A high-profile member of a major crypto project, the Ethereum Name Service, became embroiled in the culture wars last month. Brantly Millegan, who led operations for ENS and was known for his guerilla marketing of the project, saw a tweet he had written in 2016 resurface.
Millegan’s May 2016 tweet declared that “homosexual acts are evil,” and featured statements against transgender people, abortion, contraception and masturbation. Screenshots of the tweet, which was deleted, made the rounds across Crypto Twitter. As leaders of major crypto projects called on him to change his position, and the Twittersphere roiled with calls for his resignation or removal from ENS, Millegan doubled down. “Not really anything to address? I adhere to the world's largest religion, and apparently that's not allowed in Web3?" he tweeted, calling the discussion surrounding his words “my first mob.”
What happened next to Millegan – who was ultimately ousted as a steward of the DAO but remained a director of its foundation after a vote – illustrates how all the noise surrounding decentralized autonomous organizations, the groups many Web3 evangelists believe will one day replace traditional companies, is a feature, not a bug.
A tremendous amount of talking goes on in crypto circles today: on Twitter, on Telegram, and most of all these days, on Discord servers. This has been derided by some as an mere hype, noise and distraction from the more important work of, say, writing code.
But it’s precisely the crypto community’s devotion to talking shop all day that enables the key feature of DAOs: the ability to coordinate members of a group to come to an agreement about how the group should be run.
Breaking down the Millegan example
To understand what happened between Millegan and the ENS community once the old tweet came to light, it’s useful to understand how ENS, the project behind .eth domains, is structured.
First, there’s a non-profit called True Names that develops software used by the ENS protocol. This software is open-source, so anyone can check or re-use it. Then, there’s the ENS protocol itself, which issues tokens. The token-holders in turn govern the protocol, using a DAO. They can propose and vote on changes to the way it works – system at the heart of the DAO’s governance mechanism. Meanwhile, an entity known as the ENS Foundation in the Cayman Islands is the real-world entity representing the DAO, and the DAO decides the directors who sit on its board.
But there is an extra level of sophistication to ENS token voting: Holders can choose to delegate their votes to others who can then vote on their behalf. This kind of proxy voting allows holders to contribute their tokens to meaningful votes without keeping track of all the proposals themselves. Delegates include individuals as well as companies, like Coinbase.
Millegan’s case was complicated by the fact that he not only had an important position for the project but was also an employee of True Names, a major delegate, and a director of the ENS foundation.
When his old tweets came to light, some members of the ENS community began a campaign on social media to get holders to re-delegate the tokens that had been placed with Millegan. This campaign had an impact: Millegan lost about 50,000 votes over the ensuing days. And the day after the public backlash started, True Names fired Millegan. At this stage, it might seem to be the end of the tale: a typical case of someone getting “canceled.”
But as all this was happening on social media and within True Names, a parallel discussion was also going on. These conversations took place on the forums where ENS holders make proposals and discuss them. One discussion on what the community should do with Millegan generated a concrete governance proposal, labelled EP-6, to replace Millegan as a director of the ENS Foundation.
Another proposal yielded a decision to remove Millegan as a “community steward” of the protocol. Stewards run working groups within DAOs. Instead of Millegan simply being “canceled” in one fell swoop, the episode triggered a turnout of hundreds of ENS voters who were actively engaged in shaping the future of the protocol.
The discussions among token-holders generated a number of proposals and votes that arguably further decentralized the project. This isn’t mob rule at work — it’s a crypto-enabled mechanism for expressing the will of the project’s stakeholders.
DAOs in action
Although ENS might provide the messiest example of DAO governance at work, it’s not the only recent example of a DAO successfully navigating a big decision.
The Super Bowl saw a slew of crypto-focused ads occupying high-priced slots. Among them was one from Budweiser that showcased a pixelated, bespectacled avatar that’s part of the Nouns NFT collection. Its appearance was proposed, voted on and executed by the DAO that controls the collection, NounsDAO. The DAO decided to give Budweiser one Noun from its collection in exchange for its inclusion in the Super Bowl ad, plus Budweiser changing its Twitter avatar to feature the chunky spectacles, according to NFT Now.
Despite the success stories, decentralized systems aren’t perfect. Sometimes crypto’s combination of pseudonymity and decentralization means that catastrophes are waiting to happen. This was the case, for example, when MakerDAO, one of the earliest decentralized systems for creating a stablecoin, nearly liquidated $600 million worth of Ether because a user who goes by the username 7 Siblings apparently wasn’t monitoring their holdings closely.
A period of volatility in Ether prices meant that the user could have had their deposits sold on the open market, but because they were so large, it would likely have caused the price of Ether to fall further, triggering more forced sales and downward pressure on the Ether markets. A tweet from MakerDAO founder Rune Christensen alerted Crypto Twitter to the imminent disaster, and perhaps, also the whale 7 Siblings. The large user topped up their collateral on MakerDAO, reducing the odds of a potential forced sale of its Ether deposits.
Naturally, the averted disaster prompted much soul-searching on MakerDAO governance forums, with proposals to prevent such situations from percolating in future.
So, knowing all this about DAOs and how they work, what exactly is the difference between the incident involving Millegan and ENS and a more typical case of Twitter outrage in which a company is pressured to fire an employee over something offensive that surfaces? The difference lies in how these decisions were made; the tools used to come to a consensus; and the technologies in place to enforce them – and that may give us a glimpse into the future after all.