(anon)

 A weekly roundup of interesting stuff in the fabulous and mysterious world of DAOs

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*Welcome to (anon), a weekly regurgitation of undigestible DAO-related news.*

## Tornado Crash

Tornado Cash, an open-source protocol for private transactions on the Ethereum network, more casually referred to as a “coin mixer”, was sanctioned by the U.S. Government! A U.S. government official broke the news to Twitter in a tweet where he incorrectly tweeted that Tornado Cash is sponsored and operated by North Korean hacking groups.

It’s so comforting to know that these are the same geniuses who are toiling away to “regulate” crypto. The tweet was quickly deleted after the angry-beehive mind that is Crypto Twitter began stinging the poor gov. official with copy edits.

But thankfully, someone saved screenshots.

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Not long after the sanctions were announced, developers who have contributed to Tornado Cash found their GitHub accounts with Tornado-related code frozen.

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Even if you believe Tornado Cash is an evil execration that deserves to coat the lowest depths of hell, censorship resistance is a core tenet of blockchain technology. So you need to get pissed off. Please?

Twitter, as usual, can’t make up its unwanted-thoughts-saturated mind. The two most common, not contradictory takes:


1. This is an unmitigated disaster that will reverberate for years to come or maybe even spell the end of crypto as we know it.
2. Tornado Cash may well be used by some criminals. But the same is true for guns and you don’t see the US Government giving one, shiny rat’s ass. So WTF?

Also: Tornado Cash defenders (including Lord Vitalik himself) are quick to point out the many legitimate use cases it has– including donating “to a cause that might get you in trouble if done publicly.” Like supporting your many mistresses or boy toys.

No, not that.

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One of the more common criticisms of the sanction is how easy it is to avoid. The sanction was placed on Tornado Cash,  a smart contract. You can’t exactly put a smart contract in jail, so how will this work?

Hmmm. Yes, Tornado is out of commission for U.S. citizens—FOR NOW. But it can easily be redeployed to another smart contract address and probably get a few months before the U.S. government would figure it out and take steps to… sanction people or exchanges transacting with the new smart contract addresses. Curse you North Korean hackers!

Plus, the fun is just beginning! The sanction stated that anyone who interacts with Ether that has been touched by Tornado Cash is liable for it. Which created an extremely effective way to deal with the government and your other enemies– just send them a little bit of ETH.

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Which, is of course, exactly what happened. You gotta love the networked mind!

It took less than 24 hours after the sanction had been announced for people to start sending out Tornado-tainted ETH to the wallets of celebrities and influencers.

 ![](https://storage.googleapis.com/papyrus_images/f423c57084857c3eda5eb8b595cdc088)

While Tornado Cash is a smart contract, it was developed by humans, who were initially funded by MolochDAO, which was initially funded by humans. 

This begs the question of liability: will developers or investors be held responsible when a smart contract can not? DAO’s have avoided liability in the past by being sufficiently decentralized– and so far, it seems sufficiently decentralized enough to keep them in the clear. If the U.S. government does decide to go after those who fund or develop smart contracts, it will set a dangerous precedent that might scare talented builders away from the industry, or from maintaining their U.S. citizenship. 

Thoughts and prayers to any devs who worked on a project years ago that Blinken & Co. suddenly believe is the work of North Koreans!

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## All your USDC belong to US

Soon after the Tornado Cash sanction was announced, all of the USDC held in the smart-contract was frozen by its issuer, Circle.

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USDC has long been criticized for its centralization, mostly out of fear that what just happened would happen. While many thought USDC’s naysayers needed to take off their tinfoil hats, it turns out we all need more Reynold’s Wrap in our lives.

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This has reinvigorated discussions around the importance of censorship-resistant stablecoins.

 ![](https://storage.googleapis.com/papyrus_images/114a6a7905177abfcd851af86f491bf3)       ![](https://storage.googleapis.com/papyrus_images/6427856141b211f09acb07dce6c20463)

Enter MakerDAO. While MakerDAO’s stablecoin, the beloved DAI, is considered to be a more censorship-resistant alternative to USDC, at the time of writing this, [32%](https://daistats.com/#/overview) of its almost $11 billion in collateral is, erm… in USDC.

So there’s that.

