RFC-000-044: Facilitate discussions of a Governance Framework post-Alameda Collapse

[mrdgw]

Name: Facilitate discussions of a Governance Framework post-Alameda Collapse
Category: Governance
Status: Draft
Scope: To gather feedback and suggestions from both Ren Team and Community on the best way forward in terms of Governance.

Overview

Alameda’s acquisition of Ren protocol had been plagued with speculation on the exact terms and conditions since inception. With the recent collapse of Alameda, we should not dwell on this specifics anymore but rather, reflect upon how governance can be improved to prevent similar scenarios.

This RFC comes at a time when Ren is in the midst of securing funding after the collapse of Alameda acquisition. There have been no proposals to change the governing framework yet - but it would be the perfect opportunity to do so before Ren’s operating budget is fixed.

I refer to my post in Discord here Discord which outlines the rough agenda for this RFC and the importance of timing especially in this fund raising window.

Details

As per the recent medium article: Moving on from Alameda. Early last year, Alameda acquired Ren… | by Ren Community | Ren Project | Nov, 2022 | Medium , it is heartening to know that the community will be consulted through a formal governance proposal in the funding process.

The structure of the protocol should be that Ren survives no matter the external pressures and this means being self-sufficient in the long run. The DAO’s interest is not aligned to any other external entity and is only committed to Ren itself. It is the only entity that is neutral enough to implement the decentralization roadmap. It would be in the interest of Ren Team to plan for Ren DAO to control a significant stake to steer Ren’s vision. Hence, a key consideration for securing funding with external stakeholders is that a portion of funding has to be allocated to building this DAO.

As such, discussions in this RFC should revolve around how the DAO can be incorporated into the governance framework with significant stake.

Next Steps / Discussion Guideline

Building of the Governance framework with the DAO will not be possible without the assistance of the Team itself. This RFC serves as a platform for both Ren Team and Community to engage on this topic fervently.

[martign0]

This is great to see… I was even writing something that I shared with Arviee. An Interim DAO Committee should be formed to represent the community as well as RenLabs to evaluate all proposals from the community and team, and present a formal framework for approval to the community. The framework shall cover, IMO, the pillars of the protocol, The token, The DAO, the Technology. It is imperative that this should be done with the collaboration of RenLabs and the overall goal shall be to come up with a plan to finally have a “decentralized community owned protocol”. I will workout the document and post here. I recommend as next step to launch a vote to select the members to form the Interim DAO committee ASAP, after determine the expertise needed.

[XTC0r]

Fully agree. The community should be part in the next steps before any on chain vote is put up for vote. This also ensures the community is aware of any details, IP rights and shareholders.
The Alameda deal was very foggy for the REN community and we have to avoid we are trapped in the next VC money deal.

[martign0]

As mentioned before, I agree with this RFC, we need to get this done, proper structure. Major issue is we do not have a DAO structure. Just random ideas/proposals without proper coordination will not ever work. I wrote a proposal to build an interim team to develop structure, roles and responsibilities, and plan for funding.

Attached my proposal that could be jointly develop to take for a vote.

[martign0]

PROPOSAL FOR THE CREATION OF AN INTERIM TEAM TO DESIGN PERMANENT DAO

PROBLEM STATEMENT:

Current structure failed to meet the objective to deliver what was promised, a decentralized community owned protocol. The protocol has been fully managed by RenLabs with very little input and almost no influence from the community on the decisions.

A DAO exists, but is very unorganized, no clear structure, no a dedicated team and no clear roles and responsibilities. The consequence is that communication with the stakeholders as well as participation of the community is not effective.

We should add that the previous leaders of Ren sold all treasury to Almeda leaving the protocol without any funds to guarantee the safe future of the project. That VC is gone and there is no budget for the different activities of the protocol after Q4 2022. RenLabs has mentioned several alternatives that some alternatives to get funds are being evaluated, but there is no involvement from the community.

As a conclusion, DAO without structure is not effective, as the results has demonstrated.
A proper DAO organization would offer efficient:
· Engagement with RenLabs and all parties
· Communication and participation of the community
· Identification and coordination of resources

The scope and R&R of the DAO organization is something way too complex to conclude in a proposal, therefore, shall be left open for discussion by an interim team and later approval by the community.

We must remember that this protocol has tremendous achievements, being the only one that has billions of dollars in assets transacted without a single crack in the code, never hacked.

DRAFT PROPOSAL
We are also proposing to describe the protocol in 3 major pillars.
· DAO
· Technology (To be revised at later???)
· The Token

The first pillar has been in almost no existence until today, and we need to recognize it is no less important, becoming priority in any relevant protocol given the conditions of the industry and regulations. There is no reason to stick in the past, and the current proposal has the overall objective to establish an interim DAO structure with the single objective to create a permanent DAO framework that will allow Ren to dominate the space.

