This is a conversation with John Palmer and Danny Aranda about PartyDAO and PartyBid - the product that lets people pool their funds and participate in NFT auctions as a team.
We dive deep into their experience building this project. We talk about what they see as the role of product vision in the DAO, how they think about hiring, the organizational design, the stack of tools they use to operate, and the legal structures they're considering. And that's not all — we also touched the role of community in NFTs, social investing, and what John and Danny see as interesting things to work on today.
Sina [00:00:18]: Hey everyone. Welcome to another episode of Into the Bytecode. Today, I sat down with John Palmer and Danny Aranda. They are working on PartyDAO. A DAO that is shipping PartyBid. The product that lets people pool their funds and participate in NFT auctions as a team. I thought this was a particularly interesting conversation because John and Danny both have experience working with startups before crypto, and they've both been around for a while. They are veterans of the space. And I think this has put them in a unique position as they creatively think about and lean into what's uniquely enabled with crypto. In this conversation, we dive deep into everything partied out and tease apart takeaways from their experience building this project.
We talked about how they ship software, what they see as the role of product vision in the DAO, how they think about hiring, the organizational design, the stack of tools they use to operate and the legal structures that they're considering. On this last point towards the end, we talked about this idea of legal entities as serverless functions that I thought was really, really interesting. I think this is a conversation that's worth listening to for really anyone building a crypto product or protocol today. I think there's a lot to learn from PartyDAO as a case study. I really enjoyed this chat and I hope you do too. And so with that, I'll leave you to it.
Sina [00:01:40]: So there's a lot I want to talk with you about today, but I thought maybe to start telling the story of how PartyBid came together. Because for me, it was just a really cool kind of internet native, organic coming together of people that happened. I thought maybe a good angle on it would be how each of you chose to get involved with the project or how you felt the gravitational pull of spending more time on it. Whoever wants to take this first, go for it.
Danny Aranda[00:02:11]: What's interesting about the way PartyBid came together is, I think the way a normal team comes together is that there are the people first and then they come up with an idea. They iterate on the idea and they go through a few different versions of it. PartyBid started with the idea and then people came together around it in the DAO. And so the very beginning was Denis Nazarov founder of Mirror posted a tweet describing kind of just the high level parameters of the product. So, how can a group of people come together and bid on an NFT as a collective. And that being kind of a form of DAO in and of itself. Anish from Paradigm put the initial MVP together.
He just did the contracts, no front end. He went and won a NFT auction from Colin and Samir who have a podcast. And so that was the first MVP. PartyDAO itself as an org came together around the same idea, but trying to take what Anish had done and bring it into a more production state. As that was coming together there wasn't actually a team in place at all. It wasn't clear who was going to build it, who was going to work on it. But in terms of the very first thing I saw online of Denis's PartyDAO blog post, what was interesting to me was the idea of a DAO that was explicitly about building software. Explicitly about shipping some product versus it being kind of more investment focused or transactional or kind of collecting focus, but just having a product and building at the center of it was really cool.
Sina [00:03:55]: Yeah. It was kind of interesting that, I remember watching that whole process of Denis sharing the idea on Twitter. Anish building it and then Dennis launching the crowdfund and that sold out in 25 minutes. I was actually on a call during that, and I was fascinated by this whole process and I wanted to participate in it, but I totally missed the whole thing because I was literally on a call. I messaged Dennis after and he was like, I guess I can send you 10 parties so you can be in the discord. So that's how I got in.
John Palmer [00:04:30]: I mean, that's like the classic thing in this space. You never want to be on calls because anything could happen in like 15 minutes on crypto Twitter where you miss out on huge things. So yeah, that's a classic.
Sina [00:04:45]: So did you both just happen to be around?
John Palmer [00:04:48]: Yeah. I just happened to be around and I saw, I forget what it was. I don't remember if I saw it on Twitter or in a group chat that I had with some friends. But yeah, I was excited about the idea, actually similar to Danny. I guess at first, the thing with the Mirror Crowdfund was just like Mirror Crowdfunds were still relatively new. I wasn't probably in the first 10 crowdfunds, but it was still exciting just to see a crowdfund. I was excited to be contributing to them to see cool projects started on Mirror. But after the crowdfund happened and as soon as the discord came together, that's kind of when the stuff clicked for me too, around being like, oh, okay. I've been kind of critical about the DAO discourse.
People are hyping up DAOs but like to that point most DAOs are exactly just like, usually it's just some people with a Multisig, and I think that's cool too. Talking about how DAOs are going to change the world, just like buying stuff or investing as a DAO, isn't going to change the world alone. So the idea that there could be a DAO that was going to try to create the same results or the same end product that a Startup usually would, but it's going to do so without the company, without the investors, without the full-time employees, that was like, theoretically, very cool. Which is why I wanted to be involved to see like, can we actually do that? Because I had also written about some stuff like that before.
I had an old kind of halfhearted blog posts called Internet Native. That was just like, okay, right now when you form a company, you go on Stripe Atlas or Clerky and you form the C Corp and then you raise the money and you get the bank account. But theoretically there will be Internet Native versions of all these things where you don't actually have to form a C Corp or a corporate bank account or whatever. And so this is potentially like the kind of pioneer towards seeing what that looks like. Obviously doing a lot of things very manually. But I think this way of bringing people together and starting something will probably be a big part of the future. So I wanted to be part of that.
Sina [00:06:53]: Yeah. It's interesting that it's kind of Meta in that way, right? Like PartyDAO came together in this organic way and it's a DAO, and then the product itself is helping people build DAOs in real-time.
Danny Aranda [00:07:06]: Yeah. I think it's actually very helpful from like a DAO member's perspective to have that kind of reflection between the product and the org itself. So PartyBid is a product, I think a core value of it is this idea of collective ownership. Like a group of people being able to go in on something and own something together and form a community around that. PartyDAO actually embodying that in the way that it's organized itself I think, is very helpful as well.
John Palmer [00:07:35]: Yeah. It's cool because it's flexible too. Some parties will end up having a desire to be something more like a DAO that lives on and continues to either have events together or acquire more NFTs or whatever, but then there are others that are just like one-off things. So there's kind of like a nice range there. And then it's also been helpful to see, I think like this year PleasrDAO started, which was probably like, at least for me the first high profile group of people buying NFTs as a team with shared capital. We can just kind of see the behaviors that are happening three months ahead of us and then we're just productizing them and making them trust list through software.
So it's kind of cool to be able to just keep watching what's the cutting edge behavior in NFTs and then adapt it into the PartyBid product. One thing is obviously, the first is just bringing people together to pool their capital and get the asset. But now there's a lot more stuff happening with when you get like a noun, for example, one of the main benefits of owning it is being able to vote in governance or take something like Loot, which is another newer project. Loot isn't just something, hypothetically that you just buy and then eventually sell. You could also maybe use it to participate in games or governance or whatever.
Sina [00:08:56]: It gives you access to this whole world that's being created.
John Palmer [00:09:00]: Right. So I think there are many ways to expand the product, but I think in kind of like going deeper vertically, Vector is being able to take something that a group has owned and now use it in these new ways. But I guess like the Meta level pattern here is just like being able to observe the space and then have a product to fold new behaviors into it is pretty cool.
Sina [00:09:21]: It's interesting, because PleasrDAO in some ways is the PartyDAO behavior, right? Or any of these DAOs. Like first you have an idea to maybe buy a piece of NFT or you and a few friends are choosing to set up a little Multisig together and go out and buy things. When PartyBid is basically just taking that and making it super easy and making it possible for you to do that with other people without knowing who they are. Maybe to just briefly lay the groundwork before we keep talking about this, what is PartyBid actually? What does it let people do?
John Palmer[00:10:02]: The way I usually say it, the one sentence description is, PartyBid is a product that lets people pool their money together and participate in NFT auctions as a team. And then to follow that up, when a party wins an NFT auction, the NFT is fractionalized into ERC-20 tokens and those tokens are distributed to the people in the party based on how much ETH they put into the winning bid.
Sina [00:10:26]: That makes sense.
John Palmer [00:10:27]: Yeah. That's like the most literal version without kind of expanding into what people are doing with it or whatever.
Sina [00:10:34]: Totally. And so what happens after that? Now you have these people who own fractional shares of an NFT. These are ERC-20s and there's a whole space of possibility in how these people communicate with each other. What happens from that point onwards?
John Palmer [00:10:53]: Right now, when the auction ends, not completely, but we more or less kind of kick people over the wall into fractional.artworld. So right now the way that we do the fractionalization is through another protocol called fractional. They have smart contracts that let you kind of put in an NFT tip, put out fractions and those fractions govern the usage of the NFT in the future. The main thing you can do with the fractional token is you can vote on what the new reserve price should be. And so if you imagine like a hundred people pool together their money to buy an NFT, now they all have fractions. Those hundred people can all put in their own vote. I think the reserve price should be fifty ETH or a hundred or twenty.
And what fractional does is it takes a token weighted average of those votes and it sets the new reserve price. There are some constraints there, but basically then, that NFT sitting there with the reserve price, eventually a buyer can come along and place a bid above that reserve price and it just kicks off a new auction. So hypothetically, the full long tail thing is someday that NFT gets auctioned off again, it sells and the ETH from that auction, then again, there's a token way to distribution of the ETH to the people who were holding the fractions of that token. So now there are other things maybe Danny would speak more to this, but there are other things people are doing with the tokens in the meantime.
