- Do you ever feel powerless?
That your life is driven by tyranny and control
by faceless institutions that don't care about you?
If you had to redo how organizations work,
how would you do it?
There's a new idea out there
that just might help shift that.
Web3, it's a new buzzword.
But today, we're talking about what it means to us.
A new type of collaboration between people
and decentralized autonomous organizations, or DAOs.
They're what might bring a new type of society
where people can control their own destinies.
Not only that, DAO's open source and decentralized finance
mean you can participate in things
that were once only the domain of Wall Street billionaires.
We all get a piece of the pie now.
Let's get into it.
That feeling you feel of lack of control,
it's because you don't have choice.
That's the wage of centralization of power
and decision making in the hands of the few,
instead of the hands of the many.
What used to be centralized now can be decentralized,
and just as a more free country yields far more wealth,
a more free organization that can replace the corporation
might just free our society from a lot of the excesses
that we all fear about the current systems.
Tyranny and control by centralized actors
like big tech that a person far away
who you've never met could have an incredible amount
of power and leverage over you.
In an age where AI and machine learning concentrate power,
the freedom that Web3 might bring us
is what we need now more than ever.
And so to better understand DAOs,
I wanted to sit down with someone
who has been building Web3 software for many years now,
Michael Feng of Hummingbot.
- It's a hot buzzword right now,
but to me, it just has a very simple definition.
It's really about a club of people
who are anywhere in the world who get together
who are compensated, and their ownership structure
is incentivized through a token.
Now that sounds really complicated
but all it really means is that
it's a group of people that are getting together for a common purpose
and the reason that's attractive is because
even if you have a full-time job you can still get involved
part-time and still feel a sense of ownership.
Because it's global and people are compensated
through the blockchain and tokens,
it allows people from anywhere in the world, you know,
to get involved and most of the activities
are organized remotely.
And I think what DAOs are are the ability
to reinvent new designs that fit the needs
of specific organizations,
and they're encoded on the blockchain.
So it will allow people anywhere in the world
to work for them and still get paid
for their fair share of contribution.
- DAOs come from the same ethos as opensource software,
which makes sense since Michael's DAO is actually designed
to govern their opensource project for crypto trading.
Hummingbot is the best opensource
market making platform for crypto.
There are hundreds of trading markets
that list thousands of tokens now,
and every single one of those tokens and markets exist
to let people buy and sell.
And that's where market makers come in.
- A great example of I would say
are these quantitative hedge funds
like Citadel, Renaissance Technologies, and Two Sigma.
- Sequoia, the venture capital firm,
is going to be investing in Citadel Securities.
It's going to value Citadel Securities at $22 billion.
- This is probably the single most successful hedge fund
in the history of the industry
in terms of its performance record.
- Well, any one anomaly might be a random thing.
However, if you have enough data,
you can tell that it's not.
- And the reason the way they make money
is that there's different exchanges.
And every exchange, you know, has an order book,
and so they basically place orders in the order book
and they keep them updated with basicly bots
as the market moves around.
And that way, they can buy and sell, buy and sell
and hope to make money that way.
- On Wall Street, market makers make billions of dollars
but they have to pay
for expensive access and infrastructure.
Literally seats at an exchange in order to actually trade.
With crypto, that is now accessible to anyone for free.
What used to be closed access private source repositories
and private APIs is now online,
and anyone can participate.
That is new.
- This is a problem that we are very familiar with
because we started as a quantitative hedge fund.
And about four years ago, you know,
we were trying to use machine learning
to try to run bots on our own to make money.
But we realized that before you could actually run a bot
and create a strategy and do all the fun part,
you had to basically build these really
low level web stock connections
to exchanges with very poor API documentation.
And that process took like a month
before you could get to the fun stuff.
And it wasn't just us.
Every single hedge fund
and individual market maker out there
was facing the same problem.
And so that's when we realized
that given how many exchanges there were,
you know, how many people were trying to market make on them,
the right solution was really should be
an open source project that anyone can contribute to
that could build connectors
in all the different exchanges out there.
But the way people use it is you can run it as a user
and just kind of download the strategies
and use each one's templates.
