HackMDLido's heart
In order to lay the stage here, I want to start with two pieces of writing that have marked me deeply. The first is Satoshi’s whitepaper. And the second is an essay by Vitalik on credible neutrality.
As a crypto nerd, there are few pieces of writing more beautiful than Satoshi’s whitepaper.
In particular, I want to draw your attention to three lines:
"the main benefits are lost if a trusted third party is still required”
"financial institutions cannot avoid mediating disputes”
"With the possibility of reversal [of payments], the need for trust spreads"
The crux of the problem that Satoshi aimed to solve revolves around our need to trust third parties to process payments, and the inability for financial institutions to avoid mediating disputes.
While the consequences of this may feel quite abstract to you, if you’ve ever had a bank transaction or account frozen arbitrarily, you should have an intuitive understanding of this problem.
So how does this tie into credible neutrality? And what do we even mean by it?
Credible neutrality is one of Ethereum’s guiding principles, and, by extension, Lido’s North star.
In Vitalik’s words: “a mechanism is credibly neutral if just by looking at the mechanism’s design, it is easy to see that it does not discriminate for or against any specific people.”
To tie this back to Satoshi’s whitepaper, in a world in which even once respected institutions and governments feel increasingly far from neutral, If you open yourself up to acting as a mediator then you open yourself up to being pressured into discriminating against certain groups, and making somewhat arbitrary decisions on who deserves what.
This is why the concept of trust-minimisation is so important t Lido, and why the protocol needs to be safeguarded by a DAO rather than a traditional organization.
The more decisions can be automated through code, the less humans are able to interfere with it, and the more credibly neutral – or less discriminatory – the protocol becomes.
Although it feels like half a century ago, I joined Lido back in January. My first task was to distill and articulate a Mission, Vision, Purpose, and a set of Guiding principles for Lido contributors. What was supposed to take only a couple of weeks ended up taking the best part of three months.
What I want to present to you today is a summary of that work.
Following multiple discussions with many of you in this room, coupled with my own understanding of Lido’s culture, these are the purpose, mission, and vision statements that I feel we have the most consensus on so far:
The Purpose (or the why): To Keep Ethereum decentralized, accessible to all, and resistant to censorship.
The Vision (or the where): A world in which Ethereum is the co-ordination and value layer of the internet.
The Mission (or the how): To make staking simple, secure, and decentralized.
Purpose is sometimes used interchangeably with Vision and Mission, which is wrong and can be very confusing. This was perhaps understandable a decade or two ago, as the language at the time reflected an emerging set of thinking, but this should no longer be the case.
You can think of Purpose as the core essence or driver. Vision as what the world looks like once that essence has permeated into it, and Mission as the thread that brings them together.
The interpretation and inter-relation between these three definitions is now accepted wisdom, even if many organisations do not yet fully appreciate it.
So why does having a deep sense of purpose matter?
There are two main reasons for why purpose matters. The first has to do with its importance as a central organizational principle. And the second has to do with effective governance design.
Regarding the first reason, today there is an increasing acknowledgement that purpose defines both the direction of an organisation and its course, rather than simply messaging.
Going forward, we can expect purpose to only increase in importance as people look for greater meaning, greater understanding, and greater clarity on the organisation they work for, the organisations they engage with, and the brands and services they use.
To quote the Dutch businessman, and ex-CEO of Unilever, Paul Polman:
I know we all have our jobs, but that has to come from a deeper sense of purpose. You have to be driven by something. Leadership is not just about giving energy; it’s about unleashing other people’s energy, which comes from buying into that sense of purpose.
In sum, without a deep understanding of why we’re here, as well as how to authentically express it, it is impossible to effectively communicate our truths; which in turn compromises our ability to bring the best contributors on board and to build the most authentic products.
While I won’t go too deep into the second reason – governance design – today, suffice to say that a DAO’s ideal governance surface is a function of it’s goals, and goals build on top of mission, vision, and principles – which in turn build on animating purpose.
So clearly articulating purpose is the starting point to any good governance design.
The purpose we settled on, after months of debate is the one you see above:
To keep Ethereum decentralized, accessible to all, and resistant to censorship.
This purpose is intimately tied to our vision of Ethereum as the economic and co-ordination layer of the internet.
It focuses on the properties that are necessary to bring this vision to life, and is ultimately a synthesis of the many Why’s that were expressed by long-time contributors during this process.