Because the cool thing about these fractional tokens is even though they have these special fractional features like voting on reserve price, they're also just ERC-20s like anything else. So you can still do stuff like a token way to discord or a private community or whatever you want, because you have this very versatile kind of instrument underlying the whole thing.
Danny Aranda [00:12:31]: Yeah. The emerging behavior that we weren't expecting going into releasing PartyBid was the community element that would emerge out of different parties people were putting together. And so the first example that sticks out in my mind is there was the Zombie Punk that was auctioned off. PartyBid formed around it. The PartyBid won. It was exciting because there was another bidder, there were a few other bidders. It was competitive. It was a whole battle.
John Palmer [00:13:01]: It came down to the wire.
Danny Aranda [00:13:02]: It came down to the wire, there was a user dingling. Came in last second with like a hundred ETH or something like that.
Sina [00:13:09]: Dingling come into the risk.
Danny Aranda [00:13:11]: Dingling. There were memes going around online of like dingling. Like, you know, really bringing out, coming out in force. And so it was this whole kind of event and experience. I think everyone kind of being online and seeing that occur, kick started this community. I remember right when the auction was won, I just started looking at my Twitter feed and I just saw hundreds of people had changed their avatar, their profile picture to the Zombie Punk. Some of them had also [00:13:14 inaudible] the Zombie Punk plus a party hat to indicate that they were part of that moment. They formed a Token-Gated discord called The Grateful DAO.
The token was called Dead Token, so they were Deadheads, and so you kind of got this emerging community and culture around the piece. Which we did not necessarily think about that within the product itself, but started to feel like the greatest...
Sina [00:14:11]: The breakthrough.
Danny Aranda [00:14:13]: Yeah. That felt like one of the biggest opportunities around it. I think this is still all very new in NFTs. There have been communities around NFTs for a while, but again, like the Please example, Fingerprints DAO, all the different DAOs that are forming around NFT.
John Palmer [00:14:30]: Shark DAO too.
Danny Aranda [00:14:32]: Shark DAO, that's Nicholas and crew.
Sina [00:14:34]: That's a DAO to buy nouns, is it?
Danny Aranda [00:14:36]: Yeah. They use a platform called Juice Box, which is super interesting. It has a bunch of interesting treasury management tools. But yeah, their whole reason for existing is for the nouns. They want more nouns.
Sina [00:14:51]: Yeah. And so the Zombie Punk, how much did it actually sell for in the end?
**Danny Aranda [00:14:57]:**It was over 1100 ETH, somewhere around that.
John Palmer [00:15:01]: Yeah. I don't remember the exact price in ETH. I'll try to pull it up while we're sitting here.
Danny Aranda[00:15:08]: Yeah. It was a bit over 1100, maybe 1200 in ETH and there was a pretty wide distribution in terms of who contributed. Some folks contributed a lot like Andy from fractional and some folks put in less than a hundred dollars.
John Palmer [00:15:25]: Yeah. 1201 ETH.
Sina [00:15:28]: Wow. How much was that in dollars?
Danny Aranda [00:15:32]: In dollars, over 3 million.
John Palmer [00:15:33]: Yeah. 3.6. Something like that.
Sina [00:15:36]: So just hundreds of people came together and put in more than 3 million dollars to buy a Crypto Punk.
Danny Aranda [00:15:42]: Yeah. It had all these things happening at once where like, it was a super-hot punk market. It was one of the first PartyBids ever. There was just a lot of excitement around that party and yeah, it was pretty cool.
Sina [00:15:56]: Danny, I remember you said the other night that going through the Zombie Punk launch reformatted something in your brain. Like going through that experience changed you. So what did you get from that experience?
Danny Aranda [00:16:11]: Yeah, and I don't mean to pretend that this hasn't been going on in the space for a while, but my own personal experience in the space has been much more infrastructure focused. And as I was thinking about exploring things to do next, I was definitely defaulting more to like L1 L2 protocol level projects. That's what I thought would be interesting and the right thing to work on. I think we're reaching a very different point though in crypto now. And if you think about like, if you were a hot engineer back in 2017, the prestigious cool thing to work on would have been a brand new L1.
But if you think about what you should have been working on, it should have been building Uniswap or you should have been doing something in defi and the takeaway there is it becomes like a bit more application focused, right? And you're kind of like working your way up the stack. I think with PartyBid, what it demonstrated for me, and again, not like it hasn't been demonstrated with other applications out there, but it demonstrated for me that the big opportunity in crypto going forward is going to be surfacing things that have the potential to become like mass consumer applications. Specifically something around, NFTs point to part of it, but it it's something to do with social networking on crypto.
That's why the kind of community aspect that was coming out of things like the Zombie Punk and so on are exciting. They look like these small social networks, but that there is this economic piece to it where they own something together, and then that can become very motivating. And so the way I think about it, like refracting my brain is like it totally like took me out of this kind of infrastructure mindset and was like, oh man. Like the big opportunity is something application focused that is fundamentally about social software and it likely has NFTs as a component. I mean the product market fit between NFTs and DAOs, I think is well demonstrated at this point and DAOs being a social community I think is well demonstrated as well.
So it's about how do you package all that up to kind of reach whatever the next number of users are to really participate in that.
Sina [00:18:30]: Okay. So you think that the interesting space of exploration right now, or an interesting space of exploration is primitives and more like social structures and experiments that bring people together and allow them to collaborate, feel belonging, build community. That's the space of things to explore and what we have too. It's kind of interesting, because NFTs are in some ways, or a lot of what we're doing in crypto is like creating shelling points, right? It's like, we're almost taking this arbitrary thing that doesn't have any value or meaning in its own, and we're choosing to make it this focal point for the sake of gathering with other people around it, right? Like that second order effect is almost what's interesting about what's happening.
Danny Aranda [00:19:25]: Yeah. You could argue Bitcoin is that, right? Bitcoin is the social network around Bitcoin the asset and then there's this community memeing it into something extremely valuable.
John Palmer [00:19:37]: Yeah. Bitcoin holders are just like party holders of an NFT, but the NFT, they all hold Bitcoin. They all have fractions of Bitcoin the network.
Danny Aranda[ 00:19:46]: Yeah. We were joking around the other day about this with Billy from Cosmos about Christians hold fractional NFTs like the crucifix and they have this community and like value system that is like building this thing.
John Palmer [00:20:07]: Exactly. Bitcoins are just fractions of the Bitcoin Network NFT.
Danny Aranda [00:20:12]: Yeah.
Sina [00:20:12]: Yeah. Bitcoin could be one NFT that's fractionalized into 21 million pieces. But I guess what's different there is that Bitcoin has the meme. It is the shelling point around which a whole community and ecosystem has formed, but you could also say that the token has some utility. I guess any NFT would become a store of value. Being a store of value is almost like a byproduct of being a meme that enough people buy into.
John Palmer [00:20:42]: Yeah. I think these are funny, one more thing on the what to build stuff is just, I think the pattern Danny was saying in terms of like levels of abstraction makes sense. And just to tie it back in, back in 2017 when Ethereum was there, there weren't a lot of real [00:20:58 inaudible], but there was a lot of tokens because we were in the ICO era. So what is the main thing people want to do with these tokens? They want to trade them. So the best thing to build was Uniswap. It's like, I'm going to just productize the one thing people are doing, given like what we have in the ecosystem. We have a lot of tokens. There should be a place to trade them all.
You build Uniswap, that's a great idea. Now after DeFi summer and all this stuff, there's actually like a lot of DeFi applications. There's a lot more stuff in the space and there's more things people want to do with those. I think even within DeFi alone, people kind of rift on more complex derivatives and things to do with the ERC-20s or whatever. Now I think Ethereum is just a way more fruitful space with a lot more flourishing projects. So there's NFTs, there's DeFi, there's some gaming stuff. And so the thing to build in terms of like abstraction, like Danny was saying, it was like a L1 and then it was an application, but now there's a bunch of applications. It's things that bundle and compose those applications together, right?
So people have always been talking about composability in the space and whatever. It's not really about the term. It's just like, oh, there's now patterns of behavior that we can see that people want to do, given how many things are here. But no one has reduced the friction and made those things easy to do. We obviously see PleasrDAO started because Leighton Cusack tweeted, anyone want to like put money and do this thing. And then a bunch of people like Robert Lechnar and other big Twitter, crypto people just manually sent ETH to Leighton, trusting that he would buy the NFT and they would figure it out. That's a lot of friction and a lot of trust.
So one thing that people do both on PartyBid and elsewhere, like on Juice Box or whatever is, oh, cool. We all got fractions of this NFT. Let's make a Token-Gated discord. Well, there is no reason that when a party ends there can't just be a button there that automatically spins up the server using the Discord API, adds the Collab Land bot and funnels you into the community completely seamlessly. Right now it's all manual. But there are so many things now happening on PartyDAO that are just like the future product expansion just seeing the natural behavior happen.
Sina [00:23:46]: One thing I'm taking away from what you're saying is like in 2017, one type of thinking that was pretty common was to be looking 20 years into the future and be talking about how crypto was going to, you know, we're going to kind of transcend borders and nation states and we're going to have a legal system that's going to be [00:24:10 inaudible]. Yeah. It's going to be running fully on chain. And because everything is so new, there is this maybe natural tendency to try to project too far into the future and be like, where can all of this go and try to build that thing. But I guess what you're saying, which is I also agree with, and we've seen it a lot in the space, is it's still this kind of organic step by step exploration, right?
You don't need to look beyond what comes right after here. Just take the behavior that people are doing manually and unscalably and build them into products. And then that will let the next thing emerge.
