Unpacking Web3 Governance feat. Hats Protocol

This is the PoolTogether Community Podcast. PoolTogether is the world's number one no-loss prize savings account. You can visit pooltogether.com to deposit. You're listening to the PoolTogether Community Podcast. I'm your host, Millie Yearley, AKA Hot Mike, AKA Tim. AKA I'm one seltzer in today. That's my seltzer update for you. And I'm here with Nik from Hats Protocol. Nik, thanks for, thanks for coming on the show.

Yeah, thanks for having me. Pleasure to be here.

So tell me, how did you— so your Discord username is Ninty Nik. So let's talk about that first. How, what's that all about?

Yeah, it's, it's an old gamer tag. And when I first, uh, when I first started spending all day in Discord and, and kind of Web3 stuff, 2021, It felt exactly the same way as when I was spending all day in Ventrilo playing Counter-Strike and Call of Duty and World of Warcraft. So I just kept the same name and, and kind of as an honorarium to, uh, to the child self there. That's a lot of fun.

You gotta do it. You gotta do it. See, my gamertag was PoopOnSatan, like S-A-T-A-N. And so I come from a very sheltered Christian home. And, uh, and so that was my gamertag, but I, I haven't, I haven't used that because it's got poop in it. And then, you know, anyway, but props to Ninty Nick. And then my current Discord name is Milli Yearly because I am projecting, I'm manifesting a million-dollar prize for PoolTogether. I think that if we're able to have million-dollar prizes, I think everybody in crypto would be like, yeah, I got to have $10 in PoolTogether.

Nice.

So that's, yeah,

we're at

$5,000 prizes right now. But listen, if we get, if we get that TVL up with this new V5 that's coming out, I think, I think we can see it easy Especially you can deposit whatever you want into PoolTogether with this new version. So it just doesn't have to be boring USDC and AAVE. You can, you can deposit whatever you want as long as there's a 4626 yield source. So I think that'll beef up, beef up the stakes. I also have to confess that I bought a Mega Millions ticket yesterday. So I am, I am shamed, but I will publicly confess that I didn't win the $1.5 billion, but I did pay the $2. And that's what PullTogether is trying to do is like, don't do that. Just save and win. That's, and then, and then you can withdraw whenever you want. This is not an ad for PullTogether though. We're here to talk about Hats Protocol. So Nick, you said you live in Discord and so do I. And I was just in a BD group and they were talking about email. I'm like, email? I feel like you're doing crypto wrong. If you're emailing, you gotta be in the Discord. You gotta be in the Telegram, but I wanna hear your origin story. How did you go from Counter-Strike? Yeah.

So Counter-Strike was a long time ago. I was playing Counter-Strike maybe in high school, like 2008, 2009. And it was shortly after that where I was playing other RPGs and people were starting to trade gold, not items really at the time, for this weird thing called Bitcoin. I ended up buying a little bit of Bitcoin at the time and didn't hold, so it doesn't really matter. But that was my first exposure to it back in 2011. And then in 2014 or 2015, I had some friends around the MIT Media Lab who were hosting Ethereum events, talking about kind of like what was cool about smart contracts and kind of blowing my mind. I studied computer science, so it was like technically interesting to me. And then it was like maybe 2017 when I really learned about DAOs. Some of the same folks in the Ethereum community in Boston started to tell me about decentralized autonomous corporations, DACs. And I was studying, I was beginning to study AI and getting like deeper into AI research. And this idea of a DAC as a kind of like an AI-managed company was very, very, very interesting. And that, that was the first time that I started like really tracking, hearing the kind of the horror stories of what had happened with the original DAO and then kind of starting to track what was going on with DAOstack and Colony at the time, and then Aragon and just seeing, okay, we're, you know, what's happening here. I worked on an AI research project for a few years following that, really like a collective intelligence project around group decision-making, but not using the blockchain. And ended up stopping working on that, kind of running out of money for that startup in end of 2020, beginning of 2021. And I was starting to look around and see what's going on and ran into folks from Raid Guild and MetaCartel. And Niran from Punvalo was hosting this thing called DAO Rush Week. And it was a way for people who were interested in DAOs to like see all the, all the DAOs, meet with them for an hour and kind of like see which ones you wanted to join. And that's—

When was that?

That was in the beginning of 2021. I think he had done a few of them.

DAO Rush Week. That's awesome.

It's a concept we should definitely bring back, but that's how I met Ben from Raid Guild and Meta Cartel and kind of got exposed to the, the like World of Warcraft, Dungeons and Dragons themed freelancing collective that Raid Guild is. And I also saw like how effective that they could be to make money together and get shit done together. So that was my real entry point into Web3.

And then how did HAT start?