This proposal is focused on:

· Approve the creation of an interim team to carry out the design of DAO structure to be sent for comments and approval to the community. The DAO framework shall cover at least
o Definition of Mission and Vision
o Scope and framework of DAO:
1- Areas of responsibility of DAO
2- Organigram
3- Roles and Responsibilities of positions of future permanent members of DAO
o Performance key indicators to evaluate DAO
o Budget proposal

· Approve the size of the interim team to be composed “only” by DNO community members. At least 1 representative from RenLabs team will participate. We propose a team of 5 community members.

It is very important to emphasize that this interim team shall have the responsibility to represent the community and any proposal raised by the community is to be considered.

[Amaguq623]

rumors of Binance taking over Ren protocol?

REN Price Jumps 32% Following Binance Acquisition Rumors

[SixPm]

Here are some diagrams just brainstorming this out. It’s a very loose sketch of what the dao/foundation/governance framework could look like. Grey indicates Ren project infrastructure (code, hardware, and/or formal structures).

Where is this missing information or misguided?

[fuzzylogic]

Good work on those charts. With Ren 1.0 shutting down, we should really get moving on this now.

[Liberty]

I think the creation of a DAO-lead foundation does not have to be overly complex. We can borrow from the timeless principles of corporate governance of publicly-traded companies and adapt them to a DAO-run regime.

What I would like to discuss is a structure like this:

1. The nonprofit Foundation itself would be the legal entity that owns whatever is to be “owned” by a largely open-source project, domain names, marketing materials, IP etc…

2. On the second layer we have a 100% darknode run Board (or Council, whatever we want to call it) and Multisig. The board would be a larger group, say 12 people, who MUST all be active DNOs to participate at that level. These would be elected at intervals, say 20 epochs. The multisig could be appointed from within the Board, or elected as a separate body. I see this as being smaller and composed of the MOST trusted community members. Multisig’s role is singularly to appropriate the funds as indicated by the Board. The board would be elected to act semi-autonomously in the best interest of the REN community for all Darknode Operators. This is why it is crucial that every one of them is a DNO him or herself.

3. Below the management layer are employees to be hired by the Board. The Dev team sits here, effectively, as employees. They would be required to submit budgets for approval, or to work within a budget set by a manager hired by the Board if such is required. Operations would include management of web properties like the website and social media accounts and any other biz dev, marketing, conference appearances, partnerships etc.

Pros of this Structure

1. A semi-autonomous management body beholden to DNO votes would keep ultimate control in the hands of the Node Operators, while allowing enough flexibility for faster decision making
2. Since the Foundation is the legally-responsible party and decentralized, proper non-anonymous employees can be hired who wouldn’t bear legal risk. Not being able to review real resumes of real people would hold the board back from making good hires
3. Ultimate control would sit only with Darknode Operators, but that wouldn’t limit the talent pool to what is available from within the REN community

Cons of this Structure

1. Assumes DNOs will be engaged enough to perform regular elections
2. Assumes a small group doesn’t already hold outsize voting control, able to pick its own managers
3. Assumes there are enough motivated community members willing and able accept and capably perform the management roles, and that those voted in would be up to the task

Notes: A thorough “constitution” or “code of conduct” or somesuch document would need to be drafted - maybe even partly encoded in smart contracts - to govern things like how funds are used, what kinds of decisions require a broader referendum, how elections take place and so forth.

[SixPm]

That seems like a reasonable structure. Here is some brainstorming below which attempts to build on this further.

Foundation Governing Council

• Members are elected by node operators on a rotational basis and serve a fixed term.
• Members have voting power over the foundation treasury (multisig) and can vote to allocate treasury funds towards foundation department budgets and initiatives.
• Members can also nominate and vote on hiring decisions for foundation department heads.
• Members each serve on one of four subcommittees (one per foundation department)
• Let’s say one member is the President and does not serve on any subcommittee. President would technically be a mostly ceremonial role, as all council members would have an equal vote, but this person would be the closest thing to the public face of Ren.

Foundation Departments

• Development & Operations
  • Apply sanctions as required to maintain compliance with applicable laws and regulations
  • Perform general Ren buildout (i.e. adding new host chains and assets)
• Decentralization & Security
  • Conduct long-term R&D efforts to enhance the decentralization and security of the Ren Network (i.e. quantum-safe Ren 3.0, penetration testing, etc.)
• Partnerships & Community Relations
  • Maintain relationships with ecosystem partners (stakeholders who don’t operate a Ren node, i.e. application developers, users, token holders, etc.) to understand their needs and communicate this information to the relevant parties across the Ren Foundation
• Transparency & Oversight
  • Produce and disseminate regular reporting on the ongoing initiative and activities of other departments and potential risks to the Ren Network (a “second set of eyes” to provide some redundancy)

[SixPm]

Also, rather than shoulder legal responsibility for the operations of the Ren Network or fiduciary responsibility to DNOs, I wonder whether it would make more sense (or be possible) to have the Foundation be instead mission-driven. Perhaps the mission statement could be something like:

“The purpose of the Ren Foundation is to facilitate the operation and ongoing development of the Ren network so that it can effectively provide secure, decentralized custody of digital assets for distributed applications.”

