about staking rewards was that, oh, this is a good and useful mechanic to get uptake on your system. And they became so broadly adopted and so abused like the mechanized farmers who would farm specifically. It became so abused that it's a completely irrelevant sta. And another thing to think about is the staking rewards should be somebody providing you a service. In the case of like Sushi or whatever. It was people who were providing liquidity. Or in the case of Uni, it was people who were early users. They got airdrop, but it should be somebody who's providing you something because you're kind of giving away something of value. So I think people are just totally drifted from this. You look at Gem, you look at Genie. Those were two equity acquisition. I know Genie had a token, but they're wound up being an equity deal essentially. And you look at Opensea, who's never issued a token. I think it's clear that if you have a winning product that's generating revenue is a real business. Why would I give that away?

CR:

It was interesting to see that that Uniswap-- when they bought Genie, they announced these rewards in USDC. I thought that was very curious. Do you see this as a new model emerging? Why not give away protocol tokens or native tokens?

JD:

I think Uniswap Labs is one thing that I aspire to model Astaria after. Their model was very good. I would say with the exception of the UNI token. They did this airdrop for genie token holders that was in USDC. I think that was kind of brilliant because once a token has become emitted, there's nothing you can do. Like creating a merger requires you to make a contract that you can redeem for. You have to have people like swap for their original token, and then you have to have them actually do it. And you can't force anybody to do anything. And so I think that airdrop was actually brilliant.

I think that was the way to go and get the tokens off the market and go straight in as equity businesses. Uniswap Labs didn't buy this for UNI token holders. Right. This is a Uniswap Labs' acquisition. And the Uniswap token is actually ownership of the protocol, ownership of these V2 and V3 smart contracts like switch their governance and their BSL license. So I think tokens are great for some instances, but everybody is seeing them as out there. Their perception is that it's like proto equity and that's wrong. That's completely wrong. We're seeing tokens that should be ownership of things that are literally on chain, not this kind of shadow equity. That's insane.

CR:

That's interesting. Okay. So to clarify it it's true that at some point tokens did become seen as equity, as a way to get a share of a crypto project. Because of the governance power that they have-- it's like this expectation that at some point token holders can vote to get some sort of dividend and part of revenue on the fact that you can participate in governance, make token holders have some sort of right to the project. So in those ways, it does make them look like stock, but the distinction you're making is that the thing that tokens should control is not the entire project. In the case of Uniswap it's obviously just not Uniswap Labs, the company, it's actually the protocol, the whatever kind of revenue and liquidity that's on chain. That's the thing that's directly linked to the token. Nothing else. Is that right?

JD:

Yeah. And I think that their equity is really where all the value lies in any of these companies. It's whatever is out there in the zeitgeist today for Uni is that's what the UNI token is for. It's like the fee switch and BSL license and governance, but Uni's gonna make more hits, right? They're gonna make V4 or V3.1 or whatever. Right? And I think that's the value, the talent and the team and the management, because protocols can be released every day. I mean, I think Sushi did the same thing. It's just rolled out a copy of V2.

CR:

So even to you, even if like all of Uniswap activity happens on chain, to you, the equity is where the value is because the team is what's valuable in the case of Uniswap, especially in web3 where everything is open source and in the case of Uniswap you're not allowed to just fork it anymore. And you know, they have this business license, but in most cases, stuff is open source and you can just copy it. So the teams, the actual talent becomes even more important.

JD:

I think for sushi, the power was the team as well. It was the team behind it, because initially it was just this V24. And then it evolved. The team was hyper talented and focused on delivering a bunch of different verticals in the DeFi stack. And for another instance is like Yearn, right? There are a million Yearn forks, but the team is what's valuable. Not the protocol.

CR:

Yeah. I think that's totally right. So how do you think, what's next? how do you think this space will evolve? What's the future hold for tokens? Do you think they'll become valued less as it is? This becomes more apparent or maybe there's a change in regulation where tokens do become more like equity? I don't know. Where do you think DAOs as a model are going.

What does the future hold for tokens?

JD:

Yeah. I would love to see some regulation pass that allows tokens to be equity. I think it's very unlikely, but that would be the ideal scenario. I think that's what everybody's hoping for so long kind of this pipeline. And I saw this actually the opposite way for a long time, but so long, I'll say this pipeline of VC to IPO has been, like, we only allow sophisticated investors. And these sophisticated investors' qualifications for being a sophisticated investor are you're rich. And they have controlled and extracted the value from this pipeline until acquisition or IPO. And I always thought that that was just a value extraction, but actually now that I'm in this system, having seen tokens, actually, it's value extraction, but it's also accountability.

