Open KeeJef opened 1 year ago
Well guess I'll open:
https://imgur.com/a/9F7KW1V This is OPTF CEO giving a response to DAO. I argue that he is ultimately wrong in his analysis that DAO would be classified as security under Australian law.
CORPORATIONS ACT 2001 All references are to Corporations Act 2001 http://classic.austlii.edu.au/au/legis/cth/consol_act/ca2001172/index.html
Securities are defined SECT 92 http://classic.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s92.html
Voting interests and voting shares are defined under SECT 9 http://classic.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#voting_interest
Managed investment scheme is defined under SECT 9 http://classic.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#managed_investment_scheme
Disclosing entities are defined under 111AC http://classic.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s111ac.html
ED securities are defined under 111AD http://classic.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s111ad.html
ACNC ACT All references are to ACNC act http://classic.austlii.edu.au/au/legis/cth/consol_act/acanca2012523/
Tax concessions are outlined under SECT 20.5(2) http://classic.austlii.edu.au/au/legis/cth/consol_act/acanca2012523/s20.5.html
Entitlement for registration under ACNC act is defined under SECT 25.5 http://classic.austlii.edu.au/au/legis/cth/consol_act/acanca2012523/s25.5.html (Relevant subtypes column 2, rows 2 and 7)
Governance standards are defined under SECT 45.10 http://classic.austlii.edu.au/au/legis/cth/consol_act/acanca2012523/s45.10.html
CHARITIES ACT 2013 All references are to charities act http://classic.austlii.edu.au//au/legis/cth/num_act/ca2013104/
Charity is defined under SECT 5 http://classic.austlii.edu.au//au/legis/cth/num_act/ca2013104/s5.html
Public benefit is defined under SECT 6 http://classic.austlii.edu.au//au/legis/cth/num_act/ca2013104/s6.html
Charitable purposes are defined under SECT 12 http://classic.austlii.edu.au//au/legis/cth/num_act/ca2013104/s12.html
PROBLEMS
PROBLEM SOLVING Easy one first: there are no laws or regulations to prevent OPTF from providing the investors with accurate information, period. The choice to operate in darkness and without responsibility has been made: no accurate information to investors, attempts by few investors to inform others are squashed, and the CEO is habitually lying about current events as well as financials of OPTF. This has an effect on price: investors calculate information risk into their equation and deem it too risky to invest. Investors also see the blatant lies and make the decision to not invest in untrustworthy entity. Solutions could include:
The second one is much tougher. As outlined above, enforcing a profit motive onto a “charity”, will introduce multitude of legal problems with a risk of losing the tax exempt status. In order for the DAO to not be classified as managed investment scheme, it must not have these three qualities (paraphrasing the corporations act SECT9):
The problem is in potential loss of tax exempt status and further regulation on OPTF activities, but if you look at the stated lawful charitable purposes listed by OPTF: furthering education and human rights, anyone can see that these are not furthered beyond perhaps the surface level. When you strip away privacy features from the coin, the arguments for stated goals and purposes become weaker.
However
Number 2 is potentially the weak link that could constitute a loophole in the law. “All contributions from investors are pooled or used for a common purpose to further produce benefits. Benefits may be financial or consist of rights or interests in property” All contributions are not pooled, they are arguably not used to produce further benefits but to uphold and develop infrastructure in accordance with the charity’s stated goals and purposes and if there is motive to uphold the price, there is proven reason based on the whitepaper to uphold certain price level in order for the infrastructure to stay intact.
Thus, solutions could include:
Both of these would arguably introduce responsibility for OPTF towards investors.
To be able to go fast and do not waste time on sc dev for the DAO; snapshot.org could be used to vote on importants decisions of the DAO. so technically it costs nothing to start a DAO.
The proposal is about governance so we should consider the current state of governance which is through this document: https://imgur.com/a/QiaDs8i
It’s the complete LAG Foundation constitution from 21.02.2018 and unless this constitution has been amended, it is still the current governing document of OPTF.
I would like to highlight this part:
Part 2 - Charitable purposes and powers
- Objects and Purposes The Company is established to be a charity for purposes beneficial to the community generally and for the advancement of education. It will achieve these purposes through the following activities: (a) facilitating the development of an open source, highly secure, decentralised data transmission network that allows individuals, business and government to freely transact and communicate without the threat of malicious third party interference; (b) ensuring the continuing development of the secure network by funding independent development projects; (c) providing education and support to developers seeking to build apps utilising the secure network; (d) ensuring the open source network is developed as a genuinely decentralised system absent any external control or influence to ensure the independence, security and longevity of the network; (e) raising moneys to fund the activities and charitable objectives of the Foundation, including through the offering of the Loki cryptocurrency; and ® all other such activities as are ancillary or incidental to the above purposes.
