MIP-13: Merit Circle: A New Era

Hi folks,

I love this proposal by @HoneyBarrel. Maybe we should hold the tokens in escrow, pending legal challenges. I like Pumpson’s point about seed investors signing on to decentralized control, though. If we are just a security, YGG can do nothing and get paid, and that’s fine. If we are a DAO, big holders at discount entries need to make big contributions.

If we are prepared to make an example of YGG, however, we should be prepared for our investment projects to make an example out of us. That is, by revoking our distributions for dumping tokens and/or not providing value to their projects.

With that in mind, how is our infrastructure for giving those projects playtesting and other support? I think we are providing MASSIVE value to our game projects through building Sphere, but there is always more we can do.

Cheers,

Dolly

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Very well write-up. Thanks Honey. Love.

Anyway someone above mentioned the team “handpicked” them because they promise (or suppose?) to bring value to DAO.

My question:- What was the promise (s)? Did the team specify any KPI - or given any specific expectation prior the seed round? Is it written in the contract? How can we measure the success or saying “they are not meeting expectation”, if we don’t set any?

If the Core team did not set any specific neither expectation nor KPI, then should DAO set the expectation now - give them time to deliver/prove their credibility - subsequently only penalize them in case they still fail?

Hope we can hear feedback from the Core team.

Regardless - I’m happy to vote “YES” to incompetent VC(s) with my 50$ MC bag.

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As always, big thanks to Honey for their relentess activism and for providing a clear outline regarding just how useless YGG have been compared to other seed investors.

I believe every major point has already been discussed above, so I have very little further to add to the discussions besides stating that I will also be voting YES

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I disagree about needing to recognize the risk they took as seed investors. Given the founding team at MC and the sector, there was almost zero risk at buying in at 3 cents cost basis. These are sweetheart deals for people who are connected, and the implicit expectation is that they use those connections to help the project. If that hasn’t happened, then there’s nothing really owed. If terms allow it, we should refund the investment. I’ll vote YES.

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You are welcome to disagree with me. I think we should all be free to share out opinions. HOWEVER, I think what is more important than our opinions is what you said: “if the terms allow it

Putting aside my opinions (I agree with the reasons for this proposal), it is better to learn from mistakes than retroactively break contractual obligations made by the DAO. @HoneyBarrel themselves said they have not seen the SAFT note. Others such as @AdmiralErik say

While I agree that YGG has not added value, I would like someone with actual first-hand knowledge of the SAFT note to tell us what is in it (or share it with us) and actually prove that the DAO is within its rights to take this action.

Today we all have an easy target (YGG) where a majority will certainly vote “Yes”. But there are going to be issues in the future where it is not so simple. What if the DAO signs a contract with an outside game developer (paid 50% upfront / 50% on final delivery) and a majority of the DAO decides it hates the end-product / didn’t do what they said so it votes to cancel the final payment? Is that ok just because a proposal passed?

Clearly, I am in the minority here but I would like to argue that unless the SAFT note makes it very clear that YGG has not met defined milestones for ‘adding value’ in order to receive their tokens OR that a majority DAO governance vote can change the economic terms / cancel tokens / refund the investment then I think this is not a good idea.

Yes, this is a decentralized organization, but we entrust the core team to operate in our best interest. Nothing will go 100% to plan. If the SAFT lets us do this then let’s do it. But if it does not, then let’s learn from this, let the core team incorporate the disapproval vote of the DAO into future contracts with 3rd parties, and let’s keep supporting the core team (the ones who ultimately drive the most value creation).

p.s. - Here is an example SAFT note per the U.S. SEC. There are definitely clauses in it that are similar to what people are suggesting are in MC’s SAFT notes. But no one on this thread has yet to tell us what is 100% in the MC / YGG note.

Example SAFE:
https://www.sec.gov/Archives/edgar/data/1693656/000110465919039476/a18-15736_1ex1a3hldrsrtsd1.htm


Edit / Update: It is clear my constructive push back is very unwelcomed here based on what some individuals are messaging me. For the record, I am an individual investor, I have no affilation with any groups or YGG, and members of the core team have met me before. Good luck to the DAO and the core team navigating this.

