Teleporting to our current situation, we are increasingly witnessing the idea of token-based governance systems, where people can take part to discussions about governance of a given platform and cast their vote, their voting power being based on how many tokens of a given type they hold. Often, these tokens are airdropped to early users, following the idea that early users should be rewarded for their contributions.

These systems have problems. The simplest one that comes to mind is: How does the voting system work, and is it fair? This is not an easy question, and a guy named Kenneth Arrow even won a Nobel Prize in economics because, among other things, he proved how there is no voting system satisfying at the same time a bunch of criteria that we would deem desirable. But even without citing the upper echelons of academia, we see that token-based voting procedures have a problem in that voting power is proportional to the number of tokens held, often turning a superficially fair system into a kleptocracy.

But the elephant in the room is actually that governance tokens have financial value. That is, they can be bought, sold and freely transferred. This creates a huge conflict of interest, for the very simple fact that voters’ stake in a governance system is conflated with a financial investment. As such, voters are incentivized to taking decisions that increase the value of the tokens they hold. As usual, this conflict of interest comes up in full force in dire situations: if a given DAO is failing, it may be way more convenient to sell your governance tokens leaving everyone in the shit than using them to vote and propose sound governance strategies.

…But then, why are governance tokens so widely used? A couple of reasons come to mind: The first, innocent one, is that it is simply the most obvious thing people could come up with, and simple often wins in tech. The second, way less innocent, is that setting up governance tokens and airdropping them to early users is a very convenient way for a project to raise funds: the project keeps a part of the minted tokens, airdrops the rest, and as soon as the token acquires financial value and is listed on exchanges the project ends up with a few million dollars in its own treasury.

Can we make this better? I think that, without diving too deep in philosophical discussions, we can already improve the situation by creating new tools from the ones we got, and to do so we will have to restrict what we can do with our tokens. But first, let’s understand how tokens work.

ERC-20

These are the most well-known tokens around. When we talk about ERC-20 tokens, we are talking about a standard. That is, to be an ERC-20 token, the token smart contract must provide some well-defined functionalities in a standardized way. Those, called methods and events, are:

function name() public view returns (string)
function symbol() public view returns (string)
function decimals() public view returns (uint8)
function totalSupply() public view returns (uint256)
function balanceOf(address _owner) public view returns (uint256 balance)
function transfer(address _to, uint256 _value) public returns (bool success)
function transferFrom(address _from, address _to, uint256 _value) public returns (bool success)
function approve(address _spender, uint256 _value) public returns (bool success)
function allowance(address _owner, address _spender) public view returns (uint256 remaining)

event Transfer(address indexed _from, address indexed _to, uint256 _value)
event Approval(address indexed _owner, address indexed _spender, uint256 _value)

What this means is that your token contract must implement the functions and events listed above, in a way or another. For instance, there must be a function called balanceOf that takes an ETH address in input and returns an integer number of 256 bits as output. This function represents how many tokens a given address owns.

The ERC-20 basic template can then be extended in multiple ways, often obeying complex mechanics. One of the simplest additions one can implement are mint and burn functions that, as the name says, allow to mint and burn a given number of tokens for an address when certain conditions are met.

As soon as you implement the functions above, your contract is an ERC-20, and platforms like Uniswap will be naturally compatible with it, meaning that you will be able to set up a liquidity pool and so on and so forth and swap your tokens for other tokens.

By taking a look at the spec above, we see that ERC-20 is designed with one fundamental property in mind, that is, the possibility of transferring it. Even more importantly, the approve and allowance functions let us authorize someone else to transfer a given number of tokens on our behalf. This is precisely the mechanics that allows platforms like Uniswap and other DEXes to perform swaps. This out of the box ability to transfer is exactly what makes tokens into financial assets: as soon as I can swap resource A for resource B, I can compare demand and offer for A against B and deduce a price.

ERC-721

This is the standard defining NFTs. The methods and events of NFTs can be found here. They have been suitably shaped so that the ERC-721 standard takes something away from ERC-20: fungibility.

