- DAO Core Contributors
This proposal seeks tokenholder approval for the change and addition of a few signatories in Merit Circle DAO’s multisig team and to change the 4 out of 7 multisig into a 5 out of 9 multisig. Furthermore, the proposal seeks to ratify continued delegation of certain powers already granted to the multisig team, together with an additional authorization. Finally, it is proposed to require that the multisig signers enter into a simple multisig participation agreement in order to formalize the multisig signers’ participation in connection with the multisig arrangement.
If adopted, this proposal will:
- Change the 4 out of 7 multisig into a 5 out of 9 multisig (the 2 out of 3 multisig empowered for investment purposes through MIP-2 will not be affected by the said change).
- Empower a multisig team consisting of the 9 persons listed in section 1 of the heading “Specification” to act as multisig signers in accordance with the scope of authority as the current multisig team is operating under, in addition to the additional authorization as set out in this proposal.
- Require that all multisig signers enter into a simple multisig participation agreement going forward and for the authors to negotiate such agreement with the multisigs. Such agreement will be required to be entered into by all multisig teams of Merit Circle DAO.
1. Changes to the multisig team and structure
For the purpose of ensuring safety and security for Merit Circle DAO’s assets and operations, Merit Circle DAO has established and authorized a multisig arrangement whereby certain operational, administrative, and other on-chain functions related to Merit Circle DAO require that a majority of multisig signers (private keys) sign and approve a transaction message before a transaction can be executed.
Merit Circle DAO’s current multisig arrangement was formed in connection with MIP-1 and its composition later amended through MIP-2. Additionally, the multisig team has in connection with other governance decisions been empowered to carry out and execute various on-chain transactions for and on behalf of Merit Circle DAO.
This proposal (amongst other things) seeks to increase the number of multisig signers from 7 to 9 and the required signatures for a transaction to be approved and executed from 4 to 5 (a simple majority required). The reasoning behind the said increases is to increase the security with regards to Merit Circle DAO’s treasury and other operational and administrative functions that the multisig team is involved in.
Merit Circle DAO’s current multisig team consists of the following persons in a 4 out of 7 multisig:
- Flow Ventures
- Sergei Chan
- Merit Circle Ltd
- Marco van den Heuvel
- Mechanism Capital
The persons proposed to form part of the 5 out of 9 multisig team are a combination of existing multisigs and new persons. Mechanism Capital, CitizenX and Merit Circle Ltd have agreed to give up their positions as multisig signers and be replaced by OP Crypto, Spartan Group, and Orange Pill Ltd. Additionally, the gaming project Hash Rush (Vorto) and Danish Chaudhry are proposed to be appointed to fill the remainder of the 9 multisig positions. The new multisig team is thus proposed to consist of the following persons (acting personally or by use of an entity which they control):
- Maven11 (currently a signer)
- Flow Ventures (currently a signer)
- Sergei Chan (currently a signer)
- Marco van den Heuvel (currently a signer)
- Spartan Group (new signer)
- OP Crypto - seed investor (new signer)
- Orange Pill Ltd - development company and DAO contractor (new signer)
- Danish Chaudhry - seed investor (new signer)
- Hash Rush / Vorto - DAO partner and investment (new signer)
The new persons proposed to join the multisig team are all considered candidates that are highly active in the Merit Circle DAO community and in various ways incentivized to act in the best interest of our DAO. We believe that those contributing on the multisig team should be persons that are strongly incentive aligned with Merit Circle DAO, rather than neutral. The multisig wallet IDs should be published in the DAO’s GitBook in due course.
Community members should, as always, feel free and encouraged to share their view on the proposed composition and to propose alternatives for the authors and wider community to consider.
As for the multisig signers stepping down from their multisig roles; we wish to thank you for all the hard work and efforts that you have provided whilst being on the multisig team.
2. Ratification of scope of authority
The multisig is through governance already empowered to execute certain on-chain transactions, including execute on-chain decisions made by MC tokenholders and Merit Circle DAO contributor teams (that have been empowered through governance).
In this proposal, it is further proposed that the multisig team is authorized to do the following:
Make changes to token distributions resulting in less or no MC tokens being distributed to a person that is a beneficiary of the relevant MC tokens, provided that such changes (1) are agreed to by the said person/beneficiary, (2) do not result in the relevant MC tokens being put into circulation or utilization earlier than they would prior to the change, and (3) are executed without cost to Merit Circle DAO.
The reasoning behind this proposed authorization, is to enable the multisig team to execute on-chain transactions that enable a beneficiary (recipient) of MC tokens in accordance with the DAO’s set token distribution programme, to transfer to another person the beneficiary position that makes them entitled to receive tokens. For instance, if a seed investor (a beneficiary) is entitled to receive tokens that are subject to vesting and the seed investor wishes to transfer its beneficiary position “over the counter” to another person before the vesting period is completed, this proposed authorization would entitle the multisig to make such transfers possible.