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The above message is crucial in the future of decentralised anything anywhere and thank you Bambino for pointing it out. We cannot just vote that we as the DAO think that they have not provided value and therefore they are punished. I think this has to be compared to the current legal system as well as having to be within the bounds of the current agreements. If it were a legal case, we couldn’t just say that YGG has not added value, sue them, and pronounce them guilty and punish them as we please. As Bambino pointed out, this concept is very important to the proceedings. If we were to take action, we need to know which action that is, and more importantly, know that we are in our rights and that other agree with us. A DAO may be a new concept, as is the blockchain space, but that does not mean we can be judge, jury and executioner.

Just a small echo to emphasise the legal aspect and protect ourselves in the process.

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Thanks for the reply BambinoValue. I think we are basically in agreement - DAO votes cannot nullify a legal contract. I would love to see this proposal modified to something along the lines of “Evaluate options for refunding YGG seed investment”. Maybe a small engagement undertaken by outside counsel and the deliverable a report to the DAO. If we went that route, then the findings would need to be respected. Just my 2 cents, and love the active discussion and debate here.

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Hello Honey,

Thanks for writing the post. I will be voting NO. Please let me explain why;

First of all before the DAO was created the team made an agreement with all investors. Understandably some people in the DAO feel that YGG is not upholding their end of the deal and there is good reason to act on that. When a contract is signed in good faith both parties should be in communication with eachother during the time the deal is active or valid. If one party feels the other party is not delivering what they should be a conversation should be had and steps / actions should be taken for the party to improve their performance.

If that does not bring the desired results next steps could be to signal that there is still a perceived lack and if there is no improvement steps will be taken to bring the agreement to an end.

While i agree with you the value add might not be there, I also see that a discussion to come to a better understanding have not been taken. I would like to propose a process to be followed where we give YGG the chance to improve their value add and if they do, fine. If they dont then we could move to a process to unwind the agreement.

In my opinion this would be a process that could be used as a template for other deals the DAO has / makes as well. Also it would limit the risk for the DAO from a legal standpoint as well and it would be perceived by the outside as proper governance as well. If such a process or discussion with YGG would not result in better value add you have my vote as well. Untill such steps have been gone through it’s a no for me.

Regards

Tyghh

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P.S - I am an individual investor. MC is my biggest investment to date. I hold a small amount of YGG but personally wrote it off as zero (I am disgusted by their DAOs lack of transparency and value dilution antics.). I am proud to have invested in MC. I feel bad that I ever invested even a small amount in YGG.

I totally agree with the sentiment that YGG has so far added nothing of/negligible value to MC.

But what @BambinoValue is saying is supremely important.
A contract signed has value. We cannot retrospectively go back and rescind contracts unless there is such a clause in contract do to so.

If we stop respecting contracts signed then it’s a slippery slope that will come back to bite us because we sign a lot of contracts with other games. Ex - Some game we invested in can come back and say their DAO members don’t like us and cancel our investment contract.

I think the sensible thing to do here is see if the SAFT mentions any specific deliverables from YGG and whether it has some recourse to what can be done if YGG doesn’t deliver the same.

If nothing like that is mentioned in the SAFT, what I think we should do is give YGG a list of deliverables now that we want them to deliver in the next few months.

After that , if they still don’t deliver we can take some legal opinion on our options then.

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Hello fellow DAO members, and especially, thank you @HoneyBarrel for the diligent effort you have put into crafting a topic critical towards the future health and relevance of the DAO, Merit Circle, and its community at large.

First off, allow me to preface …

As an investor-first in this space, I like Merit Circle, both itself (the overall project & folks behind) as well as ROI-prospect wise (hence investor). Continuing, I don’t mean to project onto others, but I would imagine it to be a fair assumption that many in this space are also here for similar reasons, although some may be driven primarily by other incentives.

This said, although many of us may contribute to this space with the notion of return-on-investment top of mind, I would also like to imagine many of us do so with a clear moral compass in mind. Simply put, why not make a profit, while also doing well by others at the same time - both on an individual level as well as in community we surround ourselves?

