Breaking down the bankless backlash

Here’s a crypto story full of sound and fury that might actually have a happy ending: Bankless HQ, a media brand, and BanklessDAO, a semi-related entity, are discussing divorce. And it’s the children’s fault.

The split is unlikely to be acrimonious; David Hoffman and Ryan Sean Adams, the co-creators of the influential Bankless brand, have submitted a proposal to the decentralized autonomous organization (DAO) that shares a name. Right now they just want to talk.

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“We are now in the parameterization phase,” Hoffman said in a video call. The professional podcaster’s live stream quality was crystal clear, the bitrate of someone who puts time, attention and capital into the two to four news digests and interviews uploaded each week.

The topic and terms are “defined?” Whether BanklessDAO will be able to call itself that going forward is after a proposed fundraising and education initiative put forward by the DAO, apparently without Hoffman and Adams’ knowledge, blew up the entire brand this holiday weekend.

Specifically, much of “Crypto Twitter” (and some segments of “Bitcoin Twitter”) took serious offense that BanklessDAO requested 1,818,630 ARB (ARB traded around dollar parity, so ~$1.8 million) to fund a year-long education initiative financier intending to onboard people to the Arbitrum network.

“It caused the reflex of crypto Twitter … people thought it was a DAO treasury attack,” Hoffman said. It’s happened before: five times in the past two years, according to Hoffman. “It seems like there’s this series of events where somebody’s mad at us for something and … it’s, like, ‘time to air our grievances on Bankless.'”

The proposal, if approved by Arbitrum’s affiliate DAO, would fund a “multilingual marketing campaign,” content writing, 22 podcasts, 50 events and 85 “how to” training sessions, all intended to introduce the core Arbitrum technology and tools/protocols. to set top of the Ethereum scale layer to a new audience.

Whether this is a “treasury attack” is a matter where reasonable minds cannot agree, and something that the Arbitrum DAO will vote on. BanklessDAO has done similar initiatives in the past, the most relevant being for competitor Ethereum L2 Optimism – most of which Hoffman claims total ignorance of (“I asked for that information and I didn’t really get any,” he said).

For Hoffman, the most recent setback is the result of some moving parts. First is that X (née Twitter) is a “funhouse mirror” and “bad content platform for conversation”. Second, Arbitrum paid about half a million dollars to advertise on Bankless’s media products, making the DAO’s separate funding request optically a cash grab.

Most important is an issue that should be intensely familiar to anyone who has spent or observed any time in DAOs: the “failure to demarcate” between different organizations that often share a name and founders but exist for different purposes.

For example, Bankless is the established media brand covering the niche DeFi sector. It employs about 20 people, if you include its full-time contractors, and is the brainchild of Hoffman and Adams. There’s a media team that produces podcasts and newsletters, a business side that manages relationships, including with advertisers, and a “software arm” that’s finding its feet.

Hoffman and Adams also run a separate VC entity that has raised $35 million, though the Bankless LLC has never taken outside funding since incorporating in 2020 (when the duo went full-time with it).

BanklessDAO, meanwhile, is, legally speaking, an organization that doesn’t even exist. The DAO was founded in 2021, amid a bull run that saw bitcoin rocket to $69,000, and so while it counts just under 30,000 members on Discord, it’s hard to judge how many have joined and left. Hoffman described the DAO as a “very flat” entity made up of “sub DAOs,” including units focused on consulting and publishing, an audio and video guild and something called “Fight Club.”

“They all come together and, like, amalgamate into the DAO,” he said. Hoffman and Adams at one point paid two Bankless staffers for an additional role of “DAO coordination,” which could have had the title of CEO, if that term made sense in the world of DAOs.

DAOs are something of a crypto-specific idea, once described by the New York Times as a “group chat with a bank account.” Some DAOs oversee large financial operations, such as MakerDAO and Maker, but they are usually just a social group with a Discord channel and a token that provides access to the club and serves as seed funding. And like most crypto-specific ideas: they have problems.

The Bankless founders, after initially getting defensive and deflecting responsibility for the DAO’s actions, are now on Twitter and the Bankless Discord trying to do damage control. There is “an actual meeting later this week to just see each other face to face,” Hoffman said.

