treasury management, parcel, governance, & the legal challenges of DAOs w/ @0xAnubhav

Welcome to the Armada Podcast, where we are focusing in on DAO governance. Let's hop into the show. If you could start with who you are and what you're working on.

I'm Anubhav, founder of Parcel, and we have been simplifying treasury management for DAOs, realizing the problem that DAOs currently face and the highest pain point that they face right now with crypto payouts and how it leads to a lot of governance fatigue and a lot of internal operations that they have to build individually for their DAOs. So we're trying to streamline all of that for DAOs.

And what kind of got you interested in treasury management specifically?

Sure. So I was working in a Web3 company called Biconomy and we were getting paid out in stablecoins. It was a small team of 8 to 10 people, but even then the process of paying out from stablecoins was very inefficient and I was the blockchain developer there. So I built a hack at ETH Global Hackathon wherein you could do mass payouts for a team of 10 to 100 people in one single click, irrespective of the token that you have or irrespective of the token that all the recipients wants to receive. And so you can batch the transactions and swap it by Uniswap and all of it would be done in one single transaction. So that was basically the initiation of, or the genesis of Parcel. And from then we built it out into a product that could be used by DAOs.

It seems like such an important kind of leverage point that DAOs need to solve and make it because it's almost the oil a bit of the organization, make sure that these funds are flowing to make sure everyone's incentivized to actually keep doing the DAO's mission. So it's such an important leverage point in my opinion.

Yeah, that's actually what we also stumbled upon. The problem right now is that there's a lot of inefficiencies right now in paying out to contributors. And that's precisely why we wanted to solve this problem first and then move to other problems. There are other very problems that sound really interesting to solve. This is the hard problem to solve that needs to be solved. So we're starting with this, realizing this is the highest pain point and causing a lot of inefficiencies for hotels.

Absolutely. And before we go too deep down those things, I'd love to ask, who would you love to have dinner with?

Yeah, I think, I think there was probably point in my life where I started reading about philosophies that Naval Ravikant has, and it actually changed my point of view towards life in general and really helped me. Because at that point of time, I was also switching from the Web2 world or the traditional world to Web3 world. And that philosophy has actually helped me tremendously to grow as a person. And obviously that really helps in building out a product like Parcel too.

And what type of questions or like conversation would you hope to dig into?

Yeah, so it's, it's actually not professional, but personal things that I would like to have a conversation with him about. Things he mentions about how happiness is a choice, right? Things about how to lead your life without any, without any crutches or sadness within your life. It's possible. Because I have obviously been not been very good emotionally until the point that I realized, okay, this is possible if I really change my point of view. So conversation around, around how we can, you can probably trick your mind into believing certain things that, that hasn't happened for me personally for the longest time. And now it has started to. So just digging into those kind of stuff.

Yeah, no, it's, and those are some of the most high leverage and long-term, you know, return things too. I feel like sometimes when we get focused on the particular issues that were going on in our lives in the moment or with our work in the moment, it's like you're really not stepping back enough, the abstraction of what are the broader lessons, what are the broader insights I can apply for the rest of my life. So I like the longevity of that line of thinking.

Yeah, absolutely. I think we, I think I, I think all of us in the Web3 space are actually hustling very, very hard, but without realizing the long-term implications of it or reaching where we want to reach peacefully. So the end goal is actually to be peaceful while you achieve your goals, not to basically burn yourself out and not care about every other things that is beautiful about life.

Absolutely. Well said. Tell me a little bit around how do you think about treasury management? I know we just touched on a little bit before, but kind of what do you How do you think about it like broadly from maybe an opportunity space or maybe a problem?

