DAOGovernance

From https://threadreaderapp.com/thread/1536734104422522881.html (CategoryCopyrightRisk)

Uhh… a massive DAO just voted to “refund” one of their investors who was owed a 30x return ($5M+)

This is an insane story that impacts all builders in web3 and as a founder I need to speak out

Merit Circle DAO vs YGG 🧵

This proposal popped up in the governance forums:

“aims to cancel YGG’s SAFT, refund their initial investment, and remove their seed tokens”

They wanted to cut YGG out before the unlock date when they could theoretically start selling their tokens

Members took a look and overwhelming said “lol fuck em”

(WHAAAT😵‍💫😵‍💫😵‍💫😵‍💫😵‍💫)

Neither the original post nor the majority of comments made any mention of the fact that this was a contractual breach

there was one dude who popped in to mention that it would destroy their reputation and get them sued

literally no one cared

Meanwhile the investor in question, @YieldGuild aka YGG, made a post basically saying:

““UH WTF. This was an investor agreement. We’re not required to give you anything except money. You can’t just change the rules and push us out.””

And the core team (legally organized as a company called “Merit Circle Limited”) commented on the proposal saying:

“We would like to honor all agreements, however… the DAO holds the ultimate power”

…I bet those investor agreements signed by “Merit Circle Ltd” say otherwise

Despite naysayers the idea was popular, so it was put to an official vote and IT PASSED

106 for. 16 against 🫠

Immediately a new proposal popped up, the core team was trying to make this work:

“How about we at least allow them to take a reduced return on their investment”

(This would be paying them ~30% of what they were owed)

The proposal passed unanimously (???) and it was decided that the DAO would buy out YGG at a token price of $0.32

The token was, and is still is trading around $1.00 on the open market

They got $1.75M instead if $5.2M

absolutely shafted

I am not a member of this DAO, nor super familiar with YGG, but it’s hard to see this as anything other than a horrendous stain on the reputation of web3

We cannot build the future we want without the help of the outside world.

This is a nascent industry, still struggling in many ways. We need all the help we can get.

Merit Circle DAO may not need outside support anymore, but many other projects do

And now they’ve made it harder for earlier projects to get the capital they need.

Investors might rightfully ask “what if your DAO decides to fuck us”

The author of the proposal talked about the need for decentralization saying:

“Decentralization is about freedom. The freedom to do as one desires, unbound by anything and everything.”

I strongly disagree.

Decentralization is not about ruthless self-interest.

It’s about collaboration.

And if we want this industry to continue to thrive, then we’ll need to collaborate with the off-chain world too.

That includes honoring legal agreements with investors

(See the proposals here:

MIP-13 was the first vote to renege on the agreement

MIP-14 was the reduced return compromise)

vote.meritcircle.io/#/

Perhaps the vote would have gone differently if the community had been educated on the nuances of the investor agreement with an educational tool like @101dotxyz

they could do token-gated voting based on badges issued via quizzes

@mentions @101dotxyz Some nuance, from those informed on the issue:

1. YGG was subject to a 4yr vesting schedule, so it's misleading of me to say that they were "owed" a 30x return. They would not have been able to cash out of their position completely until the vesting was complete.

@mentions @101dotxyz

1. The investor agreement transferred authority of the tokens to theDAO, so "Merit Circle LTD" was apparently not legally on the hook.

(I'd love to learn how such a transfer could be accomplished if the DAO is not a formal legal entity)

h/t to @MichaelTant3 for the info

@mentions @101dotxyz

@MichaelTant3

1. YGG has formally agreed to the compromise voted on by the community (a buy out at $0.32)

Seems like this issue won't go to court.