Context
Aragon built a bunch of great code until 2020 that some massive projects are using to this day. The entirety of that team is gone. There is a new team that started getting assembled in late 2021. The new team shipped a great MVP in Feb 2023.
In response to expressed tokenholder desire, the Aragon Association (steward of the treasury consisting of Aragon ICO proceeds) has initiated a process to transfer that treasury to a DAO controlled by token holders. Meanwhile, Aragon’s treasury has been managed well and exceeds the project market capitalization.
Communication around establishing the Aragon DAO and the asset transfer process has been vague at best. Market participants have become interested in arbitrating the treasury to market cap gap through governance action.
How do we move forward without demolishing Aragon’s credibility in the industry? That credibility is essential to the market standing of aragonOSx, Aragon App, and other products streaming from Aragon.
Problems:
- Failure to communicate coherently:
- The fact that the treasury is not yet controlled by ANT holders
- The timeline at which that treasury transfer will happen is a big questionmark
- The team has almost no say in the future of the project (average pre-tax token package is around 20k ANT, most of it still unvested on account of the team being around for <2 years)
- Ambiguity around the potential gap between treasury and market cap - it is possible that that gap is overestimated
- Panicked initial reaction to questioning by token holders has destroyed the goodwill of AA and contributors when interfacing with “external” tokenholders
Solution:
Implement a rage-quit or an alternative minority protection mechanism and design/negotiate future alignment with that mechanism already in place.
Details
We have seen a series of proposals hit the forum over the past few weeks, and while a lot has excellent ideas, plenty of complexity is involved. Furthermore, they bundle a wide array of activities in a single proposal. Some of these are irrelevant to the discussion and open the door for lengthy deliberations and potential exploits to hastily implemented dynamics.
To be explicitly clear, this is not a proposal in itself. This post aims to propose a logical sequence of distinct proposals and actions. One that delineates unrelated issues and follows the path of incremental small steps. Hence the sequence is essential.
I assume that AA will act in good faith and honor these, in essence, signaling proposals, to maintain the integrity of the Aragon brand. That being said, it’s naive to assume that the committee members will take any action that exposes them to personal legal liability.
Ideally, AA would be willing and able to use the ANT they hold to help move this process in a manner aligned with the values of the industry we operate in - wrap and vote onchain if needed to ensure the project’s continuity.
Proposal 0: [Ideally avoidable]
There have been detailed discussions around legal structures and tax implications in Switzerland, specifically concerning constraining some actions for AA and asset transfer. Due to a lack of trust between the involved parties, a possibility worth exploring is to use some of the current $300k in the Aragon DAO and get an independent legal and tax opinion on the available paths forward.
Ideally, we can avoid this and move to the meat of what needs to get done.
Proposal 1:
Introduce an “escape hatch” to the Aragon DAO as a rage-quit function or another exit mechanism (inverse bonds, buybacks, etc.). Possibly including an exit tax. @alex-arca in ARCA’s proposal uses an implied 5% exit tax (in the form of a discount to “book value” on the floor of the buyback price), we have seen the Token Engineering Community implement a 12% exit tax, and in normie space, we know the US has a ~40% exit tax (lol). Such a tax can ensure the project’s continuity if all token-holders choose to exit.
- There are several exit options outlined by @Wismerhill here - the exact mechanism is TBD
- The existence and extent of an exit tax is also TBD
- Ideally, the ANT redeemed through the escape hatch gets burned. If required by legal constraints, a more complex way of taking it out of circulation can be explored.
- Redemption is pro-rata of treasury composition (to avoid complexities around covering MANA, UNI, or whatever other holding into ETH)
Proposal 2:
AA to transfer the entire liquid treasury to the Aragon DAO, net of:
- Actual tax liabilities - the current $40M provision seems quite high (might be acurate but might also be an overcautious exaggeration)
- The ANT held by AA, which, as communicated, is meant to incentivize current and future contributions to the project
AA shall convert illiquid assets into liquid ones where possible and practicable.
Proposal 3:
Move the governance from wANT to veANT, as suggested by @luis HERE. It is an important way to align governance rights with long-term financial incentives. However, giving those who disagree with that approach an exit is essential. Agree with @AntHoldersUnite and @dcfgod in the comments HERE - veANT is not either/or versus Rage Quit - it’s possibly both.
Potential follow-on proposals:
These are all viable ideas (too many people to mention) that have been raised but have no relation to implementing an exit hatch and veANT. They should be delineated from the current discussion as they introduce complexity and potential vulnerabilities. Its a list, not an endorsement:
- AA to increase token packages of current contributors (ideally, team members should be able to vote with these tokens) [doesn’t have to be a proposal technically]
- Whether to stake the ETH currently in the treasury and what to do with the yield generated
- What should be the asset composition of the treasury
- Should the treasury be actively managed
- ANT minter parameters and the transfer of the winter from AA to the Aragon DAO
- Value accrual into ANT
Disclaimers:
At the time of publishing, this thread does not reflect the stance of the Growth Guild or any contributor, delegate, or token-holder other than myself.
I am a contributor to the Growth Guild, a delegate, and a tokenholder. I co-authored Aragon’s [Governance Hyperstructure Strategy](strategy-governance-hyperstructure/strategy-governance-hyperstructure.md at v1.0.0 · aragon/strategy-governance-hyperstructure · GitHub, support the product direction that guilds are pursuing, and have been a vocal critic of things that do not work at Aragon. Lastly I identified the “treasury drain” as a vulnerability in October 2022 during the ideation of the current Aragon DAO, identified that the Discord members inquiring about the treasury transfers are not “random trolls”, and advocated against the initial ban that was implemented - relevant context for my experience and ideological inclinations.