John Palmer [00:24:49]: Right. And I guess I think the best thing to do is to kind of have both, right? There are two failure scenarios. You thought too long term and you never took off or you thought too short term and you took off and then it was just like a fad, right? So the long term thing would be like, you build digital nation state primitives for citizens to move their whatever, and nobody uses it because it's too esoteric. Or the other thing is being, I don't know, one of these fad social apps or whatever. I don't know if you remember, not even in the crypto world, but like TBH was like, they got acquired so it was a successful outcome, but they were an app that spiked in the app store, but six months later no one was using it.
So you don't really want to be either. But I think the key, the nice balance to strike is, you have to be something that is relevant right now that also has long term potential if you can keep it going. I think there are certain founders, even from non-crypto that I think have always been really good at that. I think of like Evan Spiegel from Snapchat as someone who is really good at hitting the timing on behaviors where they're just emerging and hot now, but they also have longer term ramifications. So they invented the disappearing photo, stories, filters, lenses, all this stuff was perfectly time and they sequenced that together. I think that for me was the cool thing about PartyDAO or PartyBid.
This isn't pumping myself up, because it's not even my idea, but it was just like a thing that was like, oh, okay, this is a behavior that's obviously relevant right now. So there are no waiting for the market to catch up to what we're building. The core thing works right now. There are also other longer term stuff of like, oh, if these things are really small ProtoDAOs, like there's a bunch of DAO tooling stuff there, but there's also fractionalization of NFTs and ways of governing NFTs is also clearly its own whole space. Like enabling Twitch Place Pokémon Style Interaction with NFTs, especially if they are in game items.
Sina [00:26:52]: I thought that was so cool when [00:26:54 inaudible] shipped that, where you had to keep the character alive and everyone was coordinating around that.
John Palmer [00:27:00]: Yeah, exactly. But you could imagine even stuff like that for like a single loot bag. If like the fractional holders of the loot wanted to play a game with that loot, you could have, anyway I just think that's kind of like the cool thing for me with PartyDAO. And even like the first day with the dead thing, with the dead party, winning for me. Yeah. That was like the moment. It was like it actually just kind of worked on day one. Like the behavior is definitely desired and that's cool, because as long as that can continue to be the case, there is a lot of room for expansion in the future.
Danny Aranda [00:27:34]: I mean the other angle on this going back to the prior point was we are now at a point where there are enough protocols and projects on Ethereum that you can bring them together and put a front end on top of it and have it be a cohesive experience. So PartyBid alone uses multiple auction markets, Zora Foundation, the Nouns Market, and there are a few more being built now. Then there's the PartyBid actual smart contract itself, in terms of being able to pool money into a smart contract. Then it uses fractional for the fractionalization and then fractional itself is using Zero X Sushi and Uniswap for trading the fractional tokens and so that application alone is touching close to 10 protocols.
There are going to be a ton more examples like that, of just being able to kind of cobble together all these different seemingly complex protocols underneath, but making them into a pretty seamless user experience that doesn't try to take away the crypto or make it seem like you're not interacting with crypto. But at least makes it like a fun experience to actually use and have it be something coherent that makes sense to the end user.
Sina [00:28:46]: It also implies something about the archetype of builder or team that can really build these sorts of ideas. If you are building something that fits the zeitgeist right now and is going to evolve with it, you need to ship really quickly. You need to have a good cadence of being able to put out products and you maybe don't need to be this really hardcore low level security engineer, or you don't need to have a waterfall process to design your protocol and engineer it and then security audit it and put it out. I guess if we're looking for early signs of patterns that are emerging, is just the smart contract that someone wrote over the weekend and shift and is like, Hey, this is Alpha Software and use it at your own risk.
I mean, have like what is the deal with the PartyBid contracts? Have they been audited or do you even think about that? Also if it's evolving so quickly, given especially how broken the security audit landscape is where you have to wait five months in advance to get your slot, how do these two things square up with each other?
Danny Aranda [00:29:56]: Well to quickly address your earlier point, yes, I think there is a cultural shift happening in the space where people are much faster about trying these different experiments. And there are a lot of different examples, but what Dom is doing with the various NFT projects is interesting because they are really fast. He says, listen, this is an unaudited code. Interact with it at your own risk, but what we're trying to do here is an experiment and Loot, the Wamagotchi, all those pieces kind of fall into it. In terms of how we thought about security with PartyBid. I mean, it's serious because people are putting money into PartyBids, right? And that is a smart contract where money is sitting there and if that was to get hacked, that would be really bad. We didn't do a formal audit purely because of timelines and wanting to ship.
John Palmer [00:30:44]: And also budget.
Danny Aranda [00:30:45]: Yeah.
John Palmer [00:30:46]: We had limited ETH from the little crowd fund. So yeah. But we have done security focused reviews where we've basically invited pretty senior and experienced solidity engineers from various protocols who have done audits before and had those individuals come in for like a week and look over the contracts. In those cases we've also gotten, I guess we can't really call it a formal audit report, but we've gotten a Security Focus Review report with like the P0, P1 and P2 two level vulnerabilities. There has never been any severe vulnerabilities, but they have tightened up little edge cases. We've done that every time we've updated the protocol, which is now just coming up on the third time we've had one or two people come in and perform that kind of review.
It's something that should probably expand over time, especially with the first initial launch. I think the ETH from the crowdfund on Mirror was worth about a hundred K, total. The initial mandate was, let's get an MVP on Testnet. We got the team together and we ended up building a full on V1 on main net with a UI. It was way beyond the scope of what we planned. But even then we spent probably half the funding, like roughly 50 K if you were to convert it to USD. Paying the developers and designers, the PMs, Danny on go to market, like paying the team to build that. So if you think about the pricing of audits, one, we couldn't afford a real audit, but the other thing was, we didn't even know how big the launch would be.
Initially it was like, let's just get something on staging and as we got closer to the launch, we were clearly going for a real launch, but it was definitely not obvious that there would be millions of dollars flowing through the protocol on the first day. So I think we've talked about PartyBid the protocol and the product. The other interesting thing about this is the DAO and the organization, because this is not being built by a Startup, it's being built by a DAO, which has all its own challenges. One challenge now is figuring out how to fund the DAO and give it the resources to really speed up development, give it longevity and kind of like resistance and resilience to Bear and Bull Market cycles.
Basically, the question is how to get more funding? But right now, we're still in the amount of funding. I think there's between two and three hundred thousand dollars’ worth of assets in the DAO Multisig today, which with like a team of like six to eight people working full time, doesn't give you more than a few months of runway. And so it'd be great to be able to take like one hundred and fifty thousand dollars [$150,000.00] and get a full on security audit of the protocol. But there are questions we have to answer before it becomes worth, like basically bankrupting the DAO to get an audit. So yeah. I think we'll evolve it over time,
Sina [00:33:35]: I think this model of doing, you could call it a micro audit, right? Where instead of developing everything up front and then having scheduled a real audit four months ahead of time and handing over the code, that has a whole bunch of problems. Because then they'll come back with feedback and it might result in you having to just re-architect a piece of the protocol. It puts everything into a very waterfall type process, but I think there are now a number of pretty solid security oriented solidity engineers who could just come in and spend like three days embedded in the team, looking at the smart contracts and giving feedback. That goes most of the way, especially for these early products towards having something that's decently secure.
**John Palmer [00:34:24]:**Right, and I should just add our disclaimer on the whole thing of like obviously given the state of the contracts, I think yeah. For any protocol where money is going through it, being like hacked or whatever, having something like drain funds is the worst case thing that could happen. We had one small edge case get discovered in the V1. It couldn't drain the funds, but there was a scenario where you could lock funds and we ended up giving a generous bounty beyond even the funds that could have been locked, let alone drained. There are no funds that could have been drained, but we ended up giving a great bounty to the developer.
Bringing them into the DAO, and now they're like a DAO member. That's another solidity engineer. So my public disclaimer to anyone who listens to this would be, if anyone does find exploits or whatever in the contracts, we don't think there's anything there given the amount of reviews that have been done to this point, but this kind of like a call for white hat hackers, like we're always looking for great solidity devs and the DAO is definitely committed to a precedent where potential exploits are rewarded fairly by the DAO so that...
Sina [00:35:24]: You're setting a good precedent.
John Palmer [00:35:25]: Yeah. That's what we would hope to do. I think any organization that pursues this strategy of, okay, well we're not going to spend half a million dollars on security audits because we can't. We are going to ship the code and have all the proper disclaimers like this is in our client as well. Something that has all the proper warnings. But I think any organization that's pursuing that strategy should also say, hey, by the way, like any security focus devs out there. If you find anything, we can pay you. We can invite you into the DAO. We're looking to collaborate with those people too.
Sina [00:35:54]: That's like a coherent strategy around that way of operating, right?
John Palmer [00:5:57]: Right.
Sina 00:35:57]: You ship, but you also kind of very generously reward people who proactively kind of come and find...
John Palmer [00:36:04]: Well, hypothetically, the incentive for a developer is like, if you look at these contracts and find something, you can participate in the upside of the DAO and come into the DAO on the ground floor versus just draining funds or locking funds once and like kind of killing any potential future upside. So I think that's cool to kind of publicly proclaim that incentive is there, even though there's not like formal bug bounties right now,
Sina [00:36:31]: Totally. Bug bounties in general are very interesting. I had a friend point out to me that Bug Bounties are a form of retroactive public goods funding where someone has already done the work of finding the exploit and they're coming and presenting it to you. If you anchor on how much value this action of theirs created, it's worth a lot and projects should reward that work.
