Cien años de revolución: How Carlos Marcial is leading Latin America into its crypto future

Cien años de revolución: How Carlos Marcial is leading Latin America into its crypto future

Photograph by Dave Krugman

Cien años de revolución: How Carlos Marcial is leading Latin America into its crypto future

Or, how to avoid a hangover by drinking mezcal and talking about the future of Bitcoin and NFTs.
2 months ago

Sitting by myself at Mama Rumba in Mexico City, I sipped on a mezcal margarita and waited for my guests to arrive. The club was adorned with tropical flowers and neon signs that read “salsa” and “baila,” and the waitersdressed in white button-down shirts and ironed pants—diligently attended to their customers. Music played from the speakers while the musicians began warming up. The Caribbean-inspired club in the middle of Mexico’s capital was the perfect symbol of just how fluid Latin American culture can be: mainland and island rhythms, Mexican mezcal and Puerto Rican plantains, all flowing through bodies and taste buds of so many of the people sitting here, like me, looking forward to a dance. In this moment, I was not one thing or another, but a mix of many: an American in a foreign place, the daughter of a Mexican immigrant returning to her father’s homeland, a woman sitting alone at a bar, scribbling into a notebook.

Photograph by Dave Krugman

Before I finished my first drink, a curly-haired man with beaming energy, wearing a short-sleeved button-down decorated with palm trees shouted, “Vinny!” over the clinking of shot glasses and the tuning of instruments. Carlos Marcial pulled me in for a hug, patting my back like an uncle I had not seen in a long time. The renowned crypto artist then introduced me to his wife and collaborator, Alondra Durán, who wore a beautiful, flowy dress, perfect for spins and turns. Under a neon sign that read “Havana,” we ordered a round of mezcal and waited for the music to begin.

“So, this is your first time in Mexico City,” Carlos asked me. I nodded, adding that I had only been to Monterrey to visit my father’s family. I’ve always felt at home in Mexico, even though it is not where I grew up, and Spanish is not my maternal language. “I feel so honored to have been born here [in Mexico City]” Carlos told me, “just because…even though I wasn’t raised here, I had to come back because I was born here and I needed to see, you know, why I was born here, why it was a part of my narrative.” Carlos spent most of his childhood in Puerto Rico, which you can tell right away from his bombastic demeanor, the way he pronounces his r’s and s’s in Spanish, and the way he switches seamlessly from Spanish to English and back again, just like the Puerto Ricans I had grown up around in the Lower East Side in New York City.

Photograph by Nain Leon

We got to talking about NFTs right away, partly because we’re both obsessed with the technology, but also because I had bought my first NFT just a few weeks before my trip. It was the first time in my life that I owned something other than a store-bought item or a debt. “The first NFT I ever sold, I sold it for like $100,” he told me. “And at the time I was like ‘holy shit! $100!’ I had no idea where this was going, but the fact that I had earned money from my art, which I would be making anyway, was really amazing.” 

In a matter of a few years, Carlos went from lackluster design jobs to being a top-selling crypto artist who teaches university students about blockchain technology. As Carlos began selling more artworks, he also began collecting, a phenomenon in the crypto art world which, to me, articulates both a camaraderie between artists and a relatively new level of wealth among them. On SuperRare, artists retain 85% of the money from their initial sale, and collect royalties on the secondary market in perpetuity, which generates a continuous income stream that grows with the artist’s reputation. And because crypto artists don’t need to rely on auction houses and galleries—many of which are impossible to get into if you don’t have the right education, status, or address—they can finally be in control of their artistic visions, as well as their sales. Making art is beginning to offer a mass of people stability, money, and freedom, with no strings attached.

“It’s an underground movement,” Carlos said in between dances. “It doesn’t matter if the traditional art world, if Hollywood, whatever the cultural niche, sees value in what you’re doing.” Because in crypto, there is a market for everything: fine art, memes, animation, you name it. “How crazy is it that you can have artists in the middle of nowhere,” he added, “and they still have a chance of tapping into a global art market? And then you add artists from Mexico and Thailand and Russia, and you stop and think, ‘What happened here? How did this happen in such a short amount of time?’”

 

I think people get stuck in the money, stuck in the speculation, the influencers, the hype cycle, and that’s entertainment, but there’s something about believing in an asset when no one else believes in it, just because you connect with the artist and want them to succeed.

— Carlos Marcial

“Fiat est violentiam – Knife – #1” (2019) by Carlos Marcial on SuperRare

“Art Installation N°1” (2019) by Carlos Marcial on SuperRare

Kevin McCoy’s digital artwork “Quantum” (2014), regarded by many as the first NFT, sold in the NFT boom of 2021 for upwards of a million dollars. Minted on the Namecoin blockchain, the smart contract was intended to remedy the way digital artworks circulated online—which usually resulted in artists losing credit for their creations—and as a way for artists to sell their work directly to their fans.

NFTs have knocked down barriers, allowing more people to make, buy, and sell art, regardless of who they are, what school they went to (if any), and where they are located in the world. And while this sounds great to any art-maker, including poets and visual artists who may have otherwise made peace with the idea of never making money from their work, it holds even more weight for people who live in countries where political corruption, social unrest, and economies built on systemic oppression are the norm. In Mexico, as in much of Latin America, an artistic, political, and financial revolution has long been overdue.

