Quarterly Recap Rook Q3 Preview: Governance & Organizational Design for DAOs

Rook Q3 Preview: Governance & Organizational Design for DAOs

In this community call, Jason and Guard discuss the challenges of forming a DAO and the legal implications of governance structures.

Key Takeaways

  • Jason works on governance and organizational design. He focuses on governance processes, getting the DAO caught up on executing in-flight work, and looking ahead towards the next stages. Jason recently completed a Ph.D. in organizational and institutional sociology, with a focus on how people organize to implement blockchain projects.
  • Guard is a lawyer by trade and a legal academic. His specialty is in non-corporate forms of group organization, which is particularly applicable to crypto today.
  • When Guard first joined the DAO, there was no explicit legal structure in place.
  • One challenge of reforming a DAO is honoring previous promises while still being able to move forward with change.
“What I didn't appreciate until trying to think about it as a whole, is how sensitive individual pieces become to changing other pieces. So if you change how voting happens, for example, but you don't change how the Sophons work, then you potentially create an attack vector… or you create something that could become sort of a legitimacy trap or could have all sorts of other problems.” – Jason
[~10m]
  • Governance is a complex system, and there is no one-size-fits all answer. Learning from others across the industry helps identify pitfalls.
  • Translating the desired governance process into a defined legal structure is a challenge. The crypto industry currently underestimates the need to design the legal frameworks that are needed by DAOs.
  • Jason and Guard are designing the legal structure for Rook from scratch, rather than picking existing ill-fitting frameworks “off the shelf.”
  • Arbitrary decentralization, in which every single change needs to be brought to a vote, is not optimal. Hybrid systems that allocate power and decision-making to defined roles are more meaningful.
“I think what we're looking for is more clearly articulated actors — clearly articulating what their powers are and what they're accountable for and to whom — and thinking about where are the checks and balances in the process so that no one actor has too much power.” – Jason
[19m 03s]
  • Identifying asset ownership, accountability, and decision-making abilities are some of the challenging questions that need to be addressed on the legal side of a DAO.
“...of course the structures that I design have to support and match the ones that Jason is working on. So if he comes up with a new brilliant governance structure, I have to come up with the corresponding legal structure that supports that, so that there's… actual teeth in the governance process.” – Guard
[~31m]
  • Operating a DAO is particularly challenging due to cross-border jurisdictions. Designing a legally defensible structure is part of the work Guard does.
“My arrival in the organization was a little bit like going into a building site. You can see there's a lot of really good bricks around, but you need to put them together. And the process of doing that in a way that supports the kind of structural designs that we want crypto to have and to support the governance structure that we want to have… it's a big overhaul, basically.” – Guard
[52m]
  • The DAO governance reform process is largely an invisible behind-the-scenes effort, but it will ultimately give token holders more power and improve the structure of the organization.
  • KIP-0 started the governance reform process and defined the base structure of the DAO. Moving forward, the monolithic KIP-0 will be broken out into three separate KIPs which will allow more focused discussion on individual aspects of governance. Templates will be used to facilitate a clear thinking process for proposals.
  • The three KIPs will be: templates categories, Sophons, and an overarching governance process KIP that will define the various actors in the process, as well as the lifecycle of a proposal.
  • After the reform, the governance process will look different for the average token holder. Most notably, the new KIP templates will force more well defined proposals.
“We are playing an infinite game, and you don't win an infinite game. You just play it in accordance with your values. […] But at the same, from my point of view… the law exists because there are bad actors. You only make a contract for the day that somebody is going to breach it.” – Guard
  • The DAO is looking for community involvement in the DAO process and new governance proposals. Guard would like to hear the community's questions and concerns, and it may be prudent to have a regular “legal hour community call” as a venue to ask these questions.

Transcript

[00:00:00.070] - Deetz
Awesome. All right. Well, we're just after the top of the hour. Really excited to get this started.

[00:00:06.190] - Deetz
This is our first of a short series of events to kind of open the door up to everybody at the end of the quarter here. So really excited to be kicking this step off.

[00:00:19.580] - Deetz
This first session is going to be focusing on governance, organizational design, and DAOs. We'll be speaking with the experts who are reforming both today here at the Rook DAO. So let's go on ahead and dive right in. I'm going to quickly just allow these folks to introduce themselves that will be doing the majority of speaking today. Once we get through their bits of planned content, we'll be able to open up to questions in the audience. If you can see now... you're probably not able to unmute. If you're going to ask questions -- if you want to ask a question -- please post and tag me in the voice chat text channel above this, and I will unmute you and allow you to ask your questions. But this allows for screen sharing and things that our stages previously had not allowed. So just getting that little bit of formality out of the way.

[00:01:15.270] - Deetz
Let's dive right in. So with me kind of co-hosting today, we've got Jason and we've got Guard. So Jason, why don't you kick us off -- quickly introduce yourself, what you're doing here for the DAO, and then we'll hop over to Guard.

[00:01:30.050] - Jason
Okay, great. Well, hi everyone. Great to see so many people here. My name is Jason, I go by Jason W. I guess here I work on governance and organizational design along with Guard. And my focus has really lately been on the governance process itself, on getting us caught up on executing on what we already have, and thinking about what the next stage is.

[00:01:56.960] - Jason
And I come to this from... I recently completed a Ph.D. in organizational and institutional sociology, and focused within that on how people organize to get blockchain projects implemented. So the opportunity to be able to put that research into action has been something I couldn't possibly pass up. It's been great. So that is me.

[00:02:21.530] - Deetz
Awesome, Jason. Thanks a lot. Guard, you go on ahead and introduce yourself as well.

