TIP-042 Proposal: Protecting Contributors

Given the recent regulatory scrutiny regarding DAO contributors that has begun to establish a precedent whereby DAO contributors may in some cases be held jointly and severally liable for the actions of the DAO in the United States, I’m concerned that our contributors may also be deterred from participating in the DAO formally if steps are not taken to mitigate their liability.

The way our guild’s function is akin to “service providers to a DAO”, but without the liability protections afforded to US-based entities and without the ability to interface with meat-space organizations (for insurance, useful web2 products, etc.).

Today, our guilds are elected. The unfortunate reality of the election methodology is that it limits the DAO to a self-selection-bias, valuing popularity over productivity. I propose that we switch to a capitalist approach for functional roles. In order to accomplish this transition, factions who work well together would need to (a) establish entities or (b) remain entity-less and (c) apply for either special purpose roles (temporary grants) or general purpose (term-based grants). These contracts would require the submission of budget proposals, responsibilities, goals/priorities, and privileges.

For these entities to operate, the DAO would also need to have a proxy entity to represent it and to sign agreements on behalf of the DAO. Historically, there are several models that have been used for this purpose. Offshore non-for-profit foundations (i.e. Cayman, BVI, etc.) tend to be the norm.

However, since I am not a lawyer, I have spent the past month speaking with firms to determine whether they would be able to consult on a thorough review of the model I am proposing. I propose that we allocate 10,000 DAI as a retainer to conduct a review of the optimal one-to-multiple entity model for Threshold DAO. Specifically, a top level governance entity in contract with several service provider organizations.

For this consultation, I propose that we engage Campbell Teague (https://campbellteague.com/). I have known and worked with this team for over a year and I consider them to be extremely competent with matters relating and circuitous to DAOs. The team is part of LexDAO (https://www.lexdao.coop/) and Jordan Teague, a cofounder and partner of the group, wrote the smart contracts for KaliDAO (GitHub - lexDAO/Kali: Optimized DAC Protocol).

Furthermore, while working with this team, they’ve proven to be fair and prudent with their pricing.

I invited select elected contributors to the community to speak with and vet this firm as well. I will let these contributors share if they support this proposal independently.

While I will not verify this claim publicly, I believe it is worth stating explicitly that I do not have financial ties to Campbell & Teague, Lexdao or Kalidao, beyond being a client of the foremost.

This post is motivated by several active contributors who have raised concerns about their liability to myself personally.

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Thank you Lake for taking the time to consult, research alternatives and putting up this proposal which I fully support.
We need to move forward with this as soon as possible as I expressed in my response in John’s proposal as well (link).

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Strong support from my side as well. I think it’s key to get council, clarity and a plan forward.

I have 0 experience in this field and with firms and trust the judgement of you and the others vetting in this.

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Has Campbell Teague indicated that the review fees are expected to fall within the 10,000 DAI retainer allocation?

I understand the proposed scope for reviewing the potential DAO structure but can you clarify what they are expected to review on the service provider side? That surely varies on a case-by-case basis according to the specific jurisdiction a contributor is operating in, but ultimately boils down to incorporating in a limited liability structure if desired and as appropriate. Relatedly, if the DAO is engaging a firm for review, is that firm even able to provide legal counsel/guidance to unspecified third party service providers that are not the firm’s client?

Lastly, is the DAO paying 10,000 DAI for a law firm to come back with a standard answer of create a foundation in Cayman/BVI/etc.? (If the DAO desires some written legal opinion on the topic, perhaps that is fine). Or is there some differentiated advice or guidance hoped for as a result of this review?

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Thank you for proactively researching this, @LakeLaogai, and proposing we move forward quickly to establish some form of legal entity that will both offer protection to contributors, as well as our products and IP, and also allow us to determine which jurisdiction(s) we need to review for tax and compliance obligations.

This is exactly the kind of thing I’ve suggested we need more of, and urgently.*

I not only share your concerns with contributing to an unregistered partnership, I have found in the course of receiving feedback on my proposal for a marketing role that this concern is not only widespread, we’re already losing committee members and other contributors are not comfortable contributing as fully as they’d like to.

I echo @Mr_T’s questions regarding what we can expect as the outcome for $10k and suggest an ad hoc call to gather additional questions and feedback, as well as sharing resources for those who want to read more about these issues.

So I strongly support this aspect of the proposal and would like to help coordinate on it.

I believe that the other area you articulate related to “I propose that we switch to a capitalist approach for functional roles” is very worthy of discussion and consideration but is a separate idea and needs to be fleshed out into an actual proposal.

I would add that part of the rationale for the guild structure was move decision making, including budget allocation, closer to the expertise and activity taking place (decentralization). I would oppose having every budget proposal reviewed by the entire DAO, as this is likely to prove not only inefficient but unworkable. There has been way too little discussion on certain major issues and too few people contributing to these forum posts; having a vote (or even proposal) for every spend category would mean at best fatigue and at worst people not contributing - or just contributing occasionally and defaulting to the opinion of one person they trust, rather than trusting a guild/committee who has grown from the community and been elected to a term, with accountability measures (albeit ones we need to improve on).

I suggest we discuss DAO structure on an upcoming Community or Contributors’ call. We will benefit from real-time discussion, especially if we can get better attendance than we typically do.


* From one of my responses to a question on my proposal:

  1. Threshold DAO is not only not set up for hiring people, we have no resource strategy articulated or broad discussion beyond specific proposals

  2. While it’s healthy to have a range of views on what areas we should invest in and how much, we’re not having the meta discussion required to move toward a resource allocation strategy

  3. If the longest standing and most successful DAOs are having operational challenges, our status quo will become a major impediment

  4. Some contributors and potential contributors are holding back out of concern over our lack of legal entity and the Ooki DAO suit

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No - I have not heard back from CT. To be transparent, I have worked with several lawyers in the past and have come to one conclusion:
Lawyers will do as much work as you pay them for and the work / review will never been complete. If we want a $1000 review, we can get it. If we want a $5000 review, we can get it. If we want a $100,000 review we can get it. It’s just a reflection of how much time the lawyers will spend researching edge cases.

$10k is just a proposal. I am comfortable with any amount at or north of $5,000.

The idea would to have them come back with a defensible argument that satisfies DAO contributors. We would ask for a framework, evidence and case law to support the conclusion.

Also, if anyone has another law firm in mind, I would be very open to considering anyone that has strong experience in this space.

Would love to hear more. Perhaps in another forum post?

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