Yeah, so I kind of, I kind of zoomed in on, okay, what are the problems that Raid Guild is facing? What are the problems that other DAOs are facing? And it's like, oh, governance is a huge problem. Okay, that's kind of obvious. You zoom in from there. Okay, what's, what's kind of the problem within that problem? And I thought it was reputation. I started working on basically like how to quantify people's relative level of expertise so that we can empower them or like make decision-making governance easier because you know kind of who the best person is for a given job. And that when I heard about DAX in 2017, it was this early promise of like, well, of course, like the person who's the best fit for the job is going to get the job. And then They'll do the job and then it'll, you know, the kind of AI management of this company will keep reassigning the jobs to people to make sure that it's like coordinating all of the work that it needs to do to get to accomplish its goals. And that promise is still, you know, at the time was like very much an unmet promise. And even today, you know, that's still something that I think is really, really compelling, but we're kind of working towards. So in Raid Guild, I met Spencer Graham. who was also working on DAO House at the time, and we prototyped a mechanism together called Availability and Commitments. And it was all about tracking people's commitment to a specific project, which in Raid Guild is called a raid. You get together with a couple of other devs, a designer, project manager, and you serve a client need just like in any sort of agency format. But some people are anon or they're new to the DAO, And actually like holding them accountable to their work was something that it didn't go wrong that often, but when it went wrong, it went really bad because like, you know, just like when you're in school, you have a project and someone doesn't do their— pull their weight on the project and you have to figure out how to, you know, cover the slack or, you know, kick them out in the worst case scenario. So there's that accountability piece and also the clarity piece, like who is supposed to be doing what parts of this work and really thinking about how to track that in a DAO way of down native way and on-chain, as opposed to just like in GitHub issues or like a Trello board or something like that. And then following that, basically where we landed was that a lot of DAOs were facing that same problem. And it was April of last year where Spencer kind of hit me with a message. He's like, I think I got an initial architecture for this thing. And it was like a diagram sent via Discord for accountability, eligibility for certain hats, admin authority over those hats, and very kind of like very similar to what we ended up building. And it's all been, yeah, it's been, it's been a really wild journey to see the level of engagement and excitement around having a solution to this problem and just how painful this problem is for a lot of DAOs even today.

What a great story. And so I have like 5 questions, but I will, I will control myself, but I still have to ask this one question, which is kind of a rabbit trail. So you were at MIT, I assume, just because you were Talking about it.

I was not at MIT. I went to Northeastern University in Boston and, uh, had a great experience there.

Yeah. So that was my question was going to be, uh, how many people at MIT actually go to MIT? Cause I, I talked to so many people that like are involved and in the circle of MIT, but like not at all, didn't go there or whatever. So that was like my first, like, can you, you just sneak in there? And that's actually like the best play. Anyway, that was my question. Anything, anything to say on that? Anything to confess?

Well, you can sneak into most universities. That's if you're looking for the learnings and the community and not the degree, the credential, the whole world opens up for you. And Stanford, MIT, they're amazing, kind of tens of thousands of incredibly smart, innovative people who are just like, hanging out. And even if it's just going to the bar in Kendall Square, you're going to meet like random, really sharp people that are going to be interesting to talk to. So those are like intellectual hubs. And in particular, MIT had something called the Enterprise Forum, which I don't know what the name of it anymore, but there was, I was a member of the Innovation Council for the Enterprise Forum, the MIT Enterprise Forum, and we were hosting these Ethereum events. One was called the basically like blockchain and energy or something like that. I had a friend who was kind of like very bullish on Ethereum in 2014 who wrote me into it and taught me a lot about ETH and sent me some of my first crypto beside Bitcoin. And yeah, I mean, that was just like, there were maybe 400 people who came to that conference and were hearing about like how we could rework energy supply chains using Ethereum and Just like, it was so interesting to like try to, you know, we were in that era, we were explaining what is a smart contract? Like, oh, why is a smart contract interesting? So yeah. So just, you know, if you, if you want to meet smart people, go to where smart people hang out. That's the, that's the key thing.

And especially with like YouTube taking over education generally, like just how you can learn anything you want on the internet now, it still doesn't— like you still need a community. Like it's really great. And you can have a distributed community. You can have like, you know, a digital community, this, Like being, joining people on raids and such, you know, you're able to surround yourself with smarter people than you and kind of level up your game. Well, that's, that's awesome. I would also, since we're dropping alpha, I think all these like Ivy League schools or whatever, you can also transfer into them much easier than applying as a freshman. That's another thing.

Nice.