[00:02:27.050] - Guard
Thanks deetz. So I'm Guard. I'm a lawyer by training; also been a legal academic and this sort of thing. My specialty, particularly academically, has been in... non-corporate forms of group organization or enterprise organization. So that's to say the stuff that people used to do much more of before companies were a thing. And of course that dovetails very well with the stuff that's now happening in the crypto space.

[00:02:59.810] - Guard
I've been in crypto for a long time, but it's only now that I've gotten in to see the engine room of various DAOs... I also thought that this opportunity to put some of that stuff into action was too good to pass up -- particularly in a project with a team as talented as this -- and I feel privileged to be working with people like Jason on this stuff. So in a way, we do the same work, but we work from different points of view. So he works more on the actual... governance and, as it were, internal side of it. And I look at the legal structure of the organization and how those two things support each other. I also have a Ph.D., but who's counting.

[00:03:49.650] - Deetz
Man. And if you hadn't been around too often, you'll typically see Jason leading our calls that happen on Wednesdays around the governance workshops. And we actually did an AMA with Guard a few weeks back. That's on our YouTube channel as well -- talking about all things in the legal space around crypto in the crypto industry. Both of those things have been very awesome to check in on, and it's been really an absolute pleasure working with the both of you guys. But you know what? Let's just quickly introduce... this topic today about governance, and let's just open it up to one of you two. Talk first about your impressions of the Rook DAO governance and organization as it stands today. So either one of you hop on.

[00:04:39.330] - Guard
Maybe I'll start this time, to give Jason a chance to have a sip of tea. So starting off when I first came in, the DAO was like any other DAO, which is to say there wasn't an explicit legal structure in place. Now, the myth that's going around in the crypto sphere is that that means that there is no legal structure. And of course that's not true.

[00:05:08.830] - Guard
So there is a kind of default structureless structure that the law interprets these kinds of structures as, which is fine... but that structure is really called an unincorporated association. And that's not ideal for a big sort of international business structure like a DAO. It's actually more common in things like garden allotment associations. So, like, you have a piece of land and you're not quite sure how to divide up the allotments without giving everybody else title in the land... you don't want to portion off and sell little bits of the land. So what you do is you create this organization that is very informal and that governs the whole plot of land, and so on and so forth. Same thing happens with... very small charities.

[00:05:58.450] - Guard
If you want your local corner shop or your pub to be supported, then you start an unincorporated association to do that. It's very, very good for those things (although legally very strange), but not very good for the kinds of stuff that a DAO does. We are multinational, multimillion dollar -- all sorts of reasons for why you want a bit more of a legal structure there. So it's been interesting looking into that. And unincorporated associations don't really come up in a lot of legal practice generally, so in a way it's interesting to see.

[00:06:42.770] - Deetz
Did we lose you?

[00:06:56.010] - Jason
Yeah, I can jump in while Guard is reconnecting. Yeah... it's so interesting to hear Guard talk about this because it sounds like we both came at this from different perspectives, which is exactly what we needed to do. So in terms of where the governance and organization are now, my hope is that it's different from where it was a couple of months ago, and it's certainly different from where it will be a few months from now. But I would say that in thinking about governance, when I came in, I thought: okay, this is going to be a great research project. You get to think about: what would the ideal be, and how can we work toward that? And it pretty quickly became apparent that that was a little bit naive. Because of course there's an existing governance process that needs shepherding, and there were still proposals that needed to go through, and there were still things that needed to happen. And so it was a question of first understanding what needs to happen within the process in order to keep it working now, and then thinking separately about the future, and then trying to bring those two things together.

[00:07:59.510] - Jason
And I think that's one of the reasons that Guard and I have been working... on parallel tracks that are now going to start converging: because there were the practicalities to deal with first, and then you get to have the bigger thoughts about the future.

[00:08:17.170] - Deetz
Well, unfortunately... We'll try and get Guard back in on here. But while we're waiting, Jason, why don't you talk about some of the challenges in designing DAO-based governance?

[00:08:35.630] - Jason
Yeah. I would say there are two. The first one I alluded to... was one that I didn't appreciate until I got started in this. And that is: you kind of have to do honor to what's been promised before... you have to be really cognizant of what the organization and the community have been through, and what they actually need, as a result of having had those experiences. And that can be especially challenging when you weren't there for those experiences.

[00:09:03.480] - Jason
So there have been some moments over the past year, even though Rook is... in traditional organizational terms, it's two years old, but in reality -- in DeFi terms -- it's been around for awhile. So a reasonable number of things have happened. And past events leave a residue in the community; they can create some mistrust... and then some things are very trusted. Getting a sense of what those things are so you can respect the community, and respect the team and all the work that's been done, I think, is a major challenge that certainly wasn't clear to me from the outside before I stepped in. And I think another challenge is thinking about... it's so tempting to think about things as having sort of nice, neat building blocks, and we have a process, and this will happen and that will happen.

[00:09:51.170] - Jason
And then we will reorganize the Sophons and lots of stuff we can talk about tomorrow in terms of the specifics. But what I didn't appreciate until trying to think about it as a whole, is how sensitive individual pieces become to changing other pieces. So if you change how voting happens, for example, but you don't change how the Sophons work, then you potentially create an attack vector, or you create something that could become sort of a legitimacy trap or could have all sorts of other problems.

[00:10:23.050] - Jason
...there's a great political scientist who studies complex systems who said we can never do one thing -- we can never do only one thing -- and that's, I think, one of the biggest challenges with governance also... when you're thinking about things that have to be spread across so many different kinds of actors, you have to bear those trade-offs in mind. But I would also say it is excellent to have lots of different kinds of actors, because one of the things I see looking out at the space is a lot of challenges that are coming from trying to oversimplify what governance will be, and look to, let's say, having delegated voters as the solution to all the problems.