Whereas ERC-20 tokens are fungible, which means that any two tokens are indistinguishable one from the other, ERC-721 tokens are not. In particular, every single ERC-721 token has a unique tokenId that allows to precisely identify it among all others.

As one can see, here we are restricting what the token contract can do, as we are taking properties away from the ERC-20 standard. This has resulted in a very expressive standard that, as any cryptonaut knows, resulted in an insane amount of art, games and services being created. Indeed, ERC-721 is by all means the building block of the decentralized metaverse.

What if we keep playing this game?

Many other token standards exist, for instance ERC-1155 optimizes both ERC-20 and ERC-721 unifying their features and allowing for batch transfers to save gas. Indeed, anyone can propose a new token standard to the Ethereum community, that can or cannot officially be recognized as such depending on various things. With governance in mind, let us try to venture through an extreme path.

NTTs: Non-Transferrable Tokens

This feels like an oxymoron. NTTs are just standard ERC-20 tokens endowed with a mint and burn function, where the transfer method has been erased. That is, we can mint and burn these tokens, we can check people’s balances, but we cannot transfer them. This has an immediate consequence, that is, NTTs cannot have any financial value, since they cannot be exchanged.

Why in the world would anyone be interested in this? There are circumstances. For instance, let’s think about billionaires: these people are often the owners of huge corporations, and much of their wealth is in stocks. As such, even if they have enough money to live a thousand lives in luxury, they won’t be able to give away their wealth, because this would mean losing control of the corporation they manage.

In a DAO-like situation this mechanics could be avoided, as people could convert part of their ERC-20 tokens into NTTs, that is, they could sell their ERC-20 token and receive some NTTs back. As soon as NTTs hold the same voting powers of ERC-20, this literally means taking away the financial value, and not the governance value, from a user. So a particularly wealthy person could give away part of their fortune without losing the ability to contribute or control a project they care about. In other words, your favourite billionaire can now donate part of their wealth to solve world hunger without giving up on despotically managing their megacorp.

In the opposite way, a user may convert NTTs into ERC-20, for instance as part of a mechanism of financial incentives. In general, I imagine NTTs as being paired to ERC-20 in a mixed system, where financial and non-financial incentives act at the same time in a compartmentalized way. For instance, investors in a project may receive ERC-20, while team members could have the majority of their tokens in NTTs. This allows the team to withhold control over the project without being able to rugpull the users.

NATs: Non-Approvable Tokens

This proposition is milder than the previous one, and resolves some technical problems. Indeed, NTTs are fully non-transferrable and, as such, cannot be moved if, for instance, one has to change wallet address for security reasons. There may still be ways to achieve this, for instance by a community-authorized mechanism of sequential burns and mints, but things will immediately start getting bureaucratic and complicated.

NATs instead can be transferred, but they lack the approval interface that is needed to make them compatible with DEXes. As such, the financial value of these tokens is not completely taken away, but it is greatly reduced as one can acquire and sell NATs only off the counter. For sure, there may still be collusion where an interested party acquires governance in a project by buying tokens, but this risk is highly mitigated.

In an ERC-20 based governance platform, consider indeed the following situation:

• Platform X creates a governance token Y. Early contributors get tokens airdrops.

• The Y tokens hold considerable financial value, and some contributors sell them at a profit. Even if they care about the platform they contributed to, this makes sense to them because $$$.

• Some individual Z that did fuck-nothing up until then decides to “invest” in the platform, by buying a lot of token Y.

• The wealthy individual Z can obtain nearly total control of the governance platform, depending on their wealth.

What I wrote above is made possible by the fact that Z just has to go on Uniswap to buy Y. To avoid this potentially disastrous outcome, the team behind platform X must be very clever about how they set up liquidity pools and so on and so forth. Also, they will need to keep a consistent part of the token share in their treasury.

In a NAT-based approach, all these risks are mitigated by the fact that Z will have to contact token holders individually and convince them to sell. What NATs take away is not transferrability, but transferrability through an intermediary, which is how things are exchanged today anonimously and quickly over the internet.

CTTs: Centralized-Transfer Tokens

This is yet another concept, that again plays with how transfer functions in ERC-20 are implemented. The idea here is that a transfer doesn’t happen immediately, but must be approved by the token contract through the governance system.

