LIP-4 Establish DAO Guidelines, Procedure and Team Payment Structure

Proposal #: 4

Title: LIP-4 Establish DAO Guidelines, Procedure and Team Payment Structure
Author: Ethlizards Team
Date Created: 6th April 2022

This vote is to implement the guidelines, procedures and team payment structure as detailed below:

ABSTRACT
This document proposes the structure of a decentralized autonomous organization (DAO) that would be governed by the holders of Ethlizards, a decentralized (NFT) token that will serve as the primary token for governance.

Main changes

  1. The Ethlizards protocol will be governed by Ethlizards holders on our Discourse page (https://forum.ethlizards.io/).
  2. Preliminary proposals can be created by any holder of an Ethlizards NFT via snapshot (Snapshot) after garnering support
  3. Starting from 1000 ETH trading volume on OpenSea, the founding team will be paid 15% of all revenue generated by the Treasury, as opposed to the current 50% of commissions revenue
  4. For the first three years, the Founding Team’s 15% revenue share will be paid as follows: 25% shall be paid immediately and 75% will be vested or streamed linearly over a 12 month period.
  5. Guidelines and process for Lizard Improvement Proposal/s(LIP)

Guidelines

  1. Any member holding an Ethlizard has the ability to participate in Ethlizards governance by either creating proposals, giving feedback to proposals, or just simply voting on presented proposals.
  2. The following information MUST be included in any proposal:
  • DiscordID: So lizards know who to contact for information
  • Discourse: Link to your thread in “New Proposal Discussions”
  • Rationale: Clear and concise reason for the proposal
  • Timeline: What is the time expectation or estimate?
  • Cost: What is the maximum cost of this proposal?
  • KPI: How will we know the proposal is successful and who will review/report back to the community?
  • Any other helpful context or comments…
  1. If a suggested proposal directly conflicts with a proposal that is currently up for vote, the second proposal should not go for a vote until a decision is made on the first proposal to avoid approval of opposing requirements.
  2. A suggested proposal that directly conflicts with another approved proposal cannot go to vote for three months after the original proposal has been implemented to avoid wasting community assets.
  3. The Founding team may put up a final proposal directly up for voting if it is deemed in the best interests of the DAO or community.

Process to creating a LIP (Lizard Improvement Proposal)

If you have an idea that you are passionate about and think that it will benefit the ethlizards and DAO, you have the power to help implement it.

We encourage you to put on your ‘lizard wizard’ hat and become the ‘Proposal Wizard’’ of your idea. As a Proposal Wizard, you are responsible for fostering initial discussion, refinements, listening to feedback and most importantly garnering support!

Lizard Wizard: by @operator

Only once the proposal follows the necessary guidelines and you feel the proposal has the necessary support, should you put it up for a preliminary vote…

This process gives all ethlizard owners the opportunity to propose, discuss and vote for any idea or proposal they think may benefit the ethlizard DAO.

Proposals will go through a two stage voting process.

Preliminary Proposal

  • Firstly a post must be created on Discourse under ‘New Proposal Discussion’, followed by a minimum three (3) day discussion period where the community can give feedback to the person/people submitting the LIP.
  • After the minimum three day window has passed, the LIP author may be advised to restructure the proposal in order to incorporate whatever feedback they have received to gain greater acceptance by the DAO community.
  • If the Champion feels they have significant information and support for their proposal they are encouraged to create a snapshot Proposal, with “PRELIM” as a prefix on the title and call for a vote.
  • Snapshots votes are created at Snapshot

Upgrading to a final proposal

Once a preliminary proposal reaches quorum (currently set at 500) and majority support of lizards, the founders will upgrade that proposal and formally reintroduce it as a final proposal adding necessary detail or context. We will try our best to stick to the original vision of the proposal but there may be business, legal, and financial implications that need to be considered that may potentially lead to restructuring.

After a final proposal has been created it will be Announced on Discord to maximize voter turnout.

  • Final proposals are created by the founding team

RATIONALE
Following the approval of LIP #3 which significantly changed the original roadmap of the DAO, it was necessary to outline a detailed structure on how the DAO will be operated and aim for a more decentralized future. The founding team are all very committed to working on the project for years to come and have implemented changes to show our commitment to the project and the community.

10 Likes

first!

ahhh, forums really bring me back.

6 Likes

Lol. The legend of Jeff strikes again!

Your reply seems wrong without a gif attached @jeff

Look forward to future proposals and the community being operated/run as a DAO :lizard:

1 Like

Hello, nice move a forum, old time is coming back :slight_smile:

1 Like

Great proposal and nice to see the direction the DAO is going. Thanks for all the hard work team!

1 Like

W00t! I like this…Great work team

1 Like

I am bad at ideation but I’m great on feedbacks, let’s go lizard wizards! <3

It seems like Proposal Wizard is serving as a replacement for the Champion term. But it may not have been edited out of this part.

Supporting the LIP-4!

This is a good proposal in genera! I like the way the democratic process is streamlined for both efficiency and assurance all voices are voiced that wants to be voiced.

The only thing Im not sure about is this:

There might be a situation where founders do not agree with a proposal but are outvoted by the DAO. In that case they can use this formulation as an excuse to make the proposal tootless.

What do you think about a sharper formulation. For example: “Founders are allowed to restructure and change details in a proposal if necessary due to for example business, legal, and financial implications. Any restructure made by founders must honor the original intention of the proposal”

5 Likes

Can we give more clarity to what “garnering support” means in change 2? Perhaps something like at least 15 likes on the discourse forum.

