Proposal ID: #26, Changing Our Funding Mechanisms Regarding Bonds

Proposal: Hydranet Improvement Proposal: Changing Our Funding Mechanisms Regarding Bonds Proposal ID: 26 Proposed by: Hydranet Multi-sig Date: January 1st, 2024 @ 10pm UTC

Summary: This proposal addresses the future of fundraising within the Hydranet DAO, specifically focusing on transitioning from selling bonds to a new mechanism involving the disbursement of HDN tokens to a multi-sig-controlled address for grants and funding operations.

1. Background and Current Situation: 1.1 The DAO currently raises funds by selling bonds to the community, excluding United States citizens. 1.2 This mechanism was inherited from HDX and its OHM fork, with adaptations for our custom bonds.

2. Legal Implications and Risks: 2.1 Recent legal counsel has indicated that continuing with bond sales could classify our token as a security, subjecting us to stringent regulations. 2.2 Operating as a security token could limit our market reach and impose additional compliance burdens.

3. Proposed Alternative: 3.1 Instead of using bonds, the DAO will vote to disburse 5 million HDN tokens at a time. 3.2 These tokens will be transferred to a multi-sig-controlled address.

4. Use of Funds: 4.1 The multi-sig-controlled address will use these tokens predominantly for grants and secondarily for funding operational expenses. 4.2 This approach aims to maintain flexibility and avoid the regulatory complexities associated with security tokens.

5. Benefits of the Proposed Approach: 5.1 Helps to avoid the risk of being classified as a security token. 5.2 Ensures greater control and flexibility in fund allocation. 5.3 Aligns with legal advice to safeguard the DAO's interests.

6. Market Interaction and Fund Management: 6.1 The multi-sig can only set order book limit orders with the approved funds. 6.2 No market sales are allowed, nor any sell pressure that would inhibit a healthy market. 6.3 These measures are to ensure market stability and prevent negative impacts on the market value of HDN.

7. Action Items: 7.1 Review the proposal in detail. 7.2 Engage in discussions to understand the implications and benefits. 7.3 Cast your vote on the proposed transition.

8. Voting Period: 8.1 January 1st to January 5th, 2024

Additional Information: This transition represents a strategic shift in our fundraising approach, aligning with legal advice and ensuring the long-term sustainability of the DAO.

Members are encouraged to consider the long-term implications of this decision on the DAO's operations and market presence.