Why’s that touch on deeply humanistic concepts like:
- A world of equal opportunity
- Freer and fairer systems,
- An incorruptible currency for all
- Co-ordination without violence
For the first time in our history, we can have regulation by technology, which enables software to act as both a protector and a democratizer.
To paraphrase Vasiliy, as a protector and guardian of credible neutrality, Lido has a duty to keep the lights on for everyone.
In a sense this lies at the heart of Lido’s story so far, starting with protecting Ethereum against capture by centralized exchanges.
While counterfactuals are always difficult, in the absence of Lido launching when it did it’s not hard to imagine a present in which Ethereum’s security has been captured by centralized exchanges.
With respect to Mission, or WHAT Lido will do to achieve its purpose over a specified period of time, we ended up settling on the text you see above:
Make staking simple, secure, and decentralized
While this sounds deceptively simple, achieving this mission requires us to deliver the best validator set, and significantly reduce protocol governance risk.
Importantly, you shouldn’t think of this statement as necessarily being set in stone. In contrast to animating purpose, mission statements are expected to evolve as an organisation grows.
For example, Patagonia recently updated it’s mission statement from:
Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.
To:
We’re in business to save our home planet.
It made sense for them to do this in order to reflect the fact that the company has now grown into a more powerful firm with a larger vision (one that has the ability to affect change at the global level).
With respect to vision, or WHERE Lido is heading (or what the world looks like once Lido has fulfilled its purpose), we settled on the following:
A world in which Ethereum is the co-ordination and value layer of the internet.
The words co-ordination and value are particularly important here. As summarised by these complementary comments from two long-time contributors:
Value is the source from which everything else springs; without co-ordination there is no value.
And
We choose to co-ordinate around things that are valuable.
Now I want to circle back to Purpose, since the first discussion with long-term contributors brought to the surface two questions that I think are worth answering here today:
Is it ok for a Purpose statement to be general?
Is it ok for our stated Purpose to be larger than what’s been driving us so far?
Regarding the first: is it ok for a Purpose statement to be general? The short answer here is, yes.
A great example of a general purpose company is Tesla:
We exist to accelerate the planet’s transition to sustainable energy
Some more examples include:
Ikea: To create a better everyday life for the many people
BlackRock: To help more and more people experience financial well-being And
Lego: To inspire and develop the builders of tomorrow
The most important thing here is that our Purpose feels authentic. Do the words resonate? Does it allow room for us to grow?
A good purpose statement needs to feel at the same time lofty but meaningful, aspirational but not vague, precise but not limiting. It’s a very hard balance to strike.
Regarding the second question: can our Purpose be larger than our activities to date? The short answer is, also yes.
One of the most remarkable examples of completely transforming around a higher purpose is the story of Microsoft.
Upon becoming CEO, Satya Nadella spent the better part of the first five months with his direct reports asking some pretty fundamental questions about what the purpose of the company should be. They landed on the following 12 words:
To empower every person and organization on this planet to achieve more
In the words of Chris Capossela (Microsoft’s CMO):
I think that was the starting gun for a lot of change at the company. Over the past five years, we haven’t changed the words. All we’ve done is to try to dig deeper into an understanding of what the words mean and how to bring it to life for our employees and for our customers.
The next phase involved embedding it into the culture through consistent communication, reflecting the time it takes to become a living, breathing part of the organization.
We’ve repeated it at every speech Satya has given, you hear people talk about it all the time in the halls. I don’t think that gets done in a week. I think it takes a long time to really own every word, and I’m glad we took the time to make that.
What this shows is that purpose can be reflexive, in the sense that it can push us, as an organisation, to be better.
But this doesn’t happen without considerable work. Manifestation of Purpose takes time. It requires a lot of hard and consistent work.
An aspirational purpose needs to be embedded into the culture through consistent and frequent communication. If we aren’t prepared to do this, then it will feel shallow and inauthentic.
So the question in my mind here is not whether or not our current purpose is bigger than staking, but whether there’s an appetite for it to be bigger. And if so, whether we’re willing to do the work to manifest it. It feels like there is, but this is something we all need to deeply feel and commit to.
To complement all this, we also came up with a set of guiding principles, which are unpolished, but nevertheless offer a glimpse into the direction we’re heading in.
The right mental model here is that a new contributor should feel free to do what they think is best for the DAO, subject to these principles.
It’s important to note that these are guiding principles, not operating principles. Some are abstract and hard to operationally pin down – and that’s ok.
Effective Constitutions (whether formal or informal) will always contain both types – in fact, I would argue that social schelling points which are impossible to turn into operating rules are of particular importance here.
