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Aragon Nest proposal: DAOs and the interaction with the physical world #48

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mariapao opened this Issue Jun 11, 2018 · 19 comments

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@mariapao
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mariapao commented Jun 11, 2018

Abstract

The blockchain technology, specifically smart contracts, is giving people the possibility to create new systems to organize and regulate their activity aligning social and economic incentives. This technology enables collective autonomous systems that can regulate social and economic interactions with code-based rules without the need of central coordination points.

A concrete example is the decentralized autonomous organizations. A DAO is an organization managed by a set of rules written on smart contracts running on a blockchain. Code-based rules, used for DAO’s operations and decision-making processes, reduce costs and make coordination and cooperation among known and unknown peers, easier. These organizations are more transparent, inclusive and less hierarchical because they reduce the need of intermediaries. As their rules are automatically enforced by the underlying decentralized protocol, these organizations are also self-sufficient.

For many years, nation-states have had the monopoly of governance. But, thanks to smart contracts we are witnessing the birth of new private governance systems that are opt-in instead of coercive. The possibility of these organizations to self-regulate is crucial because these blockchain-based protocols ----powered by a peer-to-peer network of computers (nodes) located around the world with no central points of control and attachment to specific jurisdictions ---- are very difficult to regulate and control by traditional means and institutions.

Today we are starting to have the necessary tools to easily create DAOs and these organizations are becoming a reality in the short term. However, the world is not very familiar with these entities yet, they represent a paradigm shift. At first, it’s going to be a challenge for the physical and traditional organizations, institutions and jurisdictions to interact with these DAOs. There will be a lot of friction between these two worlds. But, if we want DAOs and the new private governance systems to succeed we need to be proactive. Thus, we want to start funding teams working on solutions that help us reduce the friction and allow these new systems to interact with the physical world respecting the regulatory frameworks of the different jurisdictions. We would love to see DAOs interacting with the physical world without undermining the key characteristics that make these new systems valuable.

In Aragon we envision a future in which friction doesn’t exist anymore because the current system (rule of law) makes room for the new system (rule of code) finding equilibrium. But to make this future a reality there is a lot work to do and we need your help on this!

Deliverables

To be discussed or to be proposed by the team requesting funds as it depends on the specific tools being built or the specific project.

Grant size

Funding: from $50k up to $100k in ETH, split into chunks paid out over achieved deliverables.

Success reward: up to $50k in ANT, given out when all deliverables are ready.

Application requirements

  • Proof of concept implementation or well thought-out technical design document detailing how the project will be accomplished
  • Details of the team members and time commitment
  • Estimated average burn rate for completing the deliverables
  • Legal structure to be adopted, if any
  • Willingness to open source work

Development timeline

To be discussed or to be proposed by the team requesting funds as it depends on the specific tools being built or the specific project.

@mariapao mariapao self-assigned this Jun 11, 2018

@luisivan luisivan changed the title from Aragon nest proposal: DAOs and the interaction with the physical world to Aragon Nest proposal: DAOs and the interaction with the physical world Jun 12, 2018

@proftomwbell

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proftomwbell commented Jun 22, 2018

You want "solutions that help us reduce the friction [between traditional legal persons and DAOs] and allow these new systems to interact with the physical world respecting the regulatory frameworks of the different jurisdictions." Lots of options come to mind. Would any of these suit?

  • A written analysis of the legal status of simple DAO's in various jurisdictions;
  • A test case demonstrating how to register a DAO as a legal person;
  • A test case demonstrating how to run a DAO in conformity with select jurisdictions' rules for legal entities; and/or
  • An app that at the user's option legally registers a new DAO with a traditional jurisdiction at the time of its recreation.
@mariapao

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mariapao commented Jun 25, 2018

Hi @proftomwbell nice to see you're interested on this proposal :)

A DAO is a new type of organization that land jurisdictions don't recognize yet. These DAOs will have their own rule system to incentivize good and, try to prevent, bad behaviour, as the traditional legal system does today with traditional organizations.

The goal is that these DAOs are recognize by jurisdictions but respecting their nature, i.e., if the DAOs have to register and follow the law of X or Y jurisdiction, they would have to accommodate to the land jurisdiction's box created with other types of organizations in mind. DAOs are a disruptive innovation, not an incremental one.

Helping DAOs to interact with the physical world can have several approaches. Legal and technical ones. One approach can be having a template for the creation of X or Y type of organization according to A or B jurisdiction and having the DAO interact with the physical world via that organization. We see this as a short-term temporary solution, a solution that can help people (regulators, users) get used to DAOs. The DAO in this case is going to have to accommodate to a specific land jurisdiction. We call this a temporary solution because If this is going to be the future, what is the point of having DAOs?

