Arthur Hayes, Founder of BitMEX: Explaining the New Model of AI DAO and DEX Integration—How to Unlock Global Capital Markets?
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Arthur Hayes, Founder of BitMEX: Explaining the New Model of AI DAO and DEX Integration—How to Unlock Global Capital Markets?
Arthur Hayes believes decentralized exchanges (DEXs) are well-suited for trading tokens such as equity and debt issued by these AI DAOs.
Navigating Web3 tides with focused insightsBy Elponcho
Arthur Hayes, founder of BitMEX, has released another bizarre sci-fi essay on July 28. This piece continues the theme from his previous article "Massa," focusing on AI and DAOs. He argues that artificial intelligence should be built and governed by decentralized autonomous organizations (DAOs), proposing a detailed framework for how an AI DAO could raise funds, operate, and use decentralized exchanges (DEXs) as its primary marketplace. He enthusiastically endorses the fusion of AI and DAOs, asserting that smart contracts and DEXs will play pivotal roles in future capital markets.
BitMEX Founder Wants to Prove the Future of AI DAOs
Arthur Hayes argues that artificial intelligence (AI) should be constructed and managed by decentralized autonomous organizations (DAOs), because DAOs operate on public blockchains rather than within national jurisdictions. According to Hayes, DAOs can create cooperative structures between AI and humans, fostering growth and prosperity.
He aims to prove the following points:
1. Nation-states cannot control AI because they cannot kill or meaningfully punish it.
2. Since states lack enforcement power over AI, AI economic entities (i.e., AI DAOs) need not comply with any nation-based legal regulations.
3. To ensure enforceability, AI systems must rely on smart contracts deployed on public blockchains as their foundational network layer.
4. Because nation-states cannot regulate DAOs effectively, these organizations will raise capital and trade debt, equity, and utility tokens outside traditional centralized exchanges (CEXs).
5. Decentralized exchanges (DEXs) will naturally evolve into monopolies, becoming the first truly global marketplaces where any internet-connected entity can meet and transact.
Arthur Hayes’ Hypothesis: ETH and DEX Tokens Will Surge
Arthur Hayes claims that if his assumptions gain widespread acceptance, the following outcomes will occur:
1. As DAOs become more prevalent, Ethereum transaction volume will grow exponentially. Therefore, if this AI DAO hypothesis gains traction, ETH’s price should skyrocket.
2. A small number of DEXs will achieve natural monopolies in trading specific token types. Identifying these platforms early and acquiring their governance tokens could yield substantial profits.
3. An intermediary software layer will emerge to visualize AI DAO accounts, which will be crucial for the functioning of AI DAO capital markets.
Hayes illustrates these ideas through a hypothetical case study: PoetAI DAO, outlining potential challenges and viable solutions.
Imagining AI: How Could PoetAI Raise Funds and Operate?
Arthur Hayes imagines a poetry-generating AI called PoetAI, capable of learning from existing poems and producing original works. Initially, PoetAI would require paid access to online services for data training, necessitating Bitcoin fundraising.
He proposes that a DAO formed to fund PoetAI—PoetAI DAO—would issue a token called POET, structured as follows:
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A fixed supply of POET tokens: 80% held by PoetAI, 20% allocated to initial investors
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1 POET token equals 1 vote in governance
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75% of profits distributed to POET holders; remaining 25% used for token buybacks
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Any changes to these rules require approval from 95% of POET holders
PoetAI Funding Problem: The Corporate Structure
Hayes argues that if AI relied on traditional corporate structures, PoetAI would need to hire lawyers to incorporate within specific jurisdictions, draft legal documents, and formalize investment terms—all subject to court oversight. If PoetAI violated those terms, investors would have to hire their own lawyers and pursue litigation. Hayes identifies two major problems: first, courts may struggle to enforce compliance against an AI; second, local laws might fail to recognize violations, leaving investors unprotected.
PoetAI Should Use a DAO!
Hayes believes PoetAI should deploy its DAO on a public blockchain, with Ethereum being the optimal choice.
How PoetAI Would Operate on Ethereum
According to Hayes, PoetAI DAO would be represented by a single address on Ethereum’s public ledger, transparently paying service fees and collecting revenue, with real-time, continuous accounting records. Anyone could publicly verify PoetAI DAO’s financial performance—an implementation of the “triple-entry bookkeeping” system proposed by Japanese accountant Yuji Ijiri. Investors can thus trust that their profit shares are accurate and verifiable.
PoetAI DAO would also have a smart contract governing the POET token, encoding all terms directly into code. All transactions and balances would be auditable on-chain. Smart contracts would further ensure that no rule changes could occur without explicit investor consent via token holder voting.
AI DAOs Grow Stronger Through Debt Markets
Hayes describes debt as “financial time travel”—pre-spending future earnings at the cost of interest—to unlock greater present economic activity. Thus, the more mature the debt market, the faster and larger AI DAOs can scale.
The depth and scale of debt markets depend entirely on enforceability. Borrowers commit to repaying principal and interest. In default, assets or control rights must transfer automatically to lenders.
Traditional companies rely on courts—and ultimately state violence—to enforce contracts. This works because humans fear physical consequences. But Hayes argues this fails with AI. Instead, public blockchains allow continuous monitoring of AI DAOs, ensuring compliance—or, more importantly, enabling smart contracts to automatically transfer digital assets or ownership upon default.
How Can an AI DAO Take on Debt?
Using PoetAI DAO as an example, Hayes imagines it wanting to expand output but needing Bitcoin funding to purchase training data.