And yet nonetheless DAI was widely considered to be a more censorship-resistant stablecoin when compared to USDC or your dad’s fav stablecoin, Tether. MakerDAO now faces the risk of having all the USDC it holds as collateral frozen at the whim of the U.S. government– an event that would be catastrophic for the stablecoin, all of humanity and maybe even (anon).

MakerDAO Cofounder, RuneKek (not his real name!) discussed converting some of the USDC that Maker holds into ETH in order to de-risk potential blacklisting or sanctions that could harm the stablecoin.

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A notion that some ETH nerds thought wasn’t a great idea.

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But what does Vito know? He only invented Ethereum. I say YOLO on my friends.

## MachiBigBrother Goes Apeshit

MachiBigBrother, who was recently [doxxed—and it wasn't pretty—](https://zachxbt.mirror.xyz/alM_I_fDpRRNfiscZo248lAVLxzyJmjN2PZVJmGhfBA) submitted a proposal to ApeCoin. When the proposal wasn’t retweeted by the ApeCoin Twitter account (as most other proposals are) he threw a fit and began listing Mutant Ape Yacht Club NFTs at and below floor price in retaliation.

 ![](https://storage.googleapis.com/papyrus_images/c70ae72f497203c4d9c87441a3bf7d12)       ![](https://storage.googleapis.com/papyrus_images/c503418ba6280525716ce7f4c84f71fd)

If MachiBigBrother is a scammer, as the doxxer would have it, this brings up an interesting point. ApeCoin wants to be a truly fair and decentralized DAO, so shouldn’t it give all proposals the same amount of exposure to keep it equitable? Crooks, scoundrels, racists, Jesus Freaks, fish heads, politicians, Anons—everyone is equal in the decentralized world. I’m right, right? Right?

## Blinken makes me think of Wynken, Blynken, and Nod

A great fucking poem when you are on acid:

Wynken, Blynken, and Nod one night

Sailed off in a wooden shoe—

Sailed on a river of crystal light Into a sea of dew.

"Where are you going, and what do you wish?" The old moon asked the three.

"We have come to fish for the herring-fish That live in this beautiful sea;

Nets of silver and gold have we,"

Said Wynken,

Blynken,

And Nod….

Read the rest [here](https://poets.org/poem/wynken-blynken-and-nod).

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***Welcome to (anon), a smooth round pellet of mildly competent news-gathering in a sea of unmitigated editorial diarrhea.***

## The Evening Ape Morning Herald Desk

Now this is rich! That orgy of inanity known as ApeDAO, the decentralized, Discord-based community undergirding the “Bored Ape Yacht Club,” has voted overwhelmingly in favor of using its treasury funds to finance an existing and apparently popular Bored Ape-specific news site, The Bored Ape *Gazette* (italics mine), which provides news and analysis on “all things ape.” The decision was ratified through a referendum on an “__[ape improvement proposal](https://forum.apecoin.com/t/aip-70-bored-ape-gazette-ape-coin-media-bayc-news-ecosystem-fund-allocation/7015)__” (christ!) that received 1.1 million votes in favor and a paltry 149,000 against. With a $150,000 runway, sole ape correspondent Kyle Swenson will receive a monthly stipend of $7,000, an expenditure which will be justified by such groundbreaking __[reportage](https://www.theboredapegazette.com/post/10ktf-holders-may-be-eligible-to-claim-ape-coin-starting-august-6th-find-out-more)__ as “10KTF Holders May Be Eligible To Claim $Ape Coin Starting August 6th. Find Out More,” which is just as tedious and illiterate as you might expect. Nevertheless, Kyle __[assures](https://decrypt.co/106271/apecoin-dao-to-fund-bored-ape-news-site-for-150000)__ the waiting world that he prizes “objective reporting”—the Apes are paying him $7,000 a month for his blogging contract, so he would say that, wouldn’t he? Perhaps __[disillusioned with coverage](https://maxread.substack.com/p/mapping-the-celebrity-nft-complex)__ of its “community” in the mainstream rags, ApeDAO is trying to style itself as some kind of savior of the ape-adjacent arts—a Medici-like patron of self-aggrandizing press releases about gorillas. How Swenson, a former campus newspaper scribe, will be able to find enough relevant “news” to honor his vast monthly remuneration remains unclear. Shoot me in the head because I am so jelly?