In this setting, when A wants to transfer to B, they cannot do it directly. They send a transaction, and the transaction is marked as “pending”. Every fixed amount of time, the community has the possibility to approve/reject batches of pending transactions. I imagine this procedure to be performed in an almost semi-automated way. For instance, all the transactions below a certain amount could automatically approved. Yet, when particularly suspicious or consistent transactions come through, people can bring this to the attention of the community.

CTTs may be especially useful in systems where tokens give rights to a share of funds contained in a vault. This was the case in projects like ConstitutionDAO, where people deposited ETH and got a governance token called PEOPLE in return. When ConstitutionDAO implemented the possibility to claim back one’s contribution, members of the DAO had the possibility to burn their tokens to claim back the ETH they originally put in. Even more prominently, the vault concept is a core one in DeFi projects such as YFI: You put money in and receive vault tokens back. As time passes the vault value goes up, and your vault tokens allow you - at least in principle - to withdraw more money than you put in.

CTTs would allow the implementation of a system where people can come in and out of a given DAO or Vault but the process is not instantaneous. This could protect the project from a rug pull or from sudden loss of operative margin in times of high volatility.

Wrapping up

All in all, I think that today’s token standards, being built around the concept of transferrability, assume a free-market-centered perspective on things. That is, they either directly or indirectly rely on the idea that “free markets are efficient” when it comes to pricing and incentives. Unfortunately the efficiency of free markets is bollocks, as it has been proved by Sen in 1970 (again, he too got a Nobel Prize in Economics for this). Moreover, if considering tokens as an intrinsically transferrable property is very appropriate in some contexts such as finance, it may give rise to a distorted set of incentives in contexts such as governance.

Indeed, I do believe that there are some type of goods and services that are more justly and efficiently distributed in a semi-centralized way, such as public resources and welfare. Semi-centralized here refers to economic policy, not to people’s agency and ownership: with this I mean that the economic set of incentives around some goods and services should not be entirely dictated by markets. In all these cases, ERC-20 and ERC-721 standards may not be the best choice. As we see for NFTs, that stemmed out of ERC-20 by imposing restrictions on fungibility, I do believe that alternative token forms that may be more suitable for governance and welfare projects can stem from further restricting the transferrability properties of ERC-20.

I think that the propositions I made here, that should by all means be considered just as toy models, may transform into something useful in the future if they are met with curiosity and become object of further study.

• People often take part to revolutions just for the vibes or to find purpose;

• Very few people know what is actually happening;

• Those who know often are not the ones that you think.

The idea of Crypto and DAOs as a potentially revolutionary force is a popular one among Cryptoentusiasts, directly or indirectly justifying postures such as the destruction of traditional finance for the benefit of the masses and the importance of collective efforts in making Crypto accessible to everyone.

Of course, people that are used to reason about things know that the situation is way more complex than it looks like, and that the lore behind many Cryptocommunities is a strong libertarian one that may eventually result in way more inequality than the one we have now in traditional systems. Yet, Crypto remains very strongly ideologically appealing to many, if only for the idea of being part of a revolutionary force. Why?

My belief is that many people live in a world that is - or at least feels - totally devoid of purpose. We work, we have our lives, our families, but many of us lack that “why?” in their ordinary lives that propels them to literally wake up everyday and do what they do. This feeling (that constitutes the very essence of living in a decadent society) can strike everyone, from the poorest to the wealthiest, and is traditionally a great catalyst for either personal depression or political involvement of any sort, or both. We are all desperately looking to matter, in a way or another, because mattering and purpose are very scarce resources that our current societal asset doesn’t seem to guarantee. This is, in my opinion, for two main reasons:

• 1 - Socially, we seem to value material things a lot. In a society where media constantly recirculates the idea that “money and property are the only thing that really matters” it feels almost oxymoronic to follow ideologies or to pursue spirituality.

• 2 - In the last decade, with the advent of social media platforms, mattering seems to be perceived as more and more connected with following and recognition. Does it really matter what you do and think if you don’t have a bunch of followers acknowledging it?

