Wonderland - what's the teachable moment?

As I read about the implosion of Wonderland, I am struck by a number of thoughts in no particular order.

  • If crypto is truly trustless and everything was run by smart contracts in which “code is law” then what difference does it make if an ex-felon has some keys to the treasury?
  • Why was the price of the TIME token not ultimately stabilized despite a “run on the bank” given that the treasury contains almost $400m several days after the bank-run began?
  • What does this mean for Olympus DAO (of which Wonderland was a fork)? Did things work according to plan or not?
  • Is anonymity good for business in crypto-land?

Obviously, the first question is meant to be provocative and I ask it because it should be a model for the future. In other words, the solution may be to move towards even more aggressive decentralization and reliance on code whenever possible to prevent human intervention as much as possible. Why? Because there will always be bad actors, charlatans, felons, and people who just make dumb mistakes. Using the code to police ourselves could be the Gort solution that crypto is looking for to save us from ourselves.

Had code been the law at Wonderland, Mr Sestagalli would have been able to get out in front of the story to stop a bank run by simply asking the obvious question, “What difference does it make if we have an ex-felon working with us? He doesn’t have the keys to the kingdom or the treasury because that’s run entirely by code; nothing can be done without our consensus; the community is the machine.”

In other words, changes to the code, or instructions to the treasury itself, whether they be to send money or buy/sell assets, would need to come via properly formed, electronic mandates by democratic governance. Those mandates would contain instructions to the treasury which are only activated when they represent or exceed a consensus threshold. In other words, it wouldn’t make any difference if there were bad actors lurking in the DAO - none of them would have any effect on the system in and of themselves.

Code is rarely perfect but it can be improved exponentially when heavily scrutinized in the open source arena, tested and hardened on progressively larger and more mission critical platforms, until it is about as secure and hardened as can be. I am encouraged that the crypto community often forks ‘proven’ code and comes to the aid other projects and one another when there’s been a hack or a mishap. Even better when they invite themselves to have their code audited by multiple parties and specialists. We should go further by creating some sort of regulatory body, consortia, working group - whatever you want to call it - that develops the best-in-breed smart-contract auditing service in order to vet any new business that wants to earn more credibility in the marketplace.

I don’t have anything clever to say about the second question. It’s really an observation. I held the TIME token, myself. I decided to sell it after it plummeted 80% and I didn’t see any signs of the DAO buying it back to hold the price. I have since read that it fell well below the price it should have given the treasury’s holdings. The development team went silent and investors got spooked. When I sold my tokens, I could still see $400m locked up in the treasury and the price had fallen more than half just in the three days since the big revelation, suggesting to me that the treasury had failed to protect the price above the TVL despite having sufficient funds to do so. Maybe, I am wrong. That’s what it looked like. Maybe, this is how the smart contract is supposed to work but it didn’t inspire any confidence in the system.

Which leads me to the next question about the Olympus Dao smart contract code base. Do we have confidence that it will be the buyer as last resort when we really need it? I realize that it’s very early days and that the treasury is only one component of the value - to put a floor so it doesn’t go to zero, so to speak - but the experience of the investor might matter more in the long-run than the actual economics. TIME didn’t go to zero but it went below the price suggested by the value of its treasury. I will be interested to see how Zeus and others respond to the Wonderland situation.

The last question is something I find myself debating often. As a Gen-Xer, I don’t like anonymity. It seems shady to me. People should stand behind their businesses. The fact that doxxing is even a thing concerns me. On the other hand, I can see how cruel the online world can be and why some people prefer to hide their identities, especially when expressing unpopular ideas that could get them harmed.

I suppose that moving towards ‘code as law’ neatly sidesteps this issue because it wouldn’t matter at all who was behind these businesses so long as the code is out in the open and audited / approved by people who do stand publicly behind their work. Maybe, that could work. I’d be interested to hear other people’s perspectives on this.

Another approach would be to fully vet the wallet(s) involved in the project and to insist that all founders and key personnel share their wallet addresses (if not their identities). The wallet is a proxy for the owner’s behavior. If the owner wanted to do something shady, they would use a different wallet that was completely unassociated with the ‘clean’ wallet. There is some benefit in always keeping that clean wallet ‘clean’. It follows, then, that if the clean wallet is the one associated with the project that this is the persona that is behind the project - even if the person in question has multiple personas. And we should be extremely wary of projects involving wallets that have NO history or that use mixers a lot to hide their transactions. This isn’t foolproof by any means but it gives us something to inspect - to verify - and make assessments on - if not the character of the person - then at least the persona they wish to use to participate in the project based on which wallet they are using.

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