[00:10:59.000] - Jason
And now we're seeing a lot of cases where those things don't work. So I think one of the challenges is also being cognizant of what's happening in the world.

[00:11:10.810] - Guard
Yeah, go ahead. Thanks. Yeah, I'm back... what a time for my internet to start acting up... I hope it doesn't continue doing that. Which is funny because I've been on calls all day as well, so it's not like... no problems before this public forum that's actually recorded. But good.

[00:11:31.620] - Guard
So I totally agree with those two sorts of main points. I think in the legal slightly more formalistic atmosphere, they translate into slightly different sorts of things, but it's essentially the same sorts of points. So... the kind of stuff that I need to worry about are things like: what's our starting point, and what's been promised to the community? That's only true. And how do we translate that into a legally... valid and defensible structure that nonetheless is as close as humanly possible to the way that things are actually run, and the way that the community wants them to be run? And that's not always an easy thing in terms of structuring a legal organization. There's actually a lot of pieces that are all kind of in the default settings when you just start a company. So things like limited liability, or board structure, or who gets to appoint the board, and this sort of thing.

[00:12:45.200] - Guard
So there's this handy sort of off-the-shelf kind of default structure that everybody uses because it's so easy -- because it's all sort of worked out and... in the default settings. But when you start designing your own organization from scratch, it's actually a lot harder, because you don't have these default rules in place. So what you have to do is: you have to work out how is it that we get something that looks a little bit like limited liability so that our contributors are protected from... so that they're not personally liable for this sort of thing unless it's appropriate for them to be. So like unless they have a personal, let's say, contract with the DAO or something.

[00:13:28.570] - Guard
At the same time, how do you make sure that the organization that we have is something that more or less looks the way that the governance process looks like? So how do you give, let's say, token holders a vote that's... legally recognizable or recognized... you know, these sorts of things. So it's a little bit difficult to... let's just say that I'm glad that I have that Ph.D. and that I specialized in non- corporate forms of group organization, because it's... frankly, I don't know if I would quite be enough of a lawyer to take on this project without it.

[00:14:07.570] - Guard
And it's nice because you don't normally get to do this kind of academic stuff in business. You just pick up a company and you do whatever it is that a company does. So there's certainly a lot of challenges like that.

[00:14:20.190] - Guard
I think it's also fair to say that the space as a whole doesn't quite appreciate all the legal niceties or fineties that come with this kind of design work. So it's not always easy to come up with a way that... directs our liability streams in the right way.

[00:14:43.300] - Guard
So if you imagine you're in business where... [what] you're actually doing all the time is undertaking new liabilities all the time. Whenever you enter a contract, whenever you do anything, there's also... if you're operating in a regulatory environment or something, there's a kind of liability structure that comes with it. And your job, in sort of humorous phrase, is: if you're running a business, your job is to get more liabilities. And my job as a lawyer is to make sure that those liabilities come in the form and from the direction that we want them to come from. So it's a little bit like designing a... flood system, or... you've got a floodplains where you can direct your liabilities onto, or you've got your canals that can sort of drain the floodplain afterwards, or whatever.

[00:15:37.290] - Guard
But if you don't have any of this in place, then what happens is the whole city will just be flooded, and everybody's bedrooms will be ruined. So those are the kinds of basic challenges that, as a lawyer, from an organizational design point of view, I have to worry about. And it's frankly not very widely discussed in the crypto space. I think there's a lot of myths around getting lawyers involved, and having to work with liabilities, and this sort of thing.

[00:16:07.230] - Guard
And of course, it's not that the law will... ignore you just because you don't have an organization. It's basically the point. And making one from scratch is difficult, particularly because we want to be true to the crypto kind of dream of a different kind of organization where more people can get involved, and people can be more... engaged in governance process personally just by holding the token. So, yeah, there are certainly challenges to it. It's an unusual kind of organization we have as part of the project that me and Jason are here to run. We've taken quite an ambitious approach to it. So we're not just picking up the kind of off-the-shelf versions that everybody else is doing: hey, let's start a company in the Cayman Islands and avoid taxes and whatever... no, we're actually designing this stuff from scratch. And it's fun, but it is challenging.

[00:17:15.870] - Deetz
You've hit on something here. We're a very kind of unique type of organization. So thinking about DAOs and the 'D' in DAO for decentralized, why don't both of you to speak to: what do we mean by decentralization here? Jason, you want to take that first?

[00:17:42.670] - Jason
Sure. Yeah, I'm happy to... from the perspective of thinking about being in the weeds, thinking procedurally about the KIP process itself -- the main body of governance, but certainly not the totality of governance... when we think about governance, as we think about what that process is, I think there are a lot of... decentralization ends up becoming a cover word that... absorbs a lot of sins. So a lot of things that aren't necessarily decentralized. Maybe they're just arbitrary. Or it could be that there's not a balance of powers... there are lots of ways to think about what is being decentralized that don't necessarily involve every single thing going for a vote before every single token holder.

[00:18:33.510] - Jason
And I think that one of the things you see a lot of in the space overall is other projects... moving to structures that we started talking about way back in KIP 12 where we think about hybridity -- where you've got spaces for action that are carved out for specific teams, for groups, for labs in general, versus what happens within the community itself. And so decentralization, I would argue, is maybe not the right word.

[00:19:03.600] - Jason
I think what we're looking for is more clearly articulated actors clearly articulating what their powers are, what they're accountable for and to whom, and... where are the checks and balances in the process so that no one actor has too much power. That, I think, is... it's a more difficult and potentially hazy definition of decentralization. But I think that's the thing that we're working toward, and that will ultimately be a more meaningful form.