Okay. So you said that, oh, AI governance, like, or AI, sorry, AI management of companies. Are you for reals right now? Like, how does that— can you kind of just like tell me, convince me on that, sell me on that? Because I'm thinking like management is like super hard. I love management because I love people and I love like, you know, I think like in like talking to somebody who's on your team and like getting into their head and knowing their gift set and knowing where they want to go and helping them do that is like the best thing ever. I love that. But how is a robot like, how is AI going to do that? That's one. One thing. And then second of all, you were talking about like just making sure people are contributing, right? Like if you're paying them to do something on a team or you're paying a team to do something, how are you able to track all of that? Because that sounds oppressive to me. I don't want the tracking. I just want the trust. And then like, I want to deliver. So I know that's a big bundle of stuff, but you, Nick, with your AI brain, if you could just unpack that and turn that into a conversation point.

Yeah, let's start with the second one because we can talk about like the, how HATS approaches it and the, as HATS is like pretty unopinionated as a core primitive. So HATS is really focused on creating roles that are able to be managed in a DAO-native way. And DAOs so far have been really good at managing tokens. You can send tokens, you can buy tokens, Transfer them, create new ones. That's kind of like a really kind of core fundamental primitive. So hats represent a new category of tokens that are not transferable in the typical way as like an ERC-20 or 721, but they're also not soulbound tokens. We think of them as rolebound tokens. There's an admin that is able to mint this token to people, but the person who has it in their wallet is not able to transfer it to someone else. So this is kind of like the fundamental idea of delegation, delegating. If you can tokenize power or a single permission or single authority or single responsibility, and then you can give that to someone, that's a really interesting just primitive for organization, constructing an organization, and in this case, in an on-chain way. And like I mentioned with the diagram that Spencer originally set, there was, there's always this concept of accountability and eligibility baked right in. So what you get with the hat is, in addition to the admin who creates the token and can mint it and can edit the information about it, as long as it's mutable, you can also make them immutable. What you get is also a separate field. Or an address that you give the power to revoke the hat under certain conditions. So those can be social conditions where we say, well, if this person hasn't contributed to the DAO in 3 seasons, then we're going to revoke their hat and we're just going to go through a manual process of cleaning that up at the end of every season. And the DAO will be the address that's plugged into the hat. Or you could send that to a smart contract. and say, okay, well, we have this thing where we mint someone a badge or we mint someone a contribution NFT for every piece of work that they do in the DAO. And if someone doesn't get at least 6 of those over the last 3 seasons, then their hat will be automatically revoked. And that's totally dynamic. Like, it will— the hats— the hat itself will read that custom smart contract logic that you put into whatever, you know, the contract that you just the row to look at those 6 badges. And upon not meeting those conditions, the person will— the balance of that hat in that person's wallet will automatically be zero. And that's just one example of, you know, a way of holding someone accountable to a role. You can bring any smart contract logic you want. You can write a custom smart contract that looks at any parameters and includes those as the criteria for having a hat or automatically having it revoked. And that's what's so interesting. One of the things that's so interesting about hats is as an organization, as a community, you can decide, okay, here are the things that we're going to hold people accountable to. Here are the specific on-chain and off-chain requirements that we look at that are measured in kind of holding that accountability. And then it actually happens dynamically on-chain in a way that is capture-resistant. Just like, you know, the DAO itself.

I love that. So there is the on-chain and off-chain elements to this. And, but I'm going to go back to the AI thing because like, first, this is all on-chain. Hats Protocol is on-chain, right? These are NFTs. These are, you know, you, you're transferring hats. You're creating this like tree of roles and permissions. How does, how, but then you mentioned AI. So how does AI, cause right now it's a lot of like community manager or admins setting things and doing things and So I'm wondering like why AI and why on-chain?

Yep.

Or how AI and why on-chain? Okay.

On-chain gets us capture resistance. That's the main answer there. AI, it's kind of a long, I think it's kind of still a long roadmap to really deeply integrate AI with DAOs and with Ethereum broadly, or the EVM. You're starting to see stuff like, you know, ZK AI chains and DAOs and people, you know, kind of memeing in that direction. I think it's interesting, but it's just technically, I don't think it's all the way there. I'll talk a little bit about heterarchy as a core concept to how I think an AI-powered manager, or, you know, kind of like you could think of it as like an AI CEO, right? Could work. Heterarchy is this concept of a set of dynamic hierarchies that are each constructed for a particular purpose and can also kind of like melt down when they're no longer needed. So you can think, you imagine like a slime mold or a really flexible structure that you can shape in lots of different ways for each purpose. And where I think an AI can work here, or just kind of like an automated or algorithmic management of an organization, is to construct those dynamic hierarchies of specific roles and give them to the right people and then remove them from those people when they're no longer needed or when the goal that that organization, that part of the organization was trying to complete is done. So you can imagine instead of having to go through a DAO vote where we construct a hat tree and then we mint certain hats in that tree to people and then we decide using like a coordinate circle how to compensate people for their work, that with sufficient data we could input a goal into, uh, into an interesting AI that would help us to actually, you know, create recommended versions of the DAO proposal and the, the HAT tree and set of roles and the people who should have them based on their context-specific expertise and reputation and DAO-specific reputation. And kind of like do all of the coordination work that's really required in order to get a group of people to achieve a goal that's greater than the sum of their parts. So like I said, I think AI is not there yet at the level of integration that we need for Ethereum, but that's kind of the long-term 5, 10-year vision that I think Pat's really plugs into.