This is perhaps the most important part of the document. Without commenting anything on if OPTF activities are currently or historically been in line with these objects and purposes which are to guarantee the tax exempt status, only in regards to DAO, only the (d) is meaningful here.
There have been good reasons in the past to keep OPTF absent of possibility of external control or influence, but do these conditions still apply? Are the powers behind beldex and their 200M market cap a threat to OXEN in such way that their weight could sybil the project through DAO? If so, there are multitude of problems that should be taken into consideration when considering how this document should be amended and how DAO should be implemented. (d) is something that could be strengthened with right setup or weakened with a wrong one.
Easy logic and a good amount of early scientific proof of fairly novel invention exist to prove with a degree of certainty that DAO would add up to fundamental value of OXEN, establish a systemic strength and brand value. It’s assumable that this would have positive effect on price. So despite difficulties, there exists a motivation to govern OPTF through DAO in a way that would balance
Here’s a proposal for a model which would achieve these ends.
Idea is that 51% of the power is with people who have expertise, non-malicious intent, their name is staked, and that this set of people can make decisions which are beneficial to the goals of the network. This way there would be, as the 6(d) requires, truly decentralized network absent of outside control. If the DAO includes decision making mechanism which would have direct power on actions of OPTF, this set of DAO voters can be made to be bound by OPTF constitution to vote against unlawful or un-OPTF-constitutional decisions, thus among other things, guaranteeing the non-profit status. Also, if there is any danger that an entity with malicious intent attempts to use the DAO, this set of voters can collude to stop it. There can be rules or conditions which must apply in order to stay weight holder. There can be rules and mechanisms to enforce impartial selections such as all selections having to include a public reasoning how the selectee is optimal choice for a weight holder.
Even if there is no threat of sybil or malicious intent, set of expert decisionmakers who are bound to be regulated according to laws and constitution, can be used to guarantee non-profit status and give expert guidance to the project as well as guarantee interests of those who have invested most time and effort to the project.
49% of the DAO votes are distributed according to OXEN holdings. These votes are to represent the interests of the investors, but which are not even at 100% under one entity, enough to form a sybil against OPTF decision making.
I’m intentionally leaving some parts blank and if you are vigilant, you can see that there are lots of places in this model where things can be tweaked or changed around. So is with what should be done with DAO votes. These can be used for:
The way in which OPTF constitution is amended is defined under clause 9
- Amending the constitution 9.1 Subject to clause 9.2, the members may amend this constitution by passing a Special Resolution. 9.2 The members must not pass a Special Resolution that amends this constitution if passing it causes the Company to no longer be a charity.
General meeting is defined under 20, 21 and 70
- Annual General Meeting 20.1 A General Meeting, called the annual General Meeting, must be held: (a) within 18 months after registration of the Company; and (b) after the first annual General Meeting, at least once in every calendar year.
21.5 Notice of a General Meeting must include:
(a) the place, date and time for the meeting (and if the meeting is to be held in two or more places, the technology that will be used to facilitate this);
(b) the general nature of the meeting's business;
(c) if applicable, that a Special Resolution is to be proposed and the words of the proposed resolution;
(d) a statement that members have the right to appoint proxies and that, if a member appoints a proxy:
General Meeting means a meeting of members and includes the annual General Meeting, under clause 20.1;
Special Resolution means a resolution: (a) of which notice has been given under clause 21.5(c); and
(b) that has been passed by at least 75% of the votes cast by members present and entitled to vote on the resolution;
It would take 75% of these people to vote for DAO in general meeting: https://imgur.com/a/xrJlOeS
Chris McCabe Lucinda Lovegrove Simon Harman Jason Rhinelander Alexander Linton Dr Jason David Potts Josh Jessop-Smith Greg Valles Robert Morris Glen Lovsin Suelette Dreyfus Chris Pavlesic Michael Bacina Sam de Silva Sam Williams
There has been quite a few comments in #36 raising the possibility of governing part or all of the Session token/SENT through a DAO, I'm starting this issue to track that discussion.