## I’ll ‘Aave another, mate, cheerio!

Another seismic DAO vote: Aave DAO, behind Defi lender Aave, recently __[voted](https://cointelegraph.com/news/aave-dao-approving-overcollateralized-stablecoin-splits-crypto-community)__ through its own “AIP” (not another ape improvement proposal! lol) to launch an Aave-based stablecoin that will be christened GHO. Similar to DAI, kinda, GHO will be minted against collateral, in the form of a “diversified set of crypto assets,” posted on the Aave protocol; GHO borrowers will continue to receive interest on their deposits. Lovely!

For some, the proposal surfaced fresh, hellish memories about another DAO-governed stablecoin, Terra, which lost its peg and subsequently plummeted to a non-lucrative zero this year, costing investors billions of dollars and initiating the collapse of half the crypto market. Proponents were quick to stress that GHO wouldn’t suffer the same fate: While Terra was “backed” by another token, Luna, whose own value was grounded entirely in investor confidence (which quickly shattered), GHO will be overcollateralized—that is, the value of your deposits will have to always exceed the amount of GHO minted, an insurance against any collapse in the underlying asset’s value. Supposedly.

## Lifted from Twitter, edition 3.0:

__[Here’s](https://news.trust.org/item/20220729132302-8fnkb/)__ an NFT company—no, it’s not a DAO but it plans on converting into one—that uses revenue from NFT sales to buy parcels of land in the Amazon rainforest to “save the land” and “take care of it,” according to its PR. Honorable intentions but apparently there’s already an indigenous tribe in the very same area that Nemus, the NFT company, has put up for sale! (Apparently without any legal basis whatsoever.) The tribe is laying claim to the land and pushing back against Nemus’s efforts to democratize access to rainforest wealth through tokenomics or whatever.

## Not a cult …. Not a cult

A new DAO is bursting onto the scene and they call it “CULT DAO.” According to __[this piece](https://www.vanguardngr.com/2022/07/cult-dao-an-unstoppable-force-in-token-creation/)__ which is almost definitely sponsored by the DAO (maybe it was written by our esteemed Ape *Gazette* colleague?) Cult DAO is “making waves in financial sectors on a global scale.” Further, the article reports, “their DeFi system is unstoppable, computer-controlled, and ready to fund the revolution.” CULT also “thrives on the idea that change has to happen for humanity to elevate,” and, uh, “was born out of the first transatlantic slave voyage back in 1526,” out of the injustice of oppression, of the belief that any one man could be worth more than any other.”

So what exactly in Baal’s name are the specifics of this era-defining project?

Ah: It’s a governance token entitling holders to trading fees which are then invested into decentralized projects of the DAO’s choosing. Smart-contract enabled venture capitalism, basically—and, clearly, a way to finally redress the injustices of the slave trade.

*---*

*Thanks for tuning into (anon), the worst thing to come out of cryptoland since that other thing a few hours ago.*

—TinySchmancer

Welcome to (anon), a weekly round-up of spicy DAO-related news that even your ailing mother would enjoy.

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After investing several long, painful decades and a few hundred thousand fathoms of blood, sweat and other fluids into this generation-defining newsletter, we at (anon) are thrilled to announce our recent giddy arrival at a considerable business milestone: the receipt of our first “view” from a real reader, which, if you can imagine, takes our unique user count to a balmy *one a month*—an improvement of literally infinite proportions over our previous milestone, zero, and a surefire winning sales pitch to advertisers.

To mark this seismic success we are launching a new feature, AGONY ANON, in which we will deign to answer any burning questions from our now considerable readership. As it happens, we have already received a *question (!)* submitted for just this very purpose; we will endeavor to answer it with the usual perspicacity and laconic wit so beloved of our avid reader (whom we promise has no relation whatsoever to this publication).

Here goes:

## Agony Anon

**Q:** Dear (anon): On reading your most recent edition I was utterly enthralled by your newsletter’s perspicacity and laconic wit, and I have forwarded this issue to many of my “friends,” who promise they will open it at some point when they get a minute. I see great promise in this entrepreneurial venture and was wondering: Given your rarefied access to the DAO world and its myriad investors, developers and thinkfluencers, have you ever considered enlisting their help with a view to releasing some kind of cryptocurrency token that you can then sell to readers with some vague assurances about future profit resulting from the efforts of (anon)’s large, diverse and well-compensated staff?

