Request for budget to set up the legal entity for Ren 2.0

Requests For Comment | RFC
1

Name: Request for budget to set up the legal entity for Ren 2.0
Category: Governance, funding
Status: Draft
Scope: Allocate budget from CEF to fund the set up of the legal entity to manage treasury

Overview and Details

RIP-000-018 Ren 2.0 funding and Ren Foundation (Snapshot) has concluded with 94.88% of the votes in favor.

Results and recommended next steps can be found here (RIP-000-018: Ren 2.0 funding and Ren Foundation - #32 by MaxRoszko).

In summary, 1) about 180M new tokens will be printed and allocated to a treasury to support the growth and development of the Ren Ecosystem and, 2) a legal entity shall be created to be custodian of the treasury and manage the grant program.

Funds only can be allocated to a treasury in a compliance way through a non-profit legal entity. RenLabs can only receive funds throughout a legal entity.

Ren 2.0 is still in development and RenLabs ran out of funds after the debacle of FTX/Alameda. More information can be found on this link (Moving on from Alameda. Early last year, Alameda acquired Ren… | by Ren Community | Ren Protocol | Medium).

The importance of a legal entity was explained already by @Susruth:

The main reason for a foundation to exist is that without a legal real world entity everyone who is contributing to or governing Ren would be legally liable to things that are not under any one person’s control. Ideally we could create a legal entity that can legally be controlled by the DAO, and all the DAO participants have limited liability similar to the equity holders of a company. The idea of the foundation would be to get as close to this ideal as possible and protect everyone involved. (source)

Considering the legal implications of printing tokens and its allocation, the creation of the legal entity (describing by Susruth as Foundation) that can act on behalf of RenDAO in a legally compliant manner is imperative.

Darknode Operators would have no direct ownership relationship with this entity, but will be able to instruct actions through the vote. The legal entity will provide a framework to safely allocate funds and:

  • Protect token holders against liability as explain above,
  • Provide tax benefits to treasury as well as more clarity on taxation to token holders,
  • Be able to interact with real world entities (ex. create accounts in banks, sign agreements, etc).

There are two options being evaluated:

  • A non-profit foundation, that would most likely be located in Swiss or Cayman Island. Ren has estimated a budget of 100KUS$ would be neccessary to set the Swiss Foundation.
  • A Special Purpose Trust. dXdY set already a Guernsey Purpose Special Trust that is very well documented and could be a good baseline to start with. This option is faster and more cost effective.

The following links provides, what I believe, a good understanding on the 2 options:

(https://daos.paradigm.xyz/)
(What I Wish I Knew Before Talking to Lawyers about DAOs — 0x9548…2f61)
(Legal Framework for Non-U.S. Trusts in DAOs | dYdX Foundation)
(https://twitter.com/boironattorney/status/1503778549194366976)

All described on this RFC needs legal review to move forward. Lawyers are being contacted to inicial conversations and we need to allocate a budget to continue our work. We expect to have a better estimated budget and a schedule after complete legal review by professionals and decide the path forward (either a foundation or a purpose trust)

This RFC has the only intention to request to guarantee 100KUS$ from the community fund (CEF) to set the legal entity. The fastest and most cost effective option that meet the requirement to manage a treasury and distribute funds in a compliance way will be implemented after approval by the community.

The CEF has today about 200KUS$ in the following multisig wallets:

The proposal is to allocate 100K USD that shall stay in the control of CEF and only be released when any invoice is to be paid at the time that is needed.

A (Discord) room has been opened to brainstorm and collaborate on the creation of this legal entity where all community members are welcome.

(I am not a lawyer, and nothing said here can be considered as legal recommendation)

8 Likes
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In the interest of moving forward as soon as possible, I am inclined to go the special trusts route with a longer term objective to setup a nonprofit foundation.

Right now we need to get movement beyond Alameda and bring confidence back to the project. This will help support the token price which maximizes the funding we bring by the newly minted tokens.

When we have initial funding to bring 2.0, and have Catalog up and running and get a few partners like Curve onboard… we will be in much better shape and can get longer term foundation plans in motion.

Questions: Do we have a leadership team identified to administer the special trusts? Or can we assign leadership roles by vote to existing team members to kickstart this right away? We need a clear and rapid path forward.

4 Likes
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looks like the Trust is the best for us. We just wanted to leave open because we do not have still legal review. But all indicates will be a purpose trust.

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I’m heavily leaning towards the Guernsey Trust option as the quickest, and most cost-effective method for getting a basic foundation established initially.

Anything more technical (such as a foundation) we can move towards post Ren 2.0 or issuance. Given the current situation I feel we should prioritise speed and simplicity above all else, our goal now should be to have everything in place for receiving the approved new tokens.

8 Likes
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speed is safety, as they say. Agreed

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I agree with with the comments made by others in this thread. The Guernsey option seems to be the most appropriate for our current situation.

I also agree with using the community fund to found the set up of the trust/foundation/legal advice

Great work.

Is there a timeline for this RFC? The sooner we can start the better IMO

2 Likes
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Before you spend 100k USD to set up a foundation, or at least in parallel, can we get a legal review of the community’s rights to the IP? Has this been addressed somewhere?

