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Thank you @zheerwagen for your ideas and the ApeCoin DAO community for the thoughtful discussions. A moderator will get in touch with the author to draft the AIP in the appropriate template. Once the AIP is drafted and meets all the DAO-approved guidelines, the proposal will be posted on Snapshot for live official voting at: Snapshot
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-Escape
Is holding ETH on the balance sheet impossible for the dAO or can it happen?
This is truly awesome Mantis!! Love the post, and Iām largely aligned with the shared sentiment here that this decision could open up āscaryā ideological questions around the purpose of the DAO.
At the same time, the motivation for drafting this was largely to get an answer to a question thatās been asked by many DAO members.
To be clear, this is not a request to set up the DAO to accept funds, only to fund a feasibility analysis.
Candidly Iām a bit torn on whether to push forward on this given the feedback.
@Mantis @0xSword @ssp1111 @Amplify @adventurousape @Vulkan (and all) - what do you think?
Iām torn as well. While I donāt think the DAO should accept funds for reasons laid out above and do think it can succeed without doing so, it might still be a good idea to see what the process involves.
My main question is what if we look into it and donāt really get any clarity about it? Regulations around crypto, NFTs and DAOs are very limited as of now and itās hard to figure out exactly how to best proceed.
Nothing is impossible but it does come down to āIs it worth the risk for the DAO?ā
The balance sheet lies in the legal entity, which is a Foundation. In theory of course it is possible that the DAO could vote to convert APE into ETH - the Foundation entity could hold other assets than APE (again, in theory). However, there is a clear preference at this time for the direction of the DAO to be only granting out APE, therefore, I doubt it would hold up to Special Council review.
@Amplify had a workaround for this, which is to use the old original $OHM setup to allow ETH holders to buy APE at a discount (without the 825973% APY of course). If this were done in a siloed account that is set up specifically to participate in yield farming, this lets the Foundation get its hands on ETH without earning a profit.
Why I want to do this: If we have ETH, we can get into UniswapV3 APE-ETH pool, which is paying like 100% APR right now. That yield could be used to fund things rather than principal. It takes the DAO to a new level of financial sophistication using defi instead of legacy finance.
That yield gets rolled over immediately into projects to keep it from being classified as profit.
If we asked Cartan these questions all at once, giving the DAO a choice about where to go, and WHY itās going there (just asking Cartan to set up accpeting profits with no direction automatically puts the DAO into more centralized territory), then thatās a much better ask for clarification.
Iām just going to do a proposal for the APE-ETH thing, though; thatās my way of asking. Just waiting weeks for an answer on something theoretical seems wildly inefficient to me.
I believe the general idea around this is great - more clarity is needed everywhere we can get it in the DAO. Iāve had a conversation with @zheerwagen about this as well. Though Iām not certain $100K will get us good clarity either way too, including for the points you mentioned. As I write this a thought came to mindā¦Iām thinking that perhaps a legal memo about all this may already exist within the records of the Foundation.
We got to this structure of only granting out APE funds not because someone woke up one day and decided thatās what the DAO will do; there must have been significant analysis already done by legal that lays out the risks for the DAO to participate in activities other than granting funds. Now that I really think about it, I wouldnāt doubt thereās a memo with risks and recommendations already prepared.
Is the AIP to ask to release any memos regarding legal recommendations for the DAO? Maybe. But even then, I doubt it could be released to the public for the good of the Foundation. Just food for thought as far more than $100,000 was spent initially on legal to set this DAO up for success.
Also, a few millions dollars in revenue is not going to move the needle on a $1.5B+ fund that at one point was at $10B. Maybe the focus in the near-term should be on funding ecosystem projects vs. returning revenue until such time that revenue becomes material to the DAO. At that point, we could comfortably throw millions into solving the problem. Just spitballing thoughts.
Yes, this makes a lot of sense. Iām guessing there is some kind of documentation/memo as well. The community is just not privy to that information.
Maybe the focus in the near-term should be on funding ecosystem projects vs. returning revenue
This is where my thinking is at at the moment.
THIS is the question to ask Cartan, IMHO. Why doesnāt the community have this info? @0xSword also mentioned there are 20 page private reports printed up on every AIP in consideration, but voters never get to see them. Why not? These are the questions to ask Cartan.
Unfortunately that idea does not mitigate the risk to the DAO - the conversion to and/or acquisition of ETH is already a profit generating activity, regardless of future yield.
Donāt get me wrong though, I love the ideas, but this is the kind of push back Iād expect when considering the ultra conservative nature of our current structure. We donāt even have an internal team within ApeCoin DAO yet to serve as long-term planning committee or something similar. Building out our internal infrastructure is likely a better use of time since we have no need for funding given the treasury. Tackle this when we have the people and policies in place to best take advantage of potential revenues.
the conversion to and/or acquisition of ETH is already a profit generating activity, regardless of future yield.
By what measure? Are you defaulting to US law, and do we know that law applies here?
Also, if it is sold at a discount, isnāt that negative profit? Even if itās not, the DAO can pay tax if it has to. Iām not against that if it gives the DAO more money to do its work.
I believe the DARs involve background info, KYC, etc. + legal items that shouldnāt necessarily be made public.
Butā¦still a good question to ask to understand the exact reason.
Yes defaulting to US law because the entire structure is set-up offshore to prepare for a battle with the SEC and/or IRS, should it ever come down to it.
Yes defaulting to US law because the entire structure is set-up offshore to prepare for a battle with the SEC and/or IRS, should it ever come down to it.
If itās offshore, why would this be a question?
And if youāre preparing for a battle with an entity by kowtowing to them pre-emptively, that seems backwards. This is the kind of fearful planning I want to avoid.
