The LAO joins forces with Moloch DAO and MetaCartel to Begin to Standardize DAO-Related Smart Contracts

Moloch DAO, OpenLaw, and MetaCartel have been working on extensions to the initial Moloch DAO code in order to power next-generation LAOslimited liability autonomous organizationswhich would enable DAOs to engage in a greater range of for-profit ventures.

Moloch DAO started with “angelheaded hipsters burning for the ancient heavenly connection to the starry dynamo in the machinery of night.” It brought forth into the world the first comprehensive set of organizational primitives; simple smart contracts that enabled groups of people to pool assets, collectively vote, and direct assets to third parties.

In many ways, Moloch DAO frightened the Ethereum community out of its natural ecstasy, with a team of talented developers who “broke their backs lifting Moloch to Heaven.”

The LAO — in large part — stands on the shoulders of Moloch DAO and the OpenLaw team has been working with the Moloch DAO team, along with MetaCartel Ventures to introduce a range of extensions to the original Moloch v1 smart contract designs to support revenue-generating DAOs.

Today, we’re pleased to release these extensions for feedback, helping to create additional organizational primitives that will live on the growing swarm of financial and legal projects being built on Ethereum. These extensions, along with the original Moloch DAO code, are poised to become ERC-like standards for building DAO-based organizations.

Extensions to Moloch DAO Codebase

The Moloch v2 codebase will be shared among OpenLaw LAOs, Moloch DAO, and MetaCartel Ventures.

It represents the product of iterative collaboration following the initial v2 release in August 2019.

Specifically, special attention has been given to tailoring Ethereum functions to map with the operation and distribution of investments. Further, these enhancements have allowed us to collect important notes on legal and other structuring considerations for LAOs that we will release in the coming weeks.

Version 2 ChangeLog

The following is a brief description of the material Moloch DAO V2 upgrades, which includes multi-token support, token whitelisting, functions to address emergency exiting of members, sponsored proposals, guild-kick functionality and an extension for loot tokens:

Multi-Token Support

With Moloch DAO v2, a variety of tokens may be deposited into the Moloch guild bank, making it possible for DAOs to (i) receive member capital contributions in different stablecoins and other digital assets, and (ii) manage other forms of tokens (including utility tokens and tokenized securities).

Further, payments for services and funding may be requested directly in the proposal process (`paymentToken`), providing an alternative to the v1 reliance on grantees liquidating their Moloch voting shares in order to claim capital.

In this manner, DAOs will be able to make venture investments, as funded accounts won’t receive voting control in the interim of their claiming funds from the guild bank.

Token Whitelisting

V2 provides a token whitelisting scheme so that only pre-approved tokens can enter into Moloch DAO escrow. Multi-token support (described above) introduces the risk of an escrowed token freezing the proposal queue in the event that its transfer functions do not operate as expected on proposal processing. The whitelist addresses those concerns.

Emergency Exit

V2 also introduces a protective check on proposal processing: after an `emergencyExitWait` period has passed, a stuck proposal will automatically fail through `emergencyProcessing,` which will return escrowed contributions to a proposal applicant.

Sponsored Proposals

V2 introduces a new flow for proposals: anyone can submit a proposal to DAO, relying on this codebase, which may become a subject for votes if successfully sponsored by an existing DAO member.

This upgrade addresses the recommendation from Nomics Lab audit report — which concerned the safety of approving ERC-20 token deposits — and also allows for more potential access to DAO membership. With these changes, anyone applying to receive a grant or funding from a DAO’s guildbank can “get their foot in the door” by submitting draft proposals without the need for an initial sponsor.

Guild Kick

V2 implements a `GuildKick` function to forcibly ragequit a member from a Moloch DAO, eliminating their voting stakes but returning their contribution tofair share the DAO’s of guild bank capital.

The original Moloch DAO code did not support the removal of members on proposal votes and these new functions will hopefully enable more participatory DAO structures that may fall outside the scope of securities law.