Yet, the idea that what one does contributes to a greater cause that is going to make humanity better in the long run is a fundamental need for the majority of us humans. The end result is a fetishization of purpose, where people ascribe ideologies of various sorts as defining parts of their essence, even if, thinking about it a bit harder, in reality they probably would not feel too attached to them. I guess this is true for a huge chunk of Cryptodegens, vax deniers, Jordan Peterson fans, pronoun warriors, followers of the cult of KeK, and so on and so forth, you name it. In any of these “ideological” movements there is a tiny core of people that really believes in what they are doing, and a majority of others that jump on the revolution bandwagon just to have a reason to keep living (“we are leading a revolutioooon!”). The funny thing is that, obviously, everyone feels part of the core, and no one can - by definition - acknowledge to be an other.

So what?

All of this is absolutely fine, and what I wrote above about others should not be considered offensive: in the end, it’s just a matter of people finding purpose, that per se is a noble endeavor. Moreover, almost every revolution has been led by a tiny bunch of people followed by a huge swarm of unawares that didn’t know precisely why they were taking part to the community effort, or why it really mattered, but kept being part of it - and often fought for it - basically for its vibe.

In Crypto, this is for sure the feeling. There are a bunch of words thrown up in the air all the time - decentralization, DAO, trustless, governance - and very very few people that really have a the global vision to put all them in place. The majority of Cryptoentusiasts possesses only a vague feeling that “something cool is happening”, and tries to uniform to the social rituals of their environment to belong - think about gm, pepe gifs, and all the memetics surrounding Crypto Twitter, for instance.

But then who’s leading the decentralized Crypto revolution?

In Crypto, everything seems to be happening at the same time, and the “epicenter of total coolness” is often perceived to be far from the social circle you are in. Moreover, very few people can look at themselves in the mirror and truly acknowledge that they are leading the Crypto revolution. I am actually sure that this holds true also for many Cryptoinfluencers, that may as well be considered prophets by their followers but, deep down, are tortured by that very same feeling of not knowing precisely what is going on that everyone, in a way or another, feels. Not to mention that rare human breed of idiots that put stuff like “Forbes 30 under 30” in their bios.

The necessity of protagonism driven by point 2 above often makes us conflate mattering and public recognition and, as result, we tend to imagine that visible people are the ones leading the community effort. When we realize that these people often do not have much more clue of what is going on than the layperson, then the natural question to ask is: who is leading the Crypto revolution?

To answer, let’s look at the main types of actor in the Crypto ecosystem right now.

The bystanders

The bystander, is, by definition, one that “stands by”, that is, one that is just there, with no particular will of gaining any recognition. Our social media-focused society has basically taught us to either directly or indirectly pity these people for their unforgivable lack of public visibility. But take a look at all the paintings above: In all of them, some “main subjects” are surrounded by a mass of bystanders. If you were to remove them, the main subjects would look like powerless, deranged individuals.

Indeed the bystander is the very core of any collective effort, and has been historically the most important actor in a revolution, even if we have never been taught to appreciate it. This is because the real force of a revolution lies in its numbers, and bystanders make up the vast majority of the people taking part in any collective effort. They are there, they just vibe, sometimes they do not speak publicly but prefer to listen. In the case of Crypto, this is the submerged part of the Twitter iceberg, that enormous mass of people that rarely tweet, and often read. They use dapps, they talk about web3 with their friends, and lead adoption by adopting. If you are part of this crowd, you should be aware that you are part of this revolution as much as your favourite Cryptoinfluencer is. As the title says, you don’t need to lead the revolution to be the revolution. But let’s keep going.

The influencers

By influencer here I mean whoever has a direct influence on the masses, which includes but it is not limited to people shilling coins on Twitter. These are the people constantly - and often erroneously - being identified as thought leaders. The whole point here is that being able to build a huge fanbase and having the necessary intellectual toolkit to see, understand and influence the zeitgeist are different skillsets. Indeed, many Cryptoinfluencers are too busy tending to their fanbases to really pause for a second and understand what is going on. This contributes to the overwhelming feeling that “everything moves out of its own accord, as if it were part of a collective will, and I’m often far away from the epicenter of coolness”. If we imagine society as a graph where actors represent the vertexes and social relationships represent the edges, then we may say that Crypto at the moment looks somewhat like this:

As we can see, everything looks fairly decentralized: There are four main “aggregation clouds” of bystanders each one gravitating around its own influencer, respectively named A, B, C, D. As one can see, many people belonging to one of these social circles have also ties with people that tend to gravitate around other social circles. So even if there are four “thought leaders” all in all they do not seem to exert an insane amount of influence. This really is a decentralized revolution!

