How (and why) DAOs could become “cybernetic”
How (and why) DAOs could become “cybernetic”
There’s a BORG for that
Greetings, glitches. This fine Friday let us tickle your neurons with tales of an AI genie, a singer flirting with “web3-native music,” and the next movement from the creators of Eve Online. And for our main course, might we suggest you get to know a new kind of DAO? This one comes with a side of cyborg. Please enjoy.
In this issue:
On DAOs and BORGs
A “Genie” that generates new worlds using AI
ODDS/ENDS
Eve Online’s makers talk about their blockchain game
Blockchain analytics firms are fighting
James Blake is doing what, now?
Today’s DAOs face serious legal pitfalls. Here’s how they could deploy “cybernetic” protection
Of all the bizarre and inscrutable jargon that pervades the crypto-sphere, decentralized autonomous organization is among the most problematic. It’s debatable whether the first two letters in its acronym—DAO—even deserve to be there. Let’s not start an unending “what is decentralization anyway?” discussion today, though. Let’s focus on “A.”
Several crypto centuries ago, even before Ethereum launched in 2015, some described Bitcoin—composed of a large network of miners collectively validating transactions and getting compensated in a native currency—as a “decentralized autonomous corporation.” That language was ostensibly the precursor to today’s “DAO.” A big difference, however, lies in the word autonomous.
What those Bitcoin elders were talking about was “something where all the rules of the organization are embedded in autonomous software,” the crypto-focused attorney Gabe Shapiro said last week on the CryptoLaw podcast. That’s not how most DAOs work today. The blockchain-based software that underpins DAOs, called smart contracts, could arguably be called “autonomous”—they run according to a series of instructions that are baked into the code. But in most cases there are also humans in the loop, making decisions in more traditional “offchain” venues that could expose them to legal risk.
Those humans should be building “cybernetic organizations,” according to Shapiro. To help them, he has cofounded a new company called MetaLeX.
The concept isn’t brand new, and a few DAOs have already deployed what Shapiro might call cybernetic organizations. Delphi Labs, where Shapiro previously worked as general counsel, formally defined the idea last year: “The Cybernetic Organization (CybOrg or ‘BORG’), is a traditional legal entity that uses autonomous technologies (such as smart contracts and AI) to augment the entity’s governance and activities.”
Many crypto enthusiasts are upfront about how they want to use the technology to build an alternative not just to the traditional financial system but also the legal system and the nation-state itself. A cybernetic organization, in contrast, is designed to integrate with the existing legal system.
“It does use smart contracts,” Shapiro explained on the podcast. “But it’s not this sort of like broader cyber-anarchic, nation-state-transcending thing because it has enough social offchain stuff that you should still expect it to need a legal entity, and need these natural language rules, and things like that.”
There’s a BORG for that
From a legal perspective, the devil is in the details of that “social offchain stuff.” For example, who, if anyone, has the power to upgrade a smart contract—or shut it down in an emergency?
A common way that DAOs handle this is through blockchain software called a multisignature wallet. “Multisigs” ensure that before a transaction can be sent to the blockchain that would, say, upgrade one of the organization’s smart contracts, multiple people have to sign it using their own private cryptographic keys. DAOs typically elect several keyholders and determine the minimum number of signers required to execute a transaction on behalf of the group.
That setup has a major flaw, according to Shapiro: the signers don’t have what’s known as “limited liability.” That’s what the first two letters in the familiar acronym LLC stand for. You can probably see where this is going—a limited liability company is a legal entity that businesses use to protect their owners and shareholders from being held personally liable for that business’s potential failings. Corporations also offer this protection.
Multisig keyholders typically don’t have this. But there’s a BORG for that.
BORGs can be thought of as multisigs with “legal wrappers” that protect the DAO and its participants. In a whitepaper published last week, MetaLeX calls them “cybernetic modules,” or “implants.” The most basic form would be a legal entity that gives multisig keyholders limited liability by naming them officers, designating the multisig wallet and the assets in it as property of that entity, and stipulating in its charter documents who exactly can use the multisig to make changes and under what circumstances. Those documents might also give the DAO’s members legal avenues, such as the ability to appoint an “emergency supervisor,” in case the DAO members lose confidence in the multisig group.
Shapiro and his colleagues formed MetaLeX to serve DAOs “with a unique set of onchain protocols and off-chain legal agreements,” aimed specifically at using autonomous software to minimize the number of humans the DAO needs to trust. The whitepaper introduces MetaLeX’s guiding principles, the first of which is to “maximize deference to autonomous code.” In other words: use smart contracts to handle as many governance functions as possible, only turning to the traditional legal system for situations that require a type of decision-making beyond the capacity of an onchain vote by the DAO’s members. “Not everything can be decided by referendum,” said Shapiro.