I've got so many tabs open based on you dropping hot knowledge. So I got heterarchy up here. I think one of the things that you said was capture resistance. Does it have to be on-chain for capture resistance? Because I mean, like, like with this Web3 messaging stuff, they're, they're on IPFS, right? And so like even just the decentralization of a file system can be capture resistant. Are you just saying like ultimate capture resistance needs to be on-chain?

Yeah, I just put a, I put a link in the, in our chat here for Spencer's piece that he wrote called Anti-Capture. I think it really frames this concept. Well, and this this originally spun out of a big group conversation around what makes a DAO a DAO. You know, back in you know late 21, early 2022, we're like, what is what is a DAO really? Okay, is a snapshot plus a multisig a DAO? If it's not, why not? And and I think that the and and like what are we what are we why do we want these things in the first place? And the I guess the the the easiest way to synthesize that is basically. We want to be able to share things. We want to be able to share public goods. We want to be able to share private resources or club goods, whether that's pooling money together to invest in something and reap the rewards, getting together and buying an NFT, ruling over a piece of shared real estate or property. These are all things like sharing is the name of the game. But when we share things, For all of human history, those things have been subject to people stealing them, whether that's external kind of conquerors, rich people who come in and buy it. We call those whales in Web3, right? Or bad actors from within the system who are kind of trying to gain more power or more than their fair share of the resources that are together. So capture resistance really unlocked for us a solution to the tragedy of the commons and the solution to people kind of like corruption, people trying to steal from the common good. And that's why, that's why I think that's what DAOs are really about and why it's so important to get, get that right when we talk about what a DAO is trying to do.

But it does. But sorry, but on-chain or off-chain, it does matter.

It does.

I will read this article. Okay. So it's gotta be on-chain.

I'm sure there are ways to construct capture-resistant organizations off-chain, right? There's, there must be, but the zeitgeist seems to be DAOs. I mean, even now, right at the kind of like bear market and especially bear market of DAOs, doing it on-chain is kind of within the Ethereum ecosystem, creating fully on-chain organizations, capture-resistant power, capture-resistant resource sharing is like our way of doing it in this, in the network state of Ethereum.

Yeah, totally. And so one thing that's come up, especially with PoolTogether, is like this liability issue with governance tokens and holders. And, you know, one holder could be liable for everything, you know? And so it's just like this whole— so, so I, I am seeing, or at least in my, in my limited view, I'm seeing like a, a, a bulking from token governance. So it's still contribution-based governance, but how do we do that maybe without tokens, or how do we do it in a more efficient way rather than like on-chain votes and that sort of thing? So I'm wondering, as Hats Protocol, are you seeing other ways are, you know, that aren't token-based, that we can do this thing and get the, get the DAO working, producing, being that mycelium network that you're talking about. Sorry, let me use the term that you said, the, uh, the heterarchy that you're talking about.

Yeah, nice. There's, there are two, there's kind of two parts of the, of a DAO. There's, there's the top-level governance surface, Which we decentralized. Historically, we use a token for that. And then there's kind of like the operational structure and the delegation of power to people to get things done. And HAFSS is really focused on the latter, right? So you have a governor DAO, or you have a Moloch DAO, or you have a Nouns DAO, and you have a voting structure at the top level for how are we going to share the set of resources that we have, whether that's money, or brand or access to software. I think that iterating on each of those is really interesting. So when, where I'm focused on HATS is like being able to give someone a leadership position or elect people to a committee and give those people the kind of access rights and permissions that they need in order to like do great work on behalf of the DAO. I think your question is really pointing at the first category, which is like, Okay, well, if the SEC says it's creating fear that certain token models are inaccessible or potentially legally risky, and I'm not a lawyer, then what other approaches can we take? How can we innovate to new forms of top-level governance? And I think Nouns is interesting in this direction. I still think MolochDAO is extremely underrated. More people should be using MolochDAOs and non-transferable tokens to represent voting power. But, but other than that, I would say like, it's, there's kind of like the, there's a KYC angle, which kind of sucks, right? Like you can go for certain reasons, like it's not as anon-friendly, but there, I think that people are headed in that direction where you can kind of create a legal entity that is related to the DAO. And then there's like, there's people who are just YOLOing it still, which I You know, as someone who's, who's really gone the entity approach, I can't necessarily advocate for. I ultimately, it's like one of the hardest questions in the space. Like if, if every single builder that I talk to is, is thinking about this stuff and it takes up a lot of mindshare and it creates fear. So it's, to me, it's, it's really disappointing because I think it, it would be, if we had more regulatory clarity, it would actually help us create innovation faster. And I, and For me, like, especially in the US, like, that's something that I thought the US really always prided itself on.