Unless… Here come the Rasputins

I use the word Rasputin to represent people that do not necessarily have a huge public following, but are very influential among influencers. They are relatively unknown to the public and basically work in the shadows. Let’s take the figure above again into consideration, but let’s add something:

In the figure above, X is the Rasputin. X has close ties with the main influencers of the four aggregation clouds, but with no one else. As such, X is virtually unknown to the public (this network has 25 actors and 20 of them are unaware of who X is), but can influence people that influence, relay ideas between them, and basically reach the whole network much faster and much more efficiently than any other actor. Even more interestingly, X will rarely take the blame or merit for what is happening, a task that, usually, will fall upon A,B,C,D.

The essence of being a Rasputin is having a lot of power without being necessarily publicly accountable for it. The Rasputins are the true ones often leading a revolution. This has been like this in many important times in history, and it will keep being this way. For sure, this is also the case in Crypto.

So what can I do?

First of all, be aware that this is the reality of things.

Second of all, do not fret about lack of public visibility. Being influential is not what matters to be really influential.

Third, understand that being here just for the vibes is absolutely ok, and you can claim to be a core component of this revolution as much as your favourite Cryptoinfluencer can.

But what if you want to really matter more? In that case understand who the Rasputins are. Identify where it is that power is really created, relayed and exercised. Connect with those circles instead of trying to build a stupid following. More importantly, keep in mind that the bread and butter to really influence the state of things is having ideas: we are in desperate needs of those and I can guarantee you that many of the people having really powerful ideas in Crypto right now may not necessarily be on your side. If we really want to turn Crypto in a comedy of the commons where the result is a net positive not just for the Cryptocommunity, but for the whole of humanity, we will need way more Rasputins with way more powerful and community-oriented ideas than we have now.

My own feeling is that there is still time to save Crypto from the Szabo-ultralibertarian dystopia it is slowly turning into, but this window of opportunity is closing. So please, be clever about how you will spend your next months/year in this ecosystem. It will most likely be determinant.

For those of you that aren't already hardwired into the crypto-metaverse, let me give a very quick summary of what happened a few weeks ago.

• There are only 13 known extant original printed copies of the American Constitution. All but two are currently owned by public institutions.

• A few weeks ago it became known that one of the mentioned two private collectors would be putting their copy of the constitution up for auction at Sotheby's.

• A group of people that watched too many Nick Cage movies thought "what if?" and fired up a DAO (Decentralised Autonomous Organization) to take part in the auction and buy it.

• The mechanism was simple: You give them ETH and receive governance tokens. The ETH was to be used for the auction, the goverance token to vote and decide about what to do with the constitution afterwards (how to take care of it, where to put it on display etc).

• The ConstitutionDAO - as it was called - managed to get over 40 million dollars in ETH in a matter of days.

• The auction happened, ConstitutionDAO did unfortunately lose, but nevertheless became legend.

Why does this matter?

Aside of the considerations that are obvious for everyone in crypto (power of memetics/degens, investment opportunities, DAOs are the future of finance, etc.) and the incredible entertaining value of the experience (personally I'm more than happy to have provided a few $$ to literally watch the auction live on Youtube with the same state of mind I am in when I'm watching the World Cup finals), there is something much more going on. Let me explain.

