CIP-5: DAO Transparency Framework

Title: DAO Transparency framework Authors: Lombi, Avicenna and Jon Ray Created: 05/10/2023

Summary

Create a clear transparency framework that can be adopted by the Jade Protocol DAO.

Disclaimer

Jade Protocol is a decentralized autonomous organization, which means that all community improvement proposals are discussed with the community and voted on as a collective. No single member of the DAO shall be held responsible for the positive or negative outcomes of the CIP should it pass. This proposal put forth by the author(s) was synthesized in good faith as a result of due diligence and community discussion on Jade Protocol’s governance platform.

Should the community vote to pass this proposal, then the DAO and its contributors are authorized to carry out the suggestions set forth in this proposal. If new information comes to light prior to the execution of this proposal (i.e. a change in regulatory policy) then the DAO reserves the right to not enact the proposed changes, even with the successful passing of this proposal, as it may pose an outsized risk to the DAO and its collective community.

There are risks associated with modifying DAO operations, engaging new contractors and the deployment of new smart contracts, including but not limited to: loss of funds, smart contract exploits, and/or delays in deployment timelines. Due diligence is meant to mitigate these risks, however the DAO must still acknowledge and accept that these risks exist.

Abstract

The emergence of decentralized protocols has revolutionized the way we interact and transact with each other. However, many of these protocols were initially created with a centralized approach, which has led to a lack of transparency and trust issues among users.

As a result, users of these protocols are left in the dark about how decisions are made and how resources are allocated. This lack of transparency makes it difficult for people to evaluate the protocol's potential risks and benefits, leading to FUD and low adoption.

Motivation

Our DAO recognizes the need for maximum transparency in the operation of protocols to foster trust and increase adoption. While our protocol has continued to aspire towards decentralization, it still lacks some transparency in its processes – namely decision-making and resource allocation.

Pros

• It would foster trust among users and other stakeholders, which could lead to increased adoption of the protocol and the token, as well as potential new partnerships and investments.

• The transparency and accountability framework could attract new contributors and developers who value a transparent and open work environment.

• By providing regular financial reports, the protocol could demonstrate its financial sustainability, which could increase stakeholder confidence.

• The DAO should also consider hiring an external team to audit its assets at least once a year.

Cons

• The implementation of the proposed solution could require resources, such as time, expertise, and financial investment.

• The transparency framework could potentially expose sensitive information to competitors or bad actors, which could lead to security or privacy breaches.

• The increased transparency and accountability could lead to increased scrutiny and criticism, especially if the information revealed is damaging to the team.

• Some stakeholders may resist the proposed changes if they perceive them as limiting their decision-making power or reducing their financial incentives.

Next Steps

The community proposes the following changes to achieve maximum transparency regarding the DAO’s current operations:

DAO Constitution to Guide Future Operations

Create a living document that will be ratified and continuously updated by DAO governance. The constitution will outline a complete organizational structure, with SubDAOs that have clear responsibilities established by governance. An electoral process should be developed for members of each SubDAO and clear terms for duration of service in each role.

Current Contributor Transparency

Ensure a clearly defined headcount along with roles and responsibilities of all current DAO contributors, including but not limited to: advisors, managers, analysts, marketers, developers, moderators and token holders. Contributors may remain anonymous, but each person’s responsibilities should be clear. This will serve as the foundation for which KPIs can be tracked and remuneration can be determined.

Decision-making Transparency

Ensure that all decisions made related to the protocol's operation, including resource allocation, development roadmap, and partnership agreements, are made through a transparent and participatory process that involves all sJADE holders. Full transparency may not always be achievable given that some agreements may be under NDA, however, all other operational decisions should be made by the collective DAO members and not behind closed doors. All sJADE holders are considered members of the DAO and will be eligible to participate in governance discussion and vote on Snapshot proposals.

Resource Transparency

Ensure that all resources allocated to the protocol, including but not limited to: funds for infrastructure (i.e. web hosting), legal counsel, development, operational services (i.e. foundation costs), and other operating expenses, are transparently managed and reported on a quarterly basis (at minimum). Furthermore, there should be transparency regarding contributor and advisor salaries. Develop a transparent remuneration framework that ensures fair and public compensation for all contributors to the protocol, including founders, active contributors, advisors and moderators. This new framework will start in 2024 as current contracts can not be modified for the remainder of 2023.