[00:19:32.360] - Deetz
Guard: thoughts?

[00:19:36.850] - Guard
Oh, yeah, plenty. I just wonder how long you want to make this call! But yes, I once again agree with Jason. I couldn't agree with him more.

[00:19:47.290] - Guard
So decentralization is often thrown around as this kind of a word that more obscures than makes things clearer. It is something that we are striving towards, and of course committed to. We're all here, we're all into crypto, and in some ways sharing that sort of dream of having a different kind of organization where, like I said, more people are able to participate more fully.

[00:20:16.890] - Guard
But of course it's not clear what we actually mean by decentralization. And there's some blog posts of prominent crypto people, but even they don't really get into the kind of the meat and the detail of it -- or if you're a vegetarian, you know, the mushroom of it. I think of it as something that has a lot of various axes, so that you can decentralize the kind of resources or the system that you have. Like, for example, the fact that we have this trading app. Is it possible for anyone to come and kind of plug into it, or is there some kind of gatekeeper functions there? That's one thing about whether it's one sort of vector of decentralization. But then organizationally speaking, there's a bunch of them.

[00:21:09.450] - Guard
So things like: who actually holds the assets that we hold? Who actually owns them? Aside from that, a slightly separate question is: who has the ability to actually use them -- or "pledge" them is the legal term. So who has the ability to... make contracts on behalf of the DAO pledging our assets? And that's, funnily enough... a separate question from who actually owns them.

[00:21:42.290] - Guard
Things like who's accountable to whom. If you do have some kind of central committee or labs or CEO or something, who is that person accountable to? Or who are those people accountable to? Then there's of course things like decision making power generally -- and not just the power to make decisions, but... what decision making functions are most optimally distributed to whom, right? And this is... the stuff that Jason was talking about.

[00:22:16.270] - Guard
So sometimes it's not sensible to have every token holder vote on every little thing that happens. It's suboptimal because people may not care, and it maybe takes too much of their time, and then they might miss the actual important votes. (Or whatever reasons). There's a lot of literature on this. So it might make sense to concentrate some aspects of the day-to-day decision-making onto a committee -- or even onto a single person who's empowered by the DAO -- as long as that person is accountable in some toothful way (whatever is the opposite of toothless)... some real substantive way to the token holders.

[00:22:58.210] - Guard
I think that is already quite a decentralized method of doing things. And you know, this sort of thing -- who gets to design the processes by which something is made more or less decentralized -- these are not obvious questions, and all come up all the time when we do our design work, even in the legal side. Because, of course, the structures that I design have to support and match the ones that Jason is working on. So if he comes up with a new brilliant governance structure, I have to come up with the corresponding legal structure that supports that, so that there's actual teeth in the governance process.

[00:23:40.910] - Guard
So there's a lot of vectors, and I could talk about every one of these for quite some time. Even the fact that the ownership of an asset is not a simple, single thing. The fact that you own something... canonically it's split into about eleven different things, including things like pledging, residual ownership, being able to eject others from your property, and this sort of thing. So even something as simple sounding as ownership... actually consists of lots of different features, and ... in a decentralized world, we don't want those features to be all held by the same person, because that would be centralized.

[00:24:32.250] - Guard
That person just has the power to do whatever they want with this stuff. So I, in my work here, have to worry about things like: well, who do I give this function to? And who gets to decide this part of our assets, or who gets to pledge them? Who gets to control them on a day to day basis? Who do they have to ask for permission to do it, or how do you give them the power to handle these things? All these sorts of things. So there's a lot of vectors in decentralization and I could happily talk about it for like another 10 hours if you guys want. But these are some of the kinds of issues that come up. And if you have any questions on any of those or anything more general, then I'm more than happy to continue on those.

[00:25:15.990] - Deetz
OK, I think that's a perfect segue to remind folks that if you have a question you want to ask, I think we can pause right now for that. If you want to be taken off mute, just quickly tag me in the voice chat channel above, and I'll un-mute you for being able to ask a question. But if nobody's got any specific questions right now, I've got some other stuff queued up. So I'm going to give anybody a chance to tag me if they're looking to ask something. All right?

[00:25:56.690] - Guard
And by the way, I consider it a perfectly valid question: why do we need a lawyer? I know that this is an issue that people may be too polite to ask, but I've been asked this question a lot when I have worked in various crypto projects and this sort of thing. I consider these sorts of questions perfectly valid. You're unlimited to ask questions that you consider tough. I'm more than happy with that.

[00:26:23.010] - Deetz
Well, Guard, I think that actually is a great segue to one of the questions I had, which was: how, if so, do we see the DAO as an organization interacting with different legal systems?

[00:26:39.910] - Guard
Goodness. Okay. Yeah. Well, that is one of the tough ones.

[00:26:48.530] - Guard
Imagine the law as, like, a set of coding languages, right? So each country has its own slightly different coding language, and you can make stuff work in a certain way by having it interact with that coding language. I probably shouldn't have picked this as an example because I'm not that technical, but I hope I didn't say anything that's completely false about coding languages there. But the point is: you can kind of shape the laws or the legal tools that you have within a jurisdiction to make things happen.

[00:27:21.980] - Guard
So you could create a trust. If you want to leave your... let's say, for example, you want to split some of those different functions of ownership. You could do it by creating a trust. You could have somebody else manage the property and have somebody else get the benefit of that property, for example. So that's how internally, within a country, the legal system sort of works. How a DAO operates is very legally challenging because it doesn't operate with a single coding language. It operates in a bunch of jurisdictions, and anyone can just kind of go onto the blockchain and do their thing.

