Proposal: Aragon Court Independence

Disclaimer 1: This is a high-level, preliminary idea intended to carry over momentum from previous discussions and gauge community feedback. Based on the community’s response, we’ll adjust accordingly and put more specifics around the various parameters as necessary

Disclaimer 2: Delphi Ventures holds a position in $ANJ. While we’ve tried to consider what’s best for the network but our opinions may nevertheless be biased by our holdings

As the recent discussion has shown, there is currently a lack of clarity regarding the relationship between Aragon Court ($ANJ) and Aragon Network ($ANT), resulting in some tension between the communities.

In this post, we propose some initial ideas regarding how to delineate the lines of sovereignty relationships and value flows between each community. We expect that Aragon Court won’t be the last asset to be spun out by the Aragon Network and our hope is that this can act as a framework to guide future discussions.

At a high-level, we see Aragon Network as the Aragon “Holding Company”, with Aragon Court as the first of many independent, partially owned subsidiaries. Under this model, $ANT holders govern the network reserve (which owns, among other assets, tokens in the subsidiaries) and and is responsible for allocating resources (both financial and non-financial resources such as human capital) to existing and new subsidiaries in a way that maximises the growth and value of the network.

The subsidiaries operate independently with their own individual mandates, stakeholders and treasuries, with the Aragon network initially funding the treasury and taking a sizeable part of the token ownership. As such, while the subsidiaries are independent, $ANT holders still retain a strong influence on governance as well as aligned incentives in the form of shared upside in the subsidiary’s success.

Given the early stage of $ANJ and of the majority of the initiatives likely to arise within Aragon’s ecosystem over the next few years, we suggest Aragon initially captures value from these initiatives via token ownership rather than fees. The reverse would be like a VC firm investing into an early stage company and then immediately expecting to extract dividend payments. Not only would this be an inefficient use of capital as the money is simply being recycled back and forth, it would also be counterproductive as early stage, network effect businesses need to grow before they can extract value. Effectively, $ANT holders can be seen similarly to a Corporate VC, subsidising its subsidiaries with capital and resources at an early stage and then capturing value later via fees later once a robust fee market develops.

This also has the added advantage of allowing $ANT holders to select from a variety of opportunities within the Aragon Ecosystem based on their specific risk profiles and preferences. More enterprising $ANT holders can stake to an early stage DAO with a mission they believe in, helping to bootstrap and govern it. On the other hand, more conservative $ANT holders will be able to stake $ANT in order help govern the Aragon Network Reserve, taking on less risk and lowered potential reward as they benefit from the aggregate performance of all subsidiaries rather than making concentrated bets.

Specifically, our proposal is that Aragon Court is given independence from the Aragon Network, spun out to its separate DAO with its own treasury, initially consisting of the ANT in its bonding curve. However, the Court cannot realistically operate independently from the beginning since it is reliant on the Aragon Network not just for funding but also for lead generation, infrastructure, human resources and other support. In order to align incentives between ANJ and the Aragon Network more broadly, we propose that the network mints 100,000,000 $ANJ tokens and sells them to the Aragon Network at the conversion price of $0.015 $ANT per $ANJ. We further propose that the Aragon Network’s ANJ tokens are locked with a 1 year cliff and 4 year linear vesting schedule.

This way, assuming the price stays the same, $ANJ total supply would increase to 228,645,461, with a fully diluted market cap of around $11M (circulating supply would remain fixed at 128,645,461). The Aragon Network (i.e. $ANT holders) would control 43.7% of the token supply and voting power in the Aragon Court DAO. In addition, the Aragon Court DAO would have a treasury of 3,745,531 $ANT, consisting of 485,000 $ANT currently in the bonding curve + $1,760,531 $ANT premine “debt” owed to ANJ holders + $1,500,000 ANT purchased by the Aragon Network in exchange for 10,000,000 ANJ, for a total Aragon Court treasury dollar value of ~$12,000,000. This would allow Aragon Court sufficient resources to bootstrap itself, including implementing the supply-side incentives we suggest in our proposal, while also giving the Aragon Network skin in the game and aligned incentives with the Court.

Regarding the conversion proposal, we suggest that this is kept open but changed to a two-way conversion. This gives a chance for ANT holders who believe in the Court’s new independent vision to take a larger stake in it. Similarly, it gives a chance for ANJ holders who aren’t onboard with the new plans to signal their disagreement by exiting the system.