John Palmer [00:36:59]: Yeah. Definitely.
Sina [00:37:02]: So how has it been working in a DAO? How does that feel different than if PartyDAO was a normal startup?
Danny Aranda [00:37:11]: Just giving some of my own experience when the team was chosen to ship V1, I wasn't on it at first. So everything that I saw was just as an observer, looking at the discord, following along with the different work that was being put out. We did a product development call early on just like going over the spec and trying to actually define what the spec was going to be about. I will say compared to a normal startup experience where the onboarding process or the recruiting process at a normal startup is like very formal. Like you have interviews and you are presenting a very specific face and the company on the other side is doing the same thing.
All the information that is passed between them is extremely gated and curated between the two parties. With a DAO it was all laid out. I had some sense of the personalities that were at the table and how they were working together. I also got to see what problems or gaps were available to actually work on and start thinking about what a contribution that I could make would look like. I think that even goes into the [00:38:23 inaudible] example of like, if you have a DAO and there's all this work happening in discord, and it's publicly available, people are going to see things that they can potentially do.
The recruitment process becomes a lot more aligned. Like it literally becomes the same thing as just working, because you're just like observing people work and seeing where you might slot in. People talk about DAOs as like, okay, well, a DAO is like functionally, like aren't anything, but like, people at Discord with the Multisig, and that is technically true. But I think there is also a really significant shift on more of like a cultural and also like work rhythm level that really opens it up. I think it opens it up to more talent to be able to join and contribute because of the visibility that they get.
John Palmer [00:39:08]: I think that's also an interesting alternate angle on the whole building in public thing. Building in public doesn't mean that you're building something and tweeting about it and advertising it. It's more just like you're just doing work and it happens to be in a venue where people can actually observe the work that's happening. So yeah, it's not like a marketing element. It's more just like if you pop in the discord and just see this talk that's happening, you'll pretty much realize what the team is working on.
Sina [00:39:33]: So one question I've been sitting with is the way, and I think PartyDAO really kind of encapsulated this, like it had this idea embedded in it, in the beginning, was that openness and the spontaneity with which this initial team came together, right. There was a fully open crowdfund that was announced on Twitter and whoever was interested in this topic and had been following it, self-selected into the project by funding it. At first, it was just like we're building this open-source implementation, we're raising the minimal amount that we could do this. So the type of people you attracted, there was this self-selection that happened into it. But at the same time, it was like anyone on Twitter could have participated in that and become a part of this discord. Right?
And then the early team organically kind of emerged out of this. I think that you've talked about this before, and I totally agree with that too, which is like this allowed for a very, very strong group of people to come together. Where otherwise it there was no way you would've been able to hire these people if it was a normal startup. But on the other hand, what about the wisdom of, if I'm going to build this startup and work on it for the long term, that my early team matters a lot. I want to be very intentional about who is involved, who is around the table, and your team basically determines the entire trajectory of what's going to happen. So on the one hand you're kind of running this open process, on the other side you're running a much more curated, like I'm going to bring in people who I have a lot of trust with and who I think are really good.
John Palmer [00:41:17]: I think the main thing is maybe with the origin point of like a team like this, you actually just have an overabundance, or maybe in our case you have an abundance of willing contributors and so there is some curation element, I guess, or just like selecting a team carefully. I definitely agree that who is building an early product matters a lot. The product will end up reflecting that team's tastes and preferences and skills and I think definitely you want to highlight the point that building a project in a way that you don't have to quit your job and come join full time to get to work on it. It's just if you have some time you can work on it. That's what enabled us to have Danny being willing to hop in and go to market or Anna doing solidity or Colio from Uniswap designing it.
You're probably not going to recruit the first employee of Uniswap away from Uniswap to join your week-old idea. So there's definitely huge talent arbitrage there and that was cool. What we did in our case practically was, it wasn't totally everyone just raised their hand and said I'm in and those were the only people and whatever. The staggered way things went down was there was a proposal to agree on the rough spec and the DAO voted and was like, okay, here's what we're building. And then I kind of self-nominated and said, I would love to be the PM. And I would love...
Sina [00:42:44]: Hold that. So for that spec, who put that together? Was that also you?
John Palmer [00:42:48]: I drafted the spec and then I think everyone in the DAO kind of like commented and edited. It was a public Google doc., and so there was a bunch of stuff that I wrote that got changed by Danny's comments or Anna's comments. I think Dennis was in there. That doc. kind of came together [00:43:02inaudible]. Like, okay this should roughly be our spec. It was kind of through the discord. And then once that spec. was there, I was like, oh cool. I'm pretty excited now. This is looking pretty awesome. I want to be the PM or I want to help make this happen and so I just wrote a proposal that said, okay, if I were PMing this, here's what I think the roles would be. We need a designer. We need a solidity dev.
We probably need some solidity reviewers, yada, yada, yada, and we need a PM and I'd like to be the PM. So I submitted that proposal and people were like, okay, sure. Embedded in that proposal was for the rest of the roles on this team, we'll do a mini hiring process in the DAO. So we created a channel called V1 Hiring and I just said anyone who wants to work on this, if there's a role, whether it would be in the web dev or the designer or whatever, just post a little blurb in that channel or if you don't want to post there, just DM me. I will review all the people and then get back to everyone within two days and say either we'd love to have you do this role or here's who we chose and why.
But like, here's a clearer reason that we chose them and not you. Honestly, there were a lot of people who were excited, but it wasn't a massive number of applications. Probably 15 people kind of applied for five or six roles, and so I just kind of went through them and selected the people that seemed like they had the right time availability and experience for this product. There were actually a lot of really good people who ended up not being on the team, but then still helping out and either providing design review or looking over the solidity code when they had some free time, but that's how we solved it basically. We did curate down. We didn't have to manually select how many people we could actually pay to work on the project.
Sina [00:44:47]: Right. I remember noticing this as well, that you were bringing in more structure inside of this very unstructured process to this point, which didn't need to be that way. But I think it was the right call of like we're going to actually pay these people. We're going to have one person responsible for each of these pieces. We need a smart contract engineer, we need a front end engineer. We're going to have an actual team and I'm going to run a hiring process. I think that's probably necessary to make any progress. The other interesting thing is the way this happened. There was a moment at the beginning of the life of PartyDAO where it literally didn't have a leader.
It wasn't like there was a founder who put the idea out there and then carried it through and then it grew. Dennis put the idea out there, and I guess a group of people kind of led to this crowd funding moment. But then there wasn't anyone who was like, I'm naturally the leader.
John Palmer [00:45:51]: Before you finish that, I would still say that I would probably think that's still the case. I like PM stuff, but I don't know if the implication is that like I'm the leader, but I don't personally really feel that way. I think maybe in that first week it was like, oh, this guy is putting some structure in, but I think at this point everyone on that early team has pretty equivalent influence. Also I think the cool thing about the DAO is there's no reason, it necessarily has to stay that way. Hypothetically, another PM could come in and take over wherever I left off. I want to keep PMing obviously. I'm having a great time working on it, but I think it's still interesting because yeah, Dennis started it.
I project manage, but Danny led all the go to market and partnerships that we have, which are like a huge part of it and I don't know, Anna wrote all the solidity codes. So theoretically, for a lot of protocols, that person would be the leader, right. Like Hayden on Uniswap for example. So to get all these benefits of a DAO and getting all this talent, and one thing you kind of have to be willing to give up as someone who might have done a startup or something otherwise is like monopoly over ownership or control. Because there's more than usual distributed group of people who are controlling the project at this point.
Danny Aranda [00:47:16]: Yeah. To kind of back up from this process, I think the high level sequencing was it started as an idea online that proliferated and because of the proliferation, that was some validation for the idea. Dennis tweeting it out, that getting a bunch of likes and Anish building it, that was kind of very early validation for the idea. Then the DAO came together, which was just a bunch of members. Like you're saying, no leader, no team, just a bunch of members in a discord trying to figure out what to do next and then a team came together and then a product was released from that team. But I think some of that sequencing is interesting, I think important.
I think it may prove one day that the current progressive centralization model where you start with a team that then builds a product, that product gets traction and then a DAO is formed around that because there's some community using the product, might introduce complications if you inverse that model, like you wouldn't find.
Sina [00:48:24]: You're totally re-sequencing it.
Danny Aranda [00:48:28]: Yeah. And even from a product market fit point of view, like having worked on the launch and seeing the launch play out, I don't think that type of launch would've been possible if we were a normal startup and if there wasn't the DAO there. There was a lot of initial distribution through the launch that happened because DAO members were very much involved and they felt ownership over the product itself and what was being shipped. I think that kind of culture or that community aspect to it just really changed what the response was.
Sina [00:49:05]: So one maybe, outcome of this is that you as a person who has an idea and wants to build it and ship it and bring it into the world, you kind of need to have a different relationship to this project than you would to a startup that you were founding. You need to be much more flexible about where this thing is going to go. The model of the founder with a very distinct vision of the future that they're going to rally the troops behind and get there. Let's say the archetypical Mark Zuckerberg, where we want him to have board control and ability to do what he wants. That's not what's happening here. Right. Maybe another critical ingredient of what happened with PartyDAO was that the spontaneity and playfulness of it, that no one was like, this is what I'm doing with my life for the next 10 years and I need it to look this certain way. Right? It was all very casual and playful how it came together and that whole process allows for multiple people to shape what it's going to be in a more open way. Is that true?