Art and Revolution

The early economy of Mexico was built on haciendas, or plantations, which dominated the rural countryside and employed millions of people in an oppressive financial structure not unlike that featured in Steinbeck’s American classic “The Grapes of Wrath.” Up until the 19th century, it was not uncommon for people to be paid in commodities from stores owned by the same people who employed them. Prices fluctuated, never in the consumer’s best interest, and many workers were caught in a cycle of never-ending debt, a cycle that, in many parts of the country, persists today.

In 1907, half of the people living in Mexico had never seen a peso in their lives. 

In 1910, Mexican artists like José Clemente Orozco, David Alfaro Siqueiros, and Diego Rivera began crafting murals on government buildings and in the streets. They depicted scenes from the revolution: soldiers in white, politicians in black, farmers in the fields of haciendas under the burning sun, women making tortillas and grinding moles with babies tied to their backs; the poor masses rising up against the status quo. Art was made accessible to the people, not hidden away, and it featured their lives, their struggles, their dark skin and jet black hair.

When you see the migrants here in Mexico going to the United States, they’re looking for jobs. Here in Mexico, if you fail, you fall all the way. There’s no bottom.

— Carlos Marcial

Revolution or Renaissance

The NFT movement today has been compared to the Italian Renaissance on one hand, and to the Beanie Baby Boom on the other. The biggest obstacle for many people, including those who’d benefit most, has been their lack of access to understanding the technology. Those of us who grew up on the internet can see the value of NFTs, DAOs, and digital assets more readily, because we’re more accustomed to the tech that was the precursor to those inventions. We saw the programs being built, the value users placed in them, and felt connected to early internet art and communities. Then, we saw how Silicon Valley profited off of unpaid or under-paid labor. The difference with Web3 and NFTs is the people make the money, not the corporations.

“I think this is going to be like the Renaissance,” Carlos said. “But, you know, the Renaissance wasn’t decentralized. The artist was bound to whoever—the patron—and there was a whole stream of money, un montón de dinero, but the artists were still bound geographically, and working inside the castle.” The artworks, which were commissioned, tended to be portraits of nobles and still lifes, not artworks that came from their own hearts and minds. But collecting NFTs is an investment too, and one with huge headlines to boot. “I think people get stuck in the money, stuck in the speculation, the influencers, the hype cycle, and that’s entertainment,” Carlos told me when I asked about the crazy sales in 2021. Then he added, “but there’s something about believing in an asset when no one else believes in it, just because you connect with the artist and want them to succeed.” Which is exactly why people who bought works by XCOPY and Hackatao and Coldie at $25 in 2018 are now reaping the benefits of multi-million dollar sales on NFT Markets like SuperRare.

In the two years since the COVID-19 pandemic, NFTs have gone viral, and artists, like Carlos, have quit their day jobs and realized their dreams. Part of that is because so much of our attention was diverted from the physical world into the virtual. But Carlos is also certain that another reason is as a reaction, and a remedy, to corruption. “At the same time, [blockchain] is making transparent three of the most opaque human industries: governance, finance, and the art market. In Mexico, in the third world, governments don’t like transparency. And in the traditional art world you have pseudonymous bidders, and where the money goes and what happens on the secondary markets, no one knows. So what is the true value?” Is it whatever the auction house tells you?

For me it has been about, how do I bring the culture that I grew up around in Puerto Rico, and in Mexico, how do I bring that to crypto, to the metaverse, how do I make it last forever?

— Carlos Marcial

Photograph by Dave Krugman

Photograph by Dave Krugman

With a globally distributed ledger that is accessible to anyone with an internet connection, blockchain technology has truly revolutionized all aspects of the financial world. It has made it possible for people to see the provenance of any artwork, token, or contract, as well as to track every on-chain transaction ever made. This readily available data is intrinsically inspirational as it calls to mind a form of  ingenuity that many Gen-Xers, Millennials, and Zoomers have only seen in text books and movies.

For the first time since the Boomers were young, a gold rush-like opportunity has emerged, with many assets still affordable to adventurous young people willing to take the risk. You can buy into cryptocoins with prices under $100, and even buy fractions of successful ones like Bitcoin and Ethereum. You can buy NFTs for as little as $1 on platforms like Teia. And all of these things have the potential to eventually turn a profit. In fact, you can become a millionaire off of shit coins or flipping funny PFP cartoon characters, if you happen to buy in–and sell–at the right time. Which is not to say that the rich aren’t making fortunes off of crypto, too, but to the tens of millions of people that never thought they could pay off their student loans, let alone buy a home, NFTs and crypto coins are a ray of hope. “The gateway asset,” Carlos said, “kind of like the gateway drug into assets, for our generation, it’s crypto.” 