Very broad and high level. I think there isn't an optimal solution for treasury management in Web3. We're building a trustless system, but right now we do not have the tools for treasury management. We started with Web3 companies and we started focusing on companies because DAOs were not a rage back 6 months back, right? So we started with companies but quickly shifted to DAOs because we realized, okay, this is This is it. This is what we want to focus upon. This is that one single thing that we actually want to double down on and we're extremely bullish on. And this is, this is what Parsel needs to be built out for. So that was the high-level aim why we started Parsel and doubled down on DAOs. So right now we've, if you see treasury management for DAOs in general or in Web3, there isn't a self-custodial, trustless, verifiable solution. that could really help you out with treasury management. There are some structured products coming up for sure from— I mean, Balancer V2 having a smart treasury and a smart pool there. And there are structured products coming up, but there isn't one optimal solution that aggregates all of the different tools that exist right now. And we anticipate a lot of tools to come around. So, we want to build that one particular tool that really helps you aggregate and find you the right strategies that a particular DAO might need. In that sense, treasury management is Right now, a very tedious process. And what you want to take it to is basically from payouts to diversification and insurance on your funds and yield optimization, some of this stuff, but we want to make it very seamless and efficient for DAOs to manage from one single interface.

I love the approach on the product. And I was looking at the site and I feel like there are a couple of very discrete features and then there's a couple that are a little more abstract. And I apologize if this is trying to peek behind the curtain, feel free to slap my hand and say no thank you, but like yield optimization and strategic asset management. They're obviously different than the mass payouts and the multisig and the automated recurring payouts. Okay, now you have the treasury and like, what do we go do with that? Is your vision— tell me a little bit about the vision about where does that start to look like in the future? What would a DAO leader's experience look and feel like as they interact with those 2 segments of the product?

Sure, I think, I think you, you've hit the nail on the head. I think we— so what you mean basically is there are 2 Different toolkits that we have right now, one of payouts and other of yield optimization and diversification and stuff like that. We actually want to serve DAOs in its entirety. That's the end goal. That's the vision that we have. We see a lot of DAOs are based on Oasis multisig or otherwise also. But the point is there needs to be an efficient process towards what DAOs need right now. And right now, more than yield management, I mean yield optimization and insurance, They would prefer to have, they would prefer to sort out their crypto payouts first, right? Paying out to contributors and paying out grants and stuff like that. And then focus on diversification because right now it's the entirety of their portfolio lies in the native token, which is not a great strategy if you think of a bear market coming along. So I think these are the 2 things that we want to focus on. And I do believe that, that Payouts is something which is extremely, extremely tricky to solve in the sense that a lot of DAOs have their internal implementations, right? And they prefer to do their own thing. But building one interface for crypto payouts is what we wanted to start by, because that would actually standardize a bunch of process for the DAO itself. And then we can move towards what the DAOs actually need. So it's basically, our approach is basically to go by what DAOs need the most. And we believe that DAOs need crypto payouts to be solved first.

Yeah, I totally resonate with you on the— there's that joke about how many engineers it'd take to unscrew a light bulb kind of deal. And there's one for the ladder and one for the— I'll have to find the joke and meme it on the show notes, but I feel like you're totally right. It's each DAO, they have the technical capability, they have the problem. So they go and solve it and that's fine. And that probably works for some period of time, but I think anyone who's scaled a startup knows that You really want to apply that to the most important, uniquely identifiable or uniquely leveraged features within your organization. And you probably want to use vendors for things that are repeatable as well as that they're going to go learn all the edge cases and the use cases that are awesome additional features. And thus Stripe is an example in the Web2 space of, hey, we're just going to nail this thing. You guys go build all your code for your fancy startup. But we'll just make it super simple to handle all the money back and forth between your bank account and your customers and all that stuff. And so I really resonate with that strategy because it's a second-order problem that we're probably starting to bump into where it's okay, now we have this person and they need to get approval by this person and we need to split the payment over here and we don't want to put half of it in escrow. Those are just features to a payment provider, but those are all distractions to a DAO that's building something else. I think your strategy is really well thought out and very leverageable in that way.

Yeah. And just to add on that, I think paying out to contributors is also tricky because a lot of DAOs are paying out in their native tokens. And then these obviously tend to be volatile, right? There is no standard structure about how do you go about paying out to them. I mean, they could receive salaries one day and then wake up and their salaries are slashed by 25% because the token value actually went down or had a huge drawdown, right? There are a lot of other options that we at Parcel are trying to solve going into vesting contracts and that how that would help to incentivize contributors to actually hold the native tokens irrespective of, in spite of basically selling it as soon as they are exposed to the volatility of the asset. And yeah, just understanding that this is actually an absolute time-consuming process for the DAOs. All right. A DAO in itself are starting out and at this point of time, they're certainly more inefficient than a traditional Web2 company and we're trying to just basically help them ease out all of their inefficiencies starting with payouts.

