The Bisq DAO is one of the most ambitious and exciting projects in Bitcoin. For those who have never used Bisq, it’s an open source, decentralized cryptocurrency exchange, designed for peer to peer trading which protects user privacy and security. For the past 3 years, Bisq has been used to purchase and sell Bitcoin and other cryptocurrencies by thousands of users who are privacy-conscious.
The latest development for the Bisq project is the Bisq DAO. The DAO is an effort by the platform’s developers to automate the collection and distribution of the platform’s trading fees and pay them out directly to the contributors who add value to the project, in a decentralized manner.
I had first heard about the Bisq DAO a few months ago and I thought it was an interesting idea. I was a bit skeptical about the project to be honest since they were going to be issuing a token and since the DAO on Ethereum was promoted so heavily and then hacked so quickly. I was interested and wanted to know more but I wasn’t sure about how it would all play out.
Fast forward a few months. I was curious as to what was happening with the Bisq DAO I had heard about a few months prior. I decided to start searching around for an update. I was astonished to find that the Bisq DAO was almost finalized and ready for launch. I really couldn’t believe they had made so much progress in such a short time. I decided to try and contact Manfred Karrer (Bisq Developer) on Twitter to try and arrange an interview about the project for Coincache.net.
Manfred Karrer was nice enough to explain that he writes code and doesn’t really care much for interviews, but that a colleague and fellow Bisq project contributor, Steve Jain, would be more than happy to answer my questions about the DAO.
The next day, I saw a Reddit post in which the Bisq team had issued an announcement that they were looking for writers for the Bisq Blog. I felt it was fate or destiny, and I got involved. The next thing I knew, I was writing a post for the Bisq Blog! I was able to also connect with Steve Jain, through the Bisq Slack, and ask him a bunch of questions about the Bisq DAO.
The following section is my interview with Steve Jain.
Q: First of all, what is a DAO? (I’d like my readers to have a good understanding of what a DAO is before we proceed to talk about them in depth…)
A: It’s a term that has a lot of misconceptions, from the disasters of the past the term has a lot of baggage. It just means Decentralized Autonomous Organization. It’s simply a mechanism to control the operations of a project. Just like you’d pick a company or corporation for limited liability, to issue stock, or to invest. Those are great attributes for a company but you also have to register with the state, so there is a very great legal component.
With the DAO, everything is run by software. You have a mechanism for decision making or funding, but it’s regulated by software. There is no state involvement and in the case of Bisq there is an important point of control that’s removed.
Q: Can you explain how Bisq
A: Yeah, there is a couple of ways. The first way, is it’s decentralized, obviously. That means you retain custody of your funds, and it’s peer to peer exchange, so there is no order book or order matching, it’s similar to other decentralized exchanges (DEXs) and very different than custodial exchanges. Bisq is different from all other exchanges (DEXs & Custodial) in several key ways:
- It’s software that you download and run. It’s not a website you visit to facilitate your trades, it’s an app that you run. You never give up control of your private keys.
- The whole stack is open source and verifiable. You can inspect the code, there is no central server that you connect to. You can know what is actually happening, every step of the way
- Privacy was designed into Bisq. The whole thing runs over Tor. We have no idea who our users are, or where they are.
- Governance is another key difference. Bisq is software that’s not owned by anybody, but it’s also software that’s not controlled by anybody. This is a very important point most other exchanges miss. There are pressures from the state, regulators, various other actors. To have a system in place to handle those pressures, governance plays a key role in that.
Q: Why is the DAO model so powerful for an application like Bisq?
A: Exchanges are primary focus for regulation, it’s one of the few areas where regulators can exert control in the Bitcoin space. We’ve seen examples of this just in the past few months, with Shapeshift, Ether Delta, LocalBitcoins, Cryptobridge, IDEX, these are all exchanges that either had to go under or flip to AML/KYC. They flipped not because they were technically deficient or the software didn’t work, they flipped because their governance model left them with no other choice.
That’s the heart of why the DAO model is so powerful for Bisq. Because its control is decentralized, it doesn’t have to worry about handling the pressures being applied by regulators, like these other exchanges, that had to eventually cave-in to AML/KYC.
Q: How does this DAO differ from the current open source project set up that Bisq has at the moment?
