DAO Constitution & Improvement Proposal Standard

DAO Constitution & Improvement Proposal Standard [bDIP-0]
Draft Authors: 0xJustice
Working Group: GSE Team

SUMMARY

Introduce a canonical consolidation and crystalization of our org structure and governance processes via the BanklessDAO Constitution & Community Handbook.

Introduce a change management process via the BanklessDAO Improvement Proposal (bDIP) template designed specifically for making changes to the above constitution.

BACKGROUND

Our current org structure and governance processes are spread across Notion, Forum posts, Snapshot, and community member institutional knowledge. This documentation is not easily accessible, internally consistent, and is increasingly lost when experienced members leave the DAO. Without a readily agreed-upon and accessible standard, macro changes to our community architecture are impossible.

“Whew, trying to keep up with DAO governance is becoming a part-time job. This is a problem in itself: we need a streamlined & digestible system to prevent voter apathy.” - Tetranome, Feb 5

A governance system that no one understands or that is not succinctly documented is the same as no governance system at all.

SPECIFICATION

The BanklessDAO Constitution & Community Handbook changes this. It represents a single source of truth compiling previous disparate governance sources. This document aims to be the bible and a crystalization of how we are structured and how decisions are made.

We propose a new bDIP template for making changes to this constitution. It’s a fork of the existing project proposal template but specifically oriented towards governance and DAO-wide changes.

EXPECTED IMPACT

Both of these ideas are simple concepts with far-reaching implications. By introducing them we anticipate dramatic improvements in precise communication and open discussion. This is the foundation for recursive self-improvement and a small step in the direction of a more rigorous on-chain governance. If we can succinctly describe our function then we can code it.

We also believe this change will materially impact the quality of onboarding as prospective members will be able to ingest the full scope of the DAOs org and ops in one sitting. Similar to the developer experience on dev tooling, this contributor experience is critical to the DAO’s long and short-term success.

Lastly, we feel this could be a boon in the form of advertising for the DAO. Very few other communities have produced such a document and the ones that have been met with resounding endorsement even when the produced document wasn’t that great. We can do better and make a huge splash in the process.

NEXT STEPS

Assuming the community endorses this vision and the beta version of the handbook the next steps would be:

  1. Community Call to discuss the features of this proposal.
  2. Snapshot Vote (this would effectively be bDIP-0)
  3. Create a GitHub repo under the DAO org and post the constitution and governance handbook as the first commit.
  4. Create a subdomain under the main website domain to host the live version of the handbook.

All of the above is a foundation that must be in place in order for more impactful and cross-cutting changes to be proposed to the community. The next step for the GSE team is to flesh out existing bDIPs drafts in order to present them to working groups and then to the greater community for consideration over the course of the next 6 weeks so we can start what would be the next season on an improved governance foundation.

WORKING GROUP BACKGROUND

This initiative has been one of the first undertaken by the Governance Solution Engineer team. We have consolidated and condensed existing documentation to the fundamental operative features and facts to the best of our ability. We advertised an open invitation to the community for feedback and, lastly, asked key individuals to review and expand on the present work.

POLL 1 - Vision

Does this direction and vision seem like the right direction for the DAO?

  • Yes - We should do this.
  • No - This is the wrong direction.

0 voters

POLL 2 - Readiness

Can we adopt the current Constitution (v0.1.0) and bDIP template as it stands now? (June 14)

  • 1 - Ready enough
  • 2 - Almost ready
  • 3 - Not ready

0 voters

2 Likes

This is awesome. Way to go GSE!

I voted that the Constitution needs more work.

My question is who owns a project and how is project ownership defined?

Currently, many projects require credit cards on file. Individual members are using their credit cards to support these projects.

Does that mean the projects are owned by the members or by the DAO? Is it on a project by project basis? Should this be explicitly defined?

If the projects are owned by the DAO, and the DAO benefits monetarily from the success of the projects, shouldn’t the DAO take on the liabilities associated as well?