Totally agree. How do you think about treasury management and governance intersecting and how do you think about that as it relates to Parcel?

Yeah, I think it's gonna play a huge role. I think both of them and their intersection is probably gonna be needed. I would say it's probably gonna be required more than a thing that DAOs could have. But I think token holders should directly be able to decide upon what happens, where the payment goes. How the treasury is being managed, how the other funds are being diversified. I think there's, I think there's an inefficiency there in the sense that right now, if a bunch of seven people could decide the fate of treasury in most of the cases of for DAOs, and that needs to change, I think. And I think we're going to see some very interesting stuff happening at Parcel and outside Parcel, of course, which will basically have a tight integration between how governance handles the treasury about Parcel and how we want to how we actually think of it is basically the decision. of the governance directly should reflect what happens on treasury. A lot of things that we think right now, it's not yet built. It's, we're still in the building phase, but I believe could be automated for the most part. Contributor payout, that could be automated with incentives built in through Parcel for all the DAO treasuries directly from the governance point of view. And then a lot of treasury management could happen with the ownership of the governance itself. And then there would be, I think, a lot of subcommittees, obviously, who are actually quote unquote experts at what they do, whether it would be optimizing the yield or yield farming, or it could be paying out to contributors and stuff like that. But I think we're going to see a lot of subcommittees and a lot of protocols are actually working towards building out that. So we're going to see a lot of subcommittees that are experts in their field that will play out. But I think even then, right now, if you think of A subcommittee, like, like for say grants program. Right now all the funds are actually owned by the multisig owners, not the treasuries. And that's a concern, right? But going forward, I think what we're going to see is that the governance actually directly owns, owns the funds. But there are some elegant solutions coming up regarding this. And we'll see a lot more deep integration between how governance and grant programs and subcommittees are owned and distributed among the community members.

If I had to play that back a bit, what I hear you saying here is we've gone from maybe a founder or 2 founders being in a position where they're really holding the keys to the whole operation. We've now evolved in this multisig, but multisig is still a group of 7-ish people that are running this. And really we need to get to the, to kind of the full governance of the entire treasury is the end state. And so you're seeing this as a spectrum playing out over time.

Yeah, I, I do believe that's going to happen, that governance will have a bigger role to play in deciding or maybe owning the funds, having that veto over all the subcommittees is what could—

We touched on this before. So if you have to repeat yourself, I guess that's okay. But what are some of the common challenges and opportunities for DAOs that you're seeing play out as it relates to just treasury management governance? Are there kind of themes that are outside of maybe of your feature set that you're just seeing broadly in that space?

Yeah, I think I forgot to mention the legal implications that DAOs have to face. I recently was talking to someone and I realized, okay, DAOs are actually registered and they have some tax and legal implications of whatever they do. So they can't really, if you think of DAOs, you think, okay, they could easily swap from DAI to let's say ETH and then move to yield farming and stuff like that. But there are tax implications for that. If you're a registered DAO, you have to take care of what you're doing. And I think that will continue to happen because if DAOs have to interact with Web2 world and have to be registered as an LLC, there are gonna be implications that's gonna be imposed on how the treasury is being managed. And that's a different challenge outside of what Parcel can help you execute. But what we are aware of that, and at Parcel, we are trying to build products that are, that are, that will help you become more tax-friendly as DAOs continue to evolve and get registered as LLCs.

Yeah, that's— it's certainly, I feel like, an issue that we, everyone in the community, we touch on regularly-ish, but then also don't really get into the meat and potatoes of it. I feel like it's, yes, there's some legal risk out there. There's some tax implications. And to your point, it's at a certain point, the IRS is going to start knocking and the IRS doesn't mess around. And they're going to want to know what happened when you transferred all of your native tokens into xDai, and why didn't you report that as a taxable event and corporate income tax and things like that? I think you're, I think you're totally right. It's an underlooked part of the area, but also an area that really has zero guidance. So it's this weird, like the community almost has to bring forth the challenges and the opportunities and bring it out into the light, but the same token brings them personally liable as well. So it's a really perverse incentive structure the way that it's currently set up.