Now apply that newfound hope to places where there is no path to higher education (not even through debt), where there are capital controls and devastating crashes every decade, where every level of society is tainted by corruption, and where being poor is as good as a death sentence. For millions of lower and middle-class Mexicans, including most of my family in Monterrey, neither financial security nor faith in the system is forthcoming. “When you see the migrants here in Mexico going to the United States, they’re looking for jobs,” Carlos said. “Here in Mexico, if you fail, you fall all the way. There’s no bottom.” Which is exactly why my father left in 1964 and stayed in America long after his student visa expired. A culture existing under this kind of oppression has never had the opportunity to pull itself up. “That’s the beauty of crypto,” Carlos said, “and I think that’s why it has become ever so popular, especially in a place like Mexico City, where you have a young population of well-educated people. Bitcoin, and crypto more generally, has been their first interaction with things of value.” 

“Magritte’s Weed Pipe” (2019) by Carlos Marcial on SuperRare

Thanks to crypto, you don’t need access to insane amounts of wealth in order to collect art. You can choose to participate—and  build your wealth—in the crypto economy, one less dependent on connections and bribes. You can rise to fame and fortune without appeasing traditional power structures. Another path has opened—not a panacea, but a gateway, if you will—to taking control of your narrative, to giving yourself options, to earning power through culture. 

“Before NFTs, I think a lot of Mexican contemporary artists and Puerto Rican artists felt like, ‘I need to fit into the mold of whatever is popular, wherever the art market centers are in the world,’” Carlos said. “And that’s what SuperRare and crypto art has been building, precisely that you can bring all of that other part, you can bring that with you or you can stay in it and still be an artist that can live off their cultural production.”

Carlos’s art is emblematic of this newfound tradition. It’s colorful and dynamic in places, dark and mysterious in others. There are ancient symbols and animals that any person of Latin American descent would quickly recognize as their own: a jaguar, coyote, and serpent-god, each decorated in a unique pattern and brought to life by digital technology. But then he also plays with the masters of history, paying homage to Magritte and Duchamp while bringing them up to date.

“I will not drown because I have learned to fly” (2020) by Carlos Marcial on SuperRare

“Coyote’s Soul” (2020) by Carlos Marcial on Nifty Gateway

The cultural capital Carlos brings to the art world goes beyond just celebrating Latin American culture. “For me it has been about, how do I bring the culture that I grew up around in Puerto Rico, and in Mexico, how do I bring that to crypto, to the metaverse, how do I make it last forever?” 

“What colonization does is it puts layers upon layers on top of what was already there,” he added, “and if you are a creator, and you can still create in the midst of all of this crazy, colorful syncretism, then I think very special things will come out of it.” Carlos’s creations embody a santeria that only the mixing of cultures and the preservation of ancestry can produce: “a virgin, the indigenous artifacts, and the Coke bottle all a part of the same altar,” he observed, showing how everything, the good and the bad, can be intertwined, and transformed into something magical.

Into Our Crypto Future

Carlos Marcial and his wife Alondra—a Mexican-born artist, feminist, and academic of indigenous decent—have recently launched one of SuperRare’s first five Spaces. Metafísica will onboard new artists from all over Latin America, and is focusing on female voices for their launch. At a small dinner party at their home, Alondra told me how excited she was to bring crypto to the people, especially to women and people of indigenous descent. Thanks to Carlos and Alondra, historically oppressed people who have rarely had the chance to succeed will get their shot on SuperRare. “[SuperRare Spaces are] an experiment, you know, and breaking it apart in a DAO and giving different people a chance, it’s too good to be true and too good not to try it out to see if it’s the future of how companies can organize,” Carlos ruminated. “It’s clear to me that whatever we’ve had before, it’s not working. So, why not?”

Photograph by Nain Leon

It’s been a slow lead up to the invention of Bitcoin, but at the very least, we can see something good coming out of it all, like avant-garde literature and art after World War I and the Influenza pandemic of 1917 or the abstract expressionism and conceptual art that came out of the decades following World War II. “[Crypto art] is like post-war art, or turn of the century art,” Carlos noted. “We have so many crazy, historical things happening, and I think that you won’t be able to talk, in 20 years, about COVID without talking about NFTs and crypto art.” Sure, these years were and continue to be difficult—houses are expensive, the stock market is headed toward a recession, and new coronavirus variants seem to pop up every month—but transitions from the old world to the new almost always are. So what is Carlos’s advice?

“I’m gonna buy more Bitcoin, fuck it.”

32

Virginia Valenzuela

Vinny is a writer from New York City whose work has been published in Wired, The Independent, High Times, and the Best American Poetry Blog. She is SuperRare's Managing Editor.

FutureThink

Portraits

Negative Space

Web3 is not as private as you think

Web3 is not as private as you think

Above: “data privacy” by stockcatalog licensed under CC BY-SA 2.0

Web3 is not as private as you think

Join us on a quick trip back to ETHDenver where a bunch of hackers and NFT collectors talk security in Web3.
4 months ago

ETHDenver begins with waiting in line out in the cold, making new friends on Telegram and getting invited to parties. After administering a covid test and grabbing a wristband, I stand in another line to get into an elevator going up to the 4th floor where the conference was taking place. Outside, a McLaren patterned with the iconic Doge revs its engine.

Did somebody say crypto camouflage? (SuperRare/Nathan Beer)

ETHDenver is a cacophony of languages and accents, NFT enthusiasts and DAO members, noobs and experts, all of them friendly and chatty. Free merch abounds, and every five minutes or so I overhear the first in-person meetings of online comrades. “What brings you here?” is the entry point for nearly every conversation. But isn’t it obvious? The panels with new crypto start-ups, the coders competing in hackathons strewn across the shared spaces, the shortlist of famous names in crypto–like Nadya Tolokonnikova of Pussy Riot and pplpleasr, the namesake of pleasrDAO–and the opportunities to network with people who share your same interests in Web3.

