Advocacy

Adapted from articles drafted by Connor Spelliscy and Holmes Wilson, originally published in The Defiant.

Introduction

Smart contracts may be unstoppable, but the crypto industry is not. 

The U.S. government’s blessing has been crucial to every modern information empire. While states have no master keys that can shut crypto down, they can make it so expensive and high-risk for users to interact with crypto that the vast majority of their populations, and all of their institutions, will abandon it. This is particularly true in countries like the U.S., where the government has robust enforcement arms. 

Don’t let the limited government intervention to date lull your DAO into a false sense of security. While good actors in crypto have enjoyed a great run with negligible antagonism from Western governments, that appears to be changing quickly. 

There is hope for the industry, but only if we all take action. 

How do you get started? We’ve laid out some concrete and known-to-be-effective options below. Keep reading and decide which strategies are right for your DAO. 

This analysis is focused primarily on Western governments but the same principles apply to governments globally.

 

Where we are now: the crypto industry is on course for destruction

The crypto industry faces an existential threat, one that can only be neutralized by collective community action.

Western governments are accelerating their regulation of crypto. Recent examples include the Executive Order from U.S. President Joe Biden, instructing various governmental agencies to conduct research and provide proposals into crypto; the expansion of the definition of broker in the U.S. to potentially include stakeholders in crypto, such as communication platforms; the ratcheting up of enforcement efforts by US regulatory agencies targeting the crypto industry; and the European Union’s development of the Markets in Crypto-assets (MiCA) proposal. Regulation is not necessarily problematic — governments play an important role in supporting and overseeing most industries. But antagonistic and draconian regulations will slow the development of the industry or much worse, cripple it, while clear and reasonable regulations would reduce FUD and stimulate further innovation. 

The crypto industry is at an inflection point. 

These developments are particularly important because new regulation in influential jurisdictions, like the U.S. or E.U., will likely drive the adoption of similar restrictions in countries across the globe. So, if you think your DAO is safe because it’s in a jurisdiction that isn’t actively pursuing crypto companies, or you believe your DAO can simply move to the Cayman Islands, the Bahamas, or another lax offshore haven, think again. Substantial regulation and enforcement in the West will impact your business and add to your legal expenses, as well as immutably affect the size and trajectory of the entire crypto industry. New rules may also prevent you from taking advantage of business opportunities you were counting on when you started your organization. 

This dance between government and burgeoning industry has happened many times before: over the last 100+ years, government (via regulation) has always been a key player in shaping the development of information technology industries; typically in circumstances where a budding industry energized by openness and idealism is pushed to limit or centralize its offerings to “protect” consumers or national security. 

U.S. policymakers and regulators have frequently partnered with incumbents to shut down or limit promising new technologies that pose a threat to the control of either group. The list is long: AM radio, FM radio, film, television, and the internet… Incumbents worked hand in hand with government to “secure the enactment of seemingly innocuous and sensible regulations that nonetheless spelled doom for any rival.” The most poignant example of this relationship exists between government and AT&T (in its various incarnations), whose collective actions led to the centralization of radio broadcasting in the 1920s and television in the 1940s through 1960s, and continue to this day in supporting AT&T’s aggressive lobbying efforts to shut down broadband internet competitors. The only winner of these lobbyist efforts? AT&T. 

Incumbents typically lobby policymakers and regulators to advance these “seemingly innocuous and sensible regulations” to stop new entrants offering superior technologies. Even without incumbent pressure, regulators have a strong bias towards complex legal structures that incumbents can navigate easily and new entrants cannot. Between incumbent lobbying efforts and well-intentioned but misguided proposals, history indicates that crypto should expect and prepare for destructive regulation.

 

Where we want to be: a position of safety where destructive regulations lie outside the bounds of serious political debate

To avoid destructive regulation, the crypto community must educate both the political elites and general public on why crypto is a net-positive technology for society. Those in power and those who vote must be educated to recognize that regulations impacting crypto must support continued innovation in the industry, and that any proposal that damages crypto’s unique value is a political non-starter. Until that consensus exists, crypto is vulnerable to political attack.