Ok, I have my answers. I know what Iāll be doing in the next few days. Everyone else, I hope you have clarity in your own visions. And I hope that vision doesnāt include fear of any sort. Are we here to create a new paradigm or no?
Because the US regulators donāt truly care if youāre offshore, as long as they can put together a case with enough factors that they think they can win against you. All one can do is put up as many mitigating risk factors as best as possible should there be a ābattleā, and structuring offshore is one piece of the puzzle. I wouldnāt characterize the steps taken here as kowtowing, but I do see why youād think that.
In any case, thereās still a non-zero chance regulators try to tie ApeCoin to Yuga, the Founders of which are American so making this entire thing domiciled in the US. Yes thatād be total BS, but thatās the reality we live in. Itās why thereās specific messaging to separate Yuga all the time from the actions of the DAO.
We are trying to create a new paradigm, but clearly there are still boundaries. For example, evidenced by the DAO not taking on revenues, not being able to perform distributions back to token holders for passive income, etc. Unfortunately we canāt simply throw caution to the wind and say this is web3. Having a better understanding of the fears the Special Council, management team, and other partners have, will help to produce more successful AIPs.
Also, if it is sold at a discount, isnāt that negative profit? Even if itās not, the DAO can pay tax if it has to. Iām not against that if it gives the DAO more money to do its work.
Sorry I realize I missed this one. The cost basis is $0 for the DAO for APE (got it for free at the time of issuance). So any transaction, no matter the price, is already in profit.
Having a better understanding of the fears the Special Council, management team, and other partners have, will help to produce more successful AIPs.
I have an understanding of why they might be fearful, and many of those fears are likely unfounded. The SEC projects a great deal of strength, and those of you in the US bubble might give them too much credit. And so far, no one at any of the conventions Iāve been to have been able to really pinpoint what ACTUALLY happens if a DAO gets sued by the SEC.
Suppose the SEC āwinsā over a digital, nebulous DAO. How exactly does it levy punishment? Are those punishments really just inconveniences, such as putting Tornado Cash on a banned list but it can still be freely used by anyone at any time?
I can tell you from not being in the bubble, when a door closes, a window opens. If the US cuts you off, there are plenty of other jurisdictions that would open up. The UAE, Eastern Europe, East Africa, parts of Asia. Now whether you have preconceived notions of those regions that causes you to move away from them is a personal thing. I canāt help that. But I donāt share the view if thatās your perspective.
If Special Council members fear for their personal safety (which is certainly justified considering government thuggery), thatās all the more reason to eliminate the institution entirely and move to a structure more like SpiritDAO from Azuki or any number of other truly anonymous DAOs that are doing great work in the space. Now if ApeDAO doesnāt have the heart to do that, thatās another thing. But the example has been set. But this is also the reason Iām not running for any Special Council seats. It requires KYC, which means the entire spirit of this DAO is already moving towards centralization and compliance with legacy institutions. Thatās fine, too, because great things can still be built from its funding. But thereās no reason that Bored.eth should have to KYC to get a Special Council seat, even if he wants to/agrees he should have to. It should be a choice.
So there are discussions to be had, but I canāt be put aside by nebulous general fears. Or just āleaving it up to the team.ā No, everyone has a responsibility to pull out their inner lawyer and see whatās really up here. There is no way that a digitally based international DAO needs to overcompensate towards the rules of a US based regulatory body. Did I say anarchy? No. I said overcompensate towards, which is whatās happening, and itās stuffing innovation.
I appreciate your discourse, and I doubt I can say anything to fully change your mind. However, I would like to inform that certain risks are definitely not unfounded and much of what you laid out is not so simple in practice.
- Regarding SEC punishment, declaring APE a security would immediately remove it off of US exchanges - price would plummet. APE could survive, but we are dead in the water thinking this would thrive on DEX trading alone. Furthermore, this is far from an inconvenience if we are looking at mass adoption. Closing doors to the US market is not a reasonable option - full stop.
- Without this legal wrapper entity, participants in the DAO could be individually responsible for the actions of one another (general partnership law). Look at Ooki DAO where voters of the DAO are being named specifically in the lawsuit (doxxed or undoxxed). It doesānt matter where someone is operating, US regulatorsā long arms will reach if any US persons are involved. The SEC is even trying to claim jurisdiction over Ethereum because Ethereum nodes are āclustered more denselyā in the U.S. than in any other country.
- Special Council are absolutely putting themselves at risk personally, particularly the present council who could be thought to āleadā ApeCoin at inception. Given the scale of this DAO, they are needed.
There is no way that a digitally based international DAO needs to overcompensate towards the rules of a US based regulatory body.
- The genesis of this DAO was very centralized, unlike anons in the space contributing to something like Spirit DAO (though if regulators really wanted to turn their attention, weāve seen they could doxx just about most any wallet they want - people are not really as careful as they portray). There is clearly a direct line to US founders of Yuga where this all began, plus this is operating at a far greater scale.
I completely agree with stuffing innovation, but itās not the DAOs fault. Thatās US regulators not providing clarity at this time. Finally, letās be honest here, no one is going to entrust a muli-billion dollar ecosystem that they have invested hundreds of millions of dollars into just to throw the keys to full decentralization immediately. But itās terrific that we are along for the ride since inception, with the prospect of going more towards decentralization. It wonāt be an overnight process so we need to work under the constraints as best we can. You may believe it is overcompensating, but I believe it is being prudent.
Blockquote
I want to just chime in here quickly and note that every grant requires KYC. The Bluetail grant request will require you to KYC, even if your companies are requesting the grant.
Interesting discussion here.