So tokens, a lot of these teams kind like release tokens and then they're gone, right? There are founders of projects that are gone in six months because they've already kind of like exited their position by minting tokens and having them on the open market. I think there's like a lack of accountability when it comes to. And there's this very firm accountability when it comes to equity. So I think most of the people...I think the question is, how do we evolve in this space? I think the way that we evolve is that we have this really great set of ethos in DeFi, which is like kind of somewhat free and open source, allowing other people to use the platforms, trying to help people who don't have access to sophisticated financial tools. I think those are great ethos that the space carries forward, regardless of whether they're equity companies or token companies. And I think most everybody who is talented is kind of going to migrate into like an equity only company.

CR:

Okay. So to you, where is there space for tokens, like one showed up a project, have a token.

JD:

Totally. Yeah. I think that there are definitely a space for tokens. I think it is like a fundamental building block in this space as well. So I think like when we saw the ICO boom in 2017, we saw a lot of these utility tokens that were really forced and governance tokens were the next step I think in terms of the value of something and governance tokens had this real value to them whereas the utility tokens were kind of not making a whole lot of sense in the system. The tokens definitely have a place. And so we use them as an atom to build new things and not necessarily governance tokens specifically, for instance, on Astaria we have an ERC-20, 40, we have an ERC-46, 26, which is an ERC-20 compatible vault token that was developed by, I forget if it was Faye or Rari, but one of the two, and we'll use this the way you might use-- an integer or a float or a char in any software development, we kind of use it as like a building block. I don't know that there's a huge future for governance tokens. I think people will still use them. I think there will be a hybrid model that infers ownership over a thing that's on chain that you can actually govern, say interest rates or more token issuance or fee switches, that sort of stuff. And that's where, the token model really makes sense. I think governance over a thing that we can control.

CR:

Makes sense. Can you explain a bit more what you meant about using tokens as a building block?

JD:

Yeah, sure. I think the most fundamental level, most everything on chain is gonna be a token of some sort. ERC20 or ERC721, because it's almost like a memory pointer. And so we call them the DeFi primitives because we use primitives in a programming language. This is my two cents. I don't know if that makes any sense. We're gonna be swapping tokens. If we're swapping, we're not gonna be swapping differing standards. That was like one really clear thing that they did in Ethereum really early. I mean, ERC 20. It was like the 20th EIP. It was like to write a standard for the token interface. So we didn't wind up with a billion different token types. I mean, we still have quite a few, but they all have to conform to the base set of C 20, otherwise they're irrelevant. Right.

CR:

Right. So you mean tokens are useful as financial assets and they can be fungible, they can be non fungible, like NFTs. Maybe they can represent, I don't know, like things in the physical world, or?

JD:

I would love that. I can't wait for that to happen, actually. When ownership on chain is respected in the real world, can you imagine that your mortgage is like in ERC-721? I saw somebody actually get blown up on this for on a podcast for saying that idea. The thing that has to change is the laws, right? If you want.

CR:

Oh yeah. I saw that Marc Andreessen was saying that property should be traded on chain. And the guy was like, but how do you enforce that mortgage is paid if all you have is an NFT. Do you go to the bank and be like, Hey, I own this house, but you know.

Joseph:

Yeah. The same way that I do it with the piece of paper, exactly the same way. Right? I go, hey, I own this piece of paper that says, I own that house. Can you get them out please? And they go, they won't leave. Okay. Let's call the sheriff. That's it. Right. It's not rocket science. We just need off chain to respect what's going on chain. I know material was like focused on that early on. And I know there are people who built-- you have to like set up like a trust or something. And then the trust has to respect the token on chain. But yes, I love real world assets being on chain. Getting a mortgage is like that. I go to Aave and I get a mortgage or I go to a Astaria and I get a mortgage. It's amazing. Yeah.

CR:

Yeah. Well, Maker's already doing that... What's this project with a C? I'm, I'm blanking on it. Do you know the name?

Joseph:

I've heard about it, but I don't know any details. I just heard that they're doing something with kind of like Tradify stuff. Compound has some sort of business arm that they'll have like a Compound savings rate kind of thing. If you're a high net worth individual, you can get, I think, like 5% or 8% or something steady. And then there's Maple, and they're doing some of this real world money, but moving your asset, that's interesting I think.