While some of these may feel abstract at the moment, the plan is to flesh them out with concrete examples from our past. These examples should also give us a feel for what the outcomes have looked like when we’ve violated these principles VS what the outcomes have looked like when we’ve adhered to them.
They are as follows:
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Self-regulate through technology and incentives, not laws and promises.
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Minimise root-level governance, and favour solutions which push power and compexity to the edges.
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Favour long-term over short-term games.
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Increase Ethereum’s technical, geographical, and jurisdictional resilience.
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Don’t detract from Ethereum’s ability to resist or recover from an attack.
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Build products that are simple, composable, and mistake-proof.
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Only do things that have a reasonable chance of being best-in-class.
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Embrace radical transparency and seek-out constructive feedback from believable people.
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Be scrupulously truthful even if the truth is inconvenient.
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Don’t shy away from touching meatspace.
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Favour pragmatic activism over dogmatic idealism.
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Treat others how you would like to be treated (with respect).
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Abide by a philosophy of substraction (less is more).
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Think big, for thinking small is often a self-fulfilling prophecy.
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Bias towards measurable actions, for if it can’t be measured, it can’t be improved.
In closing, I want to read to you my own personal notes on three of these principles that feel especially relevant today.
Why is it important that we self-regulate through cryptography and incentives, rather than laws and promises?
As I see it, Lawfare is a modern epidemic. The current tendency of governments to instrumentalize the administration of justice for purely political ends is destroying the rule of law from within, so relying on the law for credible neutrality is no longer a viable option, regardless of the jurisdiction in question.
We can’t rely on promises to stop bad actors either, no matter how good they may make us feel. To paraphrase Nikolai Mushegian, in a system that is open for the whole world to interact with, incentives are not just a suggestion. They are more akin to physical laws, like gravity or entropy. If there is even one part of the system that is not incentive-compatible, it is only a matter of time until it is exploited. No amount of wishful thinking can reduce this risk.
If incentives are about encouraging desired properties to hold into the future, then cryptography is about proving properties about messages that happened in the past. In this sense, they are two sides of the same coin. Both are essential to self-regulation.
Why is it important for us to play long term games?
Playing long-term games is hard, It feels unnatural. As humans we are pre-wired to think short-term. Where is my next meal? What animal might kill me?
There will be moments when otherwise well-meaning people will put a tremendous amount of pressure on us to play a short-term game over a long-term one in pursuit of a so-called higher virtue. We must always push back strongly against such theatre, and force longer time horizons onto our collective mental map. When in doubt, we should zoom out.
Why is it important for us to embrace radical transparency?
Understandably, living up to this principle feels much harder today given the current political climate, but this doesn’t mean we should lose sight of it.
Understanding what is, and, perhaps even more importantly, what isn’t true, is essential to success. Being radically transparent about as many things as possible, including our mistakes and weaknesses, helps create the right foundation from which this understanding can emerge.
Radical transparency forces issues to the surface, and allows the DAO to draw on the talents and insights of all its stakeholders and contributors to solve them. It is the lifeblood of every idea meritocracy and the surest way to guard against group-think. The more people can see what is happening – the good, the bad, the ugly – the more effective we can be at deciding the right course of action.
In Ray Dalio’s words:
Radical transparency forces issues to the surface—most importantly (and most uncomfortably) the problems that people are dealing with and how they’re dealing with them—and it allows the organization to draw on the talents and insights of all its members to solve them.
But how does this philosophy apply to DAOs – organisations that should by-definition open to everyone? What does it mean to be radically transparent in this context?
In the absence of a gatekeeper, if you want to draw on the talents and insights of all potential contributors, then there's a sense in which Ray's flavour of radical transparency needs to be extended. It needs to happen in public.
Interestingly, the absence of gatekeeper and centralized managerial control are qualities which are core to the most iconic headless brands – think Bitcoin, Doge, or Ethereum – even if there are important parts within each DAO that do not share some or any of these qualities (an inevitable consequence of the absence of gatekeepers).
None of these DAOs have an official spokesperson. All of them have a multitude of fiercely aligned and independently minded contributors, an important subset of whom aren’t afraid to speak their minds in public and force issues to the surface. Each would only be a fraction as resilient – and perhaps as loved – without them.
While the current legal and political climate is forcing us to make some short-term compromises on this front, it is of paramount importance that we do not lose sight of this North star. For if history teaches us anything, it’s that it is all too easy for short-term compromises to become long-term foundations.
Thank you.