One of the first panels I went to was on a topic I’ve spent a lot of time thinking about: privacy in the age of the internet. With all of the recent conversations around user data and the ensuing calls for privacy, it is easy to feel like web3 could be our savior, our return to anonymity, and the reclamation of our virtual sovereignty. 

The problem is, it’s not.

Adrian Brink at De/Centralize 2018 (source: https://www.youtube.com/watch?v=BBN1J1H_JWg)

Adrian Brink is the founder of Anoma, a proof-of-stake blockchain that markets itself as a truly private, “asset-agnostic,” payment platform. Their goal is to ensure that their customers maintain their privacy, even as they send money back and forth between people and parties.

But isn’t blockchain anonymous?

No. Not only is your computer’s IP address tracked by services like MetaMask and Etherscan, thus connecting a geological location to your wallet, but the platforms you use to buy crypto currencies may also share your data as well. Coinbase is one of the largest crypto exchanges in use today, and one of the hot topics at this year’s conference was how they take private data from their users and then share it with other exchanges globally. They’re not the only ones.

According to Brink, one of the biggest problems with modern-day democracy is the lack of privacy afforded to individuals. In fact, when it comes to our public lives, we are as open to the world as ever, whether we engage with social media or not. Search engines track our search history, online banking tracks our sensitive information, and every single website stores (and collects) information with every visit.

But why should I be worried if I have nothing to hide?

Because privacy is not just about what people know, but how people act. According to Michel Foucault’s Discipline and Punish, people act differently when they know they are being watched. Even just the appearance of surveillance has the same effect, whether or not anyone is actually watching. This state of heightened awareness, epitomized by the feeling–fear? worry?–some of us have before hitting “send” on a Tweet that may be too political or in any way offensive to anyone, changes the way we act.

So why does this matter in a democracy? All forms of governance are about human coordination, which requires both common sense and a shared reality. Without these two things, societies cannot have shared goals or even civil conversations, and thus cannot achieve anything. Furthermore, with data-driven ads and news, each person experiences the internet, and by extension the world, in a different light. This is a clear problem that we are witnessing today, and not just in the United States, but all over the world.

And while it is true that DAOs are an effective solution for tackling specific problems, Brink does not believe that they are the answer to our problems. The solution, or one of them, is to return to a world where individuals have privacy.

Privacy matters because it changes the power dynamic between individuals and corporations. If Facebook owns your data, then they not only profit from giving you personalized advertising, they also affect your worldview, showing you content that makes your blood boil–I mean, that keeps you engaged. They can sell that data to bad actors (Cambridge Analytica, for example) who want to change the outcome of a political event, like a protest or an election (like in 2016). But if you own your data, that puts you back in control of your online life, and fights against surveillance capitalism all at the same time. 

As of right now, Brink says, 99% of all systems are completely transparent, and 99% of users aren’t aware of it. And between IP address tracking and the increase in KYC (Know Your Customer) requirements, even the pseudonymous nature of Web3 is slowly eroding. While there are companies tackling this very problem, like ZCash and Hopr, for Brink, the future of Web3 has to be multi-chain, and it has to happen sooner rather than later because governments are already starting to go after the business of blockchain.

And with that, Brink’s time is up. He thanks us for our time and attention and leaves the stage. Outside, a light snow begins to fall. I have a drink at the bar. As I pay my tab, a notification pops up on my iPhone. 15 people liked your Tweet from #ETHDenver. 

Damnit.

32

Virginia Valenzuela

Vinny is a writer from New York City whose work has been published in Wired, The Independent, High Times, and the Best American Poetry Blog. She is SuperRare's Managing Editor.

FutureThink

Portraits

Negative Space

Mike Judge dances his way onto the blockchain

Mike Judge dances his way onto the blockchain

Works by Judge

Mike Judge dances his way onto the blockchain

Beloved American satirist Mike Judge drops his first ever NFT right here on SuperRare.
Virginia Valenzuela
7 months ago

It started with frog baseball; two weirdo teenagers playing games out in a desert field, their parents nowhere to be seen, their eyes and mouths glitching out like early 2000’s internet memes. The year was 1992, and newbie animator, professional blues musician, and former engineer Mike Judge had just licensed one of his first cartoons to Liquid Television for $4,000.

Judge loved drawing cartoons, even as a kid, but it was after he went to an animation festival that he was inspired to draw for real. With a 16mm movie camera, some paper, a pencil, and cels, he went to work in his free time. In 1991, he began sending tapes—yes, physical VHS tapes—out to studios to see if anyone would take a bite. Judge’s style was rigid, producing animations that felt hand-drawn and homemade, and his characters were simple on the surface and easy to laugh at. Even the storyline for “Frog Baseball” was nothing complex. And yet, the people at MTV loved it, and knew their viewers would love it as well.

“Frog Baseball” by Mike Judge, 1992

“I wasn’t trying to blow someone away with visuals,” Judge said. “I was going more for character and comedy.” Judge not only wrote and animated the short, but he also did the voices and composed original music for it.