Up to now, decentralised autonomous organizations have mainly developed around the idea of investing and finance. The mechanics is simple: You put crypto in, you receive some tokens in return, the DAO does something and your tokens will hopefully increase in value. This has been true for DeFi liquidity pools and farms, for many governance tokens (that are often considered to be the equivalent of shares in a company by their owners, but don't tell the SEC please) and for NFTs, that are often bought to be resold - flipped, as we say - more than for their intrinsic artistic value. With ConstitutionDAO something else happened. A copy of the constitution of the most powerful country on Earth, that along with France bootstrapped the process of modern Democracy in the whole western world, was owned by a private collector. When you think about it, this sounds so ludicrous to be straight up paradoxical: No other document has influenced the lives of the people in the US and more in general in the post-WWII world more than this one. It literally contains the law and guiding principles that build up a democracy, which by definition should empower people. The thing even starts with the words "We, the people" and yet it is owned by someone. The moral perversion of all this should be absolutely evident. Mind me, I say moral and not legal, because legally there is nothing wrong going on, it's a historic manuscript that can be bought and sold like any other old book. It's the content and political significance of the manuscript that turns everything in a moral crime.

And well, having understood this, we are finally able to frame ConstitutionDAO actions in different terms: A bunch of people - a community - banded together to take the Constitution out of the hands of a private collector and transform it into what it was supposed to be from the start, a public good. This is unprecedented, and totally different from the usual "DAO as a mean of investing" lore that has been underlining the crypto world for so long. To be more blunt, what I am saying is that I don't give a flying fuck that people managed to raise 40M in a week, the real important thing is how this happened to make justice to a moral wrong.

For sure, as in any revolution there are a bunch of idiots following the crowd not really understanding what is going on. I am very sure many people invested in this project, that is, they put money in hoping for a return. As of me, and I'm sure as of many others, this thought never fucking ever crossed our minds in that moment. In an epic twitter space hosted by Cal shortly after the auction I have been able to talk with many other participants, and the whole situation was very poetic: Everyone was saying something, some considerations more trivial, some less, but there was this underlying feeling that something important had just happened. As it is for any milestone event, one is not exactly able to pinpoint why what's happening is important, but the gut feeling stays. In simple terms, when you are witnessing history in the making you don't really know precisely what you are witnessing until, well, history is made.

In my opinion, which per what I said above may just be part of the story, or altogether wrong, the real important event here is having proved how DAOs aren't just a nice tool to do investment and finance, but how they can indeed be increadibly useful to operate in the space of public goods. This is unprecedented, and we can barely imagine where this will lead.

What then?

As one could imagine, having failed to acquire the Constitution we were then in the pickle of having more than forty million dollars and zero clue about what to do with them. An obvious suggestion was to give them back to the people that wanted to leave the project. This was made difficult by some nasty technicalities, namely that the crowdfund and token distribution happened on ETH Layer 1 and that many people made small donations, around 200$. Another suggestion was to keep going, and use the money to do something nice. This is the thing that interested me the most. I didn't think we should have just spent the money to seek an economic return. I thought, instead, that we should have kept in mind the moral significance of what we just did, and persever in this direction, the one of the public good. In any case, in the end the project closed shop, part of the ETH got redeemed and many people sold their tokens.

I don't know if you are familiar with Isaac Asimov's work, but in his Foundation Cycle he describes this collective, called Foundation, that has the purpose of preserving knowledge and history in the event of a tremendous societal collapse, to aid the reconstruction of civilization. This is what ConstitutionDAO made me think of. I like to think that our intent may have been similar: In a world where everything is owned by the few, where inestimable art pieces are kept away in underground vaults as a mean of economic insurance, where inequality is tearing our society apart, we had the possibility of taking care of the public space, of returning things to the public good, and of managing them together. If you don't think this is increadibly important you're ngmi, not just in crypto but in life.

To conclude, this is the moral lesson that the ConstitutionDAO taught me:

We, the people shall embark on a mission to reclaim all the tangible and intangible cultural heritage of humanity from private collectors and owners, and return it to the public good.

I still hope that, one day, the Foundation will begin.

Acknowledgements

I want to thank everyone at ConstitutionDAO for having made this possible, everyone that participated in the crowdfund, Cal for the wonderful Twitter space and the gracious hosting after the auction, the degens in the YT auction live chat that were priceless, and all my colleagues and friends for useful inputs for this piece. Thanks to you all now I can proudly say “I was there”.