**A:** No.

# The Schmnewsletter

## Proof of Inhumanity

“Proof of Humanity” proposes a theoretically great idea: build a vast registry of verified “humans” entitled to a monthly “universal basic income” called UBI—the kind of thing that many real-world governments have been mulling for a while. Central to its project is a rigorous vetting process in which token holders can challenge new entrants to the scheme and make sure they are who they *say* they are, using online photos, social media posts, etc. It’s a democratic, smart contract-enabled bulwark against blockchain benefit fraud, basically.

And yet the project has been mired in chaos, seemingly because of a deep rift between the founders—a blockchain project called Kleros—and a cohort of new participants. Early on, Kleros, which influences Proof of Humanity at arm’s length through a DAO, enlisted the help of Democracy Earth (DE), a company run by an influential Twitter developer named Santiago Siri. Kleros wanted DE’s token as the standard for UBI, and promised to allocate it hundreds of thousands of dollars from the DAO’s treasury; DE obliged. Soon, though, and inevitably, DE began maneuvering to influence the DAO by means of the modest power afforded to it by Kleros. Siri, for instance, began to use his influence to publicly brand himself as a founder of the protocol, assigned hostile admins to the official Telegram group, complained of overreach and undue restrictions on the protocol by Kleros, and attempted to pass a vote for a fork of the DAO that would dramatically diminish the vetting process—an attempt, Kleros argues, to offer the carrot of free money to a large group of Spanish holders (and Siri loyalists) whose support would allow a complete takeover of the Proof of Humanity protocol (and the destruction of the vetting process, its key technical innovation).

Without going further into the weeds, it’s a great example of the potential chaos of decentralized governance. Complex protocols coordinated through centralized “social layers” like Telegram are easily corrupted by run-of-the-mill politicking and the mass appeal of populist agitators, and the loose, informal nature of DAO communications makes it easy to feign, say, being a project’s founder or the release of official communications. Evidently partisan tweets from Kleros’s official account make it clear that the protocol’s communication channels are not run by anything approaching consensus —indeed Kleros acknowledges it doesn’t even know who’s behind them! The financial incentive only complicates things, too. It’s hard enough to keep order in any fractious community; when a massive cohort is influenced by the additional corrupting promise of free money, arguing for any kind of technical purity is going to be difficult.

## Dune DAO Spiciness

**A hearty ANON shout out(!) to Foldable Human and his endless thread, here:**

<https://twitter.com/FoldableHuman/status/1552460615914246144?s=20&t=khhMdNUqJvneuwdIuLklGA>

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## Unrecouped Losses

A DAO called TRIBE DAO suffered an $80 million hack earlier this year. Pretty standard stuff, of course, but the kicker here is TRIBE was the result of a partnership between two distinctly centralized DeFi firms —Rari Capital and Fei Protocol, both of which appear to have sought to undermine an attempt to make victims of the hack whole.

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It happened as a kind of covert and unannounced retrenchment of early promises. Soon after the hack, a proposal was lodged on TRIBE calling for full restitution of victims via funds the DAO had specially set aside for that purpose. The vote passed: so far, so good. Further efforts to move the process forward, however, mysteriously stalled, and a veto, __[apparently supported](https://twitter.com/cobie/status/1537223536368304128?s=20&t=xSbPrMD44UURY-kTyaqSsA)__ by execs at the companies who founded the DAO, was passed to retract the vote and redo it on some spurious premise (the voting was “confusing,” according to this useful __[thread](https://twitter.com/cobie/status/1537220039522545664?s=20&t=_N2mPBs2s4emBhgN1bz-nw)__.) A second vote that was apparently constructed to *look* like another vote *in favor* of restitution—but was in fact a vote to *not* compensate victims—then passed with a majority.

The victims will not be compensated and they’re rug-chewing mad! The general consensus on the farrago is that a few wealthy holders successfully conspired to tilt the vote in their favor under the guise of a free and fair vote, taking advantage of the relative anonymity of the voting process. “Decentralization” in this instance served only as useful cover for a *fait accompli* (I have no idea what *fait accompli* means) executed behind the scenes. Good, I say!