“I’ve always done imitations, and originally wanted to get into sketch comedy, and I almost did that because right as MTV was talking early on about Beavis and Butthead I got an offer from this show, the Edge, and they wanted me to do animated transitions between sketches, and I thought, this was my dream come true.”

—Mike Judge

That two-minute-long film would eventually turn into one of the most iconic cult classics of the ‘90s, a little show called Beavis and Butthead that still charms audiences today. Sometimes they’d be at school, or skipping school, or watching tv on their nasty couch, commenting how “that sucks” or “that’s cool” in the world around them.

Mike Judge’s work captures moments in time in a way that is approachable, unique, and belly-achingly funny. If it wasn’t helping to spearhead cartoons for adults (did I mention he also created and was a voice actor in King of the Hill?), it was writing and directing cult classics like the 1998 film Office Space, which captured the chaos of cubicle work culture during the internet revolution. Or maybe it was the 2006 hit Idiocracy, which ventured into the apocalyptic future of an America where evolution no longer favors the intelligent, and fast food, guns, pop culture and monster trucks are king. Or, it was satirising the crazy world of Silicon Valley, based on the world Judge saw as an engineer in his early career.

Each of these works has accrued impressive followings and grown better with age. Which is part of why so many people are excited for Judge’s genesis NFT, “Dancing Dan.”

Judge’s genesis

There were cycles of walking, noted Judge, that gave him the idea that doing one of different people dancing would be, as Butthead would say, really cool. The animation—hand-drawn, of course—is of a stumpy man moving his hips to a funky little tune. It is accompanied by original music, a trio of guitar, upright bass and drums, composed and performed by Judge himself.

“When I was a kid, my grandpa would watch Lawrence Welk, which I really hated, and to me it was this old-timey way of dancing, and I really wanted to capture that,” Judge said. “There was also this song that inspired me. I’m a big fan of swing-era music and so I gave him that dorky swing.”

“Dancing Dan” is unique in that it makes the viewer feel nostalgic, but they’re not exactly sure why or what for. It taps into a style of animation that is not aimed at perfection, but rather the unique elements and imperfections that make something or someone a one-of-a-kind, making it a perfect fit for the blockchain.

Judge’s work coincided with a major cultural shift that was brought on by the digital revolution. But even with programs like ProCreate, that make it easier than ever to animate, Judge prefers a pencil and paper and a camera.

“People were worried when CG [computer graphics] came along, that it would ruin traditional animation,” Judge told SuperRare, “and it sort of did, but I’m guessing that when photography came along that people thought painters would be out of jobs. But that’s when great impressionist stuff happened. I think people, even just now, haven’t even scraped the surface of what can happen, just exploring CG. I think this could lead to a new explosion of art and innovation.”

Because when depicting reality is taken care of, it allows artists to look at the world through a different lens, to experiment, to explore.

“Huh?” by Mike Judge, 1991

Judge has been interested in NFTs for years now, and has even spoken at conferences like the Decentralized Web Summit in 2018. “I think NFTs are the next big step towards new artists finding success and connecting with their audiences directly. There aren’t quite as many gatekeepers, and there seems to be a big demand for it. I think it’s going to enable people to share their work in such an effective way.”

The NFT as a medium has also made it possible for artists to create works that, up until recently, did not have a place to be expressed, let alone sold for money. Judge remembered fondly how Chris Prynoski, a fellow animator who worked on the Beavis and Butthead movie, hosted something he called “five second day.” “Animators would submit something that was just five seconds long, and it really inspired people,” said Judge. Which was a relief for creators in an industry that often required each piece, each animation, to have a storyline and character development in order to be considered “finished.”

“Some people say animation is tedious or boring, doing tons of drawings, but for me it is the opposite. To me, illustrating is boring, rather than making something move. And often I’ll have a little idea, a cycle of something.” And now that little cycle can be presented, not as a scrap, but as a fully-formed product.

“Office Space” by Mike Judge, 1991

Judge is full of little ideas, and his work shows how big those little ideas can be. The movie Office Space started out as a little cartoon. Beavis and Butthead started out as a two-minute clip. “Dancing Dan,” and the other dancing characters he has in mind, started out, like so many of Judge’s ideas, as a joke. “Often when I get the urge to draw,” he said, “it’s because I see someone annoying and I am tempted to make fun of them.”

Which is perhaps part of why he has grown so popular and so beloved over the years. Mike Judge is not out to impress anyone, and yet, his satire has left a deep impression on the minds of millions. He’s just a dude with pencil and paper setting out to have a laugh, and inviting us to laugh along with him.

32

Virginia Valenzuela

Vinny is a writer from New York City whose work has been published in Wired, The Independent, High Times, and the Best American Poetry Blog. She is SuperRare's Managing Editor.