CR:

Yeah. There's been Tesla use maker to close out actual loan to buy stuff in the real world. So these bridges are starting to happen. I don't think it's so far-fetched. I think it's actually the direction that hopefully that DeFi is I believe it is going that way. And the company's centrifuge that's using maker to add kind of tokens that are linked to real-world assets as collateral. So I think they do invoices.

Joseph:

So it's like, I can buy someone's receivables or something. Very interesting. .

CR:

Yeah. So that's already happening. A major discussion in DAO governance has revolved around token holder concentration. What we see now in web3 is reminiscent of traditional models where VCs owned IPO pipelines and private equity. A large share of tokens in web3 are held by VCs. Joseph discusses the current one token one vote model and shares alternative governance systems.

Alternative governance systems

Joseph:

It's difficult to understand what the alternative might be to one token, one vote, right? We have delegations . Delegation makes more sense, I think, but it's still technically, one token, one vote, because I'm delegating to this. I mean that's just like representative democracy, right? We do that basically everywhere. And so that's probably a decent system. One like having every single person get warmed up every single time, there's an issue. And the other thing is like the voting fatigue is very much real for DAOs is like, if we're voting, I have to keep up with this thing, and then I have to stay informed of the issue. And then it also has to be something that falls into my domain of expertise for me to decide whether it is a good idea or it's a bad idea. I think those are really difficult things to do. And representative democracies are really good at that because that's kind of like this. But we joked about protocol politicians a while ago in the Ethereum ecosystem, but I think that's what people are becoming. And I think it's net positive that we have representative democracies who are paying attention to the issues and casting their votes on a basis of something that's inside their domain of expertise.

CR:

Yeah. That makes sense. What about something that can tie your wallet to your identity? So it's like one person, one vote, do you think we'll ever get there?

Joseph:

Yeah. This is kind of like around civil defense kind of stuff. I can look into the orb and it will read my eyeball and it will tell me that I am the unique individual or Santi series proof of life, proof of humanity. So that's another noble goal, but should it be one person, one vote too? I have very, a lot more at stake saying that maybe I own 20% of the token supply of something. That would be a conversation to be had, because if it's one person, one vote, then that's a bit weird, especially if they have less at stake, that might be part of the problem with DAOs is people who have very little at stake, spending a lot of their time inputting into the layers of the DAO, which is like the discord and then the forums and they not necessarily have much at stake other than being able to write stuff.

CR:

Okay. So that would be an argument for one token, one vote. I mean, the fact is that token holders who have more tokens are more involved in their protocol. They're probably team members. So there's an argument there that, maybe that should have a bigger say

Joseph:

It's like in my interactions in DAOs, the people who are normally the large token holders, they aren't necessarily the teams, the teams generally aren't doing very well, which is another problem with Dows. But the large token holders are definitely consummate professionals. They're always venture firms, prop shops, hedge funds, et cetera, and working with them was always great. Actually, I really enjoyed that. And they were like a real pleasure to work with. And then the flip side is the, the smaller token holders were very often a misery to work with. They're just complaining about the token price or whatever. And I don't have any control over that. I just, I could just build products. That's all I can do.

CR:

Devs do something.

Joseph:

Yeah. Yeah, exactly.

CR:

So is it problematic that VCs have you so much power over, over voting? I mean I see your point [that] they are smart money--it's what it's called. They, they know what they're doing. They're in the space. They can make an informed decision when they come to the vote, there's this suspicion against them because they just end up owning so much of what's supposed to be like a decentralized ecosystem.

Joseph:

Totally. And then things that aren't fair launch, it happens that way. Right? It's like they have the super secret, double secret, like token sale that happens, maybe equity or whatever. And then they're large holders. I think that's a huge problem actually. They're having like an outsized portion and we're able to participate when nobody else could participate. Things that are fair launch like Yearn or Sushi or whatever are, are less problematic in that regard, because anybody who had bought up a bunch of tokens off the market had done it at the market rate. And they had a long term belief that the project was gonna be successful. So I don't see it as a problem. But yeah, these are like underhanded token deals I'm not crazy about.

CR:

It's like, as long as they were able to participate in the same condition that everyone else was, then it's fine.

Joseph:

Yeah. But they're also earlier too. And so they are taking a risk in that regard, but yeah, the proportions are crazy out there. Mm

CR:

We're coming to the end of the hour, and I really wanna get your own story in the podcast, because I think it's so interesting how you came to crypto. And there's the question that I ask a lot of my guests, like, how are you defiant? And I think maybe we can tie that to your own story.