1 Like

Very good draft. It seems to fairly represent the current state of the DAO governance.
Perhaps I would add some indications about how to modify the Consitution.

2 Likes

This is a great question and one not answered by our current governance system. The GSE group could have shot through a bunch of proposals but that would have invariably led to confusion and controversy. This first step establishes a baseline for agreement and a process for making those changes we want to see. I’m eager to get into the improvements but this needs to be set as a basis first.

3 Likes

Thank you!! Once we can get an agreement that this is an accurate state of current governance, we can begin to share improvement proposals. I’m very much looking forward to that.

Awesome. Here’s a potential idea that may be added to the roadmap.

mint the constitution as an NFT
This NFT should be able to be updated
New improvement proposals will then be added once the community approves
holders can then refresh to get the updated constitution.
folks can carry it anywhere with them in their wallets.

3 Likes

gm! First off, I commend you for your work and am excited to see something on the forum from the GSEs. I’m supportive of the scope of the mission and stoked to see the team we have working on these fundamental issues. The ‘Constitution’ and ‘bDIPs’ are great ideas.

A few comments: although I recognize the need for expediency, I think the latter poll is premature in so far as these founding documents are currently open for comments. Consensus on the direction and vision is good, but the poll on the sufficiency of the initial operative documents should wait until comments have been incorporated. I’d also kindly ask for binary poll options going forward, as the two ‘yes’ options were a bit confusing.

Thank you GSEs!

4 Likes

Good point. This is an issue for Bankless Loans at the moment. We need a credit card and don’t want to use a personal one, especially because this is a financial product. The revenue is for the DAO, so we feel that the DAO has to take care of a legal wrapper. There should also be a procedure in place in case there would be a claim/lawsuit from a user. We will be talking to the legal guild about this, but it’s certainly something that should be specified in the DAO Constitution. Good initiative !

1 Like

Wonderful work. This handbook was much needed. Other than the high level problems such as legal wrappers, Liability, and project definitions. ect. I feel this proposal is a perfect baseline for us to build upon.

1 Like

Thanks for the feedback!

Are you saying to add that in the constitution itself? If so, the idea is that changes happen to it using that bDIP template. I tried to make this clear in the preamble but t may not be as clear as it needs to be. Just like a project uses the project funding request template to ask for money, a request to the constitution is made using the bDIP template. If it succeeds in making it through the governance process then the change is made.

Thank you and that’s the most we can hope for right now. We need this baseline in order to build out more complex processes and structures.

Very interesting idea. It sounds cool but I personally don’t know how this would work given the state of NFTs. Cant fit a lot of text and not fully developed dynamic properties. I would need to learn more before commenting further.

Great comment and I understand where you are coming from. It has become a bit of a chicken and egg problem for us. We created the draft and invited the DAO to review and almost no one did. So instead we asked a half dozen group of core DAO contributors to edit it. They did that. So now we need enough eyeballs on it to help us judge how close we are to the prize. The hope is that through this post and a community call we can get enough interest in completing it to actually do so.

Hey Katarina, I sympathize with the Bankless Loans team and think that it is unreasonable to take on such great risk when all the proceeds go directly to the DAO.

I agree that I would like legal entity to be laid out in the constitution or decided before the ratification of the constitution.

In my opinion, the DAO’s legal entity decision will determine the scope and manner of operations.

I also think that it is important for members to understand who owns what when it comes to projects. I am pretty positive that feelings range from the DAO owns all projects and their IP to the DAO owns no projects and their IP.

My feeling is that since the DAO has no legal entity, it cannot own anything that is off-chain. It has no legal recourse or property rights.

My understanding is that, the choice of entity also affects individual’s legal liability for contributing - a lawyer can correct me if I am wrong. The choice of entityless provides little limited liability protection.

I believe that ownership and legal liability should be explicit.

Personally, I am a pragmatist and would like to see a legal structure.

I think that the DAO should have a well defined legal entity that offers limited liability protection to members and allows the DAO to take legal ownership of assets including projects and businesses.