Feature Articles

Artist Discovery

Feature Articles

On decentralized governance: The case for DAOs and structural revolution

On decentralized governance: The case for DAOs and structural revolution

Photo by EthereumClassic, marked with CC0 1.0

On decentralized governance: The case for DAOs and structural revolution

The time has come to fight for something new, something better.
Virginia Valenzuela
7 months ago
Over the centuries, humanity has attempted a number of different models for large-scale governance. From monarchies to republics, democracies to dictatorships, from communism to socialism to utilitarianism, and so on. And while each may be predicated on some philosophy of who should be in charge and more importantly, how large groups should coordinate, the problem of governance being efficient and effective, and how to remain so over time, urges us to continue the search for that more perfect union.
In 2008, the economies of the world felt the crash of American exceptionalism at its worst. Banks were found to be bad actors, whose main purpose was not to help the population manage their money, but to offer them predatory loans to buy assets they could not afford. When the housing bubble burst, it was the American taxpayer who paid the bill for economic resurrection, and it’s the taxpayer who continues to bear its yoke.
It was no coincidence then, that in 2009, Satoshi Nakamoto mined the first block on the Bitcoin blockchain. Embedded within that block was the contemporaneous headline: “The Times Jan/03/2009 Chancellor on brink of second bailout for banks.” This statement, a rallying cry etched in the annals of history for all time, embodies the political motivation behind blockchains as a technological innovation for coordination of the common good.
If we zoom out from the excitement of insiders and the confusion of outsiders that surrounds cryptocurrency, NFTs, DAOs, and other groundbreaking technologies a la blockchain, we can see that these experiments are merely the latest answer to the age-old question: how do we govern ourselves? And relatedly, how do we protect ourselves from bad decisions being made on our behalf or in our name?

Preamble

In a lot of ways, we can think of Bitcoin as the first DAO. A proto-DAO of sorts, Bitcoin was formed through a social consensus about the parameters of how to keep a public ledger, and a calcification of the values around why an unalterable, permissionless and distributed ledger could become the optimal means of exchanging value and certifying history. Miners would be rewarded for honest efforts toward maintaining the network and for contributing computing power, and anyone could opt in or out as they pleased. Users could trivially access every transaction ever made, tracking the provenance of any given unit of value stored on the network, thus providing the ultimate form of financial transparency combined with irrefutable security. The political philosophy behind Bitcoin makes changing the network incredibly difficult; but theoretically this is possible given the right social consensus around any proposed changes.
Then came Ethereum, which grew as a branch off of the Bitcoin trunk, allowing users even greater opportunity to apply and experiment around the values of open-source code, distributed ledgers, and voluntary consensus mechanisms. The implementation of a Turing-complete programming language—on top of the miracle innovation of Nakamoto consensus—set the stage for a Cambrian explosion of different methods for financial and social coordination.
The DAO, which ran on the Ethereum blockchain, was the first social experiment built as a higher level of abstraction on top of the primitive of programmable digital value. It was an experiment around whether it was possible to set up a decentralized, anonymous venture fund, with shared financial interest as its mechanism of coordination. We evolved from operating as individual financial actors, loosely aligned through the basic rules that govern the Bitcoin network – to complex coordination among large groups of individuals on the Ethereum network, mediated through programmable smart contracts, which require higher levels of alignment to manage a constantly evolving social consensus.

Types of DAOs

After the original DAO blew up, causing wreckage across the Ethereum ecosystem and forcing a period of fraught reflection amongst its early adherents, a number of other experiments with DAOs began to emerge. Within a few months, the Ethereum community had reached the conclusion that, while the DAO had been a catastrophic event, the latent potential energy stored in the concept of DAO’s as a coordination mechanism was too great to ignore, and that by evolving their social parameters, this potential energy could be unleashed and channeled toward world-altering outcomes.
The Moloch DAO, founded in February 2019, was one of the first to gain early traction following the crypto winter of 2018—likely as a result of the strong stance they took on the value of DAOs as a coordination mechanism, and the political drive to continue innovating. Instead of buying in like people did with the DAO, potential members were asked to sacrifice something meaningful to them “for the greater good.” Maybe that was 2 ETH; maybe it was a certain amount of time that functioned like sweat equity.
But one of their most consequential inventions was the ragequit mechanism. Like in a videogame where a player is losing and thus rage quits right out of it, the ragequit mechanism in Moloch allowed members to cash out their shares instead of spending money on a project proposal that they disagreed with. It was important as a primitive, or algorithmic building block, in the evolution of DAOs because it allowed people a way out of a political turn that would lead them to investing in something they found unconscionable. The concept of exit is a fundamental function of decentralized blockchain networks and its application in the context of a DAO makes participation not only more attractive from the perspective of a capital allocator, but substantially more scalable from a social perspective. Like the decision to “vote with your feet” in the context of American federalism, the ability to ragequit your capital in a DAO lowers the friction around exiting while facilitating greater variation and experimentation among and between DAOs that (at least nominally) compete for limited capital, attention, and member engagement.
The Party DAO, which also launched in February of 2019, was organized around the collective bidding of NFTs. Unlike other collector DAOs like Pleasr DAO and Flamingo DAO, Party DAO allows users to initiate a Party Bid around a specific NFT. If the PartyBid wins, the group of people who pooled their capital to buy that NFT becomes a temporary DAO that can hold the NFT and split the profits when it sells. This allows groups to form around specific NFTs, rather than groups voting on which NFTs they’d like to bid on as in other collector DAOs.
More recently, there has been buzz surrounding the Constitution DAO, which raised $40 million between over 17,000 people, and aimed to purchase a folio of the United States Constitution. Though owning the document would not have changed the way politics function in the United States, the implications of such a venture would have been enormous. What would happen if people outside of elected office could vote on deletions, updates, and alterations to a document that governs our very way of life? How would voter participation and the general idea of citizenship be impacted?