Yeah, I think I totally agree that the current structure of DAOs and how it evolves is going to be very interesting to see, especially considering the implications of registering your DAO. If you're not registered, it's, I think you can go haywire and do all sorts of yield farming on BSC and all Layer 2s. But if you are registered, I think you, yeah, you basically have to behave a little differently, I would say.

Yeah, we're having a little bit of that challenge with my hobby DAO, as I like to call it, Krause House, which is a DAO to buy an NBA team. We just came together and there's a few hundred of us starting to get the DAO off the ground, but there's this question of, okay, we're all here for the shared mission. We have some really interesting ideas and projects that we're ready to get started on. When do we do a legal structure? Where do we do a legal structure? Where does that money go? What's the legal risk? I was talking to another DAO person high up in their governance and they were just talking about this, This idea of, okay, we're going to sign this contract that no one's going to sue each other. And that's what we're using as our legal net. And it's like, I don't know what's a better option at the moment. It is a really interesting problem for operators, especially ones that are first timers to spinning up a DAO.

Yeah, absolutely. I think, I think it's also a choice that they have to make if they want to be registered first or not. There are obviously going to be different implications as we've talked about. But I do believe that some DAOs might even choose to not get registered at all. I think it might give them a lot of flexibility around how they move. They can probably move swiftly and the way that they want things to happen, they can make it happen their way. And other DAOs who are registered probably can't because of the legal concerns that they have.

Yeah, it's such a great point because in Web2, we saw that with Uber, not from a not legally registering, but from a compliance perspective. They just said, we're just going to do it and we're going to let the consumers speak for themselves and we're going to move aggressively. We're going to raise a ton of money. We're going to not care about local regulation. We're not going to worry about state regulation. And my God, did they capture a ton of the market by doing that. Now, obviously there's a bunch of downsides in that model, but I do wonder if Travis Kalanick would've been more conservative in that aggressive approach that if Uber and Lyft would've been as ubiquitous as they are today. And so I wonder if there's a pattern match there in the DAO space, which is, hey, there's going to be a bunch of conservative DAOs out there. They're going to be really thoughtful about the laws and interpretation. They're going to hire a bunch of lawyers who are trying to understand this. And in general, they're going to be very conservative broadly. And then you're going to have this other class of DAOs that are just going to go hyper-aggressive, and they're the ones who are going to be able to help co-write the laws with whatever government body that they end up landing in because they're going to build so much power in that journey of being unrestricted, but they're signing up for the risk of serious legal trouble. So it'll be a fascinating race between the aggressives and the conservatives in legal DAO space.

Yeah, for sure. And I can't wait to look forward to it.

Yeah, it's just such a— you watch some of these Senate hearings in the US and you hear some of the senators asking these questions to Zuckerberg and Tim Cook and Jeff Bezos about anti-regulatory or anti-monopoly questions and how cookies work and data selling. And it's just such a— it clearly, it's a toddler talking to an adult about a particular issue because Zuckerberg and these guys, A, are incredibly smart about the technology they built. B, they've been— they have some of the best technical lawyers in the world. And then C, they're doing a political theater event. So you add those 3 variables together and it's just amazing how it's like, okay, these senators, they're asking a question with an agenda and then it's It's being completely disregarded and moved around because the question is grounded in agenda and it has no comprehension of the technical details. And so now we have this weird thing where like, how do we write law to go solve that? Now, that's Facebook governance. How do we govern from a US law perspective a thing like a stable social network like Facebook, let alone a DAO? And explaining a DAO and governance, to your point, it is going to be a wild ride as we see that get played out.

Yeah. Yeah. Yeah. I think I foresee a lot of talks happening around, around how it's going to play out and not within just the crypto community, but with the US regulators as well. It's going to be, it's going to be a long time before we actually have a stable, stable, quote unquote, stable regulatory framework around DAOs, but we're just starting out. And I think I, as I said, I think I can't wait to see how it actually unfolds. And yeah, that's pretty much it.

Yeah, I appreciate you joining the show and talking treasury management and DAOs with me. If you could remind people where to find you and where to find Parcel.

So I am on Twitter @0xanubhav, and you can find Parcel on parcel.money and @ParcelHQ on Twitter.

And thanks again for joining.

Thank you so much for having me.

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