Yeah, for sure. I mean, there's so much cool stuff we could do, but it's just at every corner, it's like, ah, but let's do that when we have more clarity maybe. And it's like, but I want to do it now. And we need that now so that we can do other stuff. But I think, I mean, maybe my brain was going somewhere it shouldn't, but I was thinking the Hats Protocol could be in that first space of DAO governance specifically because of like With Nouns, right? They have like over 50% of Nouns have never voted, of Nouns holders have never voted or something like, something like that. And also like, there's a huge push for delegation of those votes and thinking about like Hats being, you know, a way to delegate that as well. Maybe not. I mean, also while you have roles within the DAO and execution of, of the, and, and arriving at a goal, I would also think that You know, what I'm seeing with governance is it's all about delegation, right? Those token holders aren't necessarily— they don't have time to vote. Voting's a lot. Also, like, casting vision is a lot. And so what you have with nouns is a bunch of people who, you know, propose things and try to move the brand and try to move the meme and try to move the project forward. But it's that distributed vision that is really handed off to those who are delegated and proposing. I don't know. I feel like it's a conundrum there, but I feel like hats Also helps in that, but maybe that I'm just giving you scope creep on your product, on your project.

No, I think you've got it. I, I would say like most shareholders in companies that are on the S&P 500 probably don't vote, right? They're, they're buying shares for, because they think the price is going to go up, just a form of investment speculation, right? I, I think that not to draw any parallels to shares, but I think that generally speaking, like, people who buy a noun are buying the noun because it's an investment, or it's like something where they're hoping to make money. It's a, you know, for them, it's a piece of art that's going to increase in value over time. And to expect them to participate in the DAO is, is probably not the right approach always. I think that there are like, you know, there are forks of nouns where the DAOs are really being used as a coordination mechanism. But in order to try to accomplish something, and it's not just investment speculation, but I would say like the, those, the tight coupling of where we started with that, with ERC-20 token DAOs and ERC-721 DAOs, like it is, it's no surprise to me that most people are not actually voting when governance votes actually come up. One of the main things I think is missing from the space, and I know PushDAO is working on this, is just push notifications across the whole ecosystem. Like it's the, as we get into the application layer of all of Ethereum and especially, you know, kind of like the new projects that are coming out, hats included, just creating like much better interactions and hooks and the ways that, you know, all the amazing things we've learned about the development of the internet over the last 20 years. needs to be integrated more into the UIs that we're building now, hopefully without making them like too corporate or too extractive. But the fact that like, it's not, there's not really an easy way for me to get push notifications about like all the multisigs that need my, you know, need me to sign them stuff is, is really problematic.

Right. Yeah. And I know that like Daylight is trying to solve that with like actions that you need to take in the notifications that they give you, but I think they're, they're more focused on minting and airdrops and like those sorts of things. But I do, yeah, Web3 messaging and Web3 notifications are super needed. And I love, like, what, I don't know, I'm just getting so much from, I'm going to go back and relisten to this just because we're talking about, you know, MolochDAO and, and, you know, non-transferable tokens and DAO governance. It's really fun to nerd out and it's not something working for a DeFi protocol. I'm really focused on growth and, uh, you know, yield sources and wallets and swapping and swapping into smart contracts without the need for liquidity and that sort of thing. And then like, yeah, but like this stuff gets built from DAOs. Like it's so important, this DAO tooling, DAO governance. So I feel, thanks for the lesson, Ninty Nick. Appreciate it.

Of course.

So good.

Let's make it a little bit more tangible for PoolTogether. So You know, if you look at, I just, I happened to discover a recent proposal that y'all had from Tjark or Tjark about the community team. So June 19th, you know, kind of posts this and then it goes to a proposal on July 1st and, and passed with 100% acceptance, right? There's this basically like funding the community team of 3 people to get work done. This is, this is—

Which I got to say, I got to say, Tjark is the re— I mean, not rarely do things pass with 100%. On our governance. So that's, that's credit to Tiark and all of the hard work of the community team. Yes, please continue.

Amazing. And, and, and props, right? That's, that's huge. So

mad props.