SuperRare as a Curation DAO

Last August, SuperRare launched the $RARE token, thus beginning the next chapter in NFT marketplace curation. As a governance token, it constitutes membership for making curation decisions in the SuperRare network. Owning a single token allows you to vote on new Spaces, the admission of new artists, and green-lighting treasury expenditures that look to support artists, arts programs and cultural development. The larger construct is to look at curation, not just from an art perspective, but also a cultural one.
“It totally warps your perception of collaboration and corroboration with other team members and employees,” says Lee Knight, SuperRare’s Technical Community Manager. “It’s a novel experience as compared to traditional work environments, relying heavily on community involvement and a sense of responsibility and accountability.”
In the not-too-distant future, having a certain amount of tokens could grant members access to an IRL event, putting them in the room with the social milieu that we are creating within the network, connecting us all to a cultural and aesthetic desire that we believe in and want to see expressed in the world. We can think about how we are adding and influencing cultural significance all around us, our involvement via collection and DAO membership becoming just as important to the digital art world as the artists themselves..
SuperRare aims to eventually become the biggest pool of non-financial capital in the world. And unlike other DAOs, we plan to invest in things that do not have a direct financial return on investment. By believing in art as having intrinsic value outside of auctions and sales, the SuperRare community will be able to add more cultural capital to the world and begin to rectify decades of neglect for the arts driven by the over financialization of society these many years.

Hopes for the future

Thanks to blockchain technology, we are now well on our way to realizing true and meaningful sovereignty, wherein centralization becomes less and less powerful, and the sovereign individual can decide where they want to live, how they want to make their money, and with whom they want to collaborate. Power structures flip from centralized state authority exerting its will on individuals through the use of force, to a digital-first, free-agent universe. Distributed ledgers, non-custodial wallets, decentralized apps, smart contracts, and DAOs are a way for us to come together naturally, functioning under terms that we freely agree to, and in many cases, have legitimate agency to change.
DAOs are slowly becoming the new city-states, functioning best when members are drawn together by a joint cause and shared values. Whether that be to fund new political projects, collect assets, or collaborate on major social problems like supply chain or resource allocation, DAOs allow us to have an active part in both how we make money and what we do with it. Token networks solve the bootstrapping problem by helping entrepreneurs to raise capital without going through predatory systems, and instead being funded by their own community, rather than centralized entities.
The SuperRare DAO is like a city-state focused on art and culture, the same way Athens was a city-state dedicated to the arts and learning. By harnessing the social, cultural, political, and monetary capital of the cryptoart movement, we can indeed change the world that we live in, giving everyone a say through collective governance. DAOs are by design egalitarian, cross-national, and cross-cultural, making it the perfect way to collaborate on what many have called the Digital Renaissance – the first ever global art movement.
In the future, we can have rules set inside the DAO where, for example, we will be able to rage quit on some things but not exit the DAO entirely. We can have sub-DAOs dedicated to specific needs, functioning much like committees, except with actualized results, executed by smart contracts in real time. At long last, the Chomskyan anarchist philosophy which calls for decentralized markets, politics, and society can be realized. What will you do with the responsibility?
32

Virginia Valenzuela and Kyle Olney

Vinny is a writer from New York City whose work has been published in Wired, The Independent, High Times, and the Best American Poetry Blog. She is SuperRare's Managing Editor.

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The history of the DAO

The history of the DAO

The Heist

The history of the DAO

The DAO was a venture capital fund, founded in April of 2016, that ran as a DApp, or decentralized application, on the Ethereum blockchain network.
7 months ago

Above: “The Heist” by brennan.v licensed under CC BY-ND 2.0
Modified by Luke Whyte

We all know the storyline of the stereotypical heist. A plan is hatched, a team is assembled, cool or comically bad costumes are put on, and one way or another, the robbers break in, grab the money, and run. Some culprits are caught, and others go on to try other schemes, hungry for the rush that only Vin Diesel and angsty teens using the five-finger discount know the taste of.

But in the age of blockchain, where there are no physical safes to crack, no galleries or galas to descend into via rope, heists become loftier, the robbers smarter, and their traces even harder to track. Add to this the fact that the blockchain is global, and therefore outside of any one government’s jurisdiction, that there is no court to enforce a lawsuit and no customer service rep to call when your digital vault is found empty, and you’ve got the best damn version of Ocean’s 11 ever written.

Like so many stories with a heist at the center of the plot, the history of the famous DAO project, the DAO, features greed, ambition, success, and a deadly blindspot that leads to an inevitable end. But did the founders of the DAO learn their lesson? 

What is a DAO?

A decentralized autonomous organization, or DAO, is defined by Omid Malekan in his book The Story of the Blockchain as “a programmed entity that exists in the jurisdiction of a blockchain, issues tokens to stakeholders, and fulfills functions governed by smart contracts.” They are like corporations in that they represent a group of people and their interests, but they differ in three key ways. 