On the issue of poor ethics, DAO values, predatory VCs, transparency & governance…

Continuing with this mindset, and in the context of partnerships, to me, this is certainly moreso an issue of ethics, as well as alignment of morals in regards the MC DAO vs ’ value-add ’ (however much it may be suspect).

As you aptly put, YGG, in recent past has elected to postpone a live LBP (see YGG SEA ’ fair launch ’ copperlaunch). An LBP, or liquidity bootstrapping pool, is meant to be an algorithmic token disbursement mechanism, whereby token price is met at an agreed-upon level with open community demand - completely fair and without interference. Compromising a community ’ fair launch ', whereby instead of being fair, resembles something more like a rigged carnival game is just one example of poor ethics. These sorts of actions against community represent the sort of character that is the antithesis of MC, its DAO, and community as a whole.

Why was this done? Was this communicated ahead of time to the community? How about the notion of the YGG SEA token itself? Why not a singular token, integrated inside the YGG token itself? Was it a cash grab all along? Are these issues ever even considered in an open, a public debate, a fair discourse perhaps? I think you know the answer.

Morality

As many of us are all too aware that have been in the crypto space long enough, the issue of morality, or more specifically: money / cash grabbing, lying, cheating, stealing, rugging (not hugging), and all in all, profiting via wronging others in any way is all too prevalent in crypto still in 2022.

One of the big things I (& I’m sure most) of us saw different in MC is a change in model vs various many projects preceding it - It’s true, Transparency, Open dialogue, Ethics, Empowerment and allowing voices to be heard from all sides is a new trick for crypto. It shows a maturation of the space, and one I think should be actively fought for, both for the long-term health & for adoption alongside other much more mature / regulated industries. MC can be one of the few in the space leading by example at the forefront of this new movement.

On SAFT Reversion

Let me repeat, by reverting a SAFT, at least in this case, it isn’t a ’ rug ’ of anyone (see low ethics). It’s a vote towards furthering what MC & its DAO stands for → transparency, morality alignment (in project, partners & community), ethics, fairness, as well as long-term soundness.

In my humble opinion, and in light of recent actions / overall track record of YGG, I do think they pose more harm vs help remaining an active partner of MC, and I would vote in favor of removal.

In summary, it is important to remember, ’ value ’ is a subjective metric by any measure, and although considered, I do think the notion of ethics (& alignment therein) weighs more highly than ’ value ’ - especially important as various VC’s, funds, partners, angels, & individuals provide value in different ways, many of which are hard to measure. We can easily make the case that, although YGG provided ’ some value ', their lack of morality in the space is far enough a more important consideration, especially as Merit Circle has continued to show time again, even at such an early stage since inception, a champion of transparency, fairness as well as governance (& associated processes); Continuing with this leadership, cutting ties with a partner whom chooses the opposite approach I believe would be beneficial. The mere fact we are all here having this discussion on a public forum, prior a DAO vote (which comprises -all- sorts of varied opinions, both in favor & dissenting), proves the character of MC, & also highlights the disparity between it & YGG.

KG out.

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Thank you Honey,

This is exceptionally thorough analysis of current added value of YGG as seed investor to Merit Circle DAO. I agree to all given arguments that their position as VC has to be reviewed.

However, before we go for hard Yes or No vote of proposed removal of YGG, I think we need to hear first core teams’ opinion and give YGG a chance to provide their comments as well.

I would propose amendment to this proposal to have a vote in general for removal of YGG from VCs. If this vote passes, we continue with further proposal on form and conditions this removal process will take. Similar to how we are treating Staking v2 decision making.

I believe this is great precedent in DAO history on requesting accountability and added value from VCs and we should treat it with great care as we do with future of Merit Circle DAO. I hope this will help not only this DAO but industry in general.

With all my best wishes,
Carl™

P.S. This DAO has an exceptional community members and we all play important part in its future, so thank you to all of those who put their valuable time in developing this project! And thank you again Honey for your great effort you put to address VCs accountability!

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Shouldn’t we burn the tokens instead of giving them back to the DAO. We lose a large investment + extra tokens in circulation. These are 2 negative things for the price of MC and so the DAO. Burn them

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First of all I want to thank @HoneyBarrel for the ongoing engagement and for being a strong asset and vocal voice in the community. Your views and thoughts regularly encourage me to think (and rethink) important matters concerning the MC DAO, which I am thankful for.

