Highlights from Orca Governance Call #1!
Exploring the future of Governance v0 with Orca co-founder Yutaro Mori
The call was hosted by Core team member Nautilus, with questions posted in the #governance-call-1 channel of the Discord. See below for a transcript of the highlights, and be sure to tune in next time! 🐳
Exploring the future of Orca Governance 🪙
Nautilus: Let’s start off with a simple question: What is Orca Governance, and what is your vision for it?
Yutaro: The principle behind Governance is that the Orca protocol can continue to thrive after the original Core team is no longer critical to the operations and the strategic decision making of the Orca protocol.
The idea, which is in some ways a super lofty ideal, is that with blockchain, this new technology, we can devise ways for tokens to be used creatively. So let’s see if we can use the originally minted 100M ORCA tokens, distribute them to folks who are interested in contributing to Orca and see if we can set up a system where these token holders can guide the Orca protocol.
Nautilus: I think that covers all the main bases. Governance is such a broad question: How should protocols be governed over time? What are the principles that guide the protocol through governance? How do you make sure those interested in governing adhere to these principles?
Can you wind us into the history of Orca Governance: What were the problems you foresaw that needed to be avoided for Orca governance v0? Can you tell us about the decisions you have made so far to bring us to where we are?
Yutaro: Having some form of governance has been on our mind since day one, essentially since the inception of Orca. While DeFi has seen many DAOs, they are, at least in my opinion, still fairly experimental. When we launched, AMMs were well understood. We had this hunch that AMMs were the future and that some form of AMM would be the way tokens are transacted on blockchain. However, when we looked at DAO governance, it seemed that no-one had quite figured it out, yet.
One of our principal philosophies, going into the launch of Orca, was not to have any preconceived ideas about how governance should work, while recognizing that there are certain attributes that contribute to successful governance that we should focus on.
First, there must be something worth governing, we feel the Orca protocol is something worth governing. We were and still are big believers in Solana, and there will always be a need to transact tokens on the Solana blockchain. That need, in itself, is valuable for the entire Solana ecosystem. We feel that the Orca protocol is therefore inherently valuable.
Secondly, token distribution is incredibly important, given time we will distribute all 100M ORCA tokens and holders are free to buy from and sell to whomever they wish. The initial core team had control over how the initial tokens were distributed, it was important for us that our community had first dibs on the tokens, before any fundraising took place.
Nautilus: As Governance grants control of the protocol to Orca holders, how do we ensure that we preserve Orca’s founding values?
Yutaro: By, as much as possible, setting a positive tone for the community, and sharing our values. Principled, playful and professional are our core values for the team and we hope for the community as well. In crypto, particularly when markets are hot, there is a lot of bad behavior. It is important for us to be not just principled but explicitly so, and to foster a community that is value aligned.
The Impact Fund is deeply important to us, and as a second order effect we hoped to attract similarly aligned folk who also view the impact fund as valuable and therefore want to contribute to the Orca protocol. Culture is incredibly important, that’s why these preliminary governance calls are essential for establishing what is important for the Orca protocol and what we are trying to achieve. We need to find out what matters beyond the expected “number go up” type priorities.
One last thing, I have been trying to hop into the governance channels more frequently and I will continue doing that. The attitude I want to take is to try to foster a governance environment that is very open to discussion.
Nautilus: With the DAO transferring power from the team to the community we (the Core team) are effectively making ourselves obsolete. You don’t see this in other sectors, what is the vision going forward for governance?
Yutaro: There are multiple ways this has to be approached. First, we are trying to build a governance system that makes team obsolescence possible— this is one of the hardest issues to tackle. Right now, we see a ton of governance approaches in Ethereum, mainly as it is a more mature ecosystem, we see a lot of good practice examples, we also see case studies — which are helpful. These case studies dive into what it is like to be a DAO contributor on a day-to-day basis.
We have observed a view among DAO contributors that a model where all token holders vote on all issues, does not necessarily scale. There are lots of smart folks proposing solutions, and an emerging solution deploys a “Pod” model: smaller groups of specialist delegates, assigned to oversee a particular protocol function or sub-function.
A benefit of this system is that it addresses a core problem: there is no way for every DAO participant to be sufficiently informed in relation to every issue on which they vote. We are exploring this Pod model to see if it is a good fit for us.
Nautilus: Can you give an example of what a Pod might look like, how big would it be, what kind of areas could they specialize in?
Yutaro: A good example is token listing, right now it is difficult to determine if an SPL token should be tradeable on Orca and how it should be labelled. For example Uniswap has issues with the listing of scam and fake tokens, we need some kind of process for determining which tokens should be tradeable and how they should be labelled. This process is an example of a speciality that could be delegated to a subset of community members.
We need to determine the things necessary to keep the protocol humming along and how these things can be assigned to Pods. It is an interesting exercise, it remains unclear whether or not everything can be broken down and assigned to Pods, but I think a decent amount can.
