DAO Constitution & Improvement Proposal Standard

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.

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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.

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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!

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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.

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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:

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Who are the key individuals?

Thanks for the comments and insight Birdman! I would argue again that any major changes to the community should happen in future improvement proposals. I don’t believe its fair or say to introduce large changes before the current state of the DAO has been established. With that in mind, we must vote in the current version of the constitution before introducing legal innovations. Looking forward to all the future innovations to come!!

I asked several people who had a hand in crafting previous season specs. Few of them listed here: https://www.notion.so/bankless/GSE-Initiative-f69b2a80dd8749a7bc77269f6739aef3?v=a7ae662f63784749aa84ff9cf1d1a20d&p=53754bbfa3a24d7f9f444586640640f1

See comments above. I don’t believe this is the context to discuss to execute on introducing new legal constructs. Would be awesome to see that fleshed out by a separate working group and crafted into an improvement proposal tho! Really happy to see so many smart and passionate people recognizing the need tho.

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The conversation continues here:

Please everyone who voted here take another look and re-vote on current readiness given all the changes we have made.

@0xJustice I read up on dynamic NFT’s on LinkedIn today - I will fish out the link when I can and ping you it

It is a great work, but I am not sure the poll makes sense. Can we vote on one topic at a time? There is a lot of information in the constitution, not a simple yes or no can represent my opinion. For instance, can we vote for the vision/mission/values first? After reached consensus then move to the next step. The document can be a good reference when we vote for all constitution issues, but not to vote it directly.

left some additional comments @0xJustice

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If this community was just being formed, I would be more open to your suggestion, but it is over a year old with documented positions on all the issues addressed in the doc. I don’t believe now is the time to start at square one. I think the time is to document what we have and then improve upon it with greater rigor. bDAO Strong!! :japanese_ogre:

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Understood you want to consolidate the progress and then move forward, which is exactly the reason why I against the idea, as it will reinforce the path dependence and make it hard to do any major changes. As bDAO and all DAOs are still in experimental stage, it is risky to lock up the direction too early. My suggestion above is about looking back to where we started, and do it again with the experience. It is slow, but higher possibility to do it right. Anyway, I could be totally wrong, wish you and bDAO good luck.

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The proposal is attempting to document the current rules as they stand. By putting them in one place with a change process, this could make it easier to experiment quickly, couldn’t it?

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I understood the point and appreciated the work. What I am trying to say is that it may lead to the different direction despite the good intention. It is a good approach if we know what is right/best practice, but not for DAOs as no one knows what is right yet. So keep it flexible and ability to change fundamentally is critical. Bankless DAO 2.0 could be totally different to Bankless DAO 1.0, if we want it last. It is very hard to restructure an organisation as the path dependence and a very detailed constitution like this will make it harder. Not sure I made myself clear as it is quite complicated and need to see it from a systematic point of view. I can make a detailed step by step explanation about the reasons and possible solutions if you want, but I am not sure it helps as it is more about life experiences.

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I can’t support the supposition that we should be ambiguous and undefined in our structure and prescribed processes because it will be harder to change them in the future. Definite and clear language is the starting point for a rigorous discussion around change. The very fact that it took so long to get a consensus on our current community working agreement (OS) is proof of that. This all changes going forward because we will be discussing concrete changes to this document. Ex. Section 2, paragraph 3.

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I agree with the single source, and if it’s not already in the plans: A corresponding single source for New Members as a Step by Step Guide to leveling up & contributing.

It would be amazing if there was a way to “Bookmark” my place in the Bankless Journey through Discord after each visit, Quest or To Do. (Maybe like an energy bar from video games)

The BEST way to do this would be a single UX/UI with links branching out to all of the quests (and
connecting back to discord for proper denotation & access) so that New members feel on track and can continue, especially the ones like myself that are excited to contribute but got recycled along the way.

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