Joseph:

Oh yeah, totally. So I was kind of like a serial f**k up. I think I still am actually. But [I] left high school [and] somebody deemed not for college, and kind of fail through like every job that I'm in until I go into the military and I go into the air force for four years during the Enduring Freedom and Iraqi Freedom, happily named missions. And while I'm in I start learning [that] this is like Ron, Paul was huge at this time. And I was like, you know, end the fed kind of stuff. And very much this libertarian mindset. Then I leave the service and then I go to school for computer science and mathematics.

Joseph:

And then once I graduate from that, I go to a bank, which is USAA, which is a bank that serves like veterans in their families in terms of the scale of like evil. They're all the way over on probably the good side as far as banks go, but it's, you know, it's still bank. And I learned a lot about money movement and while I was in school, I had gotten involved in like Bitcoin as well. And then now I'm involved in dogecoin and figuring out what the space is like. Then Ethereum pops up and I'm like it's not even relevant to me because that time was 2014, 2015, where all these random coins are popping up, Ethereum pops up.

Joseph:

Yeah. It was 2015 of course. And Ethereum pops up. I'm like, ah, whatever dude, I'm not that interested because I'm over here. I have doge coin and some other random like master coin or something. And enough time elapses. In fact, I worked with Hudson Jameson at the bank there. Actually Johnny Ray, I worked with at the bank from element fi like CTO of element fi and Hudson Jameson. I worked with at the bank as well. Like something in the water at USAA at that time. So as I finally like come around to understanding Ethereum, I'm like, oh my God, this is amazing. This is like gonna change everything. Especially you talk about like the money use case of Bitcoin, that's great. But the entire financial system that's a lot bigger addressable market. Then we do some stuff with the bank and try and get them to do subrogation on chain. Subrogation is the process of cost recovery after an insurance incident. That's the insurance term. It just means getting your money back from all the people. And then, I leave to do Eth2 core development because I cornered Joe Lubin at Southwest when they had a booth there and I cornered him and I made him look at the thing I built at ETHDenver and he didn't call security, which was cool. And he just had a call with me and Johnny who helped build it and another friend and he hired us as Eth2 core developers.

Joseph:

And that's how we came into this, but I still have that same mindset. I'm very much libertarian in a lot of my beliefs. I think I've tapered some of them after working in DAOs and stuff and understanding the nature of human beings and how public goods work. But generally I think banks are done. I think this is like the last. Once we have a credit card system that plugs right into my wallet, I think banks are over. What good are banks for? I can't think of one.

CR:

I just think your whole trajectory is amazing. You have this thread where you go through it and you really, like you said, you started out going from job to job. You said you didn't have enough money to eat. It says you didn't even have enough to buy yourself a belt when your pants didn't fit because you weren't eating. It's just like a very extreme situation. And to go from that to you know, becoming the CTO of one of the most important projects in DeFi. I think it's amazing.

Joseph:

Yeah. It is crazy when I look back. The banks are predatory and they, they hurt people. I can't think of a good reason to use one and as long as I have blockchain, I won't. I was lucky, I think, just lucky,

CR:

Maybe it makes, I guess. It was a great call to go into computer science and then going up to Joe Lubin.

Joseph:

Yeah. No filter. Yeah. I was choosing mathematics and computer science. I was like, computer science is gonna pay well, but what's hard? I hate math, actually. I still hate math, but I did it because it was hard, I guess. And one of my superpowers is throwing my hat over the wall. It's this idea of committing yourself to something like throwing your hat over the wall. And you have to climb the wall to go get your hat. So pre-commit yourself to something. And then you, the outcome is either kind of embarrassment or success. And if you hate embarrassment, as much as I do very often, it will be success.

CR:

Nice. Nice. I like that. Such an inspiring story. And yeah, wrap up your views on how banks are done for, and just like what we've been talking about. I was like, how does the future financial industry look to you? Is it everything is on chain, but it's still managed by mostly traditionally structured companies. How does that work?

Joseph:

Yeah, this is a great question. What I really want to see, and I think is possible is so many people in the world are boxed out for participating in finance. And that is almost entirely not just money, but crony capitalism ideas that, box people out through regulation. And what I wanna see is the average people, the people like I was. If they have money to save that they can put it into an investment vehicle that sort of, that sort of financial freedom is democratized to everyone. And you see that in like Robinhood and stuff. But I think that DeFi is the end solution. And I just wanna see that.

CR:

I love it, Joseph, this was fascinating. I really appreciate you taking the time. Love the conversation. Really thought provoking. So, yeah. Thanks again for coming on the podcast.

Joseph:

Thanks Cami.