A lot of good points have been made from both sides (both here, TG, Twitter, etc.), and I will not echo them all here.

One obvious question in this discussion is whether MC actually can cut-off YGG’s right to receive tokens. Technically, the answer is – to my knowledge – yes. Obviously YGG has already (and is continuously at this point) receiving MC tokens, which to my knowledge they have also informed publicly that they will be staking for 12 months at a minimum, but I assume the proposal refers to the tokens that have not yet been distributed (i.e. those that are still subject to vesting).

The next important question that arises is whether MC can do it without facing any adverse repercussions. This question potentially has both a legal and a commercial side to it.

First, the legal. I think @BambinoValue raises some important points here that we not necessarily should shrug off so lightly. The DAO as such is decentralized, not incorporated under any specific jurisdiction and not recognized as a legal entity. Enforcing a claim in contract (for specific performance or damages) or in tort (damages) towards the DAO directly is therefore a difficult (or even impossible) road to take.

However, not being privy to the actual terms and conditions concerning the seed deal between MC and YGG, it is not possible for me (and I assume most/all token holders, apart from those directly involved) to determine whether YGG (or potentially any stakeholders of YGG) could e.g. take direct action (in contract or tort) against MC team members etc. This should naturally be assessed by those that are actually privy to all information concerning the matter. The point is however that even if you are operating through a DAO, you are not automatically shielded on the legal side by referring to that the operations are conducted by a DAO – the picture is often broader (to what extent will depend on the actual circumstances in the specific situation).

Some in here argue that YGG has not fulfilled its obligations towards MC either, which may be correct; as I do not have knowledge of what was agreed between YGG and MC, I cannot conclude on whether YGG has actually not fulfilled its obligations towards MC (nor whether that is actually relevant for this particular topic). I am curious to hear from @YGG here (noting e.g. that they have stated that they going forward will work on “providing deal flow” to MC, ref. their post in the Accountability thread), and also from the MC team, as those two parties are the ones sitting on most info regarding this.

Second, the commercial. Should the unvested tokens end up taken away from YGG, MC will definitively be setting a precedent in the space (which may or may not have adverse legal repercussions to parties involved on the MC side, ref. above). Whilst I do see the points made by @HoneyBarrel and others (a lot of which are good and important), I also share the worry raised by a few (e.g. @BambinoValue and @tyghh), that this type of decision may strike back on MC as well. One of the main revenue streams of MC will come from taking part in seed investments, where MC will be subject to cliff and vesting periods. Based on the circumstances, there may e.g. be a risk that other projects in which MC are investing in pull the similar move on MC, or use the threat of such move as leverage to make MC carry out specific actions (e.g. make MC increase its advisory role in a project and to provide additional value, and by that moving the goalpost in terms of what was actually agreed). This is just one example, and similar situations may occur where MC is interacting with third parties and where MC is dependent on third parties actually delivering a specific performance.

Based on the above and the input so far from others in the discussions, a question one should ask is if the potential upside is worth the potential downside. One obvious upside for other existing investors is that more tokens will likely be taken out of circulation, against a price far below the current market price. A second upside could be that this sets an expectation in terms of standard that is to be delivered from seed investors. However, we have already seen a lot of MC seed investors provide info on what their contribution has been and is contemplated to be going forward, so the upside may be more limited for MC specifically in this respect. Several other potential upsides could be mentioned (see Honey’s initial post and others). The potential downside on the other hand is more unknown (potentially legally and commercially).

For token holders voting, it think it is paramount that we have sufficient information on the topic before voting on the matter. Therefore, I will await to hear from both YGG and MC to shed some more light on the matter prior to making a decision.

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Thank you @HoneyBarrel for the thoughtful proposal.

In principle I would vote NO unless MC can prove that “adding value” was contractually and clearly defined, if it wasnt then YGG is simply taking advantage of MC having been foolish in providing financial compensation, in the form of tokens, without contractually making sure that YGG pulled their own weight. If we were naive about our engagement the loss should be on us and simply taking it back can set a very dangerous precedent, even though reducing the fully diluted market cap would be nice.