It's a, it's, this is a fundamental thing that you see in every single DAO. Hey, you know, I have a, I want this role or I have this role and I want to keep doing this work. So give me this job, give me this, give me certain domain authority, responsibility, and compensation. And usually there's some accountability, whether that's in the proposal or in the bylaws. But this, you know, this is still like text that is going into an on-chain proposal. It's not like an actual on-chain set of responsibilities. So one of the things that we're really excited for with Hats is that Tezarc and Under the Sea and Lancer could each have a Hat. that represents their role as a member of the community team, and they could have specific power associated with that HAT token. So this proposal would not only, you know, send a certain amount of funds to, to a multisig controlled by the team, it would also send those HAT tokens to those individuals, and the HAT token itself would be connected to multisig signing authority Discord roles, ability to send out maybe certain announcements in Discord or certain announcements via social channels. These are all things that are going to be connected on-chain and off-chain authorities to a given hat. So that's kind of like the thing that we're actively implementing with DAOs and communities right now. And a lot of them are DeFi protocols or projects because that's where a lot of the existing kind of jobs and real work to be done is still in Web3. So hopefully, yeah, that makes it like a little bit more concrete, though, the types of things that we're focused on right now.

It totally does. Now, how do we know that they did their job, that these KPIs were met and that sort of thing? Now, those include both on-chain and mostly, let's be honest, off-chain actions.

Exactly. Yeah, that's a brilliant question, right? So you see—

Thank you.

In the proposal, you see that they have a link to the metrics Google Doc. And like, you know, this is, it's an off-chain, right, Google Doc. And you have, as an organization, you have a question of, are we going to enforce this manually? Are we going to enforce it kind of automatically or dynamically? And that goes back to the idea of bringing a kind of smart contract logic, as I mentioned before, right? You can say, Hey, you know, this proposal is for 3 months of budget. These hats will be for 3 months and they'll expire at the end of 3 months unless we renew them. So it's default off. And then the community votes to extend, and that's your form of accountability. You could have the reverse where you say, well, you know, we're going to— this vote, this hat is indefinite, but we're going to have a social process where we check in every 3 months and we vote to revoke if we think that they're they're not doing a good job. And that, that's a lot more capturable because, you know, it's easy— it's a lot harder to like say, let's revoke this person's hat because they haven't done a good job. It's just, it's just less likely to happen. And then the third way would be, you know, if you had some on-chain representation of these metrics, like if you had an UMA oracle that was taking the number of Discord members that you had and putting that on-chain, or you were directly looking at the number of token holders that have greater than one pool. And you said in order for this hat to be retained by these individuals, they— that number had on, you know, if it was July 1st, then say August, September, October 1st, or, you know, the last day of September, that if that number of pool holders is not above, you know, the increase that they said, say, I guess it looks like something like 8,000, then the hat is automatically revoked. So it's a question of whether you want to be that kind of strict about it, and if you feel like you can really use on-chain data sources to hold people accountable, because who knows about market conditions and all the sorts of things that can happen, and if you want to have some degree of leniency. But what we have is the ability to go as on-chain, as decentralized, as mechanistic as you want. So you could have something that was really, really fully capture resistant and hold people to the, the most granular level of accountability and choose anywhere that you want along the spectrum as well.

Is anyone doing that? Is anyone like that cold where they're like, shut it off, take the hat away, it's my hat now?

Not yet. It's kind of, you know, it's one of our, it's one of our kind of success criteria. to be able to get to a fully mechanistic DAO. So I think of Bitcoin as a fully mechanistic DAO. There's no one who's kind of being lenient about the way that mining— obviously we can argue about that, but they're on the spectrum of snapshot and multisig and community vibing in a Telegram chat and kind of just doing formal votes when funds are needed to move. All the way to Maker, for me, very mechanistic, like running through specific protocol changes all in code. We want to be able to be anywhere on that spectrum. And just as a fun kind of throwaway thought experiment, we've often thought about mercenary DAO, right, where you set up a DAO that's NFT gated and at the top level governance surface. So it's like an ERC-721 DAO. And then you create a hats tree and you make all the hats totally mechanistic. So they have these kind of like KPI-level revocations, and then you sell the NFTs and people can buy their way into a particular job as a mercenary with the expectation that if they hit the pure mechanistic kind of cold KPIs, that they would get the compensation. And if not, that they would maybe lose their hat or maybe lose their NFT or maybe even lose staked ETH. So it's kind of, it's just this thought experiment of like, what do, what if you made like the most ruthless kind of DAO-owned corporation that you could and run that as an experiment or as a sort of game to push the limits of pure mechanistic governance?

I mean, I'm already thinking of games. Yeah. Like, as you said, not even if you're paying into it, I mean, but paying into it makes it more fun. But like, yeah, there's just so, there's ways to gamificate Gamify this. That's pretty cool. But then also, as you were talking, I was thinking, well, of course, like node uptime would be like a thing, right? So if like, if somebody like didn't re— you know, wasn't up 99% of the time or something like that, you could revoke because obviously you need, they need to be up if they're a node. So that's really exciting. But, but very cool. How do you get people to adopt? Yeah. Like, how do you get these crypto OGs to change their ways? and how they've been doing everything thus far?