[jdogg]

Hi all,

I have been running multiple darknodes since Epoch 2. Sharing my thoughts about the REN Foundation structure and next steps.

Proposed REN Foundation Mission Statement

• The REN Foundation is a Swiss Foundation dedicated to support the REN ecosystem and related technologies.

Proposed REN Foundation Structure Diagram (v4)

REN Foundation Structure Notes

Anyone

• Can submit RFCs

Ren token holders

• Can bond their REN to run Darknodes (independently or via Renbase)

RenDao

• Vote on RIPs
• Voting power based on number x age of darknode(s)

Board of Directors

• DAO representatives voted in by RenDao for a term (~3 epochs).
• DAO representatives can be voted in again
• (Debatable) Board members must be DNOs with minimum darknode age
• Facilitate efficient and orderly RFC & RIP processes
• Works with RenDao to define strategic objectives
• Works with RenDao to prioritize approved RIPs
• Works with RenDao to set budgets
• Board members are paid positions
• Hires foundation team leads
• Part of multi-sigs for treasury wallet(s)
• Board of directors can use budget to hire employees.
• Board of director hired employees do not need to be DNOs

Foundation Teams

• Responsible for specific aspects of REN Foundation
• Works with board of directors & contributors to manage team roadmap based on strategic objectives and RIPs
• Issues grants for contributors to execute on team roadmap
• Presents quarterly (~3 epochs) reports to board of directors, RenDAO & public
• Foundation team lead must request/justify budget from board of directors on regular basis
• Works with board of directors to define & report on team KPIs
• Foundation team leads are paid positions
• Foundation team lead can use budget to hire employees.
• Foundation team leads & employees do not need to be DNOs
• Board of Directors can perform this role until proper foundation team leads are hired.
• Foundation team leads should have competency in their respective team scope

Proposed Foundation Teams

• Treasury
• Protocol
• Product
• Growth
• Community
• Research & Development
• Operations
• Legal
• Marketing & Public Relations

Contributors

• Voluntary & paid opportunities to contribute to Ren ecosystem
• The existing Ren Labs team would be considered a contributor

Proposed Next Steps

Dec 2022

• Establish working group consisting of DNOs and Ren Labs members to define REN foundation

Jan 2022

• REN Foundation is officially formed and is controlled by working group members and Ren Labs
• REN Foundation arranges & executes OTC funding transactions
• REN Foundation creates job postings for foundation team leads
• REN Foundation issues grants to execute strategic objectives & approved RIPs

Q1-Q2 2022

• DNOs interested in being voted to initial board of directors begin to campaign
• DNO voting begins for initial board of directors
• Working group & Ren Labs members can campaign to be voted in as part of board of directors

REN 2.0 Mainnet Launch

• Voted in Board of directors installed as controllers of REN Foundation

[martign0]

This is my proposal on the fist steps that should be follow to start brainstorming on the creation of the new organization.

• Create a working team to develop a proposal of the new Ren organization with clear R&R, including Ren Foundation (RF). The proposal shall be approve by DNO thru RIP for implementation.
• Describe all areas and activities to execute by the new organization, and list all processes, documentation and tools to support the new organization (please, give your feedback here: Ren WBS - Google Docs)
• Get legal support to understand limitations and most recommended structure and R&R of the Ren Foundation. Get a quotation and schedule to create Ren Foundation
• Brainstorm in other possible limitations and considerations to chose the final organization

We will be in much better position for brainstorming the final approach after we complete the steps above. Neverless, it is good that some proposed structures are being publish here.

I am proposing (as an individual thinking) what I believe could be an effective and flexible organization for Ren protocol.

Consideration:

• It is very important that Ren Foundation is just for what is needed, can not be confused with “a company” because of legal concerns, so its organization must be as simple as possible.

[MaxRoszko]

I would advise against trying to create a company-like structure with the Foundation, as that is not a structure a Foundation is designed and intended for, and would make the process to set up a Foundation much more difficult to achieve.

[Liberty]

So the goal here is to socialize the risk, but not the control…?

[martign0]

I think that is right approach, and that was the intention. I change on one of my slides to be clearer on that aspect, the legal entity needs to be independent by ruled by the vote of the community.

[MaxRoszko]

Neither. It’s to decentralize control, not to create a new centralized company.