It is important to note that the power is limited to situations where (1) the original beneficiary agrees (meaning that the multisig team cannot unilaterally make any changes), (2) such transfer does not result in tokens hitting market circulation or become utilized earlier than they would prior to any transfer (e.g. if the tokens were originally subject to a 36 month vesting period, then the same or longer vesting period will have to apply for the new beneficiary) and (3) the DAO incurs no costs.
3. Multisig participation agreement
Having the multisig arrangement in place is paramount for keeping Merit Circle DAO’s assets safe and secure. As the multisig signers hold private keys to wallets that are linked to the DAO’s multisig wallets and may approve and execute transactions provided that the majority of multisigs approve, we believe it would be prudent that the multisig signers enter into an agreement on their role and relationship as multisigs (combined approach with code + law). It is proposed that the multisigs enter into simple agreement between themselves and one of the legal entities acting for and on behalf of the DAO (one of its legal wrapper entities).
To cater for any risks that the multisig singers take on in the interest of Merit Circle DAO, it is proposed that the multisig participation agreement includes an indemnification clause in favor of the multisig signers, which states that multisig should be indemnified for losses, liabilities and costs (a “Loss”) arising out of or in connection with the multisig arrangement in the multisig’s capacity as a multisig (i.e. not in general). The indemnity will not apply in case of losses, liabilities etc. arising out of or in connection with a multisig’s fraud, gross negligence or wilful misconduct. If the conditions for an indemnification are met, it is proposed that the compensation would be covered by the DAO. The multisigs’ (total and joint) right to compensation under the agreement will for good order be capped at 15% of the DAO’s treasury value as reflected in the most recent treasury report prior to this proposal proceeds to an official vote, and cannot, with respect to any single Loss (or a series of Losses arising from substantially the same facts or circumstances), exceed 15% of the treasury value at the time of such Loss.
On this basis it is proposed that the authors are empowered to negotiate such multisig agreement with the relevant multisig signers. The terms and conditions of such agreement should be made exempt from confidentiality obligations so that it can be presented to the community if needed (with personal info redacted, however).
As serving on the Merit Circle DAO multisig requires hard work and activity from the relevant signatories, we believe it makes sense to rotate some of the signers from time to time, in order to ensure that all signers remain reasonably active and available to keep signing speed and engagement at a high level.
As for the motivation for granting the multisig with an additional authority and for entering into a multisig participation agreement, the authors refer to sections 2 and 3 above, respectively.
No costs incurred in connection with this particular proposal. Indemnity provision may potentially result in costs and liabilities for Merit Circle DAO in accordance with the terms of the multisig participation agreement.
Below we have compiled a few questions that might be asked after going through the proposal above.
Will not the increase to 5 out of 9 multisig decrease the efficiency of the multisig team?
Requiring one additional person to sign a transaction message before a transaction can be executed on-chain may arguably decrease the multisig’s signing speed and thus the efficiency of the multisig team. On the other hand, the proposal proposes to add two additional signatories (increase from 7 to 9) to the team, which results in additional persons being able and available to sign.
Furthermore, the persons proposed to be on the multisig team are all in the authors’ view considered as highly involved in, and incentive-aligned with, Merit Circle DAO. The authors thus expect that the increase in signatories and required signatures will not slow down the time of execution of transactions.
Why does the multisig need the authority explained in section 2 under “Specification”?
The changes to the set token distributions are, based on the current (smart contract) set-up, not possible to do without the multisigs approving such changes on-chain. Such transfer may e.g. make it possible for MC tokens to be transferred from a person that over time has become less involved and incentive-aligned with Merit Circle DAO’s mission and purpose, to one or more other persons that have become increasingly involved and incentive-aligned, without the DAO incurring any costs or tokens entering into circulation earlier. This should be a net positive for Merit Circle DAO and the community.
Will the multisig participation agreement extend the scope of authority of the multisigs?
The agreement is proposed to include provisions that state that multisigs shall not be entitled to carry out transactions outside of the scope of their authority, as granted to them by MC DAO. However, the authors propose that the multisigs are granted the following emergency right to safeguard and protect the MC DAO treasury (to be included in the agreement):
The multisigs may conduct transactions outside of the scope of authority granted to them pursuant to Merit Circle DAO governance decisions if it is necessary to carry out a transaction or operation to safeguard and protect the assets of Merit Circle DAO and there is not sufficient time to obtain authorization for such transaction(s) through a governance decision, in which case the multisigs may carry out such transaction(s) or operation(s) in a manner that, to the multisigs’ reasonable knowledge and expertise, best safeguards and protects the assets of Merit Circle DAO.
The emergency right should hopefully not be necessary to utilize, but we have all seen (particularly in the recent year) how quickly one must be able to act in certain situations. The right shall only be exercisable for the purpose of safeguarding and protecting DAO assets in the event it is necessary and there is not sufficient time to obtain such authorization through a DAO governance decision.
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