People really, people really feel the pain. You know, you just, you talk, we talk with folks and they're like, what's your number one challenge with governance? And it's like, well, you know, it's, we have so many people who want to do stuff, but we don't, we're not clear on who's responsible for what, or, you know, actually giving people specific roles to onboard them. Like, once we decide that someone is the leader of the community team, like, giving them access to everything is kind of a pain. And then offboarding them is a pain. So the need is really there. The process for actually helping people get started using Hats, what we've learned is that we really needed something at the application layer that helps people get started. So we spent a lot of time building out what's now— we're just releasing v2.1 of our app probably tomorrow. It's at app.hatsprotocol.xyz. And It's a way to build out a hatch tree. So really like constructing a set of, you know, the admin, we call it the top hat, and then, you know, levels of child hats below that, that have, you know, specific authorities and responsibilities connected with them, and then can be minted to however many people you want. You can set the max supply on each token. And then, you know, helping people get started with templates and also a service. So we offer like a manual service where we'll build out smart contract code for you. We'll build out hatch trees. We'll dive into your organization and understand what roles already exist and which roles you want. And that's been really exciting. Cabin has a hatch tree. We've been working really closely with Maker for a long time. We've talked with folks from DeFi DAOs and other forms of other great DAOs across the whole ecosystem. We got a grant from MetaCartel. We're really deeply embedded, and a lot of these people have been our friends for years. So it's Their, their thinking is really embedded in HATS, which is an open source protocol. It's, it's, it's fully open source, AGPL v3. The repo, you can, you can clone it, fork it if you want, and it's, it's totally composable so you can build on top of it. And a lot of the modules and kind of custom code that we're writing is MIT licensed and can just be reused by, by any DAO. We're like slowly building up the network effect of how easy it is to get started and just learning a lot from, from being hands-on working with people who, who want to set up these types of HATS trees.

So that's right. Anybody can go to app.hatsprotocol.xyz and set up your own tree and see how it works. Now, how self-serve is this? Like, 'cause I really love that you're doing the, the customization and like the kind of handholding because I'm finding like, especially now in this bear market, it's like, not only is it like, you should please use the thing, but it's like, let me help you use the thing and let me help you roll it out to your community in this way. Here are the tweets. Here is, it's almost, you know, like that's the way to get adoption is like customer service for sure. But anybody can go right now and use this and mint your hats and give them to your friends and stuff. But yeah. Is it fully self-serve? Can I like pop this into Guild, Coordinate, all that?

You can. And we have a great doc site that helps you walk through it, which is just docs.hasprotocol.xyz. It's the, the updates that are coming tomorrow are going to be going to take it to another level of self-serve. So right now, I think like just when you first open the app, it doesn't give you a lot of context on what to do or like, you know, orient you to specific guides. Or templates really easily. So it still, it still takes a lot of work. And to that end, we're really happy to help people walk through it. Generally speaking, you do like a 30-minute call with folks and like orient them in the app. But the second level of difficulty is not technical. It's actually an organizational design question. So one really interesting thing that's happened is that people who are governance facilitators or like, you know, the DAO point person or sometimes like a community manager who's responsible for the governance portion of the DAO sits down with us and looks at what's possible with Hats, and they say, oh man, this is awesome. I got to rebuild our whole organization now that I have this in mind. And it's kind of like someone is counting with tallies. They can count to as many lines as they can draw in the sand, and then you give them Roman numerals and they're like, oh man, okay, This really helps me with my thinking and the types of things I want to do, but I kind of have to rethink some stuff. So a lot of our conversations have been in that kind of domain of organizational designs. Like, how do you, how do you divide up the set of authorities and responsibilities of the DAO? And how do you give people power and how do you hold them accountable? And what are the things, what are the metrics that we're tracking, the ones that we should be tracking and can use for accountability? What do our social processes look like? What do our meta governance processes look like so we can update the— update governance and update our HATs tree over time? That's— those are really hard problems. And I think I'm hopeful that by doing a lot of manual implementation work and then creating case studies and forkable templates, that it will be easier and easier for people to see the types of things that they could do and make it even easier to just like fork an existing template and, and get started distributing hats. So yeah, it's still a long way to go.

Yeah. So it's not only, it's not only adoption, it's also like, you were, you're wanting, this is crypto, right? You want devs to build with it. It's a protocol. So what about that? Like, what about other, what are the plans to get other devs to, you know, start using this, building on this? Are you going to do the hackathon circuit, the tour?