[00:28:07.630] - Guard
So there's always this sort of cross-border element within it, which makes things legally quite challenging and difficult. So part of my work is to try to come up with a defensible structure -- I mean like a logically defensible structure -- that I can tell a regulator if they ever ask: this is our seat. This is where our organization sits, or this is where this part of the organization sits. Right. Our treasury management is... seated in this jurisdiction because they give us the ability to make more frequent deals without specific tax consequences, or something like that. So that's the kind of work that legal structural design is. But how it sort of talks to the various legal systems of various countries is quite... detail-heavy. The actual answer to this would be quite... detail-heavy. So maybe I'll just finish with that.

[00:29:23.010] - Deetz
All right. Well, I think that this is a great opportunity for us to kind of now steer back towards the current state of the DAO and where we see things headed. So I'd love to give the stage to Jason to show... anticipated reform actions and a timeline of what we're working with. So, Jason, I think you've got some materials prepared if you want to go ahead and share your screen here.

[00:29:53.850] - Jason
Yeah, sure. It says I can't stream into the channel. Yeah, it's grayed out for me.

[00:30:05.770] - Deetz
All right, give me a second here.

[00:30:10.910] - Guard
While we wait on that, I see the question about... that the call is labeled governance reform. And of course that's true. It perhaps bears making more explicit that the work I do in designing a better and more... legally defensible organization is: parts of the governance structure work. So we have to make sure that the kinds of things that you as token holders can do are actually represented in the legal structure. This is a very... broad reform.

[00:30:48.090] - Guard
If you imagine... my arrival in the organization was a little bit like going into a building site. You can see there's a lot of really good bricks around, but you need to put them together. And the process of doing that in a way that supports the kind of structural designs that we want crypto to have, and to support the governance structure that we want to have... it's a big overhaul, basically. And of course, it is perhaps not so easy to see because... we haven't rolled out these designs yet. But that's basically a process of reform. But of course it does take a little while to show outside, and maybe if you're not curious, you may never really see it.

[00:31:43.080] - Guard
It's not necessarily the case that you... because you might have to go and see some filings or something, and see that oh, this is how they structured their legal affairs that have to do with this and that, and oh, isn't that nice. If you're not curious about that stuff, then you might never find your way around those areas. And it may not show in that kind of way, but it is a process of very significant reform in how the DAO is actually organized and structured in a way that gives you, the token holders, the actual power. Like legally speaking, you have the power after this reform process is done.

[00:32:20.810] - Deetz
Looks like I sorted out permission. So Jason is sharing his screen. So, Jason, looks like we're seeing a Gantt chart here. Why don't you walk us through that?

[00:32:30.220] - Jason
Yeah, sure. So in terms of how we're thinking -- and this is going to evolve over time, so this is going to be a living document. We'll be making it public next week. It's currently in our quarterly report. But the idea here... let me take a step back. So as we're thinking about reforming governance and what that means, we started off with something very elegant and concise with KIP zero, as most DAOs start with. So our first proposal laid out a governance process in terms of how to propose something, how the decision making process happens, what the Sophons do, and how things move from one stage to the next.

[00:33:10.430] - Jason
As we were thinking about how to reform that, it became pretty clear that we've outgrown a structure where you could put everything into a single proposal, just as pretty much every project does. And so the idea was to replace it with three. So you'll see here there are three KIPs that we're thinking about. One of these is already on the forum. And so that is just breaking off the front end of the process -- standardizing it around: what are the categories of proposals that we have, and how should we structure proposals?

[00:33:40.920] - Jason
And there are templates for each of these kinds. And one of the nice things about templates -- which I haven't really talked about so far, but -- one of the nice things about having templates is.. to Guard's point of how we're thinking about: where do we embed accountability, and who has accountability, and to whom?

[00:33:59.120] - Jason
When you have a template, you can make it very clear that someone who's proposing something has to describe not only the potential downside, but what they're going to do, to report to whom they are accountable, how this action can potentially be unwound, and so on. So that's really been the first part: trying to bake a lot of that thinking into the front end of the process, and also make sure that everyone who's writing a proposal is on an even footing in terms of knowing what it is that we expect. So that is the one that I'm calling the Templates Categories kit bracketing.

[00:34:33.000] - Jason
On the other end of that is the question of the Sophons, which is one thing that everybody, including the Sophons, have expressed frustration with. And so that seemed to merit having its own proposal that talks about what our expectations are of the Sophons, what the Sophons can expect, what they oversee, who oversees them, how they're onboarded, and how they can be offboarded.

[00:34:57.360] - Jason
And so that tended to... initially I thought that would be part of an overall process KIP, but it really overloaded it. So that is now separated out into its own KIP. And then the large one that sits in the middle of this is an overarching process KIP that itself replaces -- or is intended to replace or amend -- KIP zero. And that is just establishing -- A), in an Elinor Ostrom very clear and simple sense -- who are the actors, and what are they empowered to do? And then B), what is the lifecycle of a proposal, as we did in KIP zero? So that is sort of the big omnibus one.

[00:35:38.140] - Jason
To go back, deetz, to one of your questions earlier about the challenges: one of the challenges that I initially really struggled with but I found has been turned out to be incredibly generative and helpful was the fact that it's easy to get in the weeds of doing this behind a paywall in Notion, and maybe then we'll bring our grand idea out. Well, that's not really possible with governance, because we have these weekly workshops, and those weekly workshops bind us to a commitment to build in public.

[00:36:08.070] - Jason
So it's been an interesting challenge to think about: all right, how do you develop these sort of broad picture things? And you can see here where this work is going to start converging with what Guard is working on. So this is going to become more of a joint effort going forward.

[00:36:24.930] - Jason
But how do you make that happen in a way that also allows for this weekly cadence of meetings? One of the things we've been experimenting with is taking pieces of this out and discussing them with the community ahead of time, so that we don't hit everybody with this gigantic monolithic set of proposals that will be impossible for anybody to have an informed reaction to.