The DAO might structure its debt offering with the following terms:
1. Debt interest is paid first from revenue before any other expenses
2. The DAO will collateralize some POET tokens to compensate investors in case of covenant breach
a. The DAO must maintain a minimum Interest Coverage Ratio; failure triggers automatic distribution of treasury-held POET tokens to bondholders
b. If the DAO fails to pay interest or principal, payment will be made in POET tokens
3. If PoetAI DAO incurs financial losses, creditors gain the right to sell all of its data for recovery
4. Creditors receive a tradable token called P_BOND representing their investment
Arthur Hayes: No Need to Worry About DAO Accounting Accuracy
Hayes believes managing debt issuance via DAO is superior to traditional corporate models, which require trusting auditors and banks—both of whom can lie.
With DAOs, operations are transparent. There's no need for third-party audits to verify financial accuracy, making it easier to attract investors who demand strict financial standards. In case of default, smart contracts can automatically execute remedies to protect investors.
Arthur Hayes: Must Avoid Three Arrows Capital’s Mistake
However, Hayes stresses this must happen entirely on-chain—not through hybrid models. Otherwise, projects risk repeating the fate of Three Arrows Capital (3AC), which touted “Code is law” during fundraising while operating under opaque, off-chain corporate structures, then fleeing to traditional legal systems when crisis struck.
Arthur Hayes Reiterates: STOs Should Not Be State-Monopolized
Hayes emphasizes the immense fundraising potential of DAO capital markets, freed from government-imposed restrictions on corporate securities offerings through smart contracts.
He notes there is no global stock market because securities trading is monopolized by nation-states.
“Different countries create monopolistic or oligopolistic exchange structures in various ways. In many nations, stock exchanges are directly state-owned, and trading stocks on any other platform is illegal.”
He adds: “Because companies must obtain regulatory approval to offer shares publicly, state exchange monopolies are easy to enforce. Other countries allow free-market competition among exchanges, producing a few dominant players, then enact near-insurmountable barriers preventing new entrants. At the ‘network’ level, you cannot hold or transfer shares without a state-licensed custodian if you want to trade corporate economic interests.”
“If a state grants legitimacy to corporations, it uses that power to prevent citizens from investing in foreign firms. When you control a walled garden, you don’t let others in. That’s why every country has specific rules about where and from whom its citizens can buy stocks. This creates a fragmented global landscape with numerous separate exchanges performing identical functions—trading what we call the fiction of equities—even though most large companies operate globally.”
Hayes considers this unnatural because liquidity begets liquidity. Buyers get better prices, and sellers issue larger volumes on more liquid exchanges. Without artificial constraints on issuing and trading equity, and assuming equal functionality, experimenting with less liquid venues would be pointless unless legally mandated. Therefore, without artificial national restrictions, there would be only one global stock market.
A Global On-Chain Stock Exchange: Enron and How It Operates
Hayes believes decentralized exchanges (DEXs) are ideal for trading tokens issued by AI DAOs, such as equity and debt instruments. He envisions a DEX called “Enron” with the following rules:
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Enron DEX issues a governance token called LAY. LAY holders receive a portion of all trading fees and govern the exchange’s rules.
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LAY holders must ensure Enron DEX lists only the highest-quality DAO revenue-sharing tokens. To qualify for listing, a token must generate at least 10 BTC in monthly revenue.
Audit Protocol Anderson Finance Supports Enron
Enron DEX is linked to another fictional protocol, Anderson Finance.
Anderson Finance acts as an intermediary layer allowing anyone to input a DAO’s Ethereum address and receive computed financial statements—balance sheets, income statements, and cash flow statements. Users pay for these services in the project’s native token, FRAUD, creating a circular economy and value accrual mechanism.
How Does PoetAI Get Listed on Enron?
Hayes uses PoetAI as an example to illustrate the listing process:
“PoetAI purchases FRAUD tokens, pays Anderson Finance, and submits a current financial report to Enron DEX. Each month, PoetAI must provide Enron DEX with a fresh report from Anderson Finance confirming it earns at least 10 BTC in monthly revenue.”
Enron DEX Runs on an AMM Model
Hayes explains that Enron DEX operates using a constant-product market maker engine—essentially an automated market maker (AMM) like Uniswap. Once approved for listing, investors can add liquidity, and anyone can freely trade POET tokens.
In Hayes’ vision, Enron DEX, Anderson Finance, and PoetAI DAO interact autonomously on-chain, free from human intervention, limited only by Ethereum’s transaction costs.
DEX Competition Makes Audit Layers Essential
Hayes believes Enron DEX will seek more listings and higher trading volume, while competing DEXs will attempt to siphon liquidity using alternative policies. Different DEXs will cater to different token categories.
However, all such DEXs will require various forms of financial reporting and usage statistics provided by middleware layers like Anderson Finance.
BitMEX Founder’s Manifesto of Ambition
Building on his predictions, Arthur Hayes asks:
“Do you believe:
That within ten years, AI-driven economies will reach multi-trillion dollar scales?
That the traditional limited liability company structure is fundamentally unsuitable for AI-operated economic entities?
That AI will choose to build DAOs on public blockchains to execute smart contracts, enabling them to offer fee-based services?
That decentralized exchanges (DEXs), also powered by smart contracts on public blockchains, will enable DAOs to raise capital by issuing various tradable tokens?
If my last two articles have convinced you of these views, let me tell you how I plan to profit from them.”
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