Loot Tokens

V2 also contains an extension for “Loot” balances for DAOs uncoupling members economic and voting powers. The Loot balance uncouplling

members, which represents burnable economic stakes over the guild bank, which exist separate and apart from a member’s their voting shares.

In this manner, a potential member might be able to make outsize capital contributions and retain a fair economic share over a Moloch DAO without also skewing their voting weight and the incentives of other members to participate.

Additional Extensions For LAOs

In conjunction with the Moloch DAO and MetaCartel Ventures design teams, OpenLaw has built further additions for The LAO, which are focused on providing additional security and compliance-related functionality through the use of member-managed admin functions.

Administration for LAO Onboarding

The management of tokenized securities will likely require certain real world transactions requiring the need for an administrator to assist with the conversion of any proceeds from a sale back into digital assets.

With challenges at the edges of managing equity tokens and fulfilling investment contracts with Moloch DAO, The LAO will likely utilize a multisignature-controlled admin role to complete certain authorized transactions on Moloch DAO and manage off-chain operational tasks, with the primary initial use being to add the founding “Summoning Circle” of The LAO founders through a combination of KYC and an orderly auction for shares to be sold to accredited investors using Ethereum smart contracts.

In the near term, we will maintain a previous version of The LAO smart contract draft that contemplated additional administrative functions for public review here to illustrate alternative approaches. During the course of our discussion and review with the Moloch DAO and MetaCartel Venture teams for the v2 upgrades, we have gladly been able to reduce and consolidate more operational functions for The LAO membership determination.

Thus, while there will be an initial, albeit modest, administrative centralization in determining and de-risking the initial makeup of The LAO under regulatory constraints for our desired legal structure, we will benefit from the orderly, programmatic membership proposal process of Moloch DAO v2 after this founding Summoning Circle is added. The LAO will therefore self-determine its economic future and risk parameters for membership as it ventures forth, with OpenLaw software serving to streamline fundraising transactions with legal records.

Hybrid Security Tokens

Ethereum token standards have evolved to better accommodate the core “security” transfer-restriction and profit-allocating mechanisms necessary for regulated forms of token investments. Following our discussions with the Moloch DAO and MetaCartel Venture teams, we have been hard at work formalizing the open-source standards for “Simple Restricted” and “Funds Distribution” tokens as models for LAO ventures, combining the functionality of ERC-1404 and ERC-2222. The product of this research, the “Simple Restricted Funds Distribution” Token, will likely be implemented on OpenLaw to service The LAO and related venture startups.

Other Methods for Membership Onboarding

It has been observed that Moloch DAO smart contracts largely rely on a “group of friends” style membership admission process. In this fashion, candidates must be sponsored by an existing MolochDAO member in order to make their membership proposal, regardless of their ability to provide work or other useful capital.

Social verification is indeed a powerful and tested onboarding tool for DAOs, providing Sybil-resistance and an intuitive check on quality membership.

However, this is not to say that a more fluid, capital-driven membership process should not provide useful examples, for Moloch DAO and other voting smart contracts that control digital escrows.

To provide a range of options and supplement our tests, we have introduced a recut version of the original v1 Moloch with a simple `joinMembership` function and other conforming changes from our earlier vmLAO implementation to demonstrate a template for membership buy-in on Moloch DAO that might be modified with admin whitelisting or supplemented with social verification.

As discussed above in the section detailing our administered functions, The LAO will itself use KYC to screen the first 100 members, and conduct an auction of shares that will be formalized by our administrative LAO summoner agent. We will provide more details on The LAO auction process in the coming weeks.

Learn More

To learn more about The LAO, sign-up and continue the conversation on our Telegram and follow us on our Twitter. We are looking for input and feedback to make sure that we can take the next step in the evolution of DAOs!

A For-Profit, Limited Liability Autonomous Organization, powered by @OpenLawOfficial.

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