Regarding your bullet points, we are interested in projects that require a funding between 50k and 100k, more or less. Thus, I'm not sure if the first three bullet points are a fit for the program. It depends of what you have in mind so if you could elaborate more on those ideas would be great.

@proftomwbell

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proftomwbell commented Jun 25, 2018

Thanks for clarifying, @mariapao.

You mention the need for a template for the creation of a hybrid DAO/legal person, foreseeing that as a temporary solution. Longer run you presumably foresee a DAO capable of greater independence from traditional governments in the real world. The "Application requirements" calls for a proof-of-concept implementation.

Add it all up and perhaps you get something like this: First, a study defining the problem, offering several options, and step-by-step plans for creating a hybrid DAO/legal person for lab and field testing. Next, if Aragon finds that promising, lab and field tests of the proposed hybrid institution. Finally, again pending review, the public rollout, with continued monitoring and analysis for a specified period.

Does that sound about right?

@mariapao

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mariapao commented Jun 27, 2018

HI @proftomwbell so first step would be what we call the application to request funds. And depending of if we approve the application or not we move to the next phase: lab and field tests of the proposed hybrid institution. Also, when you say lab you mean building/developing/implementing, right?

@l-henri

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l-henri commented Jun 27, 2018

Hello,

We are a groupe 4 persons (UX designer, Front End designer, Solidity developer, Political science graduate) based in France and we have been focusing on providing solutions for public institutions based on Ethereum Smart Contracts.
We have developed a methodology, a set of smart contracts and a Dapp that allows users to build governance systems easily, and interact with them.
Our repo is https://github.com/97network/Kelsen. Our methodology is explained briefly on https://klsn.io/, and the Alpha version of our Dapp is on https://dapp.klsn.io/.

We currently mostly work on consulting projects, but given enough time and funding, here are some topics that we would love to explore:

  • Study in depth the state of legislation in France / Europe to see what a DAO can be used for in the real world, for businesses
    -- What is the state of the law today regarding share ownership?
    -- What is doable today in a legally compliant way with a Blockchain?
    -- What steps are missing in the law, that would allow more legal structure to be based on Blockchain systems?
    -- What processes need to happen in order to get these new laws passed?
    -- Who are the lawmakers / groups that need to be convinced to pass such legislation
  • Study in depth the state of legislation in France / Europe to see what a DAO can be used for in the real world, for public institutions
    -- What is the state of the law today regarding electronic voting and public consultations?
    -- What is doable today in a legally compliant way with a Blockchain?
    -- Developing solutions that are legally compliant today, to make it possible to use in the public sector
  • A concrete case: Recently the French Government passed a bill allowing for the « storing of shares for non public traded companies on a Blockchain ».
    -- What exactly are the requirements to be able to do this?
    -- What criteria are mandatory to create a legally compliant solution?
    -- How do we implement it in Ethereum?
    -- How do we make it easy for entrepreneurs to use these tools?
  • Produce template organisations / DAOs
    -- Identify what is technically required to declare, under French law:
    -> A non profit (Association loi 1901)
    -> A cooperative (coopérative d’intérêt collectif)
    -> A mutual insurance (Assurance mutualiste)
    -> A political party
    -- Model such organisations on Ethereum, using a flexible framework to make them futur proof
    -- Create easy to deploy template for the above structures

Would such initiatives fit into the grant described above?

@proftomwbell

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proftomwbell commented Jun 27, 2018

Thanks for that helpful feedback, @mariapao. Yes, the proposed lab testing would involve design, development, and implementation--but in controlled conditions and with close monitoring.

@mariapao

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mariapao commented Jul 9, 2018

@proftomwbell great, Tom. Looking forward to seeing the application :)

@mariapao

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mariapao commented Jul 9, 2018

Hi @ElBurritoPodrido. Yes, those initiatives would fit into the proposal, specially the last two bullet points. More than research, we are looking for practical solutions. For example, it would be nice to have a template to incorporate a limited liability company or a non-profit association on the ethereum blockchain according to the French legislation.

When you are referring to" the French Government passing a bill allowing for the « storing of shares for non public traded companies on a Blockchain " do you know if they are referring to public blockchains?

@l-henri

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l-henri commented Jul 10, 2018

Hello @mariapao , thank you for your answer.

Understood. Real world solutions FTW!
The bill I mentionned is the following https://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000036171908 . They mention that some specific actions can be recorded "by the means of a shared electronic recording mechanism", which might apply to both public/private blockchain. This relatively general term was introduced like this so that Blockchain(s) could be included, without favoring a specific technology.
This article ( in French) explains a bit more what the bill entails https://bitcoin.fr/publication-de-lordonnance-blockchain/

Can you please give us guidelines on how to submit the proposal? Are there past proposals that were well formatted, that we can refer to?
Where should we post / send it?

