Arthur Hayes thinks AI DAOs will be untouchable from regulators, driving DeFi monopolies past TradFi
You’d be excused for not sitting through Arthur Hayes’ latest blog posts on DAOs, DEXes, and Ethereum prices skyrocketing, as it was over 5000 words and veered off into the weeds on some futuristic ideas. Luckily we summarized some key points and added our own insights on it.
Arthur Hayes is bullish on AI Daos. He creates a fictitious scenario with a company called PoetAI that writes poems for people and uses the revenue to consume more data and build even better writing skills. It issues debt like a traditional company and uses that to scale its operations. Investors love it because the financial history of the DAO and its ability to repay its debts are fully transparent on a blockchain. Importantly, governments can’t touch it because it's a DAO operating on Ethereum, not in some countries where people can be harassed by law enforcement or thrown in jail. This allows them to grow faster and create monopolies, with their tokens and debt products trading trustlessly on DEXes. Lastly, Ethereum’s price goes to Valhalla as a result and the whole system is superior to TradFi in every way. Are you still following?
First, there are some things we definitely agree on. Probably the core point is that traditional finance is inefficient, expensive, and can be replaced through DeFi. He laments the painful process of regulating, auditing, and reporting that goes into a company listing on a traditional exchange. He highlights the point that banks are well known for “window-dressing” their audits, a process of moving assets around to make themselves look more healthy than they really are. We saw that flaw in the design of exchanges, which is why WOO X is the only company in the world (that we know of) that posts a live balance sheet in our transparency dashboard, which shows exactly where our assets and liabilities are, what venues and custody solutions they are sitting in, and verifies it with open source code and periodic Merkle tree proof snapshots.
Secondly, we agree that DEXes will be more regulation-proof and have more upside than centralized exchanges. This is why we invest so much in building WOOFi, developing a swap, orderbook, and earn functions that use smart contracts and self-custody, eventually leading to a permissionless world where companies and DAOs can be traded.
Lastly, we agree that Ethereum is poised to capture a lot of the value in a trustless DeFi future. That’s one of the reasons we focus on Ethereum-based L2s and rollups, supporting networks like Arbitrum, Optimism, zkSync Era, and Polygon zkEVM. No offense to the Polkadots of the world, but non-EVM chains don’t seem like a very strong offering for builders or companies right now.
With all that in mind, is the dystopian vision of self-sovereign AI DAOs independently scaling by raising capital and acquiring more computational resources likely to come true? Internally, we couldn’t reach a consensus. But it’s safe to say that the current landscape of rodent-themed racing and rug pulls won’t be DeFi’s final form. We are actively preparing for a future where transparency and permissionless qualities allow traders to confidently exchange and earn tokens representing everything from AI-driven DAOs to real-world assets.
We wouldn’t mind the whole ETH to Valhalla part, either.
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