Music DAO Deep Dives, Pt. 4: Phlote’s “open-startup” approach to music curation
This breakdown is part of an ongoing, members-only interview series focused on artist and label DAOs, as part of Season 1.5 of our ongoing collaborative research on music and Web3. The goal with this project is to make collective sense of the emerging, fast-moving ecosystem of music DAOs — not only giving structure to the current landscape and future possibility space for music DAOs from the perspectives of function, tech tooling and organizational design, but also identifying critical needs in the landscape that are still going unaddressed.
All interviews in these series are conducted and written by members of the Water & Music community, and break down a music DAO’s approach to community design and onboarding, tech tooling, governance, treasury management and more. Core contributors lead weekly, members-only research calls every Wednesday in our private Discord server to dive deeper into takeaways from these interviews.
Phlote is on a mission to create the most exciting music company on the internet, with a focus on using tokenomics and DAO infrastructure to redesign music curation, discovery and distribution.
For this project, we interviewed the DAO’s founder, AJ Washington.
Main takeaways:
- Phlote is a Black-founded “open startup” born as a DAO, where anyone can contribute and earn equity in the form of shares of the DAO’s eponymous token, $PHLOTE.
- On-chain governance of the DAO will be focused on decisions specific to the curation of high-quality music.
- Phlote’s primary challenge is communicating what they are in a succinct way that those who are less familiar with Web3 can understand.
- Onboarding and educating members to Web3 is a major priority for the DAO, with more than 600 of their members already having crypto wallets.
- They are working to create a “Phlote OS” which will be critical to coordinating community contributions.
AJ defines a DAO as an open startup – namely, a startup where anyone can contribute work and earn income without the need to go through a traditional application or hiring process with interviews, references and other steps. At its core, this kind of “open startup” is a community working collectively and dynamically towards a focused objective, with Web3 infrastructure adding value by providing the ability to track and reward members who contribute to the mission in a more distributed, decentralized way.
A former US Naval Officer and investment banking executive, AJ became excited about the potential for Web3 music when his business partner sent him a video on bonding curves (or how the price of a token is determined by its supply). From there, he began the deep dive into token curated registries (TCRs), and then into DAOs. “A DAO is magnetic,” says AJ. “It’s a way to attract a community around an idea.”
AJ’s DAO, Phlote, is a ”curation DAO” focused on decentralizing music curation, such that influence lies more explicitly in the hands of community members than in those of traditional behind-the-scenes industry gatekeepers. According to AJ, this is an “epic challenge” that requires a coordinated effort by a global community of music lovers to accomplish. The more open format of a DAO could help with organizing and rewarding the community properly as it scales.
On community:
Phlote, which was a member of Cohort 3 of the Seed Club accelerator for DAOs (disclaimer — so was Water & Music), believes it is critical to bring people up to speed on Web3 and make everyone as smart as the smartest person in the room. Hence, onboarding and education are among the top focuses for the DAO. They’re focusing primarily on onboarding artists, producers and DJs to create a community of music curators.
They have collected approximately 600 wallets through the form on their website. Currently, there are over 100 active contributors to Phlote tasks, which include driving curatorial decisions during “Live Vote Shows” on Twitter Spaces as well as helping artists with visual/animation work. Live artist activations have proven to be great onboarding events, such as a recent live event with the music/photography duo FUTRxLGND at the gaming lounge OS NYC, which resulted in about 75 new wallets created.
On governance:
Phlote’s governance structure is fairly lean. They are limiting decentralized decision-making to curation — using “is the song good or not?” as the single question the community needs to answer.
Phlote has used a voting model of one vote per token holder (a.k.a. “one person, one vote”), to give active contributors a voice in curating music while preventing whales from having outsized governance control within the community. Each “season,” Phlote will launch a new token to allow what AJ calls “resetting the clock” on quantifying each member’s recent involvement in the DAO.