One of BanklessDAO’s primary complaints is that Hoffman and Adams were “hands off.” This is a legitimate point of contention; the Bankless co-founders started the DAO, promoted it across their many distribution channels, and at one point held as much as 25% of the BANK tokens used to vote on governance decisions. (They didn’t sell tokens, they both said, but now collectively own less than 15% after selling some to “the [ DAO ] genesis team.”)

Bankless also handed over its work on a profitable, branded on-chain investment protocol with Index Coop to BanklessDAO when it launched in 2021, as well as a blockchain-related clothing project with MetaFactory. While company membership in the DAO has been fluid in the past, DAO members don’t get voting rights over all of Bankless and “no current HQ employee was also a DAO person,” Hoffman said.

There’s a reasonable argument to be made that someone — perhaps, say, the Bankless founders — should have been more involved in the DAO’s operations. If only because an amorphous social club licenses their valuable brands for free and makes decisions that can materially affect the interests of the real business.

Hoffman admits it was a mistake, and seems convinced that the solution is to split the organizations. Adams tweeted on Sunday there is a plan to “submit a management proposal to @BanklessDAO early next week to clarify brand separation between the entities” and burn their bank of BANK tokens. No formal proposal has been made, and there are many different possible outcomes.

To some extent, there is a lesson here for crypto startup founders about the dangers of ceding partial control of your business or reputation to an outside organization. There are also lessons for DAOs and the importance of leadership. And while I personally think BanklessDAO’s Arbitrum education proposal is reasonable — the budget being asked for is in line with both DAO compensation and marketing initiatives — there’s probably a bigger message to be made about messaging.

But for Hoffman, Bankless is also an idea. While the co-founders knew from the start that they wanted to keep Bankless HQ a “lean” company with a well-defined audience, Hoffman and Adams are also true believers in crypto and were taken by the idea of ​​”decentralizing” them “. media operation.

“So many people will send us a DM and offer their services and backgrounds in some adjacent field … to want to help Bankless,” Hoffman said. “We just didn’t have a place for them in the centralized company.”

Around the time their podcasts took off, DAOs were a topic of polite conversation—the same year a NYT reporter participated in a failed initiative to buy, say, an original manuscript of the U.S. Constitution—and the whole thing began to look like a way for Bankless to grow without actually growing.

And to a large extent it is true. Bankless, the media company, run by two founders with no previous journalism experience, is one of the most successful organizations in the game. At a time when crypto-trade publications are cutting budgets and employees, Bankless is taking its time, even if its audience has shrunk significantly.

There are legitimate complaints about potential conflicts of interest, an exaggerated positive bias, and a reliance on Web2 funding models such as advertising at Bankless. It is also undoubtedly an enviable operation.

Hoffman and Adams spend their time reading and writing about and communicating what they love, and doing so profitably. Bankless is often where I go when I want to understand the complexities of crypto, and is often what I recommend to people who want to dip their toes into something new on Ethereum.

Similarly, BanklessDAO rose to prominence using the Bankless brand, and is now a force to be reckoned with by its makers. It looks like one of the few DAOs worth joining, and before this weekend’s backlash, it seemed relatively drama-free. “It’s a headless brand,” as Hoffman said, who might not even have the right to say such a thing.

To the extent that Bankless are bad actors or “bad for Ethereum,” as some disaffected have claimed, it is only insofar as crypto itself today is fraught with problems. The “movement” and “mission” that both the company and DAO are “driving” towards, the idea of ​​being “bankless” would be terrible, at least using the available alternatives. But give credit where it’s due, it’s still a great brand.

But putting aside the issues that the Bankless brand embodies over Web3, this whole mess is also an issue of the internet crypto that wants to replace. On social media, everyone thinks they can write — and so everyone thinks what Hoffman and Adams built is repeatable. It’s not, it takes work and dedication and a little luck.

And while dogfighting may be frowned upon by Twitter’s algorithm, the way you communicate is still your choice.

CORRECTION (NOV. 27, 2023): This is Ryan Sean Adams, not Adam Sean Adams.

CORRECTION (NOV. 28, 2023): Clarified that Bankless collaborated with Index Coop and MetaFactory on its brand index and apparel projects.