To achieve this position of political safety, we first have to understand what victory looks like. A very basic example of political safety is when companies have no fear of nationalization. In the U.S. and Europe, there is broad consensus that the nationalization of industries is illegitimate, capital destructive, and terrible for employment and wealth creation. Whether you agree or not, you can see how someone calling for the nationalization of, say, Google or the telecom industry would be seen as a lonely voice facing scant chance of approval.

Closer to the realm of information technology, we have the example of the video cassette recorder (VCR). When the first VCRs appeared on the market, a powerful incumbent (the US film industry) saw the ability to record broadcast video as a threat to its dominance and attempted to ban or cripple VCRs through lawsuits and legislation. At first, advocates for the VCR were just barely able to win the legal and political argument that VCRs were useful things and should not be banned. They won by a single vote in a 5-4 Supreme Court decision and then managed to ward off action by Congress. Within a few years, VCRs became ubiquitous in American households, and politicians who proposed banning them looked out of touch. That victory gave the burgeoning VCR industry a period of sustained safety during which it could innovate freely, without having to waste resources adjusting its strategy to the current whims or challenges of government. 

That’s the kind of victory cryptocurrency needs to achieve.

The good news? Achieving it in the current political era is more straightforward than most people think.

The bad news is that it is a lot of work and requires significant resources, time, talent, and passion. But these are all things the crypto industry is well-positioned to mobilize.

 

Advocacy strategies: where to allocate resources to support initiatives integral to victory

Cryptocurrency’s current position is vulnerable but not hopeless. There are bright spots.

The crypto industry has huge advantages over other information technology industries. Our organizational tools, capital, and passionate grassroots support (from highly connected retail investors and early adopters) enable us to run substantial education and advocacy campaigns. Historically, new entrants were nowhere near as well-equipped to advocate for their technology and were overwhelmingly outmatched by incumbents.

The spectrum of advocacy strategies your DAO can employ likely won’t differ substantially from those available to centralized crypto companies, but your structure might inform which are most effective for you. For instance, the most impactful strategy for a large DeFi DAO could be to deploy funding from its treasury to an advocacy organization, like Uniswap’s DAO did with the DeFi Education Fund, whereas NFT DAOs might be able to mobilize NFT holders in their tight-tight knit communities to take specific actions, like calling their Senators to protest anti-crypto legislation. 

The following are some ways to mobilize these inherent advantages to achieve political safety for the crypto industry:

1. Fund Crypto Public Goods Tech

Funding and promoting initiatives that highlight the crypto industry’s potential for good helps improve the narrative for crypto among policymakers and regulators. That increases the likelihood they will progressively adopt a more favourable outlook for crypto and provide support for crypto advocacy organizations.

These initiatives should also be demonstrably helpful for the non-crypto public.

Potential Next Steps

Support existing public good grants programs
Fund public goods work in crypto through third-party platforms like GitcoinOpen Grants, and clr.fund.

Create your own public goods grants program
Create a dedicated grants program that funds projects to accelerate crypto public goods technology. This is likely more appropriate for an organization with more resources, but groups like Uniswap, Compound, Aave, the Interchain Foundation, and the Ethereum Foundation have grants programs which, at least in part, support these initiatives. For instance, your grants program could support projects that are providing public goods that would not be possible without crypto. 

Projects that rely on crypto-incentives to help reduce the digital divide, provide equitable access to financial services, and increase corporate transparency are all worthy. These projects must be capable of making a material impact and being relied upon to convince the public and policymakers of that scale of impact. Most importantly, these projects must themselves embody an example of the benefits accompanying the widespread adoption of crypto.

Draft, or fund drafting, of reports on crypto projects 
Draft periodic reports on crypto initiatives that highlight the crypto industry’s potential for good, which can be used for public relations by crypto projects and advocacy organizations. These reports could focus on clear potential for impact without having to point to actual impact.

 

2. Fund Think Tanks and/or Activism Groups

Think tanks fund and promote research concerning topics related to one or more social policy, political strategy, or economic theory. Advocacy groups participate in activism focused on similar topics, and include lobbying and organizing grassroots campaigns. Many organizations operate both as think tanks and activism groups. Some are specific to blockchain while others have broader focuses. 

