I just saw this @ml_sudo retweet of a thread on a new organizational structure, pioneered by dYdX Foundation, that can support the creation of a Zcash DAO with access to the real world through a Guernsey Purpose Trust.
Ideally, a DAO should be able to independently function outside of a fiat jurisdiction. However, as all human DAO participants are also subjects of some fiat jurisdiction, it’s unwise to start a DAO without considering potential liability for its future participants. Also especially in the case of Zcash, the two largest entities funded by the community, ECC and ZF (including ZCG), are subjects of the same fiat structure.
This new kind of structure by dYdX Foundation:
“… presents a potential solution for several issues decentralized autonomous organizations (“DAOs”) face by (1) limiting liability for DAO and DAO committee participants; (2) enabling DAOs to engage in off-chain activities; and (3) clarifying the existence, or lack thereof, of any United States tax payment and reporting obligations.” source: dYdX Foundation Blog
Considering that one of the original motivation of creating Major Grants/ZCG was to fund the 3rd, 4th, and 5th major contributor to Zcash, should the Zcash community starts the preparation for the creation of 3rd independent entity of Zcash? An independent 3rd entity could define if Zcash can continue well into the future. Creating such 3rd entity would take a lot of time and we should start it early.
I propose that we, the Zcash community, should take this idea from dYdX community as a starting point for a future Zcash DAO.
To clarify, I have no specific idea on what the DAO should be or how it should function. DAO is just an organization. It can function as any other organization. At the end, the community chooses what the DAO is for, but we know that having another Zcash entity will be good for Zcash.
That’s not an accurate characterization of the wording of ZIP-1014.
This slice of the Dev Fund is intended to fund independent teams entering the Zcash ecosystem, to perform major ongoing development (or other work) for the public good of the Zcash ecosystem, to the extent that such teams are available and effective.
Nowhere in the ZIP does it mention that funds should be used to create independent entities (like a DAO) that would act as a governance mechanism for Zcash itself.
If this route wanted to be taken I believe it would need to take a similar approach to how @aquietinvestor proposed an amendment to ZIP 1014. Or perhaps a new ZIP altogether.
I’m really happy to see the dydx and a16z have done this research and found what looks a suitable structure! Does anyone know how much it costs in money and time to create such an entity? Maybe someone (who is 100% independent from me/ECC/Boostrap) could create one to serve as a test bed for a Zcash DAO!
If the community decides to move forward with this structure, then it’ll be most efficient to reach out to Walkers in Guernsey who have worked on it. Rupert Morris at Walkers is very good on trust structures but less knowledgeable on crypto governance, though he’s a quick learner. So, unless someone in the community feels comfortable making sure governance properly fits into the trust (see definitions in section 1.1 here for what I’m referring to: dYdX_Grants_Trust_Purpose_Trust_Instrument_03_15_2022_Final_Execution.pdf - Google Drive), you’ll likely want to find a lawyer who understands Zcash governance to make sure the trust works properly within the Zcash DAO.
From a cost perspective, the Guernsey lawyers should cost less than $15k. If you need another lawyer involved who already understands this structure (or reads the paper on it and understands it quickly: Legal Framework for Non-U.S. Trusts in Decentralized Autonomous Organizations), then it’ll cost about $15k more. If some in the community can properly ensure the trust works within Zcash governance, then that cost can be avoided.
Hope that helps!
Funding the next major Zcash entity is not in the exact wording of ZIP-1014, but it was included in the early dev-fund discussions (ZIP 1001 through 1013), especially in ZIP-1006, and ZIP-1012 that states:
" Priority will be given to Major Grants that bolster new teams with substantial (current or prospective) continual existence, and set them up for long-term success, subject to the usual grant award considerations (impact, ability, risks, team, cost-effectiveness, etc.). Priority will be given Major Grants that support ecosystem growth by mentorship, coaching, technical resources, creating entrepreneurial opportunities, etc." source: ZIP-1012 discussion
I think no amendment is required. Based on the wording of ZIP-1014, there is no prohibition on ZCG funding a community effort to establish a third entity. Today, a community member can create a grant proposal to fund a third entity, and the grants committee can approve those.