Nautilus: If we were to develop a Pod system, how many Pods do you envision being engaged with the Orca protocol’s governance system?
Yutaro: I honestly don’t know but through trial and error we will figure it out. Then someone will write a book about it and we will see the development of a rule like the ‘two pizza rule’ that is applied to the size of software engineering teams. If I had to guess, for Orca, I would say it is hard to imagine more than five Pods, as a single layer, beyond that the communication overhead becomes too great — but I am guessing wildly.
Nautilus: Perhaps that was not the best question, as we are so early in building the core functionality of Orca, we may need Pods for functions we have not yet envisioned.
I cannot, off the top of my head, think of any DAOs following a system like the Pod model. What are the advantages of the Pod system: Can you cite reasons for why we should pursue a Pod model rather than a flat system where everyone votes on everything?
Yutaro: We can borrow a lot from outside the Web3 world. Ori always says that useability patterns have evolved and been perfected in Web2 that have yet to be adopted in Web 3, without good reason. This, despite differences to Web2, can also probably be applied to the management of DAOs in Web3. A good rule to follow would be to have just enough process and nothing more. We do not want a big hierarchical DAO, but we need just enough hierarchy for Orca to succeed, while retaining the values we set out initially.
Nautilus: Back to the Orca’s governance token. How would you define what the token means in terms of governance?
Yutaro: Ultimately it is up to the community to decide. I can give my 2 cents worth as to what I think it should be, at least in the short term — I have covered this in the forums. Going back to what I said earlier, I see Governance as an experiment, where the team sets the initial conditions, fostering the community and defining the initial distribution, then gradually relinquishes control.
I think right now, given where we are in the current crypto market cycle and where we are with the Solana ecosystem and its relative maturity, the Orca protocol should focus on the question of where the ecosystem will be in three or four years and how can we be the dominant liquidity layer for Solana — I think we should focus on that. A lot of decisions can fall out if we can all rally around that aim.
Nautilus: For our podmates who don’t dive too deeply into how DeFi functions, can you clarify what you mean by ‘dominant liquidity layer’ and what it looks like?
Yutaro: The simple answer is there are many fungible tokens to trade on Solana, beyond the dominant ones like SOL or mSOL, users need to be able to exchange these. In the future there may be more games powered by Solana, maybe they will have in-game economies which are interdependent with the Solana ecosystem itself. Maybe there will be a lot more governance tokens. Whatever the future experience is, we want to help power it.
Nautilus: When talking about Governance, to what extent can the community influence the future of Orca?
Through participation in our Discord and our governance forums. I see a lot of regular contributors to the discussion on this call, and we are really thankful for their contributions. A lot of our team started off as contributors, and helping out in the community, and are now team members, we really want to encourage engagement. There is also the Orca builders program, we want to see the devs in our community building. We have been very encouraged by the number of ideas that have come through the program.
Nautilus: It has been great talking to folks at the London and Barcelona Hacker Houses, who have been sharing great ideas for how to build on top of the liquidity and capital of Whirlpools.
Now let’s answer the community questions…
Using Uniswap versus Uniswap Labs as a comparable — can you talk about how you see the Orca team versus the DAO as similar or different?
Yutaro: I actually don’t know too much about the distinction, but I will assume Uniswap is responsible for the token and Uniswap Labs is the operating company. I will talk about how I see Orca. Currently, the operating team is serving the necessary core functions for the Orca protocol. The engineering team is responsible for continual development of the protocol, the Community team helps out with everything, such as calls like these, the Business Development team coordinates our interactions with others in the ecosystem. The way I see it is these functions eventually get minimised, by the fact the Orca product can be self-sustaining and spun out to things like Pods. If there is anything else in particular, I am happy to answer that too.
What is your philosophy on the ossification of governance versus maintaining flexibility but with more governance risk/demand?
Yutaro: It is one of those things where you need to understand the trade-off of different governance archetypes. For us the Orca protocol’s current position chooses the right type of governance for the current situation. In general governance starts small and nimble but will naturally become bigger, slower, and more powerful over time. Maintaining that growth appropriately is crucial. There are a ton of key strategic decisions to be made to maximise Orca’s potential. It is important for governance to be small and nimble rather than big and hard to maneuver, right now.
When we are talking about Pods are we referring to sub-DAOs?
Yutaro: These terms are not yet well defined, your idea of a sub-DAO and my idea of a Pod may be the same, or not. To be clear we are not going to issue new tokens for each Pod: Pods are just specialized functions within the Orca DAO.
Nautilus: When thinking of what Orca might look like in 2–3 years, how much of that vision depends on the broader market environment for DeFi in general?
Yutaro: The broader environment matters a ton. First of all I love talking about these things. It is worth noting that if in June 2019, I had been asked what crypto would be like now, whatever I replied would have proven not to have been right. We have no idea what crypto will look like in three years, there will be a ton of unexpected things, which is exciting.