[Liberty]

You must excuse my ignorance, being from the traditional entrepreneurship world.

How does keeping the dev team outside a DAO make a project more decentralized than it being inside a DAO?

[p.batishchev]

Hi everyone,

It’s Pavel from AURUM Law Firm (https://aurum.expert) and DAObox (https://daobox.io).

We have come across the above discussion and would like to share some thoughts on the structuring and offer the service of DAObox.

TL; DR

DAObox can set up and manage a legal wrapper for the REN DAO in the form of a Cayman Islands foundation as a turn-key solution. This structure remains under the full ultimate control of the REN DAO while amplifying its decentralisation.

DAObox handles all related processes itself: completes the formation and set-up, takes the managerial positions at the foundation, handles day-to-day operations and paperwork, performs assignments by the DAO as a hired manager under the supervision and control of the DAO, and more.

Difference in Approaches

Whatever legal structure you consider, whether a foundation, trust, or another entity, – some people from the REN community would need to be revealed, sign the engagement agreement with lawyers / reg. agents, pass KYC, and be identified in the corporate documents and public records as controlling persons, directors, members, etc.

In addition, where the legal wrapper is not merely an executive arm of the DAO but is rather an independent and highly coordinated operating unit managing multiple tasks at its own discretion, centralisation and related risks increase. This also applies to situations where the legal wrapper is managed by the same people who manage the DAO.

In contrast, where the legal wrapper is created and managed by an external team which has limited discretion and is responsible for particular matters, this results in a new point of decentralisation.

DAObox Offer

DAObox is a young company with just a few months in operation. However, we have already onboarded our first DAO – Gearbox DAO, – and are currently discussing potential engagement by several other organisations.

Behind DAObox stands the team of AURUM law firm that has been in crypto for years now as lawyers and advisors to multiple blockchain and DeFI projects, and know the market and industry quite well.

The DAObox’s service consists in creation of a dedicated legal wrapper for the DAO which our professionals then assume the management of. With respect to the legal wrapper, we act as hired managers under the supervision and control of the DAO. We take all managerial positions at the entity ourselves.

Our service does not require anyone from the DAO members or multisig controllers to be revealed or exposed – we don’t need to enter into an agreement with, or know the names and see passports of, the team members. Importantly, this structure will not absorb or replace the REN DAO which will continue to operate on-chain the same way it did before.

The main areas of our responsibility include: setting up and maintaining the legal entity and its subsidiaries, major corporate actions, accounting and reporting, opening and operating bank accounts, making fiat payments, handling paperwork, executing contracts (excluding legal services), managing accounts with service providers, such as hostings, subscriptions, servers, etc., business correspondence. In other words, we handle all types of activities that are normally carried out by an entity. This does not cover any legal services and DAObox never acts as a legal advisor.

Difference

DAObox does not have any direct competition. Our closest competitors would be lawyers and registration agents whose role is limited to assisting in preparation and filing of the incorporation documents whose role is practically reduced to zero after the incorporation. Unlike any of them, DAObox alone sets up the legal structure for the DAO, acts as a client/contact in relations with agents and state, and then continues as executive manager of the structure.

Control and Reporting

The issue of control is an important one as the legal wrapper may be holding and managing certain valuable assets of a DAO (if DAO ever decides to transfer those to the legal vehicle). In short, although DAObox takes the managerial positions, the DAO has the ultimate control over the legal wrapper and our actions are limited by the mandate given by the DAO.

The constitutional documents of the entity subordinate its governing bodies and management to the DAO and resolutions adopted by on-chain voting. Any such resolutions are binding upon the legal entity and its managers.

Furthermore, the constitutional documents limit the authority of managers on the disposition of material assets and intellectual property held by the legal vehicle, entering into certain transactions (the value of which exceeds a certain threshold), and performing certain other actions – any such acts require the consent of a DAO.

Lastly, given that the legal wrapper is to be subordinated to the DAO, the DAO can pass a resolution on replacing DAObox as manager of the legal entity at any time, and such resolution shall be binding.

DAObox provides reports on the material operations of the legal wrapper and financial transactions on a quarterly basis so that everything stays transparent. Also, our team is available to respond to the community’s queries and questions or (maybe) have AMA sessions every month or two if that would be desired.

Proposal and Timeline

It may take up to two weeks after our engagement commences to set up a legal wrapper in the form of a Cayman Islands foundation. This post is a first touch, we will be happy to prepare an offer for the REN community if it has interest in the DAObox services.

I will be reviewing this forum from time to time and responding to your questions, so feel free to ask!

–

Legal Notice: This proposal is made by DAObox Inc. We are lawyers, but not your lawyers; nothing contained in this message or otherwise communicated by us on this forum is an offering of legal services or legal representation to any person.