Authors
- @DAOCoreContributors
- @Cryptolawyer
- Various others reading through and providing input (you know who you are, thank you)
Summary and status of the discussions
This discussion thread suggests that MC DAO adopts a written constitution. The authors believe a written constitution in the proposed form will contribute to an increasingly decentralized, structured and efficient governance model. The tokenholders will, by adopting a constitution, also be seeking to strengthen MC DAO’s position as an autonomous organization.
The authors have prepared a version of a constitution, which they believe will best serve our DAO in its current state. The proposed MC DAO constitution can be found here.
The draft constitution will be subject to review and discussions for at least one month, providing each community member sufficient time to review and weigh in on the idea of a constitution and its content. After the review and discussions period, the authors will review the suggestions provided and consider whether any revisions should be made to the constitution before submitting it as an official proposal.
Specification
1. Why does MC DAO need a written constitution?
Since its inception, MC DAO has grown considerably. As with other DAOs, our DAO started out with a team of initial founders and contributors and has since grown into an organization with numerous activities being handled through a widespread network of contributors and participants. This includes multiple contributor teams contributing to MC DAO, e.g. the investment committee and multisig team empowered by MC DAO through governance proposals and consequential voting (to act in limited and specific circumstances for the benefit and on behalf of the DAO) .
DAOs are in their infancy, both from a technological perspective and from a governance and legislative perspective. They are a novel way of self-organizing with increased transparency and automation. We have thus far seen DAOs come in many shapes and forms, with differing degrees of decentralization and autonomy and there is currently no wide-reaching consensus as to how DAOs should be governed or clarification as to what formally constitutes a “DAO”. It is clear that the organization needs to be decentralized and autonomous to be able to be considered a “DAO” (i.e. all three letters in “DAO” must be true). However, the necessary degree of decentralization and autonomy that needs to be achieved by an organization in order to be considered a “true DAO” remains unclear to date.
Similarly to other DAOs, MC DAO has been and is constantly evolving and is in need of a proper and predictable governance system. It is the authors’ beliefs that we should continue to seek ways to become increasingly decentralized and autonomous in both our governance structure and daily endeavors (both in on-chain and off-chain activities). We believe a constitution in the proposed form is what our DAO needs to take the next step (but not the final step) in our evolution (see more on that below).
A written constitution will lead to MC DAO establishing a decentralized governance structure agreed upon by our community. Even though smart contracts are a key part of MC DAO’s ecosystem, they alone cannot govern communities - smart contracts, governance and further development require input through various “off-chain” activities (such as writing code or writing this thread).
Even though the idea of fully on-chain and trustless governance is an enticing one, we do not believe that the crypto space is there yet. For instance, if a proposal to implement or develop upgrades to a MC DAO product is approved, it will still require multiple decisions and activities to be carried out by one or more contributors in order to realize the approved proposal. Not all social and technical components are possible to encode into smart contracts. Behind many MC DAO activities, there is one or more teams of (trusted) appointed contributors. The constitution seeks to structure these trusted relationships and give tokenholders the ability to modify them.
Whilst MC DAO’s current governance model has been developed through various MIPs, it is still largely informalized and it lacks an approved governance procedure and structure. Even though MC DAO has created certain informational documents on how governance is structured (such as the Gitbook), the processes have not yet been compiled into one document. As our DAO continues to grow with multiple verticals, it will benefit from a governance structure that we are collectively aligned on as a DAO community. Structure is needed to create a resilient and well-run governance model that enables MC DAO to achieve its goals in a timely and secure manner in years to come. Such structure will also lay the foundation for further improvements and developments to our governance model.
Currently, MC DAO is governed by tokenholders, with multiple contributor teams being delegated certain limited powers through governance decisions (see for instance MIP-2, MIP-4, MIP-6, MIP-7, MIP-10, MIP-15, MIP-16, MIP-17, MIP-18, MIP-19, MIP-21, MIP-22 and MIP-23). Whilst many teams have been formally empowered through governance decisions (MIPs), certain other contributor teams have emerged more organically from our community over time. These teams have been and currently are conducting various work in the interest of MC DAO. For the purpose of continuing developing MC DAO in various manners, our DAO needs a system that incentivizes meaningful contributions from its community - the constitution will seek to formalize the framework for such a system.
Despite various contributor teams being delegated certain powers from time to time, it is clear that the tokenholders (through governance) remain at the core of MC DAO and expect to have a vital value-creation role in the community and development of MC DAO. This applies even if they do not necessarily have technical skills and are not developers or other highly active creative participants in MC DAO. Where the tokenholders have empowered contributor teams to handle and execute certain activities, the tokenholders are indirectly involved in decisions the contributor teams make, as they may (subject to enforceability either directly on-chain or otherwise off-chain, e.g. through agreements referring to governance decisions) intervene and change, revoke or otherwise alter the delegated powers. Thus, delegating certain authority to persons or groups does not invalidate decentralized governance.