A time frame of one year is more realistic, as we can probably reliably predict the next year. I am relatively confident that, over the next year, it will be a good investment of time for the Orca community to focus on making Whirlpools as good as possible. There are clear improvements to be made such as community listing, more sophisticated routing, and better documentation.
Over the next year we should aim to build a solid foundation for the next three years. Let’s focus on building the Governance foundations so we can move at the pace we want to move at and continue to make good decisions. I would love to continue talking to the community, I have my own ideas, but I am probably wrong. The most important thing is likely something I have not even thought of. I think mobile adoption and games will be important, and we can position Orca to capitalize on that, but these are just ideas.
Nautilus: You mention the importance of mobile. You were on stage with Ori at the launch of SMS and Saga: Can you tell us how much of a focus SMS will be in Orca’s five year roadmap?
Yutaro: I don’t believe that the majority of activity by the value of transactions is on mobile, the focus is still overwhelmingly on desktop. In five years it is virtually inevitable that the majority will be on mobile; not going with that flow would be like fighting gravity. This is why I am so excited by SMS, and Solana will take it seriously with a thoughtful approach to mobile adoption.
Will SMS be a focus for Orca? Yes. Will we bet the farm on it? Not necessarily. I think for Orca it will be an incremental thing, as a minimum we will have the Orca interface optimised for mobile, not just responsive. The big question is, what are the strategic moves we can make to capitalize on mobile adoption? For Orca there are several options.
Nautilus: It is funny how we went to mobile with Web2 but DeFi has brought us back to the desktop environment. It does seem inevitable we will head back to mobile. Talking of governance in general, is there any Governance angle for Orca in relation to SMS and the Saga phone?
Yutaro: Probably in general it is better for Governance to be as thoughtful as possible. Things that are uniquely possible on mobile are almost always fast flicker actions, [so] it may be hard to find something that is uniquely possible for governance in relation to SMS — though I may be wrong, and probably am.
Nautilus: What type of protocols are the team most excited about that could utilize Orca as plugin liquidity infrastructure?
Yutaro: Direct retail usage doesn’t include GameFi. I think GameFi is interesting, I would love to see more apps using Orca at the backend without explicit partnership or even branding.
Nautilus: It is really exciting to see what people will come up with to build on Orca’s liquidity through the Builder’s Program. You attended the Orcanaut party in New York, will there be another community event for Orcanauts?
Yutaro: I think the community balance at the event was pretty amazing, we learned not to have these parties at the end of the week, because people were burned out or have already flown back. We will definitely have more events, likely in Lisbon for the conference later in the year. It is great to meet people, I really enjoyed it.
Nautilus: I really wish I had been in New York. I will be heading to Lisbon in November so will hopefully meet some folks there.
If we have a complete newcomer who is really keen to get involved in Governance, where should they start?
Yutaro: My suggestion would be to start with the Medium posts on Governance, then get involved in the governance forum and the governance channels on our Discord. Honestly just drop in and say hi and ask if there is anything interesting that can be done, or if there are any interesting areas we could explore. Yesterday someone mentioned that maybe there are interesting things we can do with the treasury — it would be pretty awesome. I am definitely open to ideas and a discussion about what can be done . We do have a treasury, so we are open for ideas about how it could be managed.
Nautilus: We do indeed have a very open community, and welcome ideas. There was a time when I myself was an Orca user, and after lots of conversations ended up a member of the Orca team. I am an example of how open Orca are to podmates with ideas. Yutaro, do you have any thoughts to close our first governance call on?
Yutaro: Thanks for helping out — I’ve had lots of fun, I always do with this kind of call, maybe next time we could have more questions from the community and let us know of anything you would like to be opened up for discussion. We all have blind spots, including people on the team, so open conversation in general is a good thing.
Nautilus: We are always open to discussion (including criticism), so do share your thoughts with us. Thank you for joining everyone! Any suggestions for future calls, do let us know in our Discord.
Bonus question (answered outside of the main chat)
What are the plans to be multi-chain? UNI is on ETH and can easily go to SOL, and may take all the market share, like they did w/Poly and Quickswap.
Yutaro: Orca’s current focus is on shaping the protocol into the liquidity layer for Solana.
The risk of other protocols moving to Solana is minimal. Technically speaking it is difficult for the likes of Uniswap to switch to Solana. It is not a simple case of forking existing code, even using an EVM compatibility layer. It would be a significant challenge for a protocol switching to Solana to gain traction as they cannot simply migrate and bring their existing user base with them.
Disclaimer: The content of this communication is not financial advice and should not be relied on by any persons as financial advice. This communication has not been provided in consideration of any recipient’s financial needs. We have not conducted any financial assessment based on the personal circumstances of any recipients. Before using the protocol, carefully review all relevant documentation and consider risks including total loss of funds.