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Thanks for tuning in—don’t forget to like, subscribe, __[follow](https://twitter.com/TinySchmancer)__ and donate your net worth to my charity fund set up to democratically distribute by blockchain consensus all proceeds to my next disastrous drinking binge! Cheerio!

—__[TinySchmancer](https://twitter.com/TinySchmancer)__

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Send spicy DAO-related schmtips to: tinyschmancer@gmail.com

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*Welcome to (anon), a newsletter expounding on the latest goings-on at the frontiers of human coordination—that is, whatever easy-to-plagiarize content pops up on our Twitter feed.*

*Published via [PubDAO](https://twitter.com/pub_DAO)*

## Thus spake Soleimani

Ameen Soleimani, who founded MolochDAO, one of the first DAOs to follow the traumatic $50 million hack of DAO 1.0, is hoping to kill off the project he initiated. In a recent __[tweet](https://twitter.com/ameensol/status/1549452419485995008?s=20&t=gKyZDVx5dKaOKEhNNRrzHg)__, he announced his vote to approve the delivery of a 500 ETH grant, worth roughly $750,000, to a large, growing collective of Ethereum core devs called __[Protocol Guild](https://mobile.twitter.com/ProtocolGuild)__.

 ![](https://storage.googleapis.com/papyrus_images/644d6b7b208d5c674ac241da87343f14)

That money accounts for around 30 percent of MolochDAO’s treasury, and Soleimani said he’d devote every last penny to Protocol Guild if he only could! He is, he said, happy with what MolochDAO has accomplished and believes its time is over. For all the talk about community in the DAO world, Soleimani’s blunt statement of (fulfilled) purpose makes you realize that a DAO is largely whatever it has in its vault—your Discord can have all the hysterically funny ape-themed stickers in the world, but likely few will be there to sycophantically upvote them if the coffers are dry. A DAO isn’t a group chat with a bank account—it’s a flash mob with a mutual fund.

Anyway: MolochDAO came about in the 2019 bear market as a means to finance much-needed Ethereum infrastructure, and included an array of mischievous, somewhat arcane features like “summoning” and “rage-quitting,” all in service of Soleimani’s fanatical game-theory-inspired views on optimizing human coordination—and addressing the tendency of humans to act in their own self-interest at the expense of the collective, which he terms “Moloch” (in reference to a __[certain blog post](https://slatestarcodex.com/2014/07/30/meditations-on-moloch/)__ beloved of California tech potentates). This goal, Soleimani argued, has now been achieved. As he wrote in the grant proposal (linked in the above tweet):

*“We summoned MolochDAO when ETH was $100 and it accomplished 3 objectives.*


1. *provide funding for actual projects in the bear market*
2. *help ignite the DAO revolution by curing PTSDAO*
3. *spread the meme of Moloch-as-ultimate-enemy within the Ethereum community*

*I think MolochDAO has succeeded on all 3 counts. We set the bar high for __[transparent funding](https://molochdao.medium.com/moloch-2019-year-in-review-eb6f53dc035)__, providing support for ETH 2.0, the first grants for Tornado.Cash, and more. PTSDAO is a distant memory, with thousands of DAOs resembling a college activity fair. And the slaying-Moloch meme has become a banner of Ethereum community leaders, aligning folks to fight against coordination failure itself, instead of each other.”*

Devoting all of MolochDAO’s resources to Protocol Guild, he concluded, would be the best way to consolidate these successes. Protocol Guild is the only project, beyond the Ethereum foundation, that is capable of addressing problems deep at the heart of the Ethereum protocol— and is unlikely to receive much attention from VCs. “If the terminal value of Moloch is to help incept Protocol Guild with the remainder of its treasury, in my view that would be a great conclusion to this story,” wrote Soleimani. “Not every organization needs to exist forever, and MolochDAO was specifically designed to be easy to dissolve.”

It’s true: Dissolution of a DAO requires no lawyers, staff compensation, none of that jazz. The enterprise just needs to run out of money.

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## Uninsured insurance

Sometimes a minor systemic collapse involving billions of investors’ dollars is all it takes to demonstrate a project’s unsoundness. Nexus Mutual is a recent exemplar: a DAO specializing in “insurance” against blockchain disasters, Nexus, in mid-July, fell victim to a disaster involving a *project promising insurance against blockchain disasters*—schmimagine! Nexus now expects to lose around half the value of its roughly $2.5 million dollar-valued investment, which was bankrolled by members.