A: Right now, Bisq is set up like a typical open source project. Development is handled on Github, contributors communicate on Slack, people are contributing because they want to, it’s something they do in their free time.
The DAO will change that. It has two primary purposes, to decentralize funding, and to decentralize decision making. Decision making is largely deployed right now in Github with proposals. So, if you wanted to change something with how Bisq works, you can make a proposal and contributors and traders can participate in the strategy-making
Github is still a centralized website, but as far as the decision making process for the DAO, it’s kind of in place already. What really differentiates Bisq from other open source projects, is in funding. The DAO is going to enable funding from traders to contributors directly, without any central wallets or central points of control.
That’s not the case right now with Bisq, as all fees go to wallets owned by Bisq Arbitrators, and other contributors are not compensated at all. With the DAO, all contributors will be paid which is a pretty big difference compared to most open source projects where contributors don’t get paid at all. Not only will they be paid, but they’ll be paid without any central gatekeepers.
Q: What is the BSQ token?
A: In one word, I’d say it’s a place-holder, like an IOU. I know there are lots of misconceptions around the word token, it’s kind of become a hot-button term in the last few years. The BSQ token is something that can be used in a way that can’t be achieved with plain Bitcoin. It lets a contributor be paid for their work when the payer of the Bitcoin is not yet known. The general process goes like this:
- They contribute some work, let’s say they write an article, some code, or do an interview like this.
- They submit a compensation request for their work.
- The community reviews the compensation request and makes sure it’s a worthwhile contribution.
- The contributor is paid in BSQ.
- The contributor sells the BSQ to a trader for actual BTC.
- The trader uses the BSQ to pay the trading fees at a large discount when trading on the Bisq platform.
The key point is that this dynamic is not possible with regular Bitcoin alone. The reason is that traders aren’t around at the exact same time that a contributor needs to be paid.
For example, if at the end of the month, I put in a compensation request for 1000 BSQ, for work I’ve done, there isn’t necessarily going to be a trader there at that instant with a $1000 of BTC. So what happens is, I get BSQ as a placeholder for that value that I’ve earned, and over time, traders will buy that BSQ from me compensating me for the work I’ve done, the value I have earned in that way.
Q: How has the diehard Bitcoin Maximalist community reacted to the BSQ token?
A: It’s certainly changed. It’s definitely been a bit of drama. At first, we had maximalists that were like “What? A token?!! I can’t believe Bisq is doing this!!”
Bisq is a five-year-old project, it’s been operating for 3 years, and was in development for 2 years before that, so it’s been around. People know about it. I am going to hazard a guess, but I think most people realize Bisq has always operated in the best interests of Bitcoin and its users, so when they hear about the token, they are like “Oh my God!” and they freak out. In the last 4-5 weeks, however, I think people are realizing, how critical governance really is, for example, the exchanges I mentioned above, that had to close down or implement AML/KYC.
People are really starting to realize how critical governance really is, new models are needed. Especially with Bitcoin, where nobody controls it. It’s able to do things nothing else can and is resistant to pressure in that way.
I have seen sentiment change a lot on Twitter and Reddit where lots of Maximalists hang out. I actually posted on the Bisq Blog about it, it was a post called “The Bisq DAO for Bitcoin Maximalists.” It basically answered a lot of the objections they have. It got a really good reception, it was really well-received. Overall it’s been very encouraging.
Q: Is the Bisq DAO going to be issuing other tokens or just BSQ?
A: To be honest, we didn’t even want BSQ! The token really was the least horrible solution. It was the best way really address all the challenges we had. It’s possible to do something similar with multi-signature wallets, but they just have too many limitations for what we are trying to do. No, I don’t foresee any other tokens, ever.
Q: What is the overall response you have received, in terms of the Bisq DAO?
A: As I said, sentiment has changed a lot. People are realizing governance needs to be considered, probably first, when building an exchange. From a technical standpoint, we already know how to build exchanges. It’s largely a solved problem, we know how to write the code to make a functioning exchange.
What we don’t know how to do, is control that exchange so that it safeguards user privacy and user rights as much as possible. That is not a solved problem, it’s something we are still trying to figure out, and this is why governance is so important.
Q: How does the Bisq platform and Bisq DAO help a privacy conscious Bitcoin user to stay private?