We will continue taking an active role in the newly formed Aragon Court DAO, and as our first proposals we suggest:

  • Improving the Fee Model
  • Removing Bonding Curve
  • Implementing Supply-Side Incentives
  • Creating sub courts or hubs within the Court, specialised in certain verticals

The first three proposals are discussed in our governance post which you can find here or in video format here. We will also adjust the supply-side incentives to take into account the new, reduced treasury.

The last proposal we feel is extremely important also so that the Court can be effectively used for more different kinds of proposals requiring specific expertise for jurors. A key near-term example here is the Optimistic Voting stuff which may require developers to quickly and accurately adjudicate. We suggest using an architecture similar to Kleros’s sub-courts or Jur’s hubs (p28) in which jurors can setup hubs requiring specific skills or backgrounds, and charging different levels of fees. $ANJ would still need to be staked by all participating jurors, but this could be staked either to the General Court or to specific hubs based on the juror’s expertise. While this fragments security, the General Court can still be most secure as hubs can also choose to accept general cases which the General Court then routes to them as required.From a Court user perspective, they can either subscribe to the General Court or to specific hubs, and dispute fees are paid to the jurors adjudicating on the case as previously. We will put more detail around this in a future proposal but wanted to outline the high-level idea.

As always, we welcome the feedback from the Aragon Community and Team to enable us to arrive at the best outcome for Aragon Network. We will respect whatever decision the community comes to and are thrilled to be a part of this process

12 Likes

I just realised there’s an additional pro to the multi-token model: Court Independence.

The Aragon Network is a DAO infrastructure provider while the Court is meant to be a neutral third party and judicial layer for the broader crypto space. What if one day the Court is asked to rule on a dispute concerning Aragon Network and a client? Less overtly, what if one of side of a court dispute is a large Aragon client and the other isn’t?

My current thinking is that being one entity compromises one of the Court’s most important features: being an independent third party / neutral middle-ground to settle disputes.

2 Likes

I also think court independence is important. Do you think Anj is independent enough? I think the main problem is that big money can influence the court too much regardless of how independent a court is. I think a solution is that big money get less influence and individuals get more by introducing unique jurors via brightID so the influence of big money can be reduced. With brightID the court gets less likely influenced by big money.

I want to say that although I find this proposal interesting and well thought out, I still think the token unification proposal is a much better path forward.

At a high-level, we see Aragon Network as the Aragon “Holding Company”, with Aragon Court as the first of many independent, partially owned subsidiaries

I think this is the most important point with regard to this proposal compared to the status quo or the token unification proposal. Moving closer to a holding company model, Aragon Network becomes focused on evaluating and making investments, which is somewhat similar to the status quo (where investments are made in the development of connected service protocols) but with less built-in accountability and more dependence on active involvement in governance to align interest. In contrast, the token unification protocol moves in the other direction, eliminating the idea of the Aragon Network as an aggregation of multiple disparate ventures and instead focusing all of its resources to optimize the economic flows around a single protocol.

I think it is a bad idea to think about the Aragon Network as a holding company making investments, we have already seen some of the challenges such a construction poses with the AGP process, and in particular the proposal to acquire a position in DOTs. As we near the launch of the Aragon Network DAO, ANT holders will have lots of difficult governance decisions ahead of them, but analyzing and making investments are some of the most difficult to handle effectively in the context of a decentralized, transparent, and community driven process.

In addition, this particular investment where the Aragon Network takes a substantial position in ANJ through token ownership poses some specific challenges. If ANT holders are to participate in the governance process of ANJ, ANT holders would need to vote on how the Aragon network should vote in ANJ governance, which would be quite convoluted and potentially infeasible due to the time it takes to vote. Representatives could potentially be elected to represent the interests of ANT holders within the court, but setting aside principal-agent issues, a concentrated voting block of such a substantial percentage of the supply of ANJ in governance would be very likely to be an overwhelming controlling interest given past participation rates in token based voting situations, defeating most of purported benefits of this proposal (since ANJ would still not be particularly sovereign with respect to ANT).

It is absolutely essential that we establish lines of sovereignty and clearly delineate value flows to avoid misalignment between stakeholders, but I think that this proposal fails to actually do that while at the same time creating rather than eliminating a bunch of complexity… whereas unifying the tokens into a single asset enables all Aragon stakeholders to rally behind a single economic focal point. Allowing us to put our full focus, energy, and considerable resources behind making one asset and protocol successful.