1. Corporations are organized under bylaws that outline the group’s rules and regulations. These rules are carried out by officers and employees, and are meant to smooth out the day-to-day needs of the organization. Notably, these bylaws constitute a legal document and are thus enforceable by law. DAOs, on the other hand, are structured by smart contracts that carry out tasks in real time. Their rules are programmed into the contract’s code and, in turn, are not susceptible to human error or misconduct.

2. Instead of distributing shares that dictate ownership and voting rights to investors, DAOs distribute tokens.

3. DAOs exist on a blockchain, and thus are governed by the laws of code, rather than the laws of the land, unlike a corporation that has to follow the rules of the country it is registered in.

Another big difference is the leadership structure that governs each entity. The standard structure for a corporation is as follows: shareholders, board of directors, officers, employees. Shareholders rarely get involved in any meaningful way except to elect board members. Board members protect shareholders and make decisions on their behalf, and ensure that the officers are doing their jobs. Conversely, a DAO is designed to be run directly by its investors.

What is the DAO?

The DAO was a venture capital fund, founded in April of 2016, that ran as a DApp, or decentralized application, on the Ethereum blockchain network. Anyone could join by sending any amount of ether to the DAO’s smart contract. Then, they would receive tokens representing their amount of equity in return. Not only would these tokens allow investors to vote, but they could also be traded on the secondary market like a stock. 

The way it was structured, new blockchain-based ventures could apply for funding, and token holders could vote on whether or not to fund those ventures. Once the vote passed, money would automatically be dispersed to the project from the community treasury. Once they made money, profits would automatically be sent back to the token holders. Each of these transactions would be executed via smart contracts, leading to an efficient exchange each and every time. New investors flocked to it, relishing this new technology that would allow them to see their money moving and growing in real time.

Within weeks, the DAO raised more than $150 million. This insane amount of money not only brought attention to the possibilities of crowdfunding on the blockchain, but it also increased the dollar value of ether by 50%, growing the worth of the funds in tandem. Once the DAO’s tokens were added to cryptocoin exchanges, they also began surging in value, making this one of the most successful and exciting moments of the blockchain era up until that point.

What went wrong?

In June of 2016, only two months into business, funds began disappearing from the DAO’s treasury. Investors watched as their ether slipped through their fingers in real time. Someone had found a flaw in the code, and had begun transferring millions of dollars of ether to their own blockchain address. The DAO tokens’ value plummeted. Ether lost one-third of its dollar value.

Using the same strategy, a group of Ethereum developers transferred the remaining ether into a secure wallet. Then, they had to figure out what to do next.

It is very difficult to rewrite history on a blockchain. In fact, one of the major features of blockchain technology is its decentralized ledger, which is stored on numerous machines around the world. To undo the heist of the DAO, every active validator would have to go back and alter their ledger. The Ethereum developers had a huge decision to make regarding this theft. Do they step in and change history, or let history run its course?

Ethereum’s core development team, led by founder Vitalik Buterin, were afraid that having such a large amount of ether in the hands of bad actors would be detrimental to the young Ethereum blockchain. So they implemented a hard fork, whereby the consensus rules of the blockchain would be amended in order to reclaim the stolen ether and put it back into the accounts of those who invested in the DAO. 

In July of 2016, at block number 1,920,000, Ethereum’s hashing power, or the computing power used to validate blocks, forced a hard fork to rescue the DAO. The problem was, it wasn’t unanimous. A small number of validators withheld their hashing power because they did not believe in bailing out individual users who had failed to see the problems in their code. They believed that the design of the DAO was to blame, and that the blockchain should remain immutable. This resulted in two parallel blockchains: Ethereum (ETH), which is the one more widely used today and where the DAO disaster was undone, and Ethereum Classic (ETC), the one where there was no change to the original code, and where the stolen funds were never recovered, the heist left to run its course.

While the thief – or thieves – may have lost their Ethereum, they still got to keep their bounty on Ethereum Classic. The coins are worth less than they would be if they were still part of Ethereum, but a successful heist is still a successful heist. In this case, they got away with over $100 million worth of crypto, and have yet to be discovered.

What is the take away?

When it comes to smart contracts, the law is only as tight as the code that governs it. Security experts had warned the founding investors of the DAO that the smart contracts they were using were vulnerable to potential attacks. According to Omid Malekan:

​​“The bug that was exploited by the hacker was, appropriately enough, found on line 666 of the smart contract code of The DAO. It was later determined that if a capital T in a command on that line had been lowercase, the theft would not have been possible.”

From “The Story of the Blockchain” by Omid Malekan

Additionally, Vitalik Buterin has since stated that he regretted the emergency hard fork that resulted in a split in the chain.

But the moral of the story is: Hackers are getting smarter every day, finding ways to get into the wallets of even the most careful crypto enthusiasts. So if you are looking into a big venture on the blockchain, make sure you check your work, then check it again. Remember that in times of crisis, you might want to have the flexibility, and the consensus needed to affect change. With great gains come the threat of even greater losses.

32

Virginia Valenzuela

Vinny is a writer from New York City whose work has been published in Wired, The Independent, High Times, and the Best American Poetry Blog. She is SuperRare's Managing Editor.

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