For a real-life example, take Curve, which is a decentralized cryptocurrency exchange. Its smart contracts are controlled by a DAO. “Its smart contracts are quite immutable and really trust-minimized—you can see all the code,” said Shapiro. “But there are just kind of like a few situations where you probably need pretty fast human input.” Hacks are a primary example. Curve has set up a separate, “emergency DAO,” of which Shapiro is a member, that can step in and use a multisig to make changes to mitigate the damage of an attack. Shapiro said he’d call that an “emergency BORG.”
A cybernetic economy
Another problem with today’s DAOs, according to Shapiro, is that “they usually have social rules that are narrower than what they actually can do onchain.” For example, a small group of multisig keyholders might say they will only pause a smart contract in an emergency. But still have the technical capacity to shut it down anytime they want.
Under the BORG structure, the traditional legal entity, such as an LLC, could spell out exactly what constitutes such an emergency. The DAO could also deploy a smart contract that imposes a prescribed delay on any decision made via the multisig, giving the rest of the DAO some time to vote to reverse it.
Another of MetaLeX’s implants would make it possible for a multisig holder to resign unilaterally. The basic multisig setup doesn’t allow that—multiple signatures are always required.
Some crypto purists might see BORGs as capitulation: in this setup, code isn’t law. But the MetaLeX whitepaper emphasizes the power “autonomous technologies” like smart contracts and AI already have. Computers are already very good—and quickly getting better—at automating legal and financial agreements. DAOs have shown they are a formidable alternative to traditional companies if the goal is to raise and manage capital. Smart contracts are good at “replacing the fuzziness of laws with the hard-edged deterministic nature of code and math,” the whitepaper reads. In some arenas, lawyers and the law are already losing ground to these technologies.
Still, the history of crypto shows that code alone is not enough. Humans have consistently had to step in to make crucial decisions offchain. That’s why in the “cybernetic economy” MetaLeX envisions, there is still a role for lawyers—as long as they are willing to join forces with the machines. —Mike Orcutt
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WARNING: TECHNICAL
Name: Genie Interactive Environments
Brains behind it: Google DeepMind
What it is: Tell me princess, now, when did you last let your heart decide… what you want your custom-built video game to look like?
Genie is an engine for anyone that wants to make a game or virtual world with “fine-grained controls” by describing—or uploading a single picture, photo, or hand-drawn image, of—what they want their game’s world to look like.
The paper explaining the tech attempts to answer the question: “What if, given a large corpus of videos from the Internet, we could not only train models capable of generating novel images or videos, but entire interactive experiences?”
Researchers say the model can make it “possible to create and play entirely imagined virtual worlds.”
Earlier this year, OpenAI’s Sora caused a buzz with a program that “simulates [the] physical world in motion” in incredible detail, with up to one-minute-long videos based on users’ subject and style instructions.
“Sora is really impressive and visually stunning, but as @yanlecun says, a world model needs *actions*. Genie is an action-controllable world model, but trained fully unsupervised from videos,” Tim Rocktaschel, one of the paper’s authors, wrote on Twitter.
Genie is different because it independently learns from frames in existing online videos of gameplay and assigns labels to what the controllable parts of that frame are. This data enables it to generate whole worlds from just an image.
How it works: The team made a way to get a machine to process unlabelled video content —videos without a pre-packaged description of what actions were being performed in them.
The system does this with three different bits of code: “[A] spatiotemporal video tokenizer, an autoregressive dynamics model, and a simple and scalable latent action model.”
That’s a mouthful. Let’s break it down:
– Spatiotemporal videos tokenizer: A way the computer can understand and categorize what’s going on in a video. Creating a library of a video’s parts, essentially. It will then use the component parts according to new prompts.
– Autoregressive dynamics model: A statistical model that predicts future values based on past values.
– Scalable latent action model: A type of statistical model often used in recommendation systems, and for personalization and understanding user behavior. It’s designed to handle large-scale datasets efficiently while providing accurate predictions or recommendations.
So the spatiotemporal videos tokenizer lumps an image and the things that are possible within that image into a category, the autoregressive dynamics model understands what the potential of that image is in gameplay, and the scalable latent action model recommends how a user might want to use or manipulate the image in a game.