The future success of MC DAO, as it continues to grow and evolve, depends on continuing aligning incentives of the various contributor teams with the preferences of the wider MC DAO community. The adoption of the constitution will seek to acknowledge the fact that governance (through MIPs) remains a key part of MC DAO governance, whilst at the same time not requiring that each day-to-day decision within MC DAO’s ecosystem is made directly by the collective group of tokenholders.
2. The objectives and overview of the proposed constitution
The proposed constitution has numerous objectives. Section 1 above already touches upon a few. Additionally, the constitution explicitly includes a description of the objectives in the section named “Preamble” (see that for further details).
Moreover, the constitution focuses on creating a framework that allows for a flexible governance structure, rather than attempting to set in stone a specific governance format with pre-set contributor committees, teams, councils, sub-DAOs, etc. Consequently, the constitution seeks to provide flexibility for our DAO to pivot and adapt in the event that technological developments or other factors require that we do so. It determines what governance actions are legitimate for MC DAO to take and to encode into MC DAO related smart contracts. Being a framework for how MC DAO shall be governed implies that decisions taken through MIPs will continue to be an important part of MC DAO’s governance in the future.
Furthermore, it seeks to define the scope of activity which MC DAO may engage in and sets out the vision, values and core principles that are steering for what MC DAO is attempting to achieve.
3. A “work in progress” - only a first version
DAOs are still novel organizations that are tokenholder or member led. There are currently no instruction manuals for building a constitution for an organization like MC DAO. Various other DAOs have implemented constitutions and inspiration may be obtained from these, but none of them are directly suitable or adequate for our DAO.
The draft constitution seeks to take a step towards creating the right governance structure, not necessarily a perfect one. An ambition has been (and should continue to be going forward) to make complex parts relating to MC DAO feel simple, in order for everyone in the community to have easy access to the technology, products and information relating to MC DAO.
We believe DAOs are fundamental to the success of many sides of crypto, but they are currently finding themselves in legal uncertainty with no wide-reaching consensus about a path to legitimacy. Most existing laws were not designed with DAOs in mind and the regulatory landscape concerning crypto and DAOs generally remains unclear. Multiple jurisdictions are considering various approaches for specific DAOs legislation (see e.g. in the Republic of Marshall Islands which recently adopted a law providing legal identity and limited liability for “DAOs”).
Although we are a DAO, we do not live in a vacuum from a legal perspective. In order to ensure longevity of MC DAO, we should seek to adapt and conduct our activities in accordance with applicable regulation as it finds its shape, and strive to work with regulators to educate them on the benefits of the various DAOs that exist in the crypto space.
In the meantime, we can only continue to act based on the information available to us at the relevant time and to create an environment that is as efficient as possible for our DAO. Points and aspects that need improvement will likely appear. The current form of the constitution is therefore, as pointed out earlier, designed to create a flexible governance structure, so that we can adapt as we learn about points of improvement and gain further clarification as the regulatory landscape becomes clearer.
We encourage every community member to review the proposed constitution in detail, even though we appreciate it is long. The draft constitution is by no means meant to be a “take it or leave it” offer by the authors; there will be set aside sufficient time for anyone to review and weigh in prior to proceeding with a vote on this one (see the “Status” section in the introduction for information on deadlines for providing input). We believe the best ideas are born through debate and therefore in our discussions we should be giving each other the benefit of the doubt and see if we can create something great together.
Motivation
Although our governance model in all material respects has been functioning well to date, as it has provided our DAO a framework to continue its growth, we have admittedly also encountered a few challenges and realized that there are potential risks and room for improvement within our (and most other) DAO governance models.
We believe it is beneficial for our DAO to have a governance framework - which has been voted on by the DAO - in writing, rather than having a fragmented and informalized model of governance. This will allow us to enjoy increased prediction in terms of how governance functions and also provide us with simpler onboarding possibilities of new DAO members going forward.
Rationale
Much of the rationale behind the constitution is explained in the sections above. The governance model (set out in the constitution) will seek to continue to keep MC DAO decentralized, whilst simultaneously empowering contributors to act in an efficient and coherent manner in accordance with the DAO’s wishes. See below a few points that we anticipate there could be questions in relation to and to which we have provided a rationale.
Will the constitution imply significant changes to the current manner MC DAO is governed?
The constitution does not attempt to conduct a full overhaul of our governance model, but rather put in writing how our DAO has been functioning in practice, with certain alterations. Thus, most of the changes implemented through the constitution should in all material respects not affect MC DAO or its community members in practice.
There are certain changes that deserve to be highlighted explicitly.
