eosDAC prepares transition arrangements into Custodian governance
eosDAC is a groundbreaking project which aims to help build the future of Decentralised Autonomous Communities(DACs). It has been an exciting journey since the initial airdrop and launch of the EOS Mainnet; eosDAC will imminently open voting for Custodians through its in-house coded and designed member client at members.eosdac.io. Custodian nominations and voting will proceed entirely on-chain.
As the community is aware, preparations have been progressing for a number of months for the transition to elected governance; eosDAC will be the only block producer under elected governance. This governance model is a key advantage in a block producer because it makes independence, transparency and integrity toward the EOS tokenholder community integral to the functioning of the block producer. A board of 12 elected Custodians will be constituted with re-elections occurring at weekly intervals.
Despite the advantages in being a DAC, there are also risks which have been identified by members of the eosDAC community. If the DAC contracts directly with a wide range of groups then the members may take on liability relating to these contracts. `An interchangeable service company is a solution that mitigates this risk and allows eosDAC to benefit from services from ‘real world’ companies such as server hosts. Another risk is a lack of continuity related to the changeover to Custodians.
In order to secure key DAC processes uninterrupted, the interim Custodians have agreed a contract with the service provider, Dacoco Gmbh, to arrange for the procurement of key DAC deliverables such as block production, smart contract development, legal and company liaison, and comms and community functions.
After this initial three-month period, the DAC will be free to select different services from the same or a different service provider.
Commercial terms with Dacoco Gmbh
Dacoco will be fulfilling the key requirements of the DAC in a service provider, including being the single, replaceable counterparty to the DAC.
Dacoco Gmbh will charge eosDAC a 5% margin on the IT infrastructure and development and administration services it procures for the DAC. This is in line with the 5% margin charged by the outgoing service provider. The initial 3 month contract is owing by the DAC to Dacoco upfront in order to present an acceptable risk profile to Dacoco and its banking and commercial partners.
Additionally, for high intensity, recurring services, there will be a 30% charge of the first month’s payment.
These charges are to cover the overhead costs of maintaining company operations in a crypto friendly jurisdiction, including the services required of a stable, legal service provider to a blockchain entity such as eosDAC.
Finally, Dacoco will pass through to the DAC costs incurred in initially establishing systems which could service the DAC, including legal costs and insurance, of £27,500. This includes:
- Legal fees of approx £16,500, covering company establishment and the creation of innovative blockchain contracting, invoicing and payment contracts and mechanisms. We believe this represents good value as the DAC attempts to realise its vision of being a decentralised autonomous community in the real world, requiring innovative and bespoke partners in so doing
- Insurance fees of approx £8,100
- Costs required to establish a local presence in the Zug region, which is a requirement of company establishment there, approx £1000
- Auditing fees of approx £1,500
- Banking fees of approx £500
Background: why the DAC needed a service provider
There are three major challenges that needed to be addressed in terms of how eosDAC has been set up
A) Bridge to traditional financial system
Servers, infrastructure, lawyers and other professionals need to be paid in fiat currency. To do this the DAC needs to contract through a person or company. This company will be paid in crypto so they need to be located in a blockchain friendly jurisdiction.
eosDAC members tried banks throughout the Caribbean, Lichtenstein and Malta without success and have a temporary arrangement with a UK company which does not provide crypto exchange.
B) Protecting the large initial fiat currency donation
The DAC received donations to kick-start its endeavours. Because there is a risk that the fiat currency may be misused by the service company or Custodians there need to be checks and balances in place to ensure those funds would always be used for the originally intended purpose of developing DACs.
C) Member liability risks
Because each member of the DAC is potentially liable for all actions of the DAC there needs to be a way to mitigate risk for members.
How to resolve these challenges?
After extensive research, the best approach to deal with A) & C) appeared to come in the form of entering into a business relationship with a Swiss service company based in Zug, Switzerland. The Canton of Zug is also known as cryptovalley, due to the large number of crypto projects based there, and is based within a country known for its strong financial system. People involved with eosDAC pursued legal discussions with Swiss lawyers around establishing a service company in Zug. These legal discussions also led to advice surrounding the issue described in option B) above as being best dealt with by a Foundation with independent trustees.
Is this ideal? No, the service company can be seen as centralisation which is what we are trying to avoid. Therefore it has to be the case that the service company is replaceable. Additionally the service company effectively takes on much of the liability risk from the members so insurance is necessary.
Your involvement is crucial to the DAC’s success
eosDAC represents a unique and interesting example in the evolving history of Decentralized Autonomous Communities. As a DAC Enabler, we intend to provide the foundational tools required by many different forms of decentralization in the future. In order to do so in a sustainable way with no conflicts arising from the existing legal or tax jurisdictions around the world, we've structured things in a reasonable, conservative way based on the best legal advice we could find. It is our hope that the open-source tools we make available to the community will create many new DAC forms we can't even imagine today which, eventually, will improve how human governance and community coordination exists in the world.
We're very excited to play such an important role in what we believe to be the decentralized future. Thank you to all the EOS and eosDAC community members who understand and believe in what we're working hard to build and have supported us throughout this journey.
If you haven't yet participated in eosDAC, now is the perfect time to join as a member at https://members.eosdac.io/ and begin reviewing the custodian candidates you believe will best protect the value of the DAC for long-term growth and support of other DACs. As we transition to elected custodian authority, it becomes absolutely critical for those who own EOSDAC tokens to vote with them to protect the DAC and the value of their tokens. Though we've spent a lot of time refining our constitution, in the end of the day it's just a document. The code running on-chain which defines the DAC is ultimately what determines what is functionally allowed. If we, as the eosDAC community, prefer to have eosDAC revenue used to grow the DAC and support DAC Enabling initiatives, then it is our responsibility to vote in custodians who share that preference. If we don't take this responsibility seriously, it's possible the funds could be extracted in ways that do not benefit the DAC or the EOSDAC token holders.
For example, the DAC code as written today allows any member with EOSDAC tokens to vote for up to 5 custodians. If someone owns enough EOSDAC tokens, they could, in theory, create "sock puppet" custodian accounts which they control and vote in enough of those custodians to effectively take control of the DAC. When they have enough control to sign their own multi-signature transactions, for example, they could change the functioning code of the DAC to do anything they want, up to and including extending the 7-day custodian period to something indefinite (preventing new custodians from being elected), changing the EOSDAC token supply, changing how the token functions, blocking votes for other custodians, extracting all the EOS tokens controlled by the DAC for themselves, etc, etc. The power of the custodian board is quite limitless. We've done our best to mitigate these concerns by coding into dacauthority account the concepts of Extraordinary Resolution (10 of 12 custodians or the "high" permission) for foundational code changes (see the constitution for details) and Special Resolution (9 of 12 custodians or the "med" permission) for changing the constitution/terms of service, making payments, etc (see the constitution for details). Ultimately, these permissions will only work to secure the DAC if eosDAC members retain enough voting influence through their EOSDAC tokens to keep custodian elections decentralized and prevent the sock puppet example outlined here.
The DAC is only as strong as the community who supports it. This is a historic time for eosDAC and the future of DACs in general. As we turn over control of the DAC to the token holders, we'll be setting an example for the world on how a decentralized community can function and grow.
Let's set a good example.
Please, join the DAC today and prepare to vote for custodians you trust to secure the future of eosDAC. You can also join our community in Discord here: http://discord.io/eosdac
Please vote for eosdacserver
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