Danny Aranda [00:50:20]: Yeah. I agree with that. I was just thinking about your point about having someone with a strong product vision. I would argue there is a way to thread that, like I do think strong product vision is still extremely important in products in general, like designing products by committee through votes
Sina [00:50:38]: Doesn't work, right?
Danny Aranda [00:50:39]: Yeah. I don't know if it works, but it sounds tough to take an idea where someone just has a vision behind it and then have it go through the administrative process. So again, just using PartyBid as like one example of this, there was a strong product vision that got put forth on Twitter and then proliferated. I would also say what we're seeing in the community now, and even just from PartyBidusers is also some other strong proposals about what should happen next with the product.
John Palmer [00:51:12]: I would even say too, in the specing process, there were multiple people that I felt pretty strongly opinionated about exactly... I think Dennis did like the four bullet point summary, like people pool their money together, they placed a bid, they win, they fractionalize. There's a lot more details within each of those steps and at least for my opinions, I was pretty strongly advocating that we should or shouldn't do certain things at the protocol level. I think Anna was doing the same, Steve was doing the same. You were doing the same.
Sina [00:51:39]: Yeah, and it's interesting even like V2 or is that what you're calling it that you're shipping? It has some really strong product ideas of allowing it to stream to this person outside, like one particular person.
Danny Aranda [00:51:56]: That idea though, also came from within communities. So that's what I mean by, I think you can thread the needle between a DAO structure of more collective involvement between people in creating a product and still having a strong product vision. So the idea of what we're calling and releasing very soon called Party Splits is when you start the party, you can have an address that a portion of the fractional tokens resulting from the party are going to go to. There are a few things you can use that for. You can imagine someone send it to themselves. So they're almost like doing a curator or party hosting fee. You could imagine someone who is selling the piece themselves actually like retaining ownership.
So then they're just selling say 70% of the NFT to other folks so they can kind of like, co-own it with the community. But the use case that we're kind of most clearly seeing right now is around Bootstrapping DAOs. That idea came from Sirsu, who is a member of PartyDAO. Releases NFTs himself, has a decentralized Esports Team and so on. He does a lot in the space that he's experimenting with. But one thing he put together was something called the Crypto Cookout, which was a series of Party Bids to purchase Black Crypto Punks and had a whole POC community around it that had this kind of core message of owning pieces that represented that community. And so, what they'll be using this feature for is yeah, but bootstrapping a larger DAO or community and treasury for Crypto Cookout. That was directly inspired by that vision that he put forward. It's really fun actually to kind of see this process of people using the products and getting inspiration from that.
Sina [00:53:42]: So it feels like maybe it's a gradient, it's a spectrum of existing organizational types where say, you really want to empower the employees and all of your teams working on the product themselves, because they're really close to the users and have ideas. You want to empower them in a traditional company to be able to share ideas, right? You want everyone in your company to be able to share ideas, and then you also want to have a close feedback loop with your users and listening to what they want and what they're doing. You also want to make your users and your community feel like they have ownership over the platform, the way that AirBnb, Uber and Lyft probably try to do. But it's like taking all of those ideas that are on a gradient and are possible, maybe to some extent in existing organizations. The DAO model is starting with that premise, it's starting way off on this side of the spectrum. The ownership piece is probably a big part of it too, where these people like your users, your community, they actually own a piece of the company, the projects, the DAO and they don't in the old world.
Danny Aranda [00:55:02]: Yeah. I wonder how sincere it feels to be at the Facebook Town Hall and Mark Zuckerberg was like, Hey guys, I want your ideas. I really want everyone to feel like they can express ideas about product when the person telling you that owns the vast majority.
Sina [00:55:18]: We shouldn't be comparing it to Facebook up to date. We should be comparing it to Facebook when it was like ten people, right? If a DAO scales the same way that Facebook did, like the 5000th person who joins it is also not going to have as much ownership as the first five people. So what's actually different here?
Danny Aranda [00:55:42]: Someone once asked me a similar question of like, Hey, how different is this than a startup with like a hundred [00:55:48 inaudible] investors who are really involved and in a discord together and that they are sharing the project online and so on? But I think there is a very dramatic, even though the kind of technical aspects might be trivial, like the Multisig and the discord. But I think there is a big shift culturally in how people think about the product and the project itself and their own involvement and ownership in it. There is also the real practical thing that they can vote with their tokens on proposals and actually make proposals themselves. That itself is, your empowerment within that group becomes very different. Because there is no forum like that within a traditional company to be able to make those type of proposals.
Sina [00:56:33]: Yeah. I am kind of exploring this idea for the sake of it, but I do think there's like something and the biggest parts of it might be just on the cultural, like soft side of your calling this a different thing and it comes with a whole bunch of different expectations. Even thinking about ideas of someone can work with a DAO on a project and work with other DAOs on other things at the same time and phase in and phase out. Sure you can do all of that stuff with existing companies, but it's just a different set of expectations that you're starting from here.
John Palmer [00:57:12]: Yeah. It's always bad territory for me intellectually, when you're trying to draw lines that separate two different things, because usually it ends up just all being like semantic things. But I definitely think some differences between an early Facebook and an early PartyDAO or that is to say, like the prototypical early startup and the prototypical early DAO. It's a bunch of things. Like one, the fact that a lot of the work is happening in public. The fact that anyone can join the discord server versus you can't join the Facebook slack and you can't see what they are working on.
I think in terms of ownership, it's probably universally true that when a project starts the early contributors get more ownership than later contributors, but at tZERO, when the thing starts, how it decentralizes it, is also a spectrum and at tZERO for Facebook, it's 100% Mark versus tZERO for PartyDAO. It's already distributed amongst all those people, and it's not like 90% of equity is in the hands of the founders. I think about like, if you got a hundred angels investors in your normal startup. Okay, let's say that was your seed round. So 75% are still on the founder's hands and 25% are split amongst the hundred angels. For PartyDAO it's just like, okay, immediately all of it.
Like there's not the reserve 75% for the founders or whatever. So that's different, the fact that you can work on a flexible schedule so you could come in and actually earn some ownership or earn some tokens without joining full time and then you could move on and you could also be working for other DAO simultaneously, that's different. Like obviously the cultural pieces are big and then also the amount of control. So usually in a company there's ownership and there's control, those are different things. So like you're an employee, you got 1%. That's awesome. But like the founder still can tell you exactly what to do and you have really no viable route to affecting the roadmap other than personally convincing the founders to do anything that you want.
Whereas in a DAO, if you submit a proposal and more or less the other owners agree with you, you can actually affect the roadmap. So I think all these things are different. There are analogies from startups to this, or really even probably co-ops and nonprofits. They all kind of have these mechanisms. These are just core things that are going to happen when a group of people come together to try to do a thing. But these are, I think all like notable differences when you're doing it online this way.
Sina [00:59:32]: Yeah. I feel these might sound like small things, but they're actually huge, right? Like the difference between ownership and governance and ability to vote on what happens to the project. Just the simple fact that you could have a delegated voting model where people can be like, we respect this person's thinking and opinion, and we're just going to delegate a ton of tokens to that. And now all of a sudden in a totally decentralized way, this person's voice matters in the future of what happens with this DAO.
John Palmer [01:00:05]: And I mean, I also think even on top of that, just the fact that to work on PartyDAO you just have to get voted on a proposal or selected by a PM or whatever, versus joining and signing paperwork with HR, whatever. Let's use like a party analogy. If you show up to a party, an apartment and you walk in and there's just music, you're in the party. You are attending versus if you go to your friend's apartment, there's a line outside and you have to sign some paperwork and buy your ticket and get your wristband, and then you get to go in, very different vibe, culturally speaking. I think that's the same for the DAO. The idea that you can start checking it out, meet the people, you start working on some stuff, then eventually get paid to work on the stuff.
It's very different versus like signing your paperwork, quitting your job and now you're going in on the first day blind to your whole new life. All huge differences in terms of the actual human experience of doing it.
Danny Aranda [01:00:54]: All this point towards DAOs, as they exist today. I'm trying to address the question of how do DAOs become more mainstream? These are all very ad hoc processes. I would say a lot of PartyDAO has been very fun, but also a lot of feeling your way in the dark about how do you do this? How do you build a product within the context of a DAO? I do think we're getting to a point though, where DAOs are becoming, reaching a larger audience is going to require more opinionated products. Back to your point about product vision. I do think products that enable DAOs, that have a strong opinion about how they should be formed or how they should behave, I think will do better.
The analogy I think about is social media versus general website creation. So posting to Instagram or posting to Twitter is a very opinionated, narrowly constrained form of publishing and there's only very specific things you can do. Because of those constraints, it makes it very easy. The user prompts becomes very simple, and as a result, you're seeing a huge spike in terms of the amount of photos that get shared online or the amount of posts that get shared online. You compare that to early website publishing, which was like you're using GoCDs or Squarespace or some other website building tool. Building a website is a whole project and you have to hire a designer and you have to think about the information architecture of the website itself, versus just posting a photo.
I think we'll see something similar with DAOs and how opinionated they are as well. Mirror is creating tools that make it really easy to spin up a crowdfund to get the DAO done. That's what PartyDAO used. Juice Box is very opinionated in terms of treasury management and how a DAO should manage this treasury going forward. PartyBid is extremely opinionated around like what a DAO should be. PartyBid has one mission, go acquire an NFT and that's all the DAO is for, to begin with. So I think those constraints should help usher in more people and just make it more usable to more folks and more users. So I'm curious to see more examples in the space of highly opinionated products that allow you to spin up DAOs quickly.