There are also token rewards and bonuses when curators introduce winning songs into the community; curators earn 10 tokens for submitting music, and 70 additional tokens for submitting the song that wins the weekly vote. For now, says AJ, Phlote is “tracking and delivering these rewards manually until we are ready to make the incentive structure more permanent” and automated with a custom smart contract, and until there is a clear framework for the community itself to approve the rewards. They are also considering a concept of a tax where the tokens move from less active members to more active ones over time.
On technology:
As opposed to having challenges with Web3 technology, Phlote’s biggest pain points are in communication and coordination within the wider DAO.
On the communication front, AJ has struggled to find the best way to answer “What is Phlote?” in a simple way. A DAO can be so many things, in terms of what it does and how it’s used, and a succinct answer can change depending on who is asking the question.
Finding the best way to elevate latent talent within the community has also been a persistent challenge. Working to touch every single member of the Discord community and provide a pathway for them to use their expertise and talent to contribute to the DAO’s mission is an ongoing effort that requires a focused approach.
In this context, “talent” can be defined as music artists, producers, visual artists and broader contributors to the community. When it comes to organizing the members of the DAO, AJ says the goal is to define three things: The roles, the rules and the rewards for contributing. The more clarity given for these three items, the easier it is for new members to “get to work.” As with many DAOs, finding developers has been a particularly pressing challenge that has prevented Phlote from starting many ideas that their core team is excited to execute on.
A top priority on their roadmap is the development of what AJ calls “Phlote OS” which, as the name implies, is the foundational operating system for the DAO’s curation, voting, communication and more. While Phlote OS is in the works, the tech tools the DAO uses are Discord, Collab.Land, Gather and social audio applications such as Clubhouse and Twitter Spaces. They’ve also looked into using Snapshot for governance, but haven’t had a use for it yet.
As far as business structure is concerned, a DAO doesn’t provide protections to limit liability which is important in music since copyright law can create enormous complexities around litigious behavior. Phlote was also set up as an LLC incorporated in Delaware to mitigate some of these risks.
On treasury management:
Phlote intends to generate funds for their treasury by selling Founding Partner NFTs on an invite-only basis (minted on both xDai and Ethereum), and have used those funds as well as capital committed by the founding team to bootstrap the organization. Up until now, the founders of Phlote have been funding it themselves.
The treasury also currently holds 10 million Phlote tokens on Ethereum (which will serve as the DAO’s main governance token moving forward) and 100 million Polygon tokens (which will be distributed for airdrops and participatory rewards). Both of these token pools were minted on Coinvise and will start distributing in the near future.
They have plans to raise a venture-style Phlote Fund in order to be more nimble in the future. AJ is unsure if traditional venture capital works in Web3, and is more interested in aligning with strategic investors (including other DAOs) instead than pure capital providers. The DAO would first raise capital in a “Party Round” for friends, family and community members who understand Phlote’s vision and would like to participate as financial partners, before bringing in more “limited partners” from outside. Key uses for the fund include:
- Building the Phlote OS
- Launching an IRL activation space, starting in Atlanta
- Funding the full-time team
Phlote is also constantly thinking about DAO-to-DAO partnerships as a way to form strategic networks, especially within music. They love Seed Club’s model for their own token, $CLUB, which was allocated to several stakeholders around the accelerator — from previous cohort participants to core program contributors, supporters and mentors — such that the rising tide of Seed Club raises many different boats in its wider ecosystem. “We see a vision of building a Web3 music community that is interoperable … thriving through mutual support,” says AJ.
This mentality parallels those of many other music DAOs we’ve interviewed for this series — from Sone’s emphasis on openness and interoperability in their development of public goods, to Mudd DAO’s ambition to encourage co-creation by licensing its generative tech to other artists and even to other DAOs. Just like in business at large, the potential for DAOs in the music industry seems to coalesce around redesigning traditionally siloed, opaque gatekeeping systems — say, curation — into more dynamic, open networks.