[00:36:47.900] - Jason
So the approach has been: number one, there's this big overarching timeline in these big proposals. Then concurrently with that, number two: working in public to get feedback on pieces of it so we don't get too hung up on those pieces. So I'll give you an example. One of them was around last week. We had a really great conversation around... if we want to build more transparency into what the Sophons are doing, maybe we could think about a couple of different things.

[00:37:17.080] - Jason
One of the things we talked about was having the Sophons be more engaged with the forum. And another was in talking about how to ensure that they're reporting their deliberations in a way that the community will find maximally useful. And so, of course, the community needs to define what they would find useful, right? And so while I'm working on the Sophons proposal, it was extremely helpful for me -- and hopefully for the community -- to be able to engage on that one point, so that I could then take that back into the draft. So we're doing that with pieces of each of the drafts. But yeah, like Guard, I get very enthusiastic about this stuff and could talk about it at tremendous length. Happy to answer any questions about that. That's sort of an overview.

[00:38:07.130] - Deetz
I think that's an easy place to start here. It's tough looking at the timeline. I'm sure that folks want to see meaningful steps, and it looks like you have a lot of things moving through. So you want to talk a little bit about how these processes are going to move forward and implement change?

[00:38:33.810] - Jason
Sure.

[00:38:34.360] - Guard
Okay.

[00:38:34.780] - Jason
So there are a couple. I am so open to suggestions. I am not a Gantt chart wizard, so this may not be the best way to lay this out. But what I tried to think about was: for each of them there's a step where... there's taking a step back and doing some initial thinking. And so you can see for each of those there's the step of initial drafting that's been going on for a while. And then each of them starts going into workshop discussions. And so we've been doing workshop discussions for each of the three -- each of the three that have started in individual components. But as I incorporate those, then these, the KIPs, will be formalized and put out on the forum.

[00:39:23.730] - Jason
So these are somewhat optimistic timelines, but the idea is: hopefully in an ideal world, by the end of

July we will have at least one of the other two KIPs online and ready for people to respond to. But by that point we will have amended and reformed them by gathering feedback. And some of this is dependent on other considerations that are outside of this whole process. So I would just ask people to know that this is a living document and will change, but also we'll communicate any changes, and we'll also make them very public.

[00:39:59.570] - Jason
And so one of the things that's not quite ready for prime time here is that... each of these you'll see are cards. So I'm not sure which ones I've really filled in yet. But the idea is that the cards, as we go through meetings... so for example, let's do this one.

[00:40:20.890] - Jason
OK. So we could open this one, and it sort of goes through what we're going to talk about in each of the individual workshops, and what we have talked about. So I need to update this. But the idea is that we would have a public record of where we're going in terms of the time frame, and that will shorten or lengthen depending on how things go, and then also where we've been in terms of the individual cards here.

[00:40:46.690] - Deetz
Awesome. Does anybody want to hop in with any questions or anything? Feel free to quickly just ping me in voice chat here if you've got any questions that popped up.

[00:40:58.330] - Guard
So something that came to mind there as someone was talking is that... the way that this kind of new reform structure will show up in... probably more in the sort of average token holder's life... is that the governance process in some ways is going to look a little bit different. So there will, for example -- one thing that from a legal point of view and frankly from a sort of collateralization accountability point of view is quite important -- is this thing that Jason mentioned, which is kind of like a standard form proposal which will kind of force whoever wrote it to articulate with some degree of specificity. Like: what is it that they actually want to happen, and how would this actually work?

[00:41:53.390] - Guard
So that seems like it's an important thing for an organization to be able to do because you need items that are up for governance to be actionable. But of course that also means that the governance process is a little bit heavier, right? So it will be more difficult for an individual person to make a governance proposal because they might have to think about it a little bit more, and they might need to get people together, and it's not so easy to just kind of throw ideas around.

[00:42:23.650] - Guard
So what can we change so that we don't lose the kind of good-natured debate that we have around in the governance forums? How do we do that? And you've actually already seen some of that. If you've been in the Discord, for example, you've seen some of the changes that we're testing out and putting more of our effort in. So things like: you have a point, or a grievance, or some kind of challenge to a day-to-day decision which is not necessarily very easy to bring up in a governance proposal. The idea is that you'll have somebody to talk to about that. So in a lot of cases it's been me. I've been discussing various issues with a few people in over DMs... and we've come up with some actual good ideas in those things. And the idea is that we don't want to stifle debate and idea production. That's our lifeblood -- and everybody's life blood -- in a business like this. But at the same time the governance process needs to be such that if something is passed, it has to be actionable because we are bound to do it. Or the leadership is bound to actually act on that stuff.

[00:43:42.620] - Guard
And if it's not possible to act on it, then what do you do? So that's one thing: there'll be a lot more access to discuss things in a constructive way -- and even challenge things in a constructive way -- with team members. And we already started doing that.

[00:43:58.670] - Guard
Other things are things like: if your governance proposal does not fit within a certain kind of framework, and you feel like that is in some ways prohibitive of what it is that you want to say, then there should be some form of challenging that too. So there should be some kind of procedural challenge, and that's a wholly, completely new, different thing. We've never done that before. I don't know any DAO that actually does that. Absolutely normal and kind of bread-and-butter in the kind of world in which I move in my civilian job. But nobody's apparently heard of it in the DAO governance thing.

[00:44:41.250] - Guard
So, like, if something is procedurally wrong and you know it. So let's say that you note that somebody in the leadership team... misused the power that they were given, or they misinterpreted the power that they were given, and they acted outside their powers.

