Buy, invest, vest

The “inverse bond” is a slightly more complicated version of rage quit, that has been rebranded to sound more “finance”-y and impress degens who have not smelt a bulge bracket. It’s literal objective is to arbitrage the differential between market cap and treasury balance, or you know “provide direct exit for financial gain”.

what about a reverse LBP that only wAnt holders can participate in?

Not sure that is possible as wANT is non-transferable. Would you cap it at BV or allow it to go higher @Orion? Personally, I am not a fan of Reverse LBP’s.

i think all buybacks should be capped at BV. Any reasonings against a reverse LBP?

lll echo the same thing as the other forum post.

Where is the AA in this discussion?

Hi everyone!

First of all, thanks @luis for bringing forward this proposal and for taking the initiative! With former AA teams having successfully transitioned out of AA by Feb 28th 2023, each of them with their own public roadmaps, we have had a reduced bandwidth to discuss about tokenomics and treasury deployment.

I fully agree that it is time for AA to focus on solving the underlying issue you highlighted, and I’m looking forward to focus on solving those as Executive Director of Aragon Association and AA Committee member. I am glad that the proposal kickstarted so many contributions from long term ANT holders (who surprisingly have very short term accounts in Discourse). Looking forward to further discuss about tokenomics and how to further contribute to the long term success of the project.

I would like to clarify a few topics, as I’ve read some confusing messages in the thread:

  • Aragon Project treasury is currently held by an association (AA) incorporated under Swiss laws. As such, both the General Assembly members and AA Committee members are bound to such. We can discuss long about different ideas and topics, but AA is bound to applicable swiss laws and the universe of potential solutions that can be implemented is restricted to what is legal there. This is probably easy to understand for everyone, regardless of their legal background.
  • As @luis comments, it’s ultimately up to AA to decide on a course of action. Aragon Project should not be conflated with Aragon DAO. After the transition there will still be “offchain” entities within the ecosystem that fall outside the DAO, that will help protect the project and promote its development. The DAO is a core component for executing the mission (as it ultimately should control the protocol that DAOs rely upon), and as such, a means towards an end, but it’s not the end itself nor the “whole”. I understand this may be cause some confusion to some people (specially those who think that a Discord server is a DAO)

Having said this, it’s important to bring attention to this reply on the thread and also this:

My point here is that the Aragon Association should not commit to a buy-back, as this may result in a re-qualification of the ANT tokens.

If AA did a buy-back, it would have to be aligned with the further development of the project and could not be communicated beforehand. So, unless the law changes in Switzerland, we’ll have to play by those rules.

I really like the proposal in its general terms. I believe it can provide incentive alignment to all set of stakeholders. My 2c on it:

Aragon Dev DAO
Would the Aragon Dev DAO really need 50% of the 20% yearly unlocked treasury? Probably not, at the current burn-rate. I would suggest using a cost-based method based on expected runaway as opposed to a fixed % of the yearly unlocked treasury.

Fully agree on tying fund allocation in with objective and value driven method (NSM based), as this allows the protocol to progressively reduce the dependency on core teams. In fact, the Strategy to Become a Governance Hyperstructure that AA published in Q3 2022, and that is actively being pursued by current Aragon Guilds, was created so that protocol functionality could be extended by external teams. A NSM-based approach to funding teams that push forward towards achieving strategic goals is highly aligned with that.

This said, I also believe current Aragon Guild teams should be able to work with a laser focus on execution in order to get there . We can’t possibly compete with Web2 startups if we are not able to have laser focused teams. We must protect that focus (not at the expense of accountability) for the long term success of the project, as without active teams working on the advancement of the products and underlying protocol and components, there’s no long term value creation. As @alex-arca points out here, we expect that with the new product direction spearheaded by aragonOSx and Aragon App we should start to see meaningful change (and adoption, which precludes value creation). For this reason, I would recommend setting aside enough runaway for those teams to be able to execute, to give them time to execute on their roadma, kickstart value accrual to the new protocol, and create the framework to allow any third-party team to leverage on the modularity of the new stack to further enhance it (and get paid for it based on value added)

I am a bit concerned on the veANT model (specially if for the Aragon DAO). When we had to decide between wANT and veANT, after analyzing the pros and cons of the latter, we ruled it out due to several causes:

  1. The contract is difficult to manage, highly prone to errors and unexpected issues.
  2. If we wanted to continue with progressive decentralization, this was not an option. Locking people in means we would forever use this contract with almost no exit option. Given the amount of work to be done, locking ourselves into veANT without studying other options or doing something that made more sense for us didn’t seem logical. We can always enter, but once inside, it’s impossible to leave.
  3. It’s not composable. You can’t do lock-related things from contracts, for example.
  4. Withdrawal mechanisms are not included and need to be implemented in Vyper. The (back then) AA tech team was asked for a deployment to be ready by February 28th, and there was no way we could make it in time.
  5. Locking is expensive.
  6. The issue with whitelisting: most of the largest token holders used smart accounts, the process of whitelisting them through the DAO would involve using EVMCrispr every time someone with a multisig wanted to wrap. And the whole DAO had to vote to accept it or not.