Examples specific to blockchain include:

  • Coin Center is the leading US non-profit focused on the policy issues facing the crypto industry. They produce and publish policy research from respected academics and experts, educate policymakers and the media about blockchain technology, and engage in advocacy for sound public policy.
  • The DeFi Education Fund educates policymakers around the world about DeFi and advocates for policies welcoming of DeFi and decentralized governance. It was funded by a $20M grant of UNI via a Uniswap treasury proposal.
  • DAO Research Collective accelerates DAO functionality by procuring and open-sourcing research foundational to effective DAO operations. This organization has been funded by Uniswap, Compound, and Aave grants programs, as well as the Ethereum Foundation. 


Non-crypto specific organizations that are also supporting crypto initiatives:

  • Electronic Frontier Foundation is a non-profit leader in defending digital privacy, free speech, and innovation. EFF started fighting against misguided crypto legislation when campaigning against the New York Bitlicense in 2014, worked in coalition to fend off state-level crypto regulation in California, and was heavily involved in the recent fight over the infrastructure bill. The organization also has a team of lawyers working to defend rights through the court system. 
  • Fight for the Future is a grassroots activism group that fights to protect and expand privacy, autonomy, and freedom online. They focus on large-scale public campaigning and have been behind the largest online protests ever—such as the protests to stop the SOPA/PIPA site-blocking bills in 2011 and pass US and EU net neutrality rules in 2014/2015—channeling internet outrage to win public interest victories that at the time were widely thought to be impossible. They played a major role in mobilizing individuals to contact their senators during the Infrastructure Bill fight in the Senate.

Potential Next Steps

Support these initiatives directly
Your DAO can make donations and, depending on the organization, you may be able to have some input as to how your funding is used, whether for certain research topics, lobbying efforts, or otherwise.

Support these initiatives through third-party organizations
Your DAO could support these initiatives through a third-party organization like Gitcoin, which has run successful rounds specific to crypto advocacy. 

Incubate your own initiative 
While this would be a much heavier lift, your DAO could build its own think tank or advocacy group that prioritizes the research most important to the policy positions of your organization.

 

3. Fund Think Tanks and/or Activism Groups

Industry associations are founded and funded by organizations in a particular field to advocate for their collective interests. There is some overlap between the work done by industry associations and think tanks, the key difference being that industry associations have member

  • The Blockchain Association has been the most active industry and lobbying association in the US. Its membership includes many of the leading projects, exchanges, and VCs in blockchain, such as Uniswap, Compound, Aave, DCG, Optimism, Filecoin, USV, Grayscale, and many others.
  • Canadian Web3 Council is a non-profit trade association founded to work constructively with policymakers and establish Canada as a leader in Web3 technology. It’s founded by the leading crypto organizations in Canada, including Aquanow, Axiom Zen, ChainSafe, Dapper Labs, Ether Capital, ETHGlobal, Informal Systems, Figment, and Wealthsimple.
  • European Crypto Initiative aims to shape EU regulation to favor open, permissionless, decentralized applications leveraging blockchain technology. Their supporters include Gnosis, MakerDAO, Interchain Foundation, and the Ethereum Foundation.
  • Proof of Stake Alliance focuses exclusively on obtaining legal and regulatory clarity for staking; at the moment it is in litigation with the IRS over tax treatment of staking rewards. Their membership includes Tezos, Bison Trails, Polychain, and Interchain Foundation. 

Potential Next Steps

Join one or more industry associations
Decide on which organizations to support and identify someone at your DAO to be responsible for maintaining relationships with these organizations, so you maximize your interests and your membership. Consider forming a branch of an existing industry association in the jurisdiction most relevant to your DAO. 

Start your own industry association
Organize an industry association of organizations that has value and interests that align with your own. To do this effectively is a significant undertaking, so most organizations find it more efficient to join an existing association.

 

4. Directly Encourage Community Participation in Advocacy

In the U.S., policymakers can be heavily influenced by vocal individuals and organizations based in their constituencies. A recent example is the Infrastructure Bill campaign run by groups including Fight for the Future, the Blockchain Association, and Coin Center to support and provide tooling for US citizens to call their respective senators about supporting pro-crypto positions. The campaign precipitated 40,000+ calls to senators and demonstrated to policymakers that crypto was a material issue for their voters. 