Saludos!

@mariapao

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mariapao commented Jul 11, 2018

Thanks for the info @ElBurritoPodrido

Here you can find all the info regarding instructions and guidelines for submitting a proposal and a request for funding. Please read it and feel free to ask me any questions, doubts you may have.

@stellarmagnet

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stellarmagnet commented Jul 21, 2018

Well I just noticed this proposal.

Space Decentral is going through this process at the moment, and I got the idea to converge our Governance Paper into an Articles of Association of a Swiss Verein (non-profit association). It's still a work in progress and is going under review with our legal team. The DAO's tokens will be used to pay the yearly membership fee (aka Stake). We will then be writing a no-action letter to FINMA so hopefully they:

  1. Don't classify the DAO's token as a security token (there isn't any profit share)
  2. Don't classify it as a payment token (such that it requires KYC/AML)
  3. Convince them it is an (Aragon-flavored, governance) utility token (which ideally shouldn't require KYC/AML, but this is a pipe dream)

So far to me it seems that the Swiss Verein is the best real-world model for DAOs, especially if you have an altruistic purpose because:

  1. Don't have to officially be in the commercial register
  2. Requires no money to incorporate (besides legal costs for articles, etc.)
  3. You can incorporate as soon as you have written the articles and have like signed some papers with your founding team members. EASY.

Non-profit associations have membership. The current model I am thinking of (the governance integration for which I've only thought about for 1-2 days so far) aims to eventually automatically grant membership into the Association without Board/General Assembly Approval, which is in tune with how a DAO should work. We have a two token DAO, and membership is based on activity levels (by volunteers completing tasks in the DAO's open source repository and collecting non-transferable Ethereum-based merit tokens).

Deliverables

  1. Publicize/open source our Articles of Association, and create a template version that can be more generic.
  2. Publicize/open source details our No action letter to FINMA, and the results
  3. Publicize/open source details on the pre and post incorporation process, and practicing the governance using Aragon etc.
  4. Special smart contracts for the DAO's tokens that work with Aragon for governance. This will include the crowdsale token contract for the DAO, plus a non-transferable volunteer "labor" token which is used to gauge commitment to the Association (by someones Proof-of-Commitment).
  5. Design: Product/UX enhancements for the Voting app, and new Apps Aragon would need (Such as place to announce General Assembly) for it to meet the requirements for the Swiss Civil Code (Articles 60-79) with respect to corporate governance requirements when it comes to meeting notices, etc. Also suggestions on tying DAO constructor upgrades to Articles of Association updates.

Things that will need funding

  • Legal Advisor Fees = Aragon subsidizes for one DAO, but then hopefully makes it cheaper for all similar DAOs going forward :)
  • Token Development = The token contracts this particular DAO model will use.
  • Token Audit

Let me know if you think this proposal fits with what you have in mind, and I can work on the official funding request.

@luisivan

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luisivan commented Jul 23, 2018

That would be amazing @stellarmagnet. Basically an Association powered by Aragon template anyone could use, with open source code and legal contracts

@mariapao

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mariapao commented Jul 23, 2018

@stellarmagnet! As Luis says, this is something very interesting.

But, just to clarify a bit more, the goal of this proposal is to find a solution that can be used by any DAO, so we are not looking for solutions that are built around one specific use case/model. What I'm trying to say is that, for example, we are less interested in having the crowdsale token contract. This is not an essential condition for that framework to be accepted by a specific jurisdiction.

The idea is to have teams of lawyers, policy makers and devs focused on a solution that any DAO can use. In the case of an Swiss association running on Aragon, what we are hoping to see, in the technical part, is the set of smart contracts necessary for that association to be according to the Swiss regulations, nothing more, nothing less.

@stellarmagnet

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stellarmagnet commented Jul 23, 2018

Thanks for the feedback/responses @mariapao @luisivan

The reason I mentioned the crowdsale part is because it was in Aragon's original design to have a Fundraising app. I wasn't sure if that was still in the roadmap, but I was envisioning that you may have templates of bylaws that would be preconfigured to specific fundraising/crowdsale contracts.

For example, Associations can have a Sponsor class, and this Sponsor class doesn't have to have full governance privileges. (Check out Wikimedia.ch as an example: https://www.wikimedia.ch/association/bylaws/) One may want to utilize the Sponsor class to help the DAO get going in the early phases of the Association. So having a contract that supports "pre-sales" in some compliant way would be beneficial and remove headaches, and also having a token that you can start to reward to Members of your DAO/Association before you even begin selling your tokens to the public at large (increasing the Sponsorship class).