I definitely liked the long term alignment veANT offered, but the cons outweight the pros at the time we made the decision. However, I recognize the circumstances may be different now and that the benefits may outweight the cons.

I would like to bootstrap a broader conversation on the pros and cons of the veANT model, as this is as convex as a decision can get, which may have significant impact for future tokenomics models. For instance, the decision to upgrade ANT v1 to ANT v2 that was done in 2020 (with proper reasons) introduced certain design constraints when designing Aragon DAO, as ANT v2 did not have the MiniMe token functions (and therefore it could not be used out of the box for delegate voting, needing wrapping).

Would love to get everyone’s opinion on those pros & cons so we can have a constructive debate on the matter.

Few questions:

  1. Are you the only person inside the AA? From my understanding the other person left… do we not fear that a singular person spearheading a operation and in sole control of a 200m treasury worrisome?

  2. It has been voted that the entire treasury is moved to the DAO - dont want to sound like a broken record here but the DAO now owns and governs the treasury. When will that process be resumed?

  3. I am not a lawyer here but wouldnt simply moving the treasury assets to the DAO according to what was voted in remove all tax and legal risks?

Joan, thank you for taking the time to write this out. I will preface that I am not a lawyer, but it does seem like transferring the treasury or a portion of the treasury to the DAO, and allowing the DAO to operate in a decentralized manner removes a lot of the overhang from Swiss law (I am not a lawyer). Additionally, the DAO could use the bought back ANT via either a grants fund or do something similar to Optimism and provide retroactive public goods funding and incentivize projects to use the Aragon stack. To me there is a lot of really interesting solutions that can both align token holders at Book value, incentivize development, and incentivize broader adoption if at least a portion of the treasury was moved over.

In terms of veANT, I don’t see VE as the best solution for Aragon. I don’t currently see anything wrong with the wANT structure but agree with Luis and Clay that it can be improved with incentives. That being said, I think a buyback and the already approved treasury transfer are higher priorities. Thank you again for your insights and joining the discussion!

  1. Nope, there’s a Committee of (5) and a General assembly of (6). While it is ultimately GA members who elect the AA Committee, it is up for the latter to ultimately decide on the executive decisions (such as treasury transfer).
  2. I’m not following. You mention that the DAO now owns the treasury, but you ask when will the process be resumed? If the DAO owned the treasury, what would there be to resume? Logical inconsistencies apart, the fact is that the Aragon DAO does not currently own nor governs the treasury, as only $300k have been transferred so far as Phase 0 was completed. During this month of May the AA Committee will meet to approve discuss transfer conditions for Phase 1. It’s important to note that AA did not seize any assets from the DAO, as it could not possibly do so (neither from an onchain perspective, nor legal). Funds that are already in the Aragon DAO are to be governed as per the Aragon DAO Rules that were approved by token holders in January 2023.
  3. Glad to provide more context here. As I meantioned, AA is a swiss-based entity. It has a beneficial tax treatment of 5% on expenses as long as the expenses are in alignment with Aragon Association’s purpose. That purpose is:

to disintermediate the creation and maintenance of organizational structures using blockchain technology to build the necessary software infrastructure and tools. These tools and infrastructure empower developers to build functionality and applications for the next generation of decentralized organisations and give people across the world the opportunity to easily, transparently and securely manage their organizations, enabling a borderless, permissionless and more efficient creation of value.

However, if AA were to send funds to the Aragon DAO, and those funds were spent in something that is not in alignment to this purpose, that would trigger:

  • A 12% tax rate to be paid by AA on the amount of funds transferred (as opposed to 5%)
  • Tax liabilities for General Assembly members: if AA is to substantially transfer all funds to Aragon DAO, and then the DAO does not use those funds in alignment with that purpose, then swiss tax authorities would consider the transfer to be a de-facto liquidation of Aragon Association, and this could also trigger personal tax liabilities on the General Assembly members. The rationale for this is that swiss tax authorities would have no way to know whether funds were used to pay beneficial members of the AA.

I hope this provides clarity on the reasons behind the safety measures adopted by AA. It’s not an arbitrary decision.

A way to mitigate for this would be to include a new responsibility to the Legal Guardian of Aragon DAO (who is now in charge of vetoing proposals that may incur in legal liabilities), so that it should veto any proposal that may result in increased tax liabilities for AA. That could only happen if there were proposals that were sent to Delay App that were not in alignment of AA’s purpose (which stems from the Aragon Manifesto). This would help de-risk the treasury transfer from AA to Aragon DAO, and would provide assurances to all ANT holders that the funds will actually be used towards the purpose of the Aragon project.