We've been doing a very small number of bounties, some with Raid Guild, And those have been pretty successful. But basically what we're hoping for is that there, we kind of think of our ecosystem that we're building as a precursor to any sort of DAO or proto DAO that we might do in the future. The thought is really that there are wearers, the people who have hats in their wallets and are creating hatch trees in their DAOs, And there are builders, devs, open source integrators, people who are contributing to the protocol, or people who are contributing modules to the protocol. And everything from day one has been built in a fundamentally composable, fundamentally modular, and interoperable way. So on top of the protocol, where you have those, the way you can add eligibility logic and write your own smart contracts, We're, we have made like examples of those. And then we have an SDK that sits on top of that repo and makes those, makes those eligibility like easy for frontend developers to use. And an SDK, a separate SDK, that's like the module SDK. And then we have the core SDK that makes it easy for people who are building custom frontends for their DAO to integrate Hats Protocol directly into what they're working on. So developers are really a first-class citizen in our ecosystem. And the ways that if you wanted to build something on hats, I would look at, you know, creating eligibility modules that are plugins that like are for accountability and the automated granting of hats under certain conditions like ERC-20 holdings, ERC-721 holdings, staking. We just did one with JOKE around winning an election. So there's definitely like a lot of extensibility there. And then we've had people like Sobol who've built third-party front ends. So they have something called the Hats Composer where you can create a whole Hats tree and deploy it in one click. And they built that totally independent of us and super impressed by that. And then, of course, integrations. So like, you know, Hats are modified ERC-1155, so they work out of the box. with token gating tools like Guild XYZ and Collabland and Lit Protocol. So if you want to integrate it into, you know, your permissions architecture or your app, it's very, very easy to build that out. And in our docs, you'll see like kind of a list of 15 or so what we call authorities or permissions that, that you can already connect via existing integrations. But building more of those, those bridges to integrations where you can get real authorities like, signing on a multisig we did as a custom Zodiac module that, you know, it's a great example of like custom dev work that extends the protocol's functionality and really, you know, adds to the open source ecosystem of what people can do. Yeah.

You got to check out the docs, dear listener. These are, these are some pretty pristine docs looking good. Yeah. Very nice. Love the use of the emoji. And so I got to know, last question here, What's the future of hats? Like, what's in the distant future? What's the vision? Like, where are we going? Where are you headed? Are you, are you going to release beanies? Are you going to do, you know, like, like vests next? Or are you going to do, or like you said, you like make some cool DAOs like Mercenary DAO, that sort of thing. What are you thinking?

We did, we did beanies for ETH Denver this year. So maybe, maybe there will be another special hat for Next ETH Denver. We'll definitely be there.

Love that.

And yeah, the really long-term future, we just had a conversation about what could a V2 look like last night, so it was a little bit fresh in my mind. But right now, hats are trees. You create a top hat, which is the root of a tree, and then you can create child hats under there. You can have up to 14 levels, and then you can link trees together. So you can basically have infinite levels until you run out of block space. But there's something about DAOs and swarms and the nature of Web3 as a network. And also like, you know, one of our co-founders, David, David Ehrlichman, is like, wrote the book Impact Networks. Like we really want to lean into the network aspect, the non-hierarchical aspect of DAOs. So we're starting to think about a graph-based architecture as opposed to a tree-based architecture. And that That really meets my mental model of collective decision-making from, from the AI work that I was doing before I got into DAOs. So just, just like the way of creating power delegations and specific roles and admin relationships to those roles and accountability relationships to those roles that looks more like a professional graph is, is kind of something that's coming down the long-term pipeline. And of course, you know, that relates to kind of what we talked about earlier, which is an AI-managed company. Like, it's not really an AI, it's more like a DAO, but it's algorithmic. It has automated coordination of decentralized work. We trust it, we can interrupt it if we need to, but it's a way for groups of people to come together and get shit done. And be greater than the sum of their parts while also disintermediating rent-seeking CEOs and managers that we might not need anymore and sharing the profits of our laborers more fairly and more meritocratically and helping people find the work that's the most fulfilling to them and that they're best at so they can constantly be in the process of adding the most value to the organizations that they're a part of and developing themselves as individuals as part of that process.

I love that. Nick, thanks so much for spending time with the PoolTogether community on this episode of the PoolTogether Community Podcast. Pumped about Hats Protocol. This is really great. Yeah. You got Discord chat props on the docs from Taliskai. And we'll include these links in the podcast description as far as like your links to your docs and, you know, maybe, maybe one of this, one of these articles you linked to. But thanks for making time for us. This is awesome.

It was such a pleasure to come. Thanks for being an amazing host, and I really appreciate your questions. And yeah, for anyone who's listening, feel free to hit me up on Twitter or the Hats Protocol Twitter account if you want to talk more about using Hats Protocol, or if you have any questions at all. We're really hands-on with supporting people with implementation questions, bug reports. So yeah, just let us know and party on.

Party. On. All right, there you go. Thanks so much.

Thank you. Yeah, it's a lot of fun. Yeah, see you, man. Thank you so much.

See ya. Bye. Thanks for listening to the PoolTogether Community Podcast. You can visit pooltogether.com to deposit, and we'd love to hear what you thought about today's episode. So visit the PoolTogether Discord and let us know.