[00:45:01.110] - Guard
How do you actually challenge that, aside from just bringing another KIP which they might be able to block in some way? So we're putting in some form of a challenge, or a channel where you can challenge this kind of thing on procedural grounds. So you could say: well, look, this did not follow the normal procedure of governance proposals, and therefore the actions that we're taking using this governance proposal as its basis were invalid. That has to be something that a token holder has to be able to say. Otherwise, centralization.

[00:45:46.170] - Guard
I appreciate that we're talking in kind of high theory, and you've got two people with an academic background talking at you here. And I know that it's sometimes a little bit boring, but it will show up in very concrete ways on the ground. And the purpose of all of this is to give you, the token holders, a more formally recognizable way to challenge the decisions that you disagree with. I appreciate that this all sounds very academic, but that's the idea. We're giving you the power to actually run this thing, and that is decentralization -- from where I stand, anyway.

[00:46:24.270] - Deetz
Right. I'm still not seeing anybody looking to ask any questions here, so I can still drive this a little bit. Jason or Guard: Looking at what's called the mission of the DAO or aligning values between different parties, what are the considerations that go into that thought about alignment that goes between each individual member of the DAO? Where do you guys see that fitting in?

[00:47:10.790] - Guard
Yeah, you go ahead.

[00:47:12.240] - Jason
Okay. It's interesting you asked that, because I think that one of the things we're finding is that as we work through [is that] it's easy to focus on individual documents, and individual things like a constitution or a KIP process. But a lot of times these things all should have a common source in something like a mission statement. I would say a mission statement and a constitution or charter are really the fundamental documents, and it's very easy to run afoul of that if you haven't stated what those shared values are, because I think we all have a sense of what they are. But being able to put them down on paper, which is one of the things, is a primary focus for a lot of us. Early in Q3, I think it will be a big help going forward.

[00:48:03.810] - Jason
And really a lot of the things that we're thinking about from a governance perspective in one sense only work if we've got something that is exactly what Guard was talking about. I couldn't agree more, but I think... what's the word I want? Not subjectively, but in terms of shared values and alignment around things, we're working towards articulating those and then bringing them to the community to refine and shape.

[00:48:31.690] - Guard
Hello?

[00:48:33.010] - Deetz
We can hear you.

[00:48:34.060] - Guard
OK, good. For a second there I think I was on mute. Anyway, from my point of view it's similar stuff. It's maybe a little bit... the legal side of things tends to be a little bit harsher. So you always assume that everybody is a bad actor in this sort of thing. So in that sort of hyper-hostile environment, alignment is much more about nudging people to do the things that they would do if they had the best interest of the DAO in mind -- rather than their own best interest -- or trying to align those two sets of interests in a kind of fruitful way that people will respond to and follow.

[00:49:20.290] - Guard
So when I do my design work, I assume that everybody is either an idiot or evil. Including myself. Including, like, Hazard and Jason... and these are people I like, and I'm in some ways designing the structure for them, and I assume that they're either idiots or evil because that's how you align people's interests. You try to make sure that it's the case. There was a community member that I spoke to in DMs about a kind of proposal which would be, I think, very good in principle... but there's a lot of very difficult detail about it. Because this kind of stuff... if it involves some kind of even secondhand access to the treasury, or some assets that the DAO holds, then there's always this opportunity that somebody could just misappropriate, or somebody could use this otherwise very good process to slowly siphon off money out of the treasury.

[00:50:27.350] - Guard
So how do you prevent that? And you have to put a thing in place that allows that. So it's this sort of thing that I think about when I think of alignment. Everybody is either an idiot or evil. And how do you make those people still do what it is that would be in the best interest of the DAO to do? In the long term best interest of the DAO? That's how you align things. I mean there's lots of, like, little mini examples of this, but that's the general principle of it.

[00:50:57.910] - Jason
Yeah, that made me think of something. It's just fascinating to hear you talk about that, because our work is very complementary on this. So I think that I get to think about a more positive sense of it, which is: if we fully articulate what our mission and values are, it makes it much easier for us to identify proposals and actors that are not contributing, or not aligned with the overall mission. Because my fear is that otherwise, how do you determine what is an unhelpful KIP, or what is an unhelpful governance action? So having something toward which we all agree to orient is a way that will help us not only evaluate proposals, but also evaluate individual actors in the governance process.

[00:51:49.510] - Guard
Yeah, of course you need both, right?

[00:51:52.870] - Jason
We need both.

[00:51:53.670] - Guard
Definitely. So, like, every organization needs some kind of goal to move towards and some kind of ideal -- some set of values. We are playing an infinite game, and you don't win an infinite game. You just play it in accordance with your values. Right? And if you don't articulate those values, then it's very difficult to be able... as you say, this is a perfectly valid point. But at the same... from my point of view, the law exists because there are bad actors. You only make a contract for the day that somebody is going to breach it. And so that's the from the legal point of view. That's the idea I hope I've shown in the Discord chats: that I'm actually a relatively nice guy, and can tolerate a little bit of abuse, and can also, I think, continue a good and constructive discussion -- even if it is in disagreement with somebody else, and if somebody else is disagreeing with me. And I think this is all very good. I think it's good that we have the sort of value base where we debate things, and even sometimes in a tough and rigorous way.

[00:53:07.830] - Guard
But as a lawyer -- whenever I put my lawyer hat on -- that's when I start to think bad things about humanity, I guess. Yeah.

[00:53:19.140] - Jason
And I want to be clear: when I say complementary, I mean that in the actual sense that both sides are necessary and made better by the other perspective. That's what I meant.

[00:53:28.960] - Guard
Yeah, absolutely. And I agree. Yeah.