A: It’s software that you download and run over Tor, so there is no IP addresses, no accounts, no personal info that needs to be disclosed. You just download it, install it, and start using it. There is really no way for anyone to know what you’re doing, or where you are, except for the person you’re trading with. Bisq was built to mirror Bitcoin itself. It’s probably the most aligned with Bitcoin itself, it’s a really elegant model.
Q: Does the Bisq DAO pose the same risks to users like we saw with Ethereum’s DAO, which was famously hacked?
A: That’s a good question, I honestly don’t know much about the technical side of the Ethereum DAO, but BSQ tokens are just colored Bitcoin, stored in local wallets. Hacking, at least on the user side, would need to take place at a device-level which may be kind of far-fetched.
The other big attack vector is rogue issuance, that someone may find a way to issue themselves a huge amount BSQ that they don’t deserve. Obviously, the developers need to be cautious and develop a system of checks and balances which prevents this, but anything ultimately could happen.
So, the developers have followed the philosophy that for any issuances that do take place, “code is NOT law”. This way, if things do go wrong, every effort will be made to fix it. This was a point of controversy for the Ethereum DAO, since Ethereum was meant to be a protocol. Changing the code to deal with an attack was a big deal.
The distinction here is that the Bisq DAO is not a protocol like Bitcoin is, or Ethereum was meant to be, it’s just a tool to govern human activity on the Bisq network. If there are issues (which we don’t expect), they will be dealt with accordingly.
Q: Will the DAO be able to scale with the growth of the Bisq Platform?
A: There are two parts to this. First, there is the Bisq trading network, and we have seen spikes in volume, as much as 5x volume and it was just fine. The trading was unaffected, we still have a long way to go to match the volume of some of the larger exchanges, but it’s a distributed network, so it should handle it ok. In many ways, it would be better with more volume. As the volume grows, the distributed network should become stronger.
On the DAO side, there are practical limits to the amount of scaling that can actually happen. Proposals, voting, these things happen
Q: How have the Bisq contributors reacted to the DAO?
A: I think they are quite excited, they’ll finally be able to get paid! We are counting down the days. We’re targeting a 2nd or 3rd week of April launch date. Everyone is really excited.
Q: What is the Bisq Team’s long term vision for the DAO?
A: First, we’d like to see it work well with Bisq. That’s the big first step. If it becomes successful we’d ideally like to see it become the inspiration for more responsible, transparent, and collaborative software which doesn’t betray users.
There is a lot of examples of software, operating systems or social media, where users kind of get bait-and-switched. They sign up thinking one thing, and then something else happens with their privacy and their data, it’s just not a good situation.
We’d like to see new software using this model, where development and strategy are reinforced by user feedback and payments. It’s just realigning the incentives between developers and users. Users shouldn’t have to be slaves to a development team beholden to investors. The model we proposed with the Bisq DAO just realigns those incentives to make them fairer.
It improves the contributor side as well. You contribute because you want to, there is nobody telling you you can’t contribute. Economically, it’s a very interesting concept. It’s a means for anyone, anywhere, to work at will. If you can contribute high quality work that adds value to Bisq, you’ll be paid for it. There are no additional barriers like interviews, hiring, salary, etc. It’s simple, do the work, and get paid for it. It’s a dynamic I don’t think exists anywhere else.
It’s so hands-off, that I have been a Bisq contributor for over a year, and there are people who contribute regularly every month and I have no idea who they are, where they are, etc. They do the work, add value, and they can be compensated. Even if they are people banned by banks, people governments don’t like, it doesn’t matter. If they add value to the project, they are paid for it.
Q: Are there other projects like this, or is Bisq pioneering something new?
A: There are definitely other DAOs, Dash (cryptocurrency) has a DAO which it uses to fund development, there is the MolochDAO in the Ethereum space, which is an investment allocation platform, but they are both very different. One is for developing a cryptocurrency, the other is for pooled investments, and Bisq’s DAO is to fulfill the functions of running a business. So, Bisq is really the only project I know of like this.
Q: How can someone get involved as a contributor to Bisq and the Bisq DAO?
A: It’s pretty much like any other open source project. I’d say observe the project, look at the Github, get in the Slack, see what people are talking about and where you can add value to the project. Specifically what can be done, what needs to be done, get to know some of the people in the project, start throwing your ideas out there. See if what you want to do is something other people see as valuable, and once you get some approval, just do it.