I would like to bring attention to this piece from A16Z’s DAO Legal Framework article part-2 page 18-19 linked below.

Question 2: Does your DAO need to consider utilizing a legal entity structure?
Explanation of Questions 2:

Assuming that a project should operate as a DAO, then the threshold question in determining which legal entity structure may be most appropriate for a specific DAO is whether a legal entity should be utilized at all. 

What appears to be a straightforward question quickly becomes complicated depending on the facts and circumstances of the DAO in question. For instance, many blockchain networks and smart contract protocols function free of human control and physical location, do not produce income and do not provide ownership rights to users. Rather, these technologies simply provide functionality and user connectivity analogous to protocols like HTML and SMTP, and accordingly, are simply the execution of computer code providing a foundation upon which operations and functionality can be built. In such cases, a legal entity structure should not be required.

The historical distinction between human creators and the execution of computer code has led many leading voices within the space to develop philosophical opposition to the use of legal entity structures by DAOs. This perspective is founded on a belief that the adoption of a legal entity structure is counter to the idea that DAOs should exist solely in the virtual world, without borders and without being subject to government control or censorship. Implicit in this reasoning is a narrowly construed definition of a DAO where the autonomy of the process is the primary characteristic and decentralization is not representative of member voting, but rather the underlying trustless, permissionless and verifiable ecosystem provided by decentralized blockchains and smart contract protocols.

However, the above description of DAOs as nothing more than consensus mechanisms built on top of software is not reflective of the evolving nature of many DAOs, which are often still developing and taking on new roles and forms. As outlined in Part I, the introduction of a treasury as a store of governance tokens controlled by the community, real-word interactions, production of income,
ownership of assets, employment of persons and ownership of IP have resulted in organizational activities that may require entity structures to provide legal existence, limit liability and meet taxation obligations. Whether or not this broader activity rises to the level of being a DAO when defined narrowly is irrelevant to the reality that the utilization of blockchain technology providing member decision-making through the mechanizations of governance protocols has raised legal, operational and
taxation questions that must be addressed under the current laws. Although there is no perfect legal entity structure available for most DAOs and the complexities of international tax and regulatory compliance are exceedingly high, DAOs must rise to this challenge in order to mitigate the risk to their
members

Here are links to three articles on DAO legal structure. As of now, the Bankless DAO has made the choice of being an entityless organization. Like any decision, there are pros and cons. I hope that the DAO membership can educate themselves on this choice.

1 Like

This is really interesting. One thing I’ve been thinking of is otoco.io’s format of incorporation: they provide a Master LLC–a Delaware Corp–through which they distribute sub-LLC’s on-chain, with all the necessary details in the case those sub-LLCs want to operate off-chain. The sub-LLCs operate entirely independently of the Master LLC, which is completely free of taking on liability of the sub-LLCs. The whole concept is interesting. I wonder if something like this would work to the benefit of bDAO–bDAO setting up a primary LLC under which projects and guilds can incorporate on-chain as sub-LLCs.

1 Like

I appreciate all of the work that went in to creating this document and the drive to move forward with codifying the base operations of our organization. I think the constitution needs more work before we ratify it; I’ve left a series of comments on it ranging from suggestions to basic editing.

Thank you for your efforts, GSEs!

1 Like

I would like to see that the Constitution provide a premise as to the legal exposure that contributors should expect as a member of Bankless DAO. What support should contributors expect from Bankless DAO in the event that Bankless DAO was targeted by a lawsuit? We are being dishonest with ourselves to not recognize that risk in the uncertainty of the current regulatory environment. Public good projects such as Bankless Loans whose revenue goes completely to Bankless DAO are unable to launch due to this uncertainty. The time for a base legal foundation is now not later.

Bearing in mind the risk factors involved in launching projects beneficial to the DAO without any legal backing and the fact that no one will be willing to get involved in a project that could become a liability to them. I strongly agree with @jonvaljonathan on the need to procure a legal entity for the DAO.

You giys are doing great. All the best and full support :+1:

1 Like

Who are the key individuals?