Sina [01:03:12]: Maybe it's an unintuitive realization, right? Because we're also so early and there's potentially a million different patterns that could emerge, and so one instinct might be to build tools that are unopinionated and allow the user to do whatever they want with them. But what you're saying instead is the model could be to build very narrowly focused products that enable a certain type of behavior. And then you can see where this vector of exploration leads. Maybe it's a dead end and then you go and build another narrowly defined product.
Danny Aranda [01:03:49]: Yeah. Maybe I'm wrong about that that's the right path forwards. I kind of have these highly opinionated products, but I feel like crypto is complicated enough. Just take the burden away from the user and show them a path to go do something and have fun doing it.
John Palmer [01:04:05]: I definitely agree. To build a good product, maybe you don't need it. You can still get lucky otherwise. So like chaos, but your best bet is to have a really strong, smart product vision that has an insight from someone with particularly good taste or insight into a market. I think we do have that on the team. I definitely have my own opinion on what the actual long term potential is for PartyBid, what the immediate feature should be, what the long term roadmap should be. We have that in abundance. I think Danny has that. I think Steve has. There are multiple people with good vision there. It's just that that's not the only way to move forward.
So as long as you have a few people who have good product vision, it's just that they don't need to be the only people contributing to that vision. Those people can also hear ideas from elsewhere and edit and curate them into the product. So you could run a DAO. You could even run PartyDAO. You could do the same idea without any of those people and without a strong vision coming from anywhere, and I think it would do worse. But I think there are multiple ways to pursue projects and how much you can decentralize and based on what your goal is. So to take something like Loot on the other side of this, if you have a spectrum from centralized ownership on day one to decentralized ownership on day one and how you move along that spectrum over time.
I feel PartyDAO was pretty decentralized on day one, more decentralized than a Startup, but not as much as Loot. It's kind of progressively spreading ownership further as the tokens proliferate and as more stuff gets built, more contributors come in and earn more tokens, blah, blah, blah. I think we're probably right where we should be in terms of what we're trying to do, which is to actually build a pretty technically complex protocol with a coherent user experience and front end product and good design. It needs to have, at least at the end of the day, they don't need to be the only source of ideas, but it needs to ultimately have someone at the end of the chain who's editing down those ideas into what actually makes sense for the product.
For something like loot, it's more like the main thing we're trying to build is this abstract universe of IP and games and ideas that all are tied to the same asset and inspiration, but they can kind of go anywhere and they don't need to be coherent. So it's fine to decentralize it from day one, because you can go make the adventure quest that's based on dragons or whatever. You can make some derivative items that expand the merch and someone else can write a story or fan fiction. We don't need ultimate curation because really, we're just trying to proliferate a bunch of cool IP that continues to culturally expand. That's pretty different than protocol engineering.
So, I guess I think any given DAO or just project should probably know what it's aiming to do and then design its organization and ownership around that goal. I think for us right now, we're still in the realm where we need people with strong product vision. But given that we have that, we're also benefiting from some decentralized ownership and cultural momentum of having more people.
Sina [01:07:10]: I think this is like one of those very interesting questions right now that is under exploration of where do you lie on this spectrum of having a strong vision and a through line that you are carrying this project through and then other people can attach to that on the sides, versus putting a very unopinionated kernel like a shelling point flag in the ground that anyone can come and have their own take on. I was talking about this with GubSheep at Dark Forest, not to reveal his real name. Dark Forest is also kind of negotiating this spectrum where their vision is that this is a universe that people build apps within and different clients in, and ultimately the only thing that people are coordinating around are the smart contracts that enforce the physical laws of this universe.
Like where your planets are and how you can move between them. Outside of that, what they look like, what the clients are like, what marketplace you are using, what auction mechanism you are using. Like what second order battles are happening on top of this. They're totally unopinionated around that. It's interesting that, I think they are a little bit to the right of loot on this spectrum where they are kind of defining goals for each round of the game, right? Like for the latest round of the game, they're like the metric. The way you win this game is to get a planet closest to the origin coordinate, like to 00 and that's the goal. That's what everyone is optimizing for. And then within that it's total open season and you do whatever you want. So I feel that's pretty interesting.
John Palmer [01:09:08]: Yeah, definitely. And then obviously there's examples like Uniswap as well, where if you just decide on these coordinates or maybe this is a spectrum, there's probably an interesting two by two here or whatever in terms of org design. But you can kind of analyze every project in the space in terms of how much they've distributed ownership and control from day one and which direction they're moving over time.
Danny Aranda [01:09:34]: This kind of goes back to the point about consumer applications in crypto being a front end on top of a whole bunch of different protocols, where the protocols themselves, like what you were saying with Dark Horse can be relatively unopinionated about what's happening. But at the application layer, there can be an opinion about, okay, we're putting this together for this use case for someone to easily do X, Y, and Z. Maybe that's the purpose of composability, right? Like a whole bunch of contracts interact with each other to then eventually at some abstract level produce a singular experience that is cohesive and fun and makes sense to the user.
Sina [01:10:19]: I think that might be one of the kind of insights that's emerging. Which is at the smart contract layer, you want to be kind of catch the core, core logic and be unopinionated about how people use it and allow many different interfaces to be built on top of that thing without privileging any one kind of use case or direction of exploration. And then at the level above that, at the application level, you want to be opinionated. You want to have a specific user, specific use case in mind and just narrowly designed for that. That's the division between application, like full stack product with a front end and a smart contract that's meant to be this composable unit that a whole bunch of different things plug into.
That's also happening with Loot, right? Each one of these games are pretty opinionated about what they're doing.
John Palmer [01:11:15]: Yeah. It's interesting. Well, actually we kind of have seen similar experiments with alternate interfaces for PartyBid, not built by us, and we've also started to think about how to incentivize those two at the protocol level. So yeah. I'll be curious to see what it would mean for there to be different party interfaces. I think right now it's still early enough that there's kind of a clear primary use case that kind of catches everything. But over time I could definitely see more opinionated PartyBid interfaces for specific kinds of things. Especially as the types of parties that are supported or encouraged expand. So right now, every PartyBid is kind of a one off, right? So you bring the money together.
If you win the NFT it gets fractionalized, and that party as it stands is now kind of done. The membership is set. People can still buy the token, but that token is that one NFT, et cetera. There's an idea of having recurring parties where you got the one and now those same people, or even more people can pool into the same ontological unit of that party and get a second NFT and a third. I think, as an early exploration into that use case, I think this new primitive of the Party split is like the lightest way to kind of test out that idea because the commonality of a recurring party is just getting ownership in multiple NFTs. So theoretically, even using our existing PartyBid contracts, you could form ten parties in a row where 5% of every single one went into the same Multisig.
And even though each one of those is still a one off party, if you have a Multisig, that Multisig can represent a recurring DAO or recurring party, and so that's what we're excited about. Like Crypto Cookout, for example, they've won two Black Crypto Punk so far, but theoretically, because they're like, Hey, every month this DAO is going to buy another Black Crypto Punk and every time that happens, 5% of the fractions are going to go to the Crypto Cookout DAO. This will start being kind of the early prototype of these recurring parties with longevity and who knows, maybe someday that has its own interface for doing this specific type of thing if you're trying to set up a Collector DAO versus a one off party. There are a lot of stuff like that in the works right now.
Danny Aranda [01:13:33]: Maybe there's even the idea of parties as a composable idea. So what's the party in PartyBid? It's a bunch of people coming together to buy the NFT. It's a bunch of people coming together to do a transaction together and that could also mean other things. We've tossed around the idea of Party Mint, minting an NFT as current experience that happens through ether scan and so on and it happens very sequentially, like each person kind of comes on and it eventually it runs out. But what if it all happened at the same time. All 10,000 people are online at the same time and they then receive their NFT once they're all on, and that being kind of like a collective experience that they have together
John Palmer [01:14:17]: Or a party sale where a group of creators come together and sell. Each of them is selling an NFT at the same time and a party can buy the whole collection of different artists’ pieces who have collaborated to be a group of artists as if they were opening their own shared gallery show for the evening or something like that. And then also funny of parties as a composable primitive. Imagine you're having a party at your apartment. I'm your hallway neighbor, I'm having a party. What if we merge our parties and share the booze or whatever. You could imagine the reserved Party Split fractions staying within the contract itself to be governed in terms of where those fractions go.
We could eventually merge parties and swap fractions or take the fractions and vote on how to spend them elsewhere or whatever. All the stuff obviously has a million angles we could go. I don't think it makes sense to pursue them all at once, but I think what we're doing is trying to figure out what is a pretty good bet in terms of what's tangibly valuable today and let's productize those things. I think the fun thing for us right now, at least the fun thing for me, and I think for the whole team is we're a protocol and we have the flagship UI or whatever. We are a protocol and a product, and so, not only are we getting to build the primitives at the protocol level, but then we get to be pretty opinionated about what the visual product experience is for those things.
Obviously one big thing on the launch was the shared cursor presence and cursor chat. You could imagine the PartyBid client being pretty boring actually and maybe not even taking off the way that it has, just because it wasn't at school on the product side. So I actually think we've done a really good job so far, and I'm excited to keep being like, what's the next primitive that gets introduced and then how do we productize it to make it really cool and make very calculated bets on what's important as we evolve the thing. Today, we're recording this on Monday. Those will go live today. There's a cool, pretty lightweight experience feel like when you create your Party, setting up the fractions and who they're going to go to for your use case.
Sina [01:16:24]: How did you think about the product experience for that?