But you can also customize each one,
and actually some of our most successful
and most profitable users are the ones
who've built their own strategies
and modded Hummingbot to their heart's content.
- With Hummingbot, you can be the market maker
and that's actually what thousands of people are doing now.
Opensource has already pushed forward humanity
in unbelievable ways.
Linux, for instance, is the dominant operating system
for servers including the servers
that brought you this video.
Writer James Surowiecki said,
"Linux is a complex example of the wisdom of crowds.
It's a good example in the sense that it shows you
that you can set people to work in a decentralized way-
That is, without anyone really directing their efforts
in a particular direction-and still trust
that they're going to come up with good answers."
That is why Michael and the Hummingbot team
decided to go with a DAO for governance.
- What we're trying to do with the Hummingbot foundation
is to mix like the the ethos of an open source foundation,
where it's truly about open source,
it's truly about creating public infrastructure.
But also kind of giving you that control
over to the user base to decide where to take that.
Because traditionally, open source foundations
have been led by kind of board of directors
where there's like, you know, five people.
You don't know how they're making decisions
and how they're actually impacting the user base.
But here, every single change
will be approved by the community,
and the community will actually control the treasury.
And so that means that, you know,
wherever the community wants to take H bot
and Hummingbot is up to them.
- Imagine if Facebook started as an open source DAO
instead of a big faceless corporation.
It wouldn't be centrally controlled,
and the people who contributed to it
whether they're programmers, users,
or early financial backers
would have more of a say in the ongoing day to day,
as well as a share in the success.
- All the value is going to the shareholders,
and the shareholders are a very limited population.
Most of the people, all the users of Facebook,
really should be getting all these benefits.
And our model, what it allows for,
is the contributors into the open source project
are getting the value from that relationship,
because I think most software have this model
where there's the people who use it,
there's the people who develop it,
but then there's all these like
these touch points that it touches.
And so the touch points are typically companies
that want to sponsor it.
So I think a model where you have companies
that benefit from software, sponsor it,
developers then can build whatever that software is,
and the users who use it kind of deliver
the activity that benefits the sponsors.
I think that kind of flywheel can exist
in many other projects besides Hummingbot.
- Open source led to a DAO, and this DAO, Hummingbot DAO,
turns out to be the door opener for any smart engineer
being able to participate in what we now call
decentralized finance, or DeFi.
Michael got started many years ago in traditional finance.
Creating CDOs, credit default swaps.
He realized this was a very closed system,
and he had to get a golden ticket
to be invited to Wall Street.
Those days are over.
- What I realize now with DeFi and crypto
is that we're doing the exact same things
that I was doing 10 years ago
working for JP Morgan and Citibank.
The only difference is that now anyone can do it
because you can just write a simple program
and launch it on a smart contract and get liquidity for it
via decentralized exchange.
Back then we would spend, you know,
hundreds of millions of dollars just to launch
a single kind of like security or derivative.
And today, you know,
anyone with a single computer can do it.
And so that's a seed change that's going to impact Wall Street
like a ton of bricks over the next 10 years.
And to me, it's the same thing that happened
with the internet 20 years ago.
Now that anyone can create exchange,
anyone can create a bank, the gates are wide open,
and the whole sector of finance is up for disruption.
- So that's it for this week.
DAOs are a key piece of a more decentralized open future,
and Hummingbot DAO like maker DAO,
and a lot of other DAOS out there like that,
it's a key piece of decentralized finance.
Here's how you can get involved in Hummingbot
and participating in DeFi.
You don't have to ask for permission.
Your place in the decentralized world
is right here for the taking.
- People make billions of dollars in market making.
With Hummingbot, you can go do the same thing.
So go to our website, hummingbot.io,
and try out the test drive to try out Hummingbot.
Or you can go to hummingbot.org,
and check out the DAO
and how you can get involved in governance.
- If you like this video,
please share it on your social media, wherever you might be.
Click like, subscribe, and the bell icon
to get notifications whenever we post here.
I'd love to hear from you in the comments.
What do you want to see?
What questions do you have about startups,
about getting startups funded, about investing
about life, philosophy, the future of crypto?
Whatever you want to hear, I want to understand that.
I'll see you next week.