I believe this was also why members of the community, who wants the establishment of a 3rd entity during the dev-fund talks, did not push too hard on creating the 3rd entity since ZIP 1014 allows for funding of next major Zcash entities. This is also why ZCG grant slice is bigger than ECC or ZF.
That’s correct, several of those dev fund proposals intended to establish a legal third entity but were not chosen by the community.
Perhaps we a mixing terms here. My understanding of a DAO is to control a protocol and how it’s governed ie: what is focused on, how funds are spent, etc… ZIP-1014 doesn’t give ZCG the power to unilaterally establish legal entities that control allocation of block reward (dev fund).
If the intention is for this DAO to somehow replace the ZCAP as a voting structure for measuring community sentiment then I could see that working within the ZIP.
But if the intention is for the a DAO to have the power directly spend block-reward ZEC then I don’t see how that works with the existing Zcash legal governance structure (ZCG, ZF, ECC) without a community vote on a new ZIP to re-allocate a portion of the block-reward to go towards the DAO.
DAO is just an organization. It can function as any other organization. At the end, the community chooses what the DAO is for. Think of the Zcash DAO as a global virtual cooperative that falls under no specific fiat jurisdiction. The trust structure by dYdX Foundation above, would allow this DAO to have a real world activity.
I think you are referring to some specific DAO that has existed in other cryptocurrency network. Zcash DAO should be established and function according to what the Zcash community wants.
This can actually be a good initial use case for Zcash DAO.
I was under the impression that DAO stood for “Decentralized Autonomous Organization”
How would it be
Decentralized: if it’s 100% reliant on a single entity like ZCG for funding?
Autonomous: if it has to apply for and be approved for grants? Unless ZCG doesn’t ask questions about how the funds would be spent?
Maybe a “DAO” is just a poor acronym for what its trying to accomplish.
Don’t get me wrong, I understand what you are saying, a DAO could help Zcash be anti-fragile and less prone to “interference” if something were to happen to ZF or ECC. But I don’t think structuring a DAO downstream of more centralized entities would accomplish that. For it to be effective I think it would need to be implemented at the base protocol layer and funded directly without having to rely on a middle man for funding.
Firstly, there’s no reason why a DAO has to depend on direct protocol funding. While it’s probably a more resilient approach, directing the dev fund to the DAO will take a lot of time and probably some (well-intentioned) resistance from the current entities. If we want to make changes to how dev fund is distributed, I think the best time for that is during the PoS transition.
Secondly, the decentralization and autonomy of a DAO relates to its internal mechanism rather than what happens to the protocol or anything around it. Today, there’s no way you can make a DAO on Zcash. This statement is probably still true even after the first version of ZSA is released.
Should the Zcash DAO be on Ethereum then? It seems like that’s the best place for it. If the DAO is on Ethereum, then having a middleman for its funding from the Zcash protocol is actually a good thing. When Zcash allows for a DAO to exist on it, then Zcash DAO will move to Zcash.
Finally, at the start of its existence, the DAO doesn’t have to be well-funded. If it can gather sentiments of Zcash users and fund some small projects from pseudonymous contributors, then it’s already a good start.
Why would we create such a DAO that has a very small impact, then? Establising a new structure can be a foundation of a future DAO on the Zcash protocol. At the same time, it can act as a lifeboat for when the community needs it.
So, the first version of the Zcash DAO could very well be: (1) not directly funded from the block rewards, (2) not on Zcash, and (3) less financial in nature.
Not exactly related, but I found this 2021 write up of a DAO created within Aave whose job it is to manage the risk parameters of the Aave protocol. They backgrounds, roles and compensation pretty well and succinctly.
@tokidoki I’ve always wondered what a DAO could achieve if it funded fully autonomous individuals/groups/entities. The DAO’s job would not be to review and fund proposals but to review and fund individuals/groups/entities. The only decisions the DAO will periodically consider is if they reduce, continue, or increase funding based on results.