John Palmer [01:16:28]: Yeah. I think for that, the most important thing for us was naming and copy that explains how the feature works because it's a new feature and then also just surfacing the fact that those fractions are being allocated to the party. So that participants who are contributing ETH to the party are very clear about the fact that, for example 5% of the tokens are going somewhere after this is over, which is essentially a dilution. So I think the main thing for that was making it legible. We'll be publishing a blog post later today. It's explaining the feature and what you can do with it. But with this type of feature, I also usually trust it's simple enough that once it's out there, people will realize what they can do with it. Because there's like strong incentive to do so.
Sina [01:17:08]: I feel like I noticed just the kind of product questions around that. I was just thinking about that of, I think you're calling it The Future Guest of Honor. Is that right? Or have you changed it?
John Palmer [01:17:20]: Well, we're calling it Party Splits, but we had played with the name Guest of Honor. We had played with the name Party Percentage. We probably had like a dozen viable candidates. All of them had their own tradeoffs. So the Guest of Honor thing I think was nice because it fit very well into the party vibe. If the fractions were going to someone who was not the party creator, it's kind of the perfect name. Because it's like, oh, if I'm making a party to win this crypto tote or whatever, and I'm getting 5% to, I don't know, someone on Twitter that we think is really cool. That's awesome. They're the guest of honor. They're getting these fractions. That's perfect.
The problem is a bit confusing when you set it to be like the curator fee for yourself. You wouldn't host a party and say I'm the guest of honor at my party. So we had to find the name that kind of conveyed the specialness of the meaning and was fun, but also didn't actually kind of confuse the versatility of it. So Party Splits is where we ended up
Danny Aranda [01:18:18]: There was a medieval aspect to the phrase Guest of Honor too. It's like maybe like two like Ren Fair, like gay Game of Thrones. That wasn't quite part of the brand.
John Palmer [01:18:31]: If I started a party and used the Party Split to give fractions to someone other than myself, I will just call them the Guests of Honor on Twitter or something, which is why they're getting the Party Split.
Sina [01:18:41]: Yeah. It's amazing how much names matter. I think that's another thing I've learned in this space over the last while of a name is a big part of the meme that you're creating and the vibe that people have around a particular project. One of the questions is if PartyBid was called something else. If it was called Group It, it would not have gone.
Danny Aranda [01:19:07]: No. If it was called Compose a Bid or some... It has to be really simple and legible. It has to be immediately easy to understand and like bonus points if it's also fun. Right? So Fractional is not a super fun name, but it's very, very clear what it does and no one is confused. Oh, the company's called Fractional and you can fractionalize an NFT.
Sina [01:19:31]: It's not as boring as Group Bid.
Danny Aranda [01:19:33]: Right. Yeah. You can imagine calling it something kind of like insane like, I don't know, like an engineering term for mechanizing fractionalize whatever. There's definitely crypto products out there that I could think of. I can't off the top of my head and wouldn't want to call anyone out anyways. PartyBid is great because everyone, like party is just a fun word and PartyBid is pretty simple.
Sina [01:19:58]: I feel that NFTs in particular are kind of social by nature. Right? You become a part of the community by owning an NFT, whether it's a Crypto Punk or participating in a PartyDAO. And so, because the social aspect is a key part of it, you want to speak on behalf of the wallet that you participated from and it's different than when you're putting funds into a Uniswap pool, which is pretty much a solo experience. You are interacting with this anonymous protocol.
John Palmer [01:20:38]: Definitely.
Danny Aranda[01:20:39]: I think the argument I would make though is I think increasingly, and part of it is just going to be one example, but I think increasingly people will want to do types of transactions that are with other people, or they will seek out on chain experiences that are social in some form. I think part of the reason NFTs are in this moment right now is I think they are the best expression of that right now. Again, you can see who is interacting with Lama Gachi and who is actually like feeding the pet and so on, or who's participating in the Party Bid. I think one day it'll seem strange that all value that's described is very social. The reason that Picasso is valuable is because there is social consensus around Picasso being an important artist or even like a currency. It has a social consensus around it, but the idea that you had your own bank account and you had your own investments and they were entirely solo. The bar to actually share them with anyone else is super high, like you get married, right? But that's going to seem like a weird idea when you have friends that you've talked about movies with or art with or finance with for hours, but you have zero share interest.
Sina [01:21:52]: It's like there is this manufactured firewall between your talking about the token or the investment or how you think about a particular thing and then each person goes off in their own solo accounts and executes the same transaction and why can't that all happen together?
Danny Aranda [01:22:12]: Yeah. I think if you propose the argument that more transactions are going to be more social going forward, and that's uniquely enabled by crypto trustlessness and permissionlessness. That people will want to show up with their wallet that they want to present to the world that has a name ascribed to it and has a set of NFTs that they're proud of. So John is going to clean out his wallet after this. He wants the wallet that's going to present his best side and he's going to take down his poster of, I don't know, I'm trying to think of an analogy of like a kid in their room who is like, oh yeah, I got to take down my...
Sina [01:22:48]: You are having your friends over.
Danny Aranda [01:22:49]: Yeah exactly. I got to take this one poster. I got to pull up like the cool band poster to show who I am in this social environment now.
Sina[01:22:58]: Right. I feel like it is going to go through a cultural block that we have around being transparent with our financials too. It's basically completely private. No one else knows what's in your bank account to any extent, other than say your spouse like when you get married and now we're going to transition to a model where it's like, okay. Do you each want to put in X amount of dollars to buy this NFT? And these sorts of behaviors are going to become more normal.
John Palmer [01:23:30]: I definitely think that's true. I think there will definitely be a pretty significant increased comfort sharing financial info. Not necessarily because people want to go through that change, but that will just happen by nature of it being inevitable. Everyone in Crypto's finances are more open than they've ever been before. So people just kind of have to adjust to that. I mean, if you participate in anything on chain, it's basically impossible to obfuscate entirely what kind of gains or whatever you're making. And particularly too, I mean, if you're an artist too, everyone can see how much your work is selling for. Like what kind of revenue you're doing.
It's very different than like, if you were selling prints on Gum Road or something. No one can see what kind of sales you're doing, but on foundation, everyone can literally see how much money you are making. And that's just for that one job.
Danny Aranda [01:24:24]: Maybe this is a byproduct of Crypto being really early. So right now there is a lot of activity that's like whale dominated. And so how much Bitcoin or ETH in the account really matters. Maybe as Crypto proliferates more, it becomes more mainstream. There'll just be a lot more smaller wallets. And the idea that you're snooping around a wallet and seeing a hundred bucks, who cares about that as kind of financial information. And so maybe all of this, like the idea of sharing more of your life publicly financially is because Crypto today is still small and somewhat whale dominated where the financials really matter.
But as this distributes to millions, billions of people where you have a lot more wallets with smaller amounts, the predominant activity might just be around smaller transactions where that kind of financial history sharing is less pronounced. The activity that will matter is your association with the community because of a certain NFT that's in your wallet and that you're kind of like presenting to the Cloudland escort bot or that you're presenting your name, which maybe has like, a symbol attached to it that you're presenting when you're participating in the Mirror Crowd from the PartyBid and so on.
Sina [01:25:41]: So what's happening from here with PartyDAO?
John Palmer [01:25:47]: Well, 1.2 is live today or the day that we're recording this. The other thing beyond Party Split is that the fee model for PartyDAO is updated. So instead of taking 5% of the ETH used in a winning bid, we take two and a half percent of the ETH and we take two and a half percent of the Fractions. Which is cool because that means that the PartyDAO treasury will gradually accumulate fractions of all the NFTs that are ever won on PartyBid which means that the DAO's business model is very aligned with the users of the protocol, which we think is going to be really cool. Also the fact that we're taking ETH and Fractions means eventually we can do really cool stuff like having the protocol provide liquidity for these Fractions and stuff like that.
So that's a cool protocol upgrade. One thing that we're aiming to do kind of forever is just increase the number of platform integrations that we have. So right now it's a foundation, Zora, Nouns, Catalog. We're just continuing the number of marketplaces that you can bid on using PartyBid. And then there's bigger protocol changes and new features coming out that are super top secret. So we'll be working on those as well. And then obviously in terms of the DAO setup, we're hoping to find more long term models for having contributors working on the DAO. Inviting new members to the discord. Continually funding the DAO. These are kind of the big existential questions.
So there's the product and protocol work, but there's also the organizational work. And right now, because of the time we're in like the protocols out there, we've just released new protocol version. We're trying to be kind of like 50/50 right now, so that we can solve these organizational questions while still shipping products.
Sina [01:27:26]: So on the organizational side, how do you see the team growing from here? Do you see you giving grants say to people to come and execute specific projects? Are you looking to hire people full time? Is that even a concept that makes sense within DAO?
Danny Aranda [01:27:43]: Yeah. There are a bunch of options. There's full-time, which is already happening to some extent. The rhythm right now are these like two month sprints where there's budget for the sprint approved by the DAO members and then four or five people can go heads down and contribute as much as they can to complete that sprint and ship out product. There are also options around people doing kind of more task specific things and someone might propose like, Hey, I want to create a Twitter bot and I'm going to work on that for a couple days or weeks or whatever.
Sina [01:28:17]: That's a good idea.
Danny Aranda [01:28:18]: Yeah. That would be great for PartyBid for sure. So there's more of that happening. That kind of would be more grants based. There's also potential for, this is just riffing right now, but something that's more committee based, like people maybe don't participate a significant amount of time, but they're participating in a committee that has an objective. Maybe that's a party curation committee where they're like looking out for auctions or NFTs and they're like, wow, this would be a really great one to party on and we should work with the community on this and get that party started. You can imagine that type of work coming together as well with people who contribute to the DAO.