Other examples of similar campaigns include anti-SOPA and Save the Internet. The anti-SOPA campaign was organized by a similarly broad range of organizations including Google, Mozilla, Reddit, Wikipedia, Electronic Frontier Foundation, and Human Rights Watch, in response to the introduction of anti-piracy legislation that could have limited free speech on the internet. These organizations helped mobilize their users by, among other things, blacking out their websites for periods of time to create awareness of the potential impact of the SOPA bill. Google collected more than seven million signatures from Americans for its anti-SOPA petition. The campaign was successful and the SOPA bill was not passed.

Save the Internet was organized by a broad coalition of media, consumer and internet groups to preserve some protections for net neutrality in the US. This group was composed of dozens of organizations ranging from conservative to libertarian to liberal, including the Gun Owners of America, MoveOn.org, and the American Library Association. It obtained 1.9 million signatures for petitions to defend net neutrality and is credited with playing a significant role in stopping AT&T’s 2006 attempt to erode net neutrality rights in the U.S. 

Potential Next Steps

First, you’ll want to develop a strategy for how your DAO could engage your community to participate in advocacy supporting crypto. Your DAO could execute on a strategy now, or prepare a strategy to be deployed in situations such as the introduction of a new bill potentially damaging to the crypto community. The DAO could develop the strategy alone, or with other organizations with similar interests, and should always keep in mind that the best approach differs based on which jurisdiction is most relevant to your DAO.

For instance, during the recent effort to stop the expansion of the definition of “Broker” in the Infrastructure Bill, organizations like Kraken alerted users of the need to support advocacy efforts directly. The key is having a capacity to notify and mobilize the largest part of your community directly in a way that’s authentic, thoughtful, and fits with your organization’s product or platform. Asking all of your community members to call Congress by sending a Discord message may result in an impressive example of coordination, but doing it in a thoughtful way that creates an interesting story can achieve a better result.

 

5. Lobby Directly

Lobbying is any attempt by individuals or private interest groups to influence decisions of regulators or policymakers. While the practice has some negative sentiment associated with it, it’s a fundamental part of the process for rulemaking in many governments across the world. Policymakers and regulators have an abundance of varied subjects to learn about quickly, and, without assistance from industry, it is inevitable that they will overlook or misunderstand some of that subject matter, particularly when it’s as complicated as crypto.

In the context of lobbying for crypto in the United States, crypto organizations generally hire lobbyists to connect those organizations with relevant policymakers, regulators, and their staffs to (1) educate them on crypto and (2) encourage them to champion policy or regulations that support the industry or a subset of the industry.

Potential Next Steps

Learn more about this process from those with experience; speaking with industry associations in the jurisdiction where your DAO will be lobbying is a good place to start. Some can help coordinate your lobbying efforts, or connect your organization with lobbying firms best suited to help with its particular issues.

 

6. Support a Defend Crypto Fund

Help create a “Defend Crypto” fund to provide grants for the defense of projects and teams against inequitable prosecution from regulators. The initiative would be designed both to provide support for those in the industry who have been targeted by regulators and to help create legal precedents favourable to the industry, which will ultimately help protect other crypto projects and teams. With SEC Commissioner Gary Gensler nearly doubling the size of their crypto enforcement unit, it’s critical to support the broader ecosystem through funds such as this.

Potential Next Steps

To our knowledge, no such fund currently exists but could gain traction among the community. Pool Together recently launched a successful campaign to raise funds for their litigation defense via the sale of NFTs.

 

7. Support an individual member-backed crypto rights group

Help support an individual advocacy association like that proposed by Ryan Selkis, the CEO of Messari, where members are individuals rather than organizations. These groups can often take more aggressive positions given that they are not burdened with representing particular organizations. These rights groups can also help mobilize voters at a greater scale than industry associations if they have a sufficiently broad membership.

Potential Next Steps

Help build this organization or simply join as a member once one is built. 