While this programming could yield amazing results for those with the imagination to create them, there are still weaknesses in the tech, the researchers said. These include the fact that the computers sometimes generate unrealistic hallucinations (as seen with the LLMs feeding OpenAI’s ChatGPT), and have a limited capacity to store information on everything that happens in a game, meaning sessions that last longer may not have consistent environments. It also currently only runs at about one frame per second—which means that, for now at least, it looks a lot more like a slowly evolving series of still images than anything approaching a video.
With development, “Genie may hold the key to unlocking unlimited data for training the next generation generalist agents,” Google said. This is because a whole new world of online video content is now available for models to learn from, without a big human-led engineering lift needed to transform the content within the videos.
We wrote before about freakishly human AI-powered characters in video games. They may now have a place of their dreams to live in. This computer-powered magic lamp could be a further catalyst for creating the games of the future. — Lucy Harley-McKeown
ODDS/ENDS
Prosecutors in The Netherlands allege that Tornado Cash developer Alexey Pertsev aided in the laundering of more than $1.2 billion via the Ethereum-based privacy tool. That’s according to DL News, which obtained the indictment. “Prosecutors are suspecting Pertsev of money laundering and they have described it in a general way, but they don’t specify which exact acts he committed to take part in the criminal offence,” Pertsev’s lawyer told DL News. Pertsev’s trial begins March 26.
“A universe that will evolve from the actions of its players.” That’s how CCP Games—maker of the cult-classic massive multiplayer online (MMO) game Eve Online— describes the world of Project Awakening, the blockchain-based “persistent world” it is creating with MUD, the framework developed by onchain gaming startup Lattice. CCP has been conducting closed playtests for months, but last week it revealed new details about the game. Like Eve, Awakening will be a “spaceship experience,” CCP CEO Hilmar Veigar Pétursson told Decrypt. But it will be its own, new kind of game. “I think people will be shocked to find out how the game is architected when it comes to what is onchain and what is not onchain,” Pétursson said.
Roman Sterlingov, the founder of a cryptocurrency privacy service called Bitcoin Fog, was convicted in US federal court of facilitating the laundering of tens of millions of dollars from darknet markets. Unlike the Tornado Cash case, this one didn’t raise many questions about the future of decentralized privacy software, as it was a clear-cut centralized service. But as Fortune notes, it did raise interesting questions about how courts should treat evidence from blockchain analytics firms. Last August, an investigator for CipherTrace, an analytics firm owned by Mastercard, gave expert testimony casting doubt on evidence the prosecution had obtained from rival firm Chainalysis. That led to hearings over whether the evidence should be admissible. But then in February, Mastercard pulled the CipherTrace investigator’s testimony, calling her data “unverifiable and unauditable.” Ultimately, the judge ruled that the prosecution’s evidence from Chainalysis was admissible. But the noisy squabble between rival analytics firms suggests that a larger debate over the role of blockchain analytics in the courtroom may be just starting.
Crypto games that let players earn real money have come roaring back to the Philippines, according to the New York Times. Axie Infinity, the first big play-to-earn game, was popular in the Philippines before the market crashed in late 2022. Now that the crypto market is back, so is the fervor for crypto gaming. According to the NYT, the Philippine player base for the game Pixels has increased from 80,000 in November to more than 830,000.
Crypto VC firm Paradigm did its own political poll. Among other things, the survey of 1,000 registered voters in the US found that 7% owned more than $1,000 in crypto and 1% owned more than $10,000. Of men aged 18-54, 40% have bought crypto. A third of African Americans surveyed and nearly a third of Hispanic respondents currently own crypto, up from 20% and 22% last year, respectively. While 26% of college graduates polled own crypto, only 13% of those with postgraduate degrees do. “This difference may be due to the fact that postgraduate degree holders benefit the most from the current economy and financial system,” Paradigm speculated. Meanwhile, 70% of the sample responded that they were “dissatisfied with the current financial system. The kicker: 48% of crypto owners plan to vote for Donald Trump versus 39% for Joe Biden—even though, according to the survey, only 39% of crypto owners “recall voting for” Trump in 2020.
2010s crooner James Blake’s new “experiment” feels like a crypto thing. The Limit to Your Love singer posted on X that he’s had enough of the current economic models that mean musicians only see a fraction of their streaming royalties, and wants to "show music has inherent value beyond just exposure." His solution: charge $5 a month for fans to access his unreleased tracks via a mysterious platform called Vault.fm. You might be asking: Why are you telling me about a once well-known pop star trying to reignite interest in his catalog? Well, the company behind Vault.fm, Out The Mud Ventures, appears intent on making “web3-native music” a thing. It’s the same outfit behind the crypto music platform sound.xyz. If Blake really is shilling a new crypto thing, he’s maybe not super excited about it? The announcement made no mention of crypto.
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