[00:53:33.190] - Deetz
All right. Well, hey, we have been at this for almost an hour here, and really just a lot of awesome discussion and whatnot. But I want to just make sure that I've given everybody any last chance for comments or questions for these two guys as it pertains to governance and changes coming through. So if you've got any thoughts, just please do ping me. Let's get you unmuted. Let's get in your question here. So unless we don't see anything else here: maybe Jason, can you just... outside of the Gantt chart, where do we go from here? What's your call to action for the DAO to help be a part of this process?

[00:54:24.190] - Jason
I would say... there's the near term, which is: we have a bunch of proposals and a bunch of things we're talking about that would really benefit from the community's involvement. So as we think about our budget... and we've got a very heavy cycle coming up in terms of the next couple of weeks for governance proposals. So we're going to take maybe a little bit of a step back from thinking so much about process, and we're going to focus much more on these proposals for the next couple of weeks. And then the call to action after that is: come back to the governance workshop for process, but please come to it in the intermediate time -- the intervening time -- for really thinking about the DAO's needs and what kinds of things are coming up in proposals.

[00:55:10.450] - Guard
Yeah. And from my point of view: I don't have my own hour with you guys. Maybe I will. Maybe I'll snake my way into having one. But what would really help my work -- and kind of a call to action on the community's part -- is: you don't have to be super formal or legal about it or anything like that, but just tell me... it helps always when somebody tells me what is it that they want. What would you like to see? What kind of organization would you like us to be? Even if it's something like: well, I want to be able to fire his ass. And then I'll be like: whose ass? And he goes: hazard's. And I go: well, why? When do you want to fire him? And it's like: well, if he misbehaves, I want to be able to fire him. And then I go: OK, good. Thanks. That's an actionable thing that I can do. I can make a structure like that where you can fire his ass if he misbehaves. (And by the way, hazard, no offense intended).

[00:56:16.810] - Guard
Or the lawyer guy -- I want to fire him. How do I do that? And what kind of structure can you put in place so that we can get rid of you? And I could be like: OK, I can do that. I can build a structure like that. So it helps enormously to get that sense that Jason was talking about -- of that shared sense of values that we have, especially when it comes to things like accountability and powers. So things like who's able to do what and who's accountable to whom. This sort of thing.

[00:56:45.900] - Guard
Any ideas that the community has around that, I am more than happy to listen to and talk about. And we can do that any time you guys want. And maybe I'll get my own hour. Like, not the Treasury Tuesdays or the Governance Wednesdays, but maybe like "the boring hour with Guard" when you talk about the legal stuff, and it'll be like me and three other people. So anything you want to get, anything you want to swing past me like that, I'd be more than happy to talk about and be very grateful for that. Otherwise, what will happen is we'll just press on with the structural changes that I have been planning.

[00:57:25.720] - Guard
The idea behind them is to give you, the token holders, a lot more power in terms of accountability, and even procedural challenge and these sorts of things. But it does help if I get the community side into it as well, because ultimately it's you guys that I'm building this stuff for, and Jason is building this stuff for.

[00:57:51.410] - Jason
Agreed.

[00:57:53.630] - Deetz
Great, guys. Well, I'm not seeing any more questions or anything being raised here, so why don't we go on ahead and draw this first end of the quarter event to a close. First, a big thank you to both of you guys for sharing your thoughts -- for the work that's going into the reform that's happening. I'll just plug Jason here. We'll be continuing to push the reform stuff forward every Wednesday. So for folks that want to take part in helping shape where governance is headed, please be joining us on Wednesdays.

[00:58:35.990] - Deetz
Outside of that, just a little bit more housekeeping for the rest of the week. So in the announcement that we posted last night, we've got four more events to work through. So the next one is in 2 hours from now. We'll be talking Q3 and beyond strategy. And so hazard will be leading that, and I'm really excited to hear where long term strategy is going and the central parts of that. So 3:00 PM here in the same voice chat channel. And then tomorrow we've got three events. So tomorrow at 11:00 AM Eastern time, we'll be doing our first run through a part of the Q2 quarterly report, and it will focus on the engineering side.

[00:59:26.420] - Deetz
So we'll be seeing a lot of folks from our engineering team come and speak about some of the developments that have been going on through the last three months, and maybe even a little bit of a look ahead as to what's being built as we go through Q3 as well. And then the next event is at 1:00 PM tomorrow. We'll be talking about Rook narratives. What I mean by that is some of the things that we will be looking to showcase to the public about what our protocol is going to be able to achieve, and where we see ourselves fitting within the overall crypto ecosystem. So, really excited for that call as well. We've got some interesting slides and stuff to show there, and then we'll be wrapping up these end of quarter events in the original Town Hall time slot, which will be tomorrow 3:00 PM. We'll be doing Q2 recapping on operations. So you'll hear from the different operations verticals, whether it's myself and Troy biz-dev, the operations team with Tommy, treasury and finance with Matt, and everything else in between.

[01:00:53.180] - Deetz
So really excited to kind of see these four events still happening. Hopefully we see a bunch of you guys attending the rest of these. For folks that can't attend, we'll be doing what we've been doing already earlier this week: posting a recording of the call as well as a key takeaways document, and sharing that around with folks as well. But for now, we'll go on ahead and end this call with another thank you for everybody that showed up and showed interest in governance here. And as I said, this recap will be posted later for folks that want to either re-listen to or grab those key takeaways. But outside of that, we'll go ahead and say: talk to you soon -- in less than 2 hours -- for the strategy call. So thanks again, everybody. I'm going to go ahead and end the event and we'll see you soon. All right, thanks everyone.

[01:01:56.990] - Guard
Thank you, everyone.

[01:01:58.970] - Jason
Yes, thank you. Bye.