Once you do a couple of things, you’ll get the hang of how things are done. Then, if you’re interested, you can make bigger contributions. That’s my story, I started out just doing some simple documentation stuff and it snowballed into a larger role in communications and marketing.
Q: What kind of skill sets is Bisq DAO looking for? Is it only people who write code, or can you contribute in other ways?
A: We always need developers, but Bisq is a flourishing project, and we can use people from really any kind of background. So, if you’re a marketer, writer, designer, in communications, know how to increase liquidity, these are all skills which could help Bisq. I didn’t mention this before, but I have a software development background, and I don’t even do any development for Bisq.
I mainly do some writing, communications, and a little web design work. To be honest we probably need non-developers more. We have lots of developers, but not many people who are in marketing, communications, or growing liquidity. We could certainly use that kind of help.
Q: How do you think Bisq & the Bisq DAO will do in terms of competing with custodial exchange businesses?
A: I think people are recognizing the issues. It seems like every week, more bad news comes out about Coinbase, it’s been happening for years, but recently #deletecoinbase has picked up a lot of steam. People are realizing custodial exchanges are pretty much the same as traditional banks. They are blindly doing the bidding of the state, whether it’ makes any sense or not. It’s really antithetical to Bitcoin itself. We are seeing strong resistance to custodial exchanges and I think it’s only going to continue.
Q: Is the DAO going to use BSQ and trading fees to pay for advertising or other traditional business expenses like a custodial exchange would?
A: Yes, indirectly. Trading fees don’t go to any central place. We do hope that the contributors will directly contribute to those activities, like marketing, advertising or kinds of things a business would normally do. Then, they will be paid in BSQ for that work. The answer is yes, but not in the traditional capital allocation sense, seen in other businesses. The contributors will choose to do those things and then be paid for them.
Q: How do you think the DAO will hold up in the spotlight of financial regulators and regulatory oversight?
A: Very well, we hope. That’s part of the reason we have the DAO. I will say that I don’t think that using Bisq is any different than you and I meeting up to do a deal at a coffee shop. It’s just two people meeting to do a deal, you have dollars and I have Bitcoin. It’s not any different than that, except that Bisq makes it electronic and takes borders out of the equation.
I want to add that regulation serves a fine purpose. We want to keep Bisq users safe too, and that’s what regulation aims to do. We just do it through a very intentional set of incentives. We just hit 25,000 trades and there have only been 3 chargebacks in the history of the platform.
On Bisq, people maintain custody of their funds, they don’t have to provide any sensitive data to a centralized honeypot, and we have taken great care to make sure the payment methods available are safe. Smart incentives are a big part of the safeguards Bisq has put in place to fulfill the same job as regulatory oversight.
Q: Is there anything about Bisq or the Bisq DAO that we haven’t covered, that you’d like my readers to know?
A: I would just urge people to consider what we are trying to accomplish with the Bisq DAO. I know the terms DAO and token are scary to lots of Bitcoiners, but I have been contributing to the project for a year, and have yet to see Bisq do anything hostile to Bitcoin or its users, and I think many people realize that.
So, I’d urge people to take that into account. We aren’t nobodies that just popped up, we have been around Bitcoin for a while. So far, I think we’ve been doing a lot of good for the community, unfortunately, since there have been so many scams, it’s easy to dismiss what we’re doing as a scam. I also did a series of short 3-5 minute videos which explain the DAO in depth, which I’d encourage people to check those out.
This concludes my interview with Steve Jain of Bisq. I hope this article gives you a better glimpse into how Bisq is truly innovating new approaches to encourage mass adoption of Bitcoin in a secure and private way. I will be re-publishing the article I wrote for the Bisq Blog soon, so stay tuned for more Bisq coverage.
I had a great conversation with Steve Jain, and I wanted to thank him again for his thoughtful responses. He was very busy and still made time to answer my questions thoroughly and patiently.
I am now officially a Bisq DAO contributor, and it was relatively painless to get involved. I strongly encourage you to also become a contributor if you support Bisq, or use the platform. The Bisq Team is great to work with, very knowledgeable, and friendly. More importantly, they need the help. A single person can’t do everything, but everybody can do something!
I recorded the interview I did with Steve and you can watch it on the World Crypto Network.
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