Nexus had invested that money in *Bancor*, a relatively long-toothed Ethereum protocol that offers decentralized trading of small-cap tokens via “liquidity providers”—traders who deposit their tokens in pools of funds in exchange for a steady cut of transaction fees. Bancor became hugely popular and valuable last year after unrolling its flagship feature, billed as protection against the “impermanent loss” of capital suffered by liquidity providers when their deposited tokens are in use elsewhere.

In reality, Bancor’s solution was less of a “protection” than a straight-up bribe. Its pledge was to make up for any loss suffered by providers by simply paying them the equivalent value of that loss in BNT, Bancor’s native cryptocurrency. It’s a clever kind of insurance, one of Bancor’s major draws, and it’s little surprise a risk-minded DAO like Nexus would have invested in the protocol; in a __[press release](https://www.businesswire.com/news/home/20220303005706/en/Nexus-Mutual-Joins-30-DAOs-Adopting-Bancor%E2%80%99s-DAO-Treasury-Management-Solution)__ in March at the time of its large (then $2.2 million) investment the DAO exalted Bancor’s “100 percent protection” from impermanent loss—describing it as the “preferred” vehicle for colossal amounts of investor funds.

 ![](https://lh4.googleusercontent.com/gAG6heSXD7CFx74Pg5C47OBX4-TLMGLm8OMZPAluyUAgFbqKfWNP1hGRvHA5VYt_0A5yM4gKGdK1jILathqP37a16yVnJrKBtD5YNSfZ3EFInArrf8YjbQaNRt8MqUHB__i-yl0CPltGoE6mYRQqpTE "right-50")The mechanism, however, proved self-defeating. The trouble began earlier this month when Celsius, the insanely beleaguered giant of defi lending, was about to get liquidated on derivatives exchange FTX. Panicked, the lender withdrew millions of dollars of ETH and Bitcoin from Bancor liquidity pools it had deposited in. Bancor automatically compensated Celsius with a vast amount of BNT, equal in value to the massive loss the lender had incurred. Celsius subsequently dumped that huge sum on the market, causing a major BNT sell-off. To mitigate a total collapse Bancor shut off the impermanent loss feature entirely, meaning liquidity providers would only be able to retrieve around 40 to 50 percent of any deposited funds. It was a major reputational blow for Bancor, and the protocol is now fucked, a source tells me–”utterly fucked.”

It’s little better for our Nexus: The DAO was among the many, many victims of Bancor’s move to shut off its most popular feature, and its members recently proposed to try and retrieve 51,523 “wrapped Nexus Mutual” tokens it had invested in the protocol. The proposal concedes that Nexus expects a “40-50% haircut” on the enormous sum; it was all met with little acclaim. “great investing acumen and track record by the nexus mutual investment committee,” said defi investor @DegenSpartan.

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## Turns out *law* is law!

Maybe a little ominously, members of MakerDAO have been discussing the role of US bankruptcy law in the (hypothetical!) liquidation of a DAO’s funds. “Code is contracts, code is enforcement,” writes Maker analyst Christian Peterson in a __[blog post](https://forum.makerdao.com/t/code-is-law-vs-bankruptcy-law-is-law/16669)__, “but law is law.”

Peterson’s central point is that Ethereum diehards too often consider matters adjourned by smart contract to be final: in this case, the liquidation of an insolvent DAO’s treasury funds. But US law, Peterson writes, exists for a reason and offers a lot of flexibility that isn’t accounted for by the insane, unyielding courses of action enforced by smart contracts programmed before mere theoretical concerns became practical. A “stay” ordered by a court, for instance, prevents an indebted entity’s funds from being liquidated and gives it a chance to get its affairs in order. In the case of a DAO, Peterson points out, this kind of opportunity might be inadvertently wasted in the case of an automated liquidation that ignores the unique conditions a troubled DAO might find itself in. It’s hard to get a court to help you restructure your confounding token business if a robot accidentally sold it to a Russian oligarch on your behalf, eh? Eh!?

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*—TinySchmancer*

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