For more context on Guardians and their role I highly recommend checking the blogpost about Aragon DAO design and the signalling vote that approved the Aragon DAO Rules by token holders in January 2023.

The fact that you think this is a game of gotcha and insist on approaching it as a reincarnation of Golem watching over a treasury that isn’t yours, speaks volumes. You’re clearly insecure about your value added here, know that siphoning off a comfy salary for as long as you possibly can is the peak of your professional career given the measly deliverables to date, and are clinging to it for dear life. If your mission was truly to empower and further DAOs, then maybe, you know, sticking to the vote to create and fund the largest and most valuable truly on-chain organization on the planet, would not only be a sufficiently aligned action to tick the box of the Swiss tax authorities, but might show that you have a morsel of authenticity and consideration beyond furthering your own self interest.

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The other issues you mention are indeed drawbacks (although IMHO advantages outweight them). But the veToken contract isn’t really prone to errors or unexpected issues. It’s been battle tested by Curve, Balancer, etc. for years. If anything, it’s actually one of the most vetted smart contracts in the industry.

Just to clarify: I think you mean that most of the largest token holders don’t use EOAs, and instead use smart accounts.

Yep, meant smart accounts. Edited the post.

veANT makes lots of sense to align long term interests (increases the costs of short term capture), and specially as a way to govern protocol revenue. I wanted to highlight the tradeoffs, and that this specific change would entail a hard commitment to the model that would introduce several constraints to what can be done from a tokenomics perspective.

Not saying it’s a bad option, just an option that needs careful evaluation (involving Product Development). But that is probably worth a different thread xD

Aragon Association’s purposes is to promote the use of DAOs and build tooling for it, however:

  • It disregards its own DAO and changes its purposes overnight as if it were a simple empty shell and deletes all the content about it on its website (!).
  • It hasn’t built a mature codebase in 5 years, hasn’t found any product-market fit, and asks for “more time”.
  • It now considers the ICO token as a pure shitcoin with no rights attached, no fiduciary duty, just a bogus “voting for pre-vetted grants”, that can be anyway struck down by the AA. The last grant was 1M$ to the founder of the association.
  • Refuses to trust the DAO with the treasury, yet refuses any measure to increase wANT and governance participation.
  • Team is trading the latest announcements is the pure insider trading tradition while lecturing holders about “Swiss laws”.
  • Hasn’t released transparency reports for the last year and a half, while it should be doing it every six months.

If I was a newcomer to crypto wanting to build a project, a regulator doing some general research, a journalist writing a piece about our world, only one thing would strike my mind reading this: DAOs are yet another way for insiders to graft and extract value from gullible investors.

If Aragon can’t even trust its DAO, why should it build products for DAOs? As a DAO, why would you trust such a crucial product from a team with zero accountability? To be frank, a liquidation would be then better for our industry, as, if things don’t change, it will be a textbook example of “why DAOs are bad”. It will be cited by regulators and investors alike, killing any hopes of having any meaningful on-chain organisations in the future. Mission accomplished!

Luis’ plan, completed by Arca, is a good way to get out of this hole. Regarding tax/laws: The world of DAOs is quite new, it’s still undiscovered territory, so coming up with clear and definitive views about what is and what should be isn’t going to cut it. Hire the tax team at PWC Geneva, they’re quite competent from experience, with the mandate to find a way to frame the plan while limiting the tax liability. Or use a tested framework, like RAMOS from Temple, which by the way was a similar situation before they sorted themselves out. In this regard, buying back the ANT token to revive the DAO, is clearly in line with the Aragon Association purpose.

Anyway, if things continue like this you’re at risk that an aggressive tax auditor claims that the association works only for of the team, and has lost its purpose. Especially after the last episode of team trading its announcements.

That is untrue. aragonOS secures double digit billions (Lido alone is $11bn) and the largest DAOs on Ethereum, even Curve or Decentraland, use Aragon. If aragonOS would break tomorrow, hell would break loose on Ethereum. There are very few smart contracts with such a Lindy effect as aragonOS.

Feel free to DM Joan with who is doing that, if you have conclusive evidence. However right now most contributors work in their own guilds with their own legal entities, not the Aragon Association, FYI.

@Joan_Arus Is it possible to see the articles of association, any legal swiss documents regarding the association?

ve contracts are vetted but there are still a lot of exploits because most people who reuse them dont know them as well as curve and friends

Pretty sure it is a modified Aragon Fork, we should be ok to adapt it to our needs if we need to. Not saying we do, but can remain an option The Curve DAO: Governance and Voting — Curve 1.0.0 documentation

You’re right - Aragon products have been used by large DAOs. However:

There has been very cool research by Aragon regarding zero knowledge. Now it’s time to productionize this and make AragonOS the cheapest to deploy and operate with.

Agreed, this should be prioritized.

Agree as well. Aragon has one of the strongest zk teams out there.

@Joan_Arus possible to see any of the legal documents like articles of association?