I'm definitely curious to hear Aragon's roadmap with regard to utilization of the MiniMe token and what the plans are for the Fundraising app! The point is to make launching a DAO a seamless process for everyone, that one doesn't have to hire that many lawyers, smart contract developers, auditors to get the DAO going.

The more modular/flexible, the better. The proposal I have above can likely easily work for both a two token and one token DAO as well, it's just a matter of if the member's of the DAO feel comfortable enough for a membership fee alone being the determining factor to become a member of the association. I think there can be three versions:

  • one that uses a sybil-resistant identity system (like BrightID etc)
  • one that uses a two token system as described previously (sybil resistance here is based on the limits human beings have to complete tasks - e.g. the hours in a day a human can work.)
  • one that is purely based on a membership fee/stake (but unclear if this would meet requirements, since there needs to be some element of one person, one vote for associations)
@mariapao

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mariapao commented Jul 23, 2018

I totally agree with you @stellarmagnet in that, in general, is key to make launching a DAO a seamless process for everyone.

If you guys think that the crowdsale contract is needed in order to have a basic Swiss association running on Aragon. That's great, I imagine there is a Swiss lawyer in the team. So I encourage you to submit the RFF with a PoC and the relevant explanation and reasoning (legal and technical) behind the framework that you are choosing to build. What I was trying to clarify is that the goal of this proposal is to find solutions that can be used by DAOs regardless of their specific model.

Regarding the roadmap in terms of the utilization of the MiniMe token and the plans for the Fundraising app, @luisivan or @sohkai can explain better than me ;)

@sohkai

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sohkai commented Jul 24, 2018

@stellarmagnet

Minime

We're investigating whether or not we should move away from requiring this in our apps, but there are a number of nice things we get for free with the Minime token. Notably, staking will solve a lot of the double-vote problems and so once we have a good implementation of staking, we might begin offering alternative apps that only rely on standard ERC20 interfaces.

Fundraising

There are a lot of fundraising models out there, and each project will likely want to customize their fundraising in their own way. For that reason, it is really hard to design a generic enough fundraising app while containing complexity.

However, if there are funding models you'd like to see, we encourage you to build them within the Aragon App architecture! In the future we may also have tutorials that walk devs through a small fundraising example to show them how to begin.

@rouxel

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rouxel commented Jul 25, 2018

Good evening @mariapao I am Alexandre Rouxel co-founder of Wespr and Ryhope. I wanted to inform you that we have created a team to apply on this grant.

To be brief we will make you a proposal - probably by the end of the next week- that aims to create a new kind of PPL license - Peer Production Licence- which allows to protect contents that are governed by a Aragon-DAO and which also functions as a governance instrument for DAOs. The Pando project having shown that we can now turn all contents in DAO.

This project will be supported by the following persons (Not only)

Benjamin Jean

Benjamin Jean is a lawyer specialized in intellectual property and founder of Inno3. He specializes in intellectual property management within the framework of open models (Open Source, Open Data, Open Hardware, interoperability or more generally Open Innovation and Open Access). He is President of the Open Law Association. He is also very present in the Free Software communities, administrator of Framasoft, co-founder of Veni Vidi Libri and of the European Open source & Free Software Law Event (EOLE) conference series. » In 2016, he co-chaired the Paris Open Source Summit 2016 on the theme "Empowering Open Innovation”.

Primavera De Filippi

Primavera De Filippi is a permanent researcher at the CERSA / CNRS / Université Paris II and faculty associate at the Berkman Center for Internet & Society at Harvard Law School. She is a member of the Global Future Council on Blockchain Technologies at the World Economic Forum, and co-founder of the Internet Governance Forum’s dynamic coalitions on Network Neutrality and Blockchain Technology. In addition to her academic research, Primavera acts as a legal expert for Creative Commons and is part of the stakeholder board of the P2P Foundation.

Lionel Morel

Lionel Maurel is a lawyer and curator of libraries at the University of Paris Lumières, where he holds the position of project manager for Scientific and Technical Information. He specialises in legal issues related to the digital environment, such as intellectual property, personal data protection or public data law. His work also deals with Free Culture in its different dimensions (Open Source, Open Access, Open Data), as well as the question of the commons of knowledge. Author of the S.I.Lex blog since 2009, he is also co-founder of the SavoirsCom1 collective and member of the strategic orientation college of La Quadrature du Net.

We'll be back soon and we hope you'll be interested. We are still working on the document.

Best

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mariapao commented Jul 26, 2018

Hi @rouxel I can't wait to see the application. It sounds super interesting :)

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jtiannelli commented Jul 29, 2018

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