 

Conclusion: Act now

Ultimately, arguments and evidence are the most important tools in the campaign to achieve regulatory safety for crypto. Contrary to popular belief, navigating the political system is much more about debate, reason, and writing than overt or implicit bribery. The most valuable use of money is not buying politicians. Rather, it is making sure as many brilliant and persuasive people as possible are working full-time, in a coordinated way, to build powerful arguments. But if your supporters’ arguments are less convincing than those of your adversaries, you are unlikely to succeed. People in power are smart, skeptical, and busy. At some point in the struggle, you or someone on your side gets an opening to  talk with them, and in those moments you must be wholly convincing or you are sunk. 

On the flip side, here’s what it looks like when you haven’t achieved political safety: a zombie-esque nightmare. Once a party, a Congressional coalition, or government agency decides “something must be done” and formulates a bad proposal that would destroy or hobble some piece of your ecosystem, you can perhaps kill it once but it will keep coming back, again, and again. The cycle of incoming antagonistic regulation becomes a relentless yearly barrage that can wear down even the most well-organized coalitions in a battle of attrition.

This nightmare state is where the cryptocurrency community is now. It does not have strong basic arguments adapted to a range of audiences, and a range of depths. Its public support is fractured, with strong support but also strong opposition. You can ignore knee-jerk crypto haters on Hacker News and Twitter when building your products, but in the political sphere they are an impassioned counterweight to crypto and that matters. Crypto does not have broad intellectual support, even within the tech and security community. 

The political work is not done. Crypto is not safe. Regulatory threats will keep coming, unabated. 

The only way to escape this political fragility is to identify the primary threats to crypto and decentralization that must be made politically untenable. This is what’s necessary for a zone of safety to exist. We must allocate the resources to the political work to make this a reality. This is what activists and the traditional tech industry have had to do time and again. 


Authors’ note: This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services.

Footnotes:
5. For more information on this cycle, see The Master Switch by Tim Wu.
6. The Master Switch (128)
7. The Master Switch (125-128, 179, 309); “The anti-competitive forces that foil speedy, affordable broadband”, Fast Company
8. https://en.wikipedia.org/wiki/Sony_Corp._of_America_v._Universal_City_Studios,_Inc.
9. https://en.wikipedia.org/wiki/Jack_Valenti#Valenti_on_new_technologies
10. This relates to a concept called the Overton window, a term coined by American policy analyst Joseph P. Overton for the boundaries of acceptable policy proposals. Achieving political safety means pushing the most dangerous policy interventions outside of the Overton window, i.e. the set of things that it is acceptable to discuss. Just as the Overton window can shift or be shifted, safety is never permanent. But it is the best kind of victory you can hope for, and it can provide an industry with a sustained period in which to flourish without fear of regulatory intervention. They sound wacky, for starters. See: https://en.wikipedia.org/wiki/Overton_window
11. A more recent victory that mirrors the victory of the VCR was the 2012 victory in the US against proposed website blacklisting legislation SOPA/PIPA. SOPA’s opponents (including one co-author of this piece) successfully cast it as a dangerous form of censorship, and that consensus remains in place a decade later. This paper provides a data-driven analysis of how that victory was won: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2295953
12. https://www.eff.org/deeplinks/2014/10/beware-bitlicense-new-yorks-virtual-currency-regulations-invade-privacy-and-hamper
13. https://www.eff.org/deeplinks/2015/08/license-kill-innovation-why-ab-1326-californias-bitcoin-license-bad-business and https://www.eff.org/deeplinks/2015/08/digital-rights-groups-team-tech-companies-fight-ab-1326-virtual-currency-license
14. 
https://www.eff.org/deeplinks/2021/08/cryptocurrency-surveillance-provision-buried-infrastructure-bill-disaster-digital

June 1, 2022 

Decentralized Autonomous Organizations: Beyond the Hype

"Aiden Slavin Project Lead, Crypto Impact and Sustainability Accelerator, World Economic Forum, USA & Kevin Werbach Professor of Legal Studies and Business Ethics and Director, Blockchain and Digital Asset Project, Wharton School, University of Pennsylvania, USA"