Article 7 defines and formalizes the MC DAO proposal process, including explanations as to what conditions must be met for proposals to be valid and what voting criteria must be met when voting on different matters. A potential issue that has been voiced by the community (known also for other DAOs) is that a limited group of people at some point may be holding a fairly high amount of the tokens in circulation, or may by other means sway a vote in their favor. To protect the tokenholders and MC DAO as a whole against internal takeovers and malicious attacks, this part of the constitution lays out (a) higher majority requirements for the percentage of votes cast that need to be in favor of a proposal, and (b) requirements for a higher percentage of circulating tokens that need to participate in a vote in order for it to reach quorum. The requirement of a simple majority (more than 50% of the votes) will still remain the standard rule, except for special circumstances explicitly listed in the constitution which require qualified majority (75% or more of the votes) or extra qualified majority (90% or more of the votes) to pass.
Additionally, article 7 introduces clearer (objective) criteria for how a governance proposal shall be processed. This will change the somewhat arbitrary process that we currently have, with no specific consensus as to how long a proposal shall be subject to discussions prior to proceeding to a vote and what criteria determine whether a proposal shall proceed to an official MIP vote or not. Proposals will as a main rule require a discussion time of 7 days, whilst proposals regarding certain specific matters will be subject to a 14 day or 1 month discussion period. The constitution also requires that each proposal must include a for/against poll to gauge community sentiment regarding whether a proposal should proceed to a vote or not. If 25% or more of the poll votes are in favor at the time of expiry of the discussion period, the proposal shall proceed to an official MIP vote.
Article 4 does, amongst other things, include provisions ratifying the current governance model pursuant to which tokenholders may delegate certain powers to contributors. We do not believe that micromanagement by the wider group of tokenholders is the way to proceed for a DAO. Reducing the need for governance in certain situations (governance minimization) does not however automatically imply that the DAO becomes less decentralized or autonomous. MC DAO will remain decentralized, as tokenholders will control how power moves within MC DAO, subject to enforceability either on-chain or otherwise off-chain.
Article 4 also points out that nothing in the constitution can be construed to bind any person to perform or carry out any activity or similar as a result of a “DAO Consent” (as defined in the constitution), i.e. MC tokens do not govern people in general, but can govern “on-chain” through code (which may indirectly govern people in various ways). For instance, we cannot enforce a MIP voting for Vitalik Buterin becoming a MC DAO multisig signer - that is not possible to enforce through code. Such decisions are thus in principle utilized for sentiment signaling purposes and not “binding”. Any decisions that cannot be enforced through code may however potentially be enforced through separate agreements in accordance with the applicable terms (e.g. through agreements referring to governance decisions).
Article 6 specifies that proposals that will require input from the community through multiple decisions (e.g. such as staking v2 required) will need to be published as discussions first, and polls (defined as “MPOLLS”) held, prior to proceeding to a proposal. Further, the article encourages proposal creators to first exchange thoughts and ideas with the wider MC DAO community through the discussion category or through other MC DAO channels for the purpose of gauging community sentiment before publishing an idea as a proposal.
Article 8 sets out the framework for a delegation system, but does not adopt it. Such a delegation system would need to be implemented through a separate MIP, in accordance with the framework set out in the constitution. Increasing tokenholder participation is important for a number of reasons. Lack of participation can result in inadequate monitoring of the various contributors, and in turn misalign the incentives of MC DAO. Furthermore, benefits may accrue in the form of increased decentralization with more persons/tokens participating in a vote, albeit indirectly by way of delegation. Delegates can potentially also make smart, informed decisions about complex, technical issues in a context where many tokenholders are unlikely to have the necessary time or expertise. To be clear, the authors will not be proposing to implement a delegation system together with the constitution; we merely wish to think ahead in case that is something that the DAO wishes to implement in the future.
There are various other articles of the constitution that could have been highlighted, but we do not believe it is sensible to go through them all in detail. The authors are however more than happy to elaborate on other parts of the constitution as well if necessary after the community has had a review of the constitution.
Will the adoption of a constitution render code and smart contracts less important?
That is definitively not the intention with this constitution. Adopting a constitution is not intended to diminish the importance of smart contract systems (where code is law) within our DAO ecosystem, but rather supplement and create the framework for such systems.
Our strong view is that MC DAO, as a blockchain native organization, should continue to, as much as possible, strive to utilize smart contracts and other crypto technologies in its various endeavors, including governance. The constitution in fact endorses increased use of smart contracts that enable enforcement by code and provides flexibility with respect to implementation of various on-chain solutions, e.g. on-chain governance (which we can implement in various ways as part of the DAO’s governance). Therefore the next steps in our evolution to becoming increasingly decentralized and autonomous should be to (to a larger extent) embrace the technologies that crypto has to offer.
How will the constitution be stored?
The constitution (if adopted through a proposal) is proposed to be stored and recorded on the Ethereum blockchain, e.g. through a NFT solution (such NFT could be held by the main MC DAO wallet) or other similar solutions utilizing blockchain technology. The draft version made available for the community’s review together with this discussion thread is for simplicity reasons made available as a simple PDF file.
Budget
There is no budget needed for implementing the constitution.
Copyright
Copyright and related rights waived via Creative Commons CCO.
