- Orange Pill Ltd
In light of the recently passed proposal (MIP-13), the Merit Circle DAO is obliged to renegotiate the terms of the financial agreements made between the DAO and Yield Guild Games. We, Orange Pill Ltd, would like to propose a solution that has been agreed upon by both parties. A joint statement of both parties (YGG and MC) will follow as a reply to this thread in the following days. Explaining the rationale from both sides, why this is a win for all parties involved and our intention going forward. This is not the end of a hostile chapter, but the start of a collaborative future.
The Merit Circle DAO raised a seed round all the way back in September 2021, a period that feels like years ago given the magnitude of everything that has occurred since. At the time, we spoke with dozens of interested parties. As part of the internal discussions, we assessed whether those seed investors could add value and in what way.
One of these investors had been Yield Guild Games (YGG), one of the first guilds in the web3 industry. Pioneering the Guild model. Given the fact that we would be operating in the same industry, the match between Yield Guild Games and the Merit Circle DAO felt like a good fit.
At some point, discussions within the DAO started emerging about whether YGG was a valuable stakeholder to the DAO, citing conflicts of interest among other reasons. At one point, community members started publicly questioning whether they (YGG) should have joined the seed round in the very beginning. Then, challenging the possibilities of the DAO’s governance, one of the community members called ‘Honey Barrel’ issued a proposal.
The proposal, MIP-13, seeks to remove YGG and Nifty as early stakeholders. By reverting their stream and refunding their contribution.
The full proposal can be found here. YGGs reply can be found here
A clause was proposed by Merit Ltd and accepted by the author. The clause gives a week long time-period for a counter-proposal that could overwrite MIP-13 and delay the effects of MIP-13 by two weeks.
After vibrant discussions with good arguments on both sides, the proposal was ultimately voted in.
An agreement for tokens in return of a financial contribution has been made between Merit Ltd and all other parties. We formed these relationships in the hopes of sticking together for many years and collaboratively building a long-lasting project that will live on for decades to come. As a result of believing in us from the very beginning, we believe that each of these parties deserves to be rewarded in due course.
All parties were selected as valuable stakeholders that could add value to our DAO. We have stated this before in our official reply to MIP-13, but will restate again for the avoidance of doubt: adding value was not part of the written agreement. We do not believe YGG or any other stakeholder should, or deserve, to be singled out in this manner. It is a topic that deserves much more nuanced discussion and consideration. Nuance on which we hope to shed more light in our joint statement.
Within the Merit Circle DAO, the rule of the majority plays out through a young and crude, but democratic system. What we saw occurring in MIP-13 brought us into an uncomfortable situation, being conflicted on both sides. On the one end our agreement with an early stakeholder and contributor, on the other hand, the community and the absolute power of the DAO.
We think it is important to strive to honor all moral and legal agreements as a DAO. These agreements affect our relationship with past, current and future relationships the DAO has, and how these will evolve.
We clearly understand that this proposal and the ripple-effects it may cause is something that we wish to avoid. There are dozens of flaws in the current way our, and many other, DAOs are run, and we wish to improve on these.
It is clear there needs to be a more clear alignment between the absolute power of the DAO and the agreements it makes in the past, present and future. All while maintaining the democratic system and the power of the token holder.
We have a lot of governance improvements in mind that should avoid explosive situations like this in the future and will mitigate the potential doubts parties could have around agreements with DAOs. Of course, we will also rely on input from the community and from external stakeholders to come to the best models. Together we can strengthen DAOs and pioneer the way for other DAOs.
Ever since the proposal was published, we reached out to YGG in order to find a solution that works for all parties involved. Whereas this is far from an ideal way of conversing, both parties have given it their all to work things out in a friendly but professional way. Given the fact that we should honor the governance process, we asked the author to allow us, Orange Pill Ltd, to come up with a counter proposal that is amenable to YGG and would mitigate the potential second-order effects.
After careful consideration and debate with the involved parties, we would like to present the following solution. Please bear in mind that this settlement has been provisionally agreed upon by all parties involved in the interest of avoiding legal proceedings for the DAO or for Merit Circle Ltd. Something both parties wanted to avoid. After all, we are all building towards a common goal. It would be a giant waste to put our time and resources to any other use, especially a negative use.
Given the context given above, we would like to propose the following.
The Merit Circle DAO buys out the YGG and Nifty Fund allocation, a total of 5,468,750 $MC tokens at 0.32$. For a total of $1,750,000 USDC.
A legal agreement will be signed, enforcing the buy-out offer legally and protecting both sides against future litigation.
In the above shared abstract, we have shared background information on the matter and the most important technical details of the proposal. The motivation will become more apparent in the joint statement we will release with YGG. Reflecting on the matter and showing a positive example forward to other parties in the space. We will highlight a few important general considerations that we think deserve extra attention below.
In an industry where fraudsters and empty-promises are on the daily menu, honor is something to live by. The most prominent parties in this industry are those who honor their agreements, live up to their side of the deal and show what they are worth. Everyone within the Merit Circle Ltd is operating in this fashion, and has thereby built their reputation in industry. This same train of thought is reflected in the Merit Circle DAO.
We wish to be a party that always lives up to their side of the deal, a party you can trust and a party that goes above and beyond for their partners. It’s something that we have been, and will continue to be throughout the existence of the Merit Circle DAO.
We are operating in an industry that is young and often we move in unmarked territory. This proposal has shown the capabilities of a DAO, and the challenges that come along with it. The Merit Circle DAO is a democracy, where the tokenholders hold absolute power over the DAO. This is an important underpinning for the DAO. However, some decisions require extra consideration. What may seem beneficial for an organization at first glance can bring serious adverse effects in the long-run. This realization has brought us to believe that our current governance structure needs to be improved upon.
All decisions should be made decentralized and all expert opinions should be considered by the DAO. In specific cases like with agreements or where governance bumps into exisiting laws, there should be extra considerations for the moral and legal implications that breaking this could have. It is important the DAO governance aligns itself with existing agreements and laws. An improvement that can be made by creating a more refined governance process and a more informative discussion period. Making sure voters are well informed to vote in the DAOs best interest. The best functioning democracies are also layered systems, underpinned by a legal framework and constitution.
This proposal brought us in a conflicted position between honoring previously made agreements and the governance structure that is currently in place. Luckily, we have been able to work out a solution in collaboration with Yield Guild Games which fits all parties.
We have always wanted to make sure that we find the middle ground here, to make sure the DAO retains a good commercial reputation and no party feels diminished.
The next step
To that end, we are currently working on a joint statement with YGG. In this joint statement, we will address the concerns raised by both camps and describe our rationale for the proposed settlement. We describe why this will present a win to all parties and is the best way forward. We thank both Mechanism Capital and Dialectic for mediating this matter. Thanks to them and YGG we will be able to share a message of positivity. Both YGG and we prefer the collaborative approach over the combative approach. It is very easy to fall into adversarial thinking, but this is generally not the best path forward. In fact, it is often a slippery slope downwards. We need to show the world our industry is better than that, that web3 is a future that can work. That the future belongs to optimists and collaborators.
In MIP-13 - a three-month cooling off period for proposals that involve a change of token economics or current agreements. This will give us time to come up with improvements to the governance framework.
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