His passing away makes me sad. You know how when you talk to someone you can instantly feel strong resonance? I felt that with Shakti.
Shakti might be gone, but his ideas, values, and energy should persist. He gave time and attention to young people before anyone else validated them.
How should a protocol like Uniswap or Compound structure its treasury? This post covers the principles of protocol treasury management, fiscal policy, asset allocation, ways to diversify the treasury, and responsibilities of a treasury committee.
Principles of treasury management
Infinite time horizon
There is a primal demand for extreme sports type thrills in finance. This includes cryptocurrencies, Tesla stock, S&P put options, and liquidity mining. Investing is a form of entertainment like riding a roller coaster or watching a horror movie. The ticket fee you are paying is in the form of possible investment losses.
Invest your money to save to buy a house, send your kids to college, save for retirement, blah blah blah. Sounds boring. Buy a call option on AMC Entertainment for $300 to make $10,000 if the stock is up 30% by Friday? Sounds fun.
We typically separate investment and consumption goods. Consumption goods are meant to be consumed and have no future productive use. Investment or capital goods are used to produce more consumption goods. But what about investment goods being sold as consumption goods? When investing is a form of entertainment, it is also a consumption good.
This essay was published on Forefront.
Crypto is partly a resistance to the decline in ownership. Home and car ownership have declined. Digital goods are rented on platforms. Software is licensed via subscriptions. But you actually own the private keys to your crypto. That opens up a universe of internet-native assets that you can own and control. These include digital art, media, online communities, video game collectibles, and many other things we haven't created yet.
A non-fungible token (NFT) is a unique digital asset whose ownership is tracked on a blockchain. A $1 bill is fungible, i.e. replaceable with another $1 bill. The original Mona Lisa painting is non-fungible, i.e. not replaceable with another Mona Lisa painting. ERC-721 is the token standard for NFTs on Ethereum.
How do you build a pseudonymous reputation that is not tied to any particular platform and portable across platforms? The only satisfactory answer today is building a reputation based on your on-chain history.
There are three components of a pseudonymous economy: identity, reputation, and dispute resolution. This essay will focus on reputation.
Building a Pseudonymous Reputation
"If we are going to pursue biological longevity, we should allow a diversity of lives to be lived." - GPT3.
I am many people. I’m funny with some, quiet with some, bold with some, nerdy with some, restless with some. We play a different role in different environments. That’s why new places and new friends are valuable. A part of yourself is completely unexplored till you meet a particular person or go to a particular place. What about online? Pseudonymous identities let you traverse the internet (and soon the metaverse) and create or find parts of yourself that cannot be discovered with a single identity.
In a terrific talk on the pseudonymous economy, Balaji Srinivasan says that pseudonymity is as important as decentralization. Decentralization meant that you couldn’t shut down the Bitcoin network; pseudonymity meant that you couldn’t go after the person(s) who built the network. Pseudonymity is a continuum. With 33 independent bits of information on someone, you can de-anonymize them. An identity with 5 independent bits is more pseudonymous than one with 15 independent bits, which is more pseudonymous than one with 30 independent bits.
There is a practical reason for pseudonymity: you don’t want your employer to fire you because of a spicy tweet. But I find the other reason more attractive: exploring yourself. Derek Parfit, David Hume, and Buddha have argued that your identity doesn’t persist. There is no “you” that is the same person from birth to death. You have a long life. You should play around with many you’s.
Crypto treasuries are typically thought to be transparent. But if a community member needs to spend several hours digging through Etherscan, Snapshot, and Discourse to get a summary of the treasury’s activities over the past month, is the transparency useful?
A crypto community treasury consists of crypto assets in a wallet owned and operated by the community. It is like a community savings account with assets in crypto (not fiat), typically held in a multisig wallet (not a bank account), managed by the community (not a CFO/CEO), and public (not private).
We’re in the early days of documentation for crypto treasuries. It is time-consuming for treasurers or operations members of crypto projects to categorize income and expenses, so many do not do it effectively. There could be several proposals every day or week, which are difficult to track. For the community, there is limited real-time, human-readable transparency of the treasury. Members might feel less informed to make and vote on proposals.
We’ve had an explosion of online communities. Social tokens add a monetary layer to these communities, which can help distribute ownership, improve governance, reward active contributors, and much more. I like an analogy that Eric Ruleman came up with in a conversation - being involved in a social token community feels like running a college club that could scale to nation-state.
Social tokens are crypto tokens issued by individuals or communities that represent ownership in and value provided by creators and communities. Social tokens are typically ERC-20 tokens issued on Ethereum. They can be used to gain access to permissioned group chats, content, products, and revenue. They can be used to bet on the potential of a creator or a community. They serve as a badge or social proof that you are a “true believer” in the community. Nadia Eghbal asked, how do top creators build equity, not just salary? Social tokens help creators and communities build equity. You can't build a billion dollar newsletter business, but you can build a billion dollar newsletter community.
Many social tokens start as personal or creator tokens, backed by the reputation of the individuals issuing them. They help the creator establish a relationship with their community and capture some of the value of that relationship. But some of these tokens transition to community tokens, where most of the value comes from the creator’s community. They help the creator’s community members establish relationships with each other and leverage the untapped social capital embedded in groups.
JAMM: crypto natives experimenting with tokenized community tools
We have tools to communicate with billions of people but our tools to coordinate with people haven’t kept up with this. It has been over twelve years since Satoshi published the Bitcoin whitepaper. Since then, we’ve had several successful experiments in human coordination. It is clear to me that crypto will re-orient society. It will affect how people think, feel, and live.
It was easy to predict the automobile in 1880; it was difficult to predict the traffic jam. For a technology to affect the way we live, society needs to be re-oriented around it. For the automobile to affect the way people lived, we needed to build roads, highways, traffic signals, parking garages, drive thru restaurants, seatbelts, traffic laws, and toll stations. Over the next few decades, we will build the infrastructure needed for crypto to affect the way people live.
This blog will focus on crypto and society. I will dive into crypto projects and protocols, Etherscan transactions, Discord and Telegram chats, governance proposals, and smart contract exploits. I will cover pseudonymous reputation and justice, DeFi, DAOs, social tokens, NFTs, decentralized governance, encryption, digital nation states, and more. I will write about how crypto will re-orient society.
DM me on Twitter at @HelloShreyas if you have any thoughts or questions.