Current monthly spend in salaries is 225K USD. There are currently 7 active contributors on salary: Kevin, Hector, Mac and Rex (part of the founding team) in addition to Avicenna, Jon, and Gavin (who were hired later as consultants with the project). These costs also include contractors that periodically work with the DAO (i.e., Zeal and Aquachoc who have been leading development efforts). Current monthly spend on advisors is 315K USD paid in JADE tokens and these payments cease indefinitely after August 2023.

All operating expenses must be well defined, and an annual budget should be created prior to the start of each year. Expenses must be reasonable and a clear process for making updates to a budget that has already been approved must be put into place. As of now, some operational expense line items include: foundation costs, hosting costs, legal costs, salaries, development, design and marketing.

Wallet Management Transparency

The DAO will need to work towards developing a decentralized treasury management system. This may begin as a SubDAO that is elected by the community to execute transactions within certain parameters defined in advance by DAO governance. This framework will evolve over time as the DAO matures.

In addition to the treasury balances, each monthly report (starting in July) should also include a section on operating expenses, which tracks the usage of remaining hyper growth fund balances and any treasury payments made for DAO salaries or services received by the DAO. All multi-sig signers for DAO wallets should be known publicly and rotated regularly with certain term periods (just as the Legal Fund signers are). For transparency, all DAO treasury wallet addresses are listed on Gitbook since January 1, 2022.

Hyper Growth Fund (HGF) Usage Transparency

We will make enquiries to the founding team to provide an update on the status of the hyper growth fund (HGF) with an updated ledger describing the use of these funds between January 2022 and today. HFG initially stated that advisors and contributors were being paid from this 6M USD budget without a token allocation. We need to shed light on how much each contributor is earning and if they are being double paid from the HFG and the investment treasury.

Legal Fund Transparency

We will ensure that any reimbursement from the DAO’s legal fund is supported by evidence of the legal expense of the beneficiary, making them eligible for reimbursement. This process will be finalized by Jon Ray and Avicenna in the legal fund guide book as per the recently passed TMP-4.

Monitoring and Evaluating Transparency

Establish a Transparency SubDAO which will be responsible for tracking the progress of this proposal and ensuring that its goals are met. This SubDAO will be responsible for reporting to the community and also communicating with the founders, advisors and other contributors who will be involved in generating the information needed to further this initiative. This SubDAO should be made up primarily of active DAO community members who have shown an interest in transparency and productive discourse. Lombi has 10 years of experience designing and leading brainstorming sessions, and will lead this SubDAO to outline an approach towards each transparency framework mentioned above.

The proposed solution would increase transparency and accountability in the protocol's governance, decision-making, financial management, contributor remuneration, and resource allocation processes.

Conclusions

A transparency framework for the DAO is a critical step towards building trust and confidence among stakeholders. This would enable greater participation, engagement, and collaboration among contributors, developers, and users, which can lead to increased adoption and growth of the DAO.

While there are potential risks associated with implementing such a framework, the authors of this proposal believe the benefits outweigh the potential downsides. To minimize risks, it is crucial to carefully plan and execute the implementation process, including choosing the right tools and technologies, identifying and mitigating potential security risks, and communicating effectively with all stakeholders.

Overall, by prioritizing transparency and accountability, a DAO can foster a culture of openness, trust, and collaboration, which is essential for achieving its long term goals.

Voting

This is a DAO Proposal that was drafted by community members Lombi, Avicenna & Jon Ray on 5/10/2023. After 20 days of community discussion, the proposed edits were incorporated and consensus was reached. This vote will be subject to a 24 hour warmup period, followed by a 5 day voting window.

If you agree with this proposal, a [YES] vote would confirm the following:

• Gather key outstanding questions from the community to be answered by the core team.
• A request for a core team AMA with Kevin, Hector, Mac and Rex to shed light on all the questions gathered in step 1 above (not necessarily as a group).
• All action items as highlighted above in each sub-section.

If you disagree with this proposal, a [NO] vote would result in the continuation of operations as is.

Eligibility

All users with an sJADE balance on Avalanche and Binance Smart Chain will be eligible to vote.

Copyright

Copyright and related rights waived via CC0.