One could begin a slipper slope where the DAO just voted to take back any tokens that we feel were too onerously granted, even tokens to stakers that are still looked, as the rewards are 40 times what one gets for locking up money in a regular fixed deposit, and such…such an attitude would make MC an uninvestable token.

If, however, we can prove that YGG is in legal breach of their obligations (and that it truly was an obligation not an expectation) then one can consider voiding the engagement and getting the tokens back…but sadly none of us can know the answers to this, only the administrators that actually made the engagements with the VC’s.

So, if anything, we should vote to make those agreements public for any token holder to be able to analyze them.

Thank you

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As some others are mentioning I think we need a better understanding of what the terms of the agreement actually were.

I think almost any early stage project would hope their seed investors would add value. The question is was that adding of significant value an actual requirement for participating in the seed round or merely the hoped for behavior of an early partner.

If YGG is truly in violation of their side of the agreement then I think we should take action including possibly canceling and refunding their seed investment. If however they’ve just been a disappointment but no explicit requirements were placed on them than I don’t think we’re in our rights to reclaim their tokens.

This isn’t just a legal question, it’s also a reputational question for us. Any organization, DAO or otherwise, needs to be able to make long term deals and partnerships.

As an individual for example when I staked my MC I did so assuming the conditions I was being offered would be upheld. If I had doubts that they wouldn’t, if I thought there was a chance MC might alter the terms after I’d already locked my tokens because it was unhappy with how the staking program was going, it absolutely would have affected my decision to stake longer term or not. Similar scenarios where we need to be able to make longer term agreements with outside parties are going to be crucial for the success of the DAO.

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Dear Meritians,

First, we (the main development team) thank you all for your opinions and for participating on the governance forum. It shows once again you have the DAO and community at heart. Thanks to everyone for weighing in, it is clear this is a hot topic and that we have a vibrant community.

Second, we spent the past 48 hours discussing various options internally and have been in touch with the Yield Guild Games team who are open to constructive solutions that will meet the community’s voiced sentiment.

Please allow us to spend some more time discussing these options together and to get back to you all with suitable suggestions.

It’s important to note that we cannot speak for the DAO. The DAO, with its many stakeholders, is ultimately the entity that will decide.

Because of the complexity of the situation, the gravity of the proposal and the range of views, it is our opinion this proposal should not be rushed to a vote. Not until all options have been weighed and all opinions have been heard.

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Thanks for your response and the work you all are putting in. I fully support this and appreciate the fact that you take the community’s concerns seriously

Firstly, I would like to kick off by thanking @HoneyBarrel for this thread and the thoroughly written proposal. Secondly, I’d like to give a shout-out to all DAO participants that have taken the effort to read and respond with their points of view.

I’ve been following YGG for a long while now, both from the sidelines and during times as an active investor. The reason I’m not an active investor anymore (for quite a while now) has been because of the many reasons that were addressed by people above already like the lack of transparency, no clear vision/mission and underwhelming actions in the interest of their DAO (or should I say DAO’s lol).

As a top LBP investor and LP provider, I will certainly be voting yes if this proposal comes to a vote.

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I support this proposal YES!

Yield Guild is not even adding value to their own token …let alone the badge (which was suppose to hold special perks) . Aside from their initial contribution with fund its clear that …that they are not adding any value to MC.

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Henlo,

Thank you for your response.

We’d like to remind the MC (dev) team and YGG team that we are operating under the flag of the MC DAO. In that sense, discussions from all sides including the teams, DAO participants, VCs, and general stakeholders are to be decentralized and (hopefully) transparent.

We understand that some things behind the scenes are more delicate than others, but we are a DAO and the DAO has spoken. As can be seen by the many opinions and proposed voting stances, we seek justice via our proposal. By the rulings of the MC DAO, we fairly and correctly created and motivated our proposal.

As such, we would like to reemphasize, that the vote should not require (unneeded) delays - as this too - can be seen as centralization and goes against the founding principles of the MC DAO. We hope you understand the grave nature of these matters.

Thanks,

Honey Barrel
Vanquisher of non-Frens
The Freefolk Fellowship

honey-with-wooden-barrel-vectors

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