The Aragon Network is a DAO infrastructure provider while the Court is meant to be a neutral third party and judicial layer for the broader crypto space. What if one day the Court is asked to rule on a dispute concerning Aragon Network and a client? Less overtly, what if one of side of a court dispute is a large Aragon client and the other isn’t?

If we go down the token unification path the Aragon Network and Aragon Court would be synonymous, with the Court protocol being the singular focus. In this case, this issue is effectively the same for the “standalone” Court that has its own treasury and may need to “hire” parties to work on improvements or deliverables.

That said I think this issue is very much an important consideration and one of the reasons I had advocated for the division between ANT and ANJ in the first place. It works in the status quo because ANJ holders have no direct claim on the Aragon Networks assets, and therefore have a greater incentive to optimize for the reputation of the court as an arbiter.

However, I think that we can create that same incentive (and even improve it) for court participants without creating a separate economic asset by using a non-financial dimension like reputation to amplify stake and rewards for court participants.

Overall, I generally agree with all the statements in this post about how to improve the court… having a treasury and allocating resources towards supply side incentives, adding domains to the court, creating a reputation dimension, adjusting fee model, and there are likely many other improvements and optimizations that could happen in the future. What I don’t agree with is keeping the complexity of two or more economic focal points, or spreading the resources and attention of the community across many disparate ventures. I think as a community we should rally behind the Court as a single protocol that becomes synonymous with Aragon, and make adjustments in order to make that protocol as secure, effective, and compelling as possible.

3 Likes

I don’t understand why we are holding that Aragon being run as a holding company is in any way positive. Aragon Court has to have independence in order to be used by any community outside of ANT holders because it will just be beholdant to ANT and thusly looses value to other communities if it is amalgamated.

Look at the networks that have supported multiple tokens for different use cases (KSM/DOT, YFI/yUSD) and how that has created synergies in value as well as important separation of “church and state” or isolated experiments from crucial infrastructure. I get ANT whales wanting to accrue the most amount of value to themselves because Aragon Court is really interesting, but it doesn’t make sense for Aragon Court at all.

5 Likes

A different token creates different community even if the tokens are bonded. Does this makes Aragon stronger or weaker? It could make it stronger cause independent communities working towards similar goals make Aragon’s vision more robust and accomplished in a greater spectrum cause of different approaches taken by the communities to achieve those shared goals. If Aragon don’t embrace two different communities it can also weaken Aragon cause of tensions regarding independence.

Anj has more ROI potential cause it’s a small marketcap compared to ant and it fulfills a crucial part in the Aragon vision. That’s in my opinion the main reason to keep the split for most ANj holders.

I don’t care wether ANJ stays independent or reunite with ANT. I think for ANT holders a reunion is more beneficial because most ANT holders don’t hold ANJ. If ANJ from the dao gets air dropped over time with withdrawal fee to ant holders then for ant holders I guess they would embrace anj independence too. An independent community is more robust and has a higher chance to realise their full potential.

I see the marketcap and security of the court as the main problem. I also think that with the approach of Jorge that anj becomes like the cosmos hub of courts. In this way different projects can spin up their own court with different staking tokens and integrate other courts to make it more secure. Also introducing reputation for jurors of those courts I think the security issue can be solved without an anj to ant unification.

A few items.
1- An ANT-only vote isn’t fair: I don’t think this vote should just be an ANT vote. ANT holders will do what they think accrues more value to them. ANJ holders should be heard on this matter. We should have an ANJ vote. If we have a close vote among ANT holders but a massive majority of ANJ holders vote no, than that should matter.
2- There is a lot of external professional groups rallying around ANJ that will loose momentum: For example, my company Dialectic has hired a bar-certified lawyer to act as the judge on our behalf. Aragon Court will have legal professionals handling these cases already. But we have to maintain independence the way that a court system retains independence from the government and executive branch.
3- IF we are leaving this to ANT holders than the cost of the “re-acquisition” should be accretive for ANJ holders. Those of us who put money into ANJ from day one should not be penalized for supporting this community in the early days. I kindly request that the valuation of ANJ not be less than 4% of ANT.

Best,
-Ryan, Dialectic

1 Like