John Palmer [01:28:56]: I think there are a lot of models doing the mini grants make sense too. I think right now we still haven't completely secured our future or like totally solved having people working on PartyBid the protocol, for a long time in a serious way. And so I think other committees, grants, different focus areas like having more events, having more community stuff happening, having more live streams, granting contributors and doing bounties. All that stuff is really cool. I think it should happen, but the complete total focus right now is figure out the recurring way to have contributors always elaborate on the protocol and then once we do that, we can look at all the other stuff.
Sina [01:29:42]: What's the bottleneck to that? Is it funding?
Sina [01:29:47]: I think funding is a big one and the other is choosing the right models and incentives. To use the engineering term, like naive implementation, but naive implementation would be get a bunch of funding and then make full-time offers to a bunch of people that would be very straightforward and that's one solve. But I think since we're definitely innovating on, or maybe not innovating but we are trying new things with organizational models and contribution models there are more specific things we could do. There are more flexible arrangements in terms of part-time or full-time, or there's like completely decoupling pay and time spent and more tying pay and token allocations to deliverables or KPIs.
There are a lot of stuff we could figure out, and so I think obviously we need funding to be able to pay people, but we also need the right model that's going to serve the DAO long term to help PartyBid grow as a protocol. So I think the way that we're doing that is like, well, roughly revenue has been funding the DAO so far. It would be nice to really increase revenue or find another way to inject capital so that we can at least know like, okay, once we know the right model, we can pay everyone. And then I think the other things, I know the contributors are thinking about it. There are discussions happening in the DAO members discord channels around token structure stuff and I think eventually we'll get to the right incentive models for contributions.
But I think the bottleneck there is just social coordination and establishing consensus in the DAO that we know a model that we feel confident is the right model to move forward with.
Sina [01:31:22]: How do you guys think about how this DAO ties into the real world, as you start thinking about this as a more long term thing for you personally? Like one version of this is that it remains completely Crypto native and each person is receiving pay in ETH and USDC and Party Tokens and just kind of accounts for that as if they're a freelancer working with this. I don't know, a foreign entity that isn't based in the country where they are. How do you model this as you start to double down on it?
Danny Aranda [01:32:00]: Yeah. We've done some initial research around what this could look like going forward. Right now, what's cool about it is like PartyDAO is pretty pure. It is fully on chain. There is no like outside entity. There is no legal representation of PartyDAO. I think the design goal for any DAO is probably to keep that going forward and having it purely on chain. As you start thinking about DAOs paying taxes, DAOs maybe offering legal contracts to contributors or employees, and so on, you'll want probably some type of representation of the DAO in the real world. But the idea that you just set up a corporation to represent that DAO, like singularly, maybe is like John was saying earlier, is like the naive implementation.
Maybe there could be kind of more flexible models. Something John talked about before is, imagine every single function that a DAO would need to interact with the real world for was just spun up as a single purpose corporation that would then just get spun down right afterwards.
John Palmer [01:33:10]: I was thinking about serverless functions or legal entities as serverless function. So it's like, oh, the DAO needs to receive a big payment and pay taxes on it. Ok. It spins up Party DAO LLC number 13, facilitates that transaction, pays the taxes and then shuts down the LLC, and it just does this whenever it needs to interact with legacy legal systems. Because the DAO does have real world constraints. It has to comply with the laws of the nation that it's in. It has to pay taxes in the nation that it's in. It has to follow all the rules, but it also wants to be flexible. So it can just have these moments in time that it spins up the proper legal structures to do whatever it needs to do and then just spins them down.
And that keeps things moving flexibly versus having this kind of behemoth legal entity that is just growing over time as the DAO does more stuff. And also there are lawyers we've spoken to who have mentioned that another way some DAOs or some people thought about DAOs doing this is having each individual working for the DAO having their own LLC through which they interact with the DAO. So the individuals have limited liability as they interact, whatever. But again, all these things are just kind of theoretical ideas right now. I think we're still trying to figure out this output into this set of questions that we're still figuring out.
Danny Aranda [01:34:32]: There are also basic stuff like payments. There are accounts that Party DAO has. There are services that we pay for, and right now an individual has to front the money in order to pay for that. If there was [01:34:45 inaudible] for DAOs, we would use that. Give us a real world account that we can pay.
John Palmer [01:34:51]: Give us a Visa Card that just draws down a wallet that the company owns that we pre put ETH in or whatever. Because right now I think the team members' credit cards are on like GitHub for sell Google Domains, Google Suite, all kinds of different stuff.
Sina [01:35:07]: I like that idea though, of you don't want the core DAO itself to have an LLC. That will lose the magic. Anytime you want to give a token to a new contributor, you'd have to update the cap table of this LLC. It would completely defeat the purpose. So instead, what you want to do is to keep the core DAO Crypto native and just outside of the physical world and then say whenever you want to do a treasury diversification and you want to sell some Party Tokens for some ETH, you just send that Party to some LLC. That LLC, you know, I mean there's complexities like it's got income? I don't know, but it does the sale. It pays the taxes on it and then pays back. Maybe it's a loan that you like receive these Party Tokens and you pay it back a week later.
Danny Aranda [01:35:58]: It would do that programmatically. Like if you had Stripe Atlas.
John Palmer [01:36:01]: Strip Atlas, API, that worked serverless infrastructure. I think Stripe Atlas is set up right now to be like, you're doing it. You're starting your startup, like welcome. Let's walk you through everything you're going to need and it's going to be the one time you ever use this product, but it'd be cool if it was set up more, to be like [01:36:17 inaudible].
Danny Aranda [01:36:17]: Yeah. If it was like thousands of corporations spun up and spun down for each DAO based on what they're interacting with and also DAOs are global. The idea that they're just going to interact with US law or Swedish law or whatever. It's probably going to be a lot more complex than this.
John Palmer [01:36:35]:[01:36:35 inaudible] there. You just make or put a put request to create an LLC, choose the country that it's in, choose how much funding you want to start it with. Make that API call and then just make API requests against the different LLCs that you have to perform certain payments.
Danny Aranda[01:36:51]: That option is uniquely suited to a payments company, I would say like Stripe and even Coinbase. Because both Stripe and Coinbase have to go out, they have to set up legal entities in each country where they're going to operate. They have to set up a bank account. They have to get licensing, like a money service business license or an MTL, whatever it is. And you could imagine all that infrastructure, you know, AWS style, being sold as a service to DAO in order to interact with the rest of the world.
Sina [01:37:19]: So maybe last question. So we've been talking about this API. What are the tools? Mechanically, how does the DAO operate today? What are the different tools that you're using?
Sina[01:37:31]: So the funds are stored in a Gnosis Safe Multisig Wallet. We have a discord server for members. We have a discord server with all kinds of public channels for users of PartyBid, but there's a set of channels that are token gated for the Party Token using the Collab Land Bot. Within those channels we talk about things and we frequently use Snapshot, using token weighted voting off chain to make decisions. When we write proposals that we're voting on, we usually write them in Google docs, but then we upload the PDF of the Google doc to IPFS through the Pinata client so that the proposals store forever and uneditable. In terms of tooling, I don't know like VS Code, Vercel, Google domains, Aven for Redis, GitHub, all this stuff.
And then we also use Parcel.money for managing our Gnoses Safe. It's just a nice interface on top of the Gnoses Safe contracts. It lets us do things like paying the team all at once and like a bashed transactions that we're not signing stuff all the time. Google authenticator, 2FA.One password for the team, Security. I don't know. Telegram, Calendar. We use Gmail, iPhone, MacBook. Yeah. All the doubts. All the classic doubts comes.
Sina [01:38:53]: The thumbs, human brain. Okay. That's a pretty comprehensive overview.
John Palmer [01:38:59]: People are always like, yeah, you need Gnoses Safe and Discord and Snapshot. That's like whatever, like the DAO stacking whatever. But yeah, this is a more comprehensive list of all the stuff.
Sina [01:39:09]: Right? Yeah. And soon to be added, LLC, APIs.
John Palmer [01:39:16]: Yeah. And I mean, seriously, the first person who lets us literally just get a prepaid visa card that we paid using ETH right away, because we would transfer all our monthly [01:39:25 inaudible].
Sina [01:39:24]: That doesn't exist today?
John Palmer [01:39:27]: I don't think so. I mean, we could...
Danny Aranda [01:39:29]: There's a bunch of prepaid cards where you can load it with crypto and then spend in the real world, like in dollars. So like Coinbase has that. Crypto.com has that. There's a whole bunch of those. But they're not really offered for DAOs. They're offered for people.
John Palmer [01:39:45]: Like KYC individuals.
Danny Aranda [01:39:47]: Yeah. Like legal people, like individuals.
Sina [01:39:51]: Would you need to spin up the LLC and have the LLC go and do that?
Danny Aranda [01:39:55]: Yeah, exactly. So like how do you give a credit card to a DAO that doesn't have any legal?
John Palmer [01:40:02]: That's a perfect example though. Maybe that one doesn't wind down, but it would be like PartyDAO credit cards LLC. And the only purpose is to be registered for the credit cards. That's it?
Sina [01:40:14]: Totally. All right. Thank you. This was fun.
John Palmer [01:40:18]: Yeah. Thanks for interviewing us.
Danny Aranda [01:40:19]: Thanks for having us.