Let’s step back and review how we got here:

  1. The two former founders of Ren entered into a legally binding agreement with Alameda Research (allegedly, as apparently nobody has seen any details) that included the transfer of “all Ren assets and IP” to Alameda (allegedly). I’m basing this on Ren Labs’ comments from AMAs. So clearly, if Ren Labs statements are true, Alameda owns all IP for Ren 1.0.

  2. From some time beginning in 2021, Alameda began to pay Ren Labs as an “outsourcer” to maintain and develop on top of Ren 1.0 (allegedly). Again, no details to my knowledge of this agreement between Ren Labs and Alameda have ever been released, even though clearly Ren Labs has a copy of this agreement (they signed it!). But if this is true, clearly it means Alameda Research had been paying Ren Labs to develop on top of Ren 1.0, correct?

So, with the above 2 points in mind, why would the “Ren community” or “Ren DAO” or even Ren Labs (a legal entity, I assume?) have rights to any IP associated with Ren 1.0, including derivatives? Please don’t tell me Ren 2.0 (note the name!) is not owned completely by Alameda! They own Ren 1.0 and they paid Ren Labs to develop Ren 2.0!

And while Alameda may have made promises in the past about how they will relinquish rights to future IP ownership (I believe Ren Labs alluded to this on occasion), why is that in any way legally binding now? The entire FTX/Alameda operation was built on fraud, right? So whatever Alameda or SBF promised to Ren Labs is really meaningless now.

I can’t see any world in which Alameda and FTX bankruptcy lawyers - assuming there was a legally binding agreement between the former Ren founders and Alameda - will not vigorously pursue all possible future revenue streams and all possible IP ownership. They will do whatever they can to claw back anything possible! And their case for full ownership of Ren 2.0 seems pretty clear (“We own Ren 1.0, we paid an outsourcer to develop Ren 2.0”). Case closed, right? Seems straightforward!

So perhaps the Ren community, as part of setting up a foundation, can get clarity on whether the community has any rights to anything associated with Ren 2.0 or any other derivative built on top of Alameda’s legally owned IP.

2 Likes
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There will be a informal meeting in Monday with a Lawyer. We should plan according after having the feedback from that meeting.

And agree, the fastest should be implemented if met all criteria, which looks like it is the Purpose trust

1 Like
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IMO, should be the way around. We form whatever legal entity is needed, then, we clarify the rest. I am tired of discussing what happened in the past, we can do nothing to change that.

But it is true IP must be clarified, but after solve the issue of having a way to fund development.

The particularities of the project could led in one direction or another (type or details of the legal entity), so, it is important to have IP discussion with lawyer as well in mind.

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Hi, great to see you here.

I think those are goods points and we really should get legal review to put things right. However, these legal issues will take time to resolve and focusing on it will only put the community in limbo right now.

To put things in perspective:

Whatever agreement with Alameda was a mutual agreement made between the 2 founders and Alameda only. I don’t recall the community being consulted.

  1. Based on the whitepaper in 2017, there is mention of “REN powered DAO” before the issuance of ICO to the public to raise funds. As such, the fund raise by the community is with the expectation that a DAO be set-up in the future to manage the protocol in a decentralised way.
    https://media.abnnewswire.net/media/en/whitepaper/rpt/95938-whitepaper_1.0.0.pdf

  2. Based on a Medium Blog post in 2020, there is a mention of decentralisation as part of REN’s roadmap - “Begin with a level of central control, and slowly progress to decentralisation as appropriate.”
    RenVM | The Road to Decentralisation | by Loong | Ren Project | Medium

  3. Based on one of the community calls with Susruth, there was a mention that decentralization is a priority (with support from Alameda) . Alameda committed to IP to be open-sourced as a public good.
    Ren Community Call 007 - YouTube
    (32min / 42min)

So when Alameda transacted with the original 2 founders, Alameda should be aware that it is not the only tokenholder. To go against decentralization, they will need to consult the stakeholders (which are the token holders). There was no such arrangement to stop decentralization. The protocol is destined to be decentralized in the future (based on point 1 and 2).

Now, for decentralization to take effect, my interpretation is that:

  1. Previous IP needs to be open-sourced
  2. Ren 2.0 be open-sourced
  3. Ren protocol is managed by the DAO

It should be the case that Alameda consult the tokenholders when to open-source the IP.

From a technical standpoint, the MPC IP is largely legacy it could only give us a headstart until now. Arent all these MPC technologies based on public papers?I really doubt if our competitors are lagging behind that much.
If REN is to be bogged down by these legal stuff, lots of energy will be wasted and it is inconsequential on growing the tech of REN.

So i agree with martign0 that we can keep in mind the legal issues but to move forward, to focus on innovative tech and opensource it as we decentralize.

4 Likes
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Hey builders! PM me if you want to add a comment/quote to the article

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What are we waiting for？

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There is a meeting with a lawyer on the week of Jan 2nd. We move to next steps from there, that most probably will be as well to have a RIP to allocate a budget from the community treasury. You can place any question you may have for the lawyer here (Discord)). Things are moving.