Is MakerDAO interested in allowing a RWA budget to flesh out ideas associated with DAO’s and Single Purpose Entities?
Can we manage RWA on-chain in a permissionless manner?
- Can legal entity DAO’s (“LAO’s”) be created using Moloch frameworks?
- Can these LAO’s be designed to hold assets similar to how a SPV functions?
- Can “dai” be minted against these assets?
- What would “on-chain” remedies look like against RWA collateral?
- The RWA brainstorm was highlighted in an earlier post here and further fleshed out in blog post here.
This is a temperature check to see if MakerDAO is willing to earmark some RWA funds to bootstrap building the proof of concept of having legally formed DAO’s, which can own an RWA, that is represented by NFT’s. The Single Purpose Entity would also develop ideas and frameworks to allow a SPV DAO to have shifting governance over a pool of assets using the Moloch v3 (unaudited) framework discussed in Baal.
There are enormous advantages in the ability to have “originators” or individuals form single asset/single purpose DAO’s that can be governed on chain and “resolved” in a permissionless manner. In light of the new “Clean Money” proposal, there would be clear use cases to finance green energy and carbon capture. For example, these SPV’s could own solar farms, methane digesters, carbon offsets and credits, organic transition financing, sequester carbon through land use, etc. Agriculture finance, which is my specialty, will need a wide range of investment into ESG goods, which are often difficult to provision using traditional financing. I see specific needs in the previously mentioned areas, and each of these would be good candidates to place the real world assets into the SPV to finance.
Funding Request - “The Ask”
It is likely that the people (lexDAO, RealDAO, Moloch Mystics) working to build these primitives will continue to build with or without a grant, but it is clear that a signaling and morale boost would be much appreciated as this would be infrastructure core to the decentralized future of MakerDAO. All the aforementioned DAO’s have a strong history of providing open source and available goods to the public commons.
LexDAO - Repository of Legal Engineering Primitives - LexDAO · GitHub
Medium LexDAOism - open sourcing ideas and thought leadership in the legal and organizational development space.
RealDAO - Proof of concept that can be extended easily to manage assets from a DAO. The following LexDAO primitives are stitched together to demonstrate the pattern of onchain asset control and management
- LexSummoner - to easily and quickly generate DAO native legal shells that would provide cognizable benefit to house assets
- RealNFT - NFT minting contract with cognizable advantages as it is permissioned to a “DAO” to control the functions, ownable, whitelistable, burnable, pausable. Current version here.
- Dispute Resolution - May be part of agreement between the SPV LLC and the intermediary that is providing DAI or more “at risk” lenders of first resort tranche.
- LexLocker contract - Used to lock the NFT or perhaps proceeds and payments into a double sided (buyer/seller) escrow smart contract. There are no intermediaries unless either the buyer or seller hails a resolver, locking the NFT for swift resolution.
Pros and Cons
- Using SPV mechanisms based on Moloch are much easier to cordon off and manage for regulatory and systematic risk as each can be a legally cognizable entity organized as a legal shell and DAO.
- Legal simplicity is that they would be governed by organization laws of states that have a long history of using the LLC frameworks.
- On-chain mechanics allow real time monitoring of the real assets and digital entitlements. The dual legal frameworks would allow traceability and transparency to follow the chain of title. For example, the deed and the title report could be put into the NFT’s metadata.
- Flexibility - Obviously the DAO model above would be useful for a wide range of assets. Most assets can be legally held in an LLC organization, and through code deference the DAO smart contract can be programmed to manage the asset in the form of an SPV. In other words, this model should be extensible to other asset classes.
- Regulatory - It may be difficult to navigate in the US (and other jurisdictions) as there is current regulatory uncertainty. If the distributed ledger world is saddled with it’s own set of onerous regulations, it may make sense to just follow a traditional finance path.
- Smart Contract Risk - Obviously with any custody of assets of value, there are questions associated with smart contract risk, audits, and recovery. These can be mitigated by using trusted frameworks, audits, and legal disclaimers.
15K to develop single asset operating agreement and legal forms based on Wyoming LLC or Delaware, LLC state organization code.
20K for Smart Contract specifications of Baal to allow for governance shifting of control based on event of payment default
5K for management
10K to LexDAO upon deliverable of working SPV model
- This polling request is to receive feedback and hopefully the DAO’s support to build out a hybrid decentralized SPV model as described above. If support is received, then we will incorporate the feedback into specific milestones.
- As can be seen in the linked blog post, many of the steps have already been accomplished as a proof of concept. Step two, would be to incorporate MkrDAO feedback into making the model customized and fit their procedures.
- Provision specific milestones into the Special Purpose Fund (if approved)
- Further refine the specific asset use case into a collateral request using the SPV framework. Methane digesters appear to fit the ethos of the DAO, are very capital intensive and are very able to separate from the real property and finance separately in a SPV, with offtake and ontake agreements.
- A simpler alternative to methane digesters would be to simply make loans on conservation lands, though the coupon that these lands are able to generate is considerably less than that of higher intensity projects such as methane digesters.
The fund would be permissioned according to the requirements of a Special Purpose Fund (“SPF”) MIP55 to ensure progress and sufficiency of the deliverables and to prevent scope creep.
Additional thoughts and comments welcome in the thread below.
Would the DAO signal a 50,000 DAI SPF (with conditions) to signal boost and build decentralized infrastructure?
Poll Closes 11/11/21 at 12 GMT