In May, Lido DAO contributors created a proposal to form the Lido Alliance Workstream, a task force designed to help Lido create an Ethereum-aligned ecosystem around Lido/stETH to both spread and decentralize the network beyond just its current form.
But the problem arose of "How do we keep this entity accountable?". The crypto world is littered with the corpses of dead workgroups, initiatives, and funding disasters already, so designing a workgroup to avoid this fate was paramount.
Thanks for reading MetaLeX Newsletter! Subscribe for free to receive new posts and support my work.
Thus the workgroup decided to create a BORG that is highly restricted in what it can do both on a legal and cybernetic front, turning the workstream that can't do evil, rather than one the community can only hope won't do evil. Both the proposal and signaling vote passed, the BORG is being constructed as we speak. Let’s go through the implications and how it impacts the future of
https://x.com/MetaLeX_Labs/status/1826656096129306928
-------------------------------------------
Firstly, what is a BORG?
A BORG is a hyper-restricted legal entity that is bound to a project or DAO to do one specific task, or a series of tasks, being restricted both legally and cryptographically (via multisigs and smart contracts) to execute what it was designed to do without the possibility of rugging or misusing its power. Essentially, its the law equivalent of a smart contract. An entity that can only do what it was made for and nothing else.
https://x.com/MetaLeX_Labs/status/1767194511875174623
-------------------------------------------
Duel Layer Protection
The key to BORGs is that there are two layers of accountability involved, Legal and Cybernetic. Here’s how each one works:
-------------------------------------------
Legal Layer
The BORG will be designed to be a trust-minimized , memberless, beneficiary-less Cayman Islands entity with change-resistant bylaws that mean that, on the legal level, it is bound to follow what it was created to do vs the freedom that most foundations or similar entities have. It also makes it so that the BORG has to be operationally transparent from the ground up, vs trying to tack on transparency mechanisms at a later time.
https://x.com/MetaLeX_Labs/status/1826993918677823912
-------------------------------------------
Along with this, BORG members need to disclose all conflicts of interests and will be publicly known by the community and the Cayman government. Also, all BORG members would need to satisfy eligibility criteria not being subject to sanctions, not having previous egregious criminal convictions, and being reasonably sophisticated regarding blockchain technologies Aka no North Korean hackers, no scammers, no threat actors, and no easy collusion. ------------------------------------------- All this combined helps prevent situations like the recent Compound voting disaster where hostile actors tilted the vote in favor of their proposal. BORG bylaws would enable and permit the judgment of the board to be able to detect hostile takeover attempts or distorted votes and let the DAO have more time before enacting a potentially suspect proposal.
https://x.com/MetaLeX_Labs/status/1823431143338745861
-------------------------------------------
While the members of the BORG are not directly accountable to the DAO, they are to the BORG, and the DAO has legal and onchain mechanisms for ensuring the BORG follows the BORG's own (Lido-purposed) rules, making it the closest to a legal-DAO fusion that you can get without compromising decentralization or DAO autonomy.
But this is not enough.
-------------------------------------------
Cybernetic Layer
The cybernetic layer makes it so that any proposals have to be approved by the board and DAO before any funds are received from the treasury (enforced via an EasyTrack veto). This means that even if the BORG wanted to misuse the funds it could be stopped at any time by the DAO and there would be legal consequences for the members involved in said misuse.
No trust required.
-------------------------------------------
This setup will soon be augmentable further with MetaLeX's own tech stack, which allows for more granular checks-and-balances. This will let the DAO have even more power over the BORG, and make the setup more customizable, adding even more checks-and-balances to the organization.
-------------------------------------------
By formalizing the Alliance Workstream as a BORG, we can make sure these goals are actually legally and cybernetically binding mandates, rather than vague promises or ideals.
-------------------------------------------
Further Decentralization
To further secure the BORG, the Board and DAO will appoint more members to the BORG multisigs (Guardians) which can be veto’d by the DAO, adding more security while avoiding the unaccountability of regular multisig setups.
-------------------------------------------
FAQ
-------------------------------------------
What the BORG is NOT:
The BORG will not be a black-box monolithic foundation, LLC, contractor, or regular company!
We've detailed a lot of the downsides of these types of law-only organizations in our thread about the recent Cosmos/ICF drama. These are all relatively unaccountable entities and tend to cause, rather than alleviate, drama and conflict within a DAO or project.
This will be a legally and cybernetically bound workgroup BORG that is transparent in pursuing and accountable to fulfilling specific Lido-related purposes with no real possibility of mission creep.
https://x.com/MetaLeX_Labs/status/1828004521278116027
-------------------------------------------
How will the board of directors be chosen and held accountable?
The initial directors are reputable, well known Lido community contributors (listed in the proposal above), and any future directors will need to be voted in by both the board and DAO.
This lets both the board and DAO suggest new members, but avoids a situation where either tries to manipulate the board composition to be tilted too much in their favor and avoids governance attacks.
-------------------------------------------
How does the DAO keep the BORG itself accountable? If one of the directors or the BORG itself misbehaves, the DAO can both suspend funds to the BORG and/or vote to oust the offending board member. The DAO can also appoint an "Emergency Supervisor" with legal authority to pursue legal actions related to the BORG violating its Lido-specific rules, including (albeit unlikely) potential legal consequences for BORG members who engage in egregious misconduct.
-------------------------------------------
What is the process to add or remove a director?
It would be the same as the regular DAO snapshot vote + binding on-chain vote, just like for normal proposals.
-------------------------------------------
What is the difference between the BORG and Workstream?
The people working on the Workstream are hired by and work for the BORG, which is then tied to the DAO and based in the Caymans.
-------------------------------------------
What happens if SHTF?
If a catastrophic event happens or if the BORG goes rogue somehow then the DAO can directly appoint an Emergency Supervisor for the BORG.
The Emergency Supervisor would have strong legal powers in both Cayman law and in the BORGs bylaws and can remove/appoint directors at their discretion. To avoid a dictatorship scenario the tenure of the Supervisor is terminated after 12 (unless directly renewed by the DAO).
NOTE: This would not be an easy event to trigger and would involve multiple checks-and-balances.
------------------------------------------- The full Lido Alliance BORG bylaws are here:
-------------------------------------------
The proposal for the Lido Alliance has passed. The BORG shall be made. The cybernetic future is now.
If you have any questions free to ask any questions them here or in our Telegram chat:
-------------------------------------------
But DAOs are just the beginning. Nations are next. Recently the UK released their groundbreaking scoping paper about DAOs and BORGs, meaning that structures like the one above are just the start of the crypto-legal fusion that’s about to happen.
Read more about it here:
https://x.com/MetaLeX_Labs/status/1813894652384129424
-------------------------------------------
More shall join. This is just the first major BORG, the second is in the works.
Assimilate Today
🖖
____________________________________________________________________________ SCRAPS
Thanks for reading MetaLeX Newsletter! Subscribe for free to receive new posts and support my work.