Another question, what is the rationale behind change 4? and what are the implications?

This is an important point that deserves some clarity.

Summary of Ethlizard community questions, concerns and engagement on LIP-4


DAO & Proposal Process

  • Can voting be limited for the first 24 hours to allow discussion time before voting happens (is this needed / a good idea?)

Council Members
Community Sentiment: In favor of doxxed council members managing the funds and investments. Curious about other responsibilities.
So far we know there will be 5 council members voted in by the DAO. These council members will serve as fund managers and will research, make investments decisions as well as decide when to take profit from investments.

  • Are their responsibilities ONLY investment/treasury related?
  • Will the treasury gnosis safe list only these 5 members on the multi-sig for fund management or others added to multi-sig also?
  • Any governance related responsibilities, power, etc?

Founding / Core Team
Community Sentiment: Overall team has done a good job up until now and community is supportive overall. Most have questions about who is doing what?

  • Who is currently a paid member of the Ethlizard team?
  • What are the roles, responsibilities, and time commitments of each member?
  • Are any roles needed immediately to expand the team?

Founding Team Work since mint
Community Sentiment: Many want to know more about the team’s work. Only those who spend A LOT of time on discord asking questions have a decent idea. The rest are lacking information.
Is it possible to provide a brief summary of works the team has completed since mint? (some of us know bits and pieces. I (Kakashi) think that the community will show even MORE support for the team if they can see a list of just HOW MUCH has been accomplished (I know it’s more being done than most think).


What does the 15% commission for the team cover?
Community Sentiment Some discussion over whether 15% is fair – this all depends on exactly WHAT the 15% covers.*

  • Does this include marketing, DAO overhead and operating costs, etc?
  • Does it include hiring and payment of additional team members to run the DAO?
  • If a founding team member stops working or leaves, do they continue to be paid? How much? (It’s not unreasonable to get paid for building a brand, just clarifying)
  • How is this 15% divided amongst the founding team, costs, etc?
  • Do advisors get paid from this (or any payment at all)?
  • Is this 15 % of DISTRIBUTED profit revenue, or 15% of what comes into treasury directly?

Treasury Profits
Community Sentiment: Is the following correct?
DAO investment profits

  • 5% profits to council members
  • 15% to Ethlizard team
  • 40% reinvested
  • 40% distributed to stakers


    Royalties, merch, future NFT drops, other income
    15% team
    85% treasury for reinvestment

What are the costs for the treasury?
Community Sentiment: Unclear whether the treasury is to be used ONLY for investments or if it also has additional costs.

  • Any overhead or fees paid from treasury, or this is covered by the 15% paid to the team?

Disagreement between the DAO & the Founding Team
Community Sentiment: How decentralized will this DAO be? Who really has control/power and in which situations?

  • What is the mediation process in case there is difficulty finding and agreement between the team and the DAO?
  • Who has final say in a disagreement?
  • What happens in the case that the DAO/community thinks that a certain team member is causing extreme harm to the DAO – I.e. worst case scenario – how would a team member be removed? (By DAO, or by team on behalf of the DAO, etc).
  • WHO handles hiring? Only the team hires people for project development?
  • Can the DAO vote that a role needs to be added? Is there a process for the DAO to hire it’s own representatives or vote on behalf of it’s own needs for a recognized volunteer role/ paid position (think things like governance/community support roles that provide things like reports, advocacy, engagement, etc.

NOTE ON DISAGREEMENTS
This section above about disagreements does not mean to indicate any kind of “us vs them narrative.” It’s actually instead to understand what are the mechanisms we can put into place to keep the founding team, community and DAO in alignment with one and other whenever possible. Additionally, which mechanisms are in place to resolve any disagreement so that some middleground may be reached with minimal drama, delays or disturbances to the protocol.


Personal Thoughts from KakashiSama:

  • Awesome that we are moving forward as a DAO with quality, speed and community engagement.
  • I LOVE that the governance forum is now up and available so quickly.
  • It’s great to see the founding team pushing this forward and engaging positively in the community
  • Clearly a lot of thought and work has already gone into the creation of LIP-4
  • Many people seem very much in support of the general idea of this proposal, however they have questions about some specifics before placing their vote.
  • In CONTRAST to Illuvium DAO where council main focus is governance, the Ethlizards DAO is only able to vote in council members who serve as fund managers. The team is hand-picked by the team. It should feel very clear WHO actually has final decision making power in terms of governance decisions (Team, Council and/or DAO vote)
  • TBH after seeing so many questions and parts undefined (as we’re literally forming the DAO’s foundation), it could be worth it to temporarily suspend voting for a matter of days until these things can be answered.
  • IMO, MOST of these questions are not so much because the proposal is unclear or people are against it (most seem for it), it’s just that we’re literally forming a DAO and there are A LOT of details that go into it.

My biggest question: How much of this is being taken from existing successful DAOs and how much are we creating because it’s new / different? [sometimes it’s difficult to give an opinion on a new topic, however if we know a certain topic/policy is suggested because it’s used at Illuvium/BarnBridge, etc, then this info is helpful.)

17 Likes

Great summary - appreciate KakashiSama for putting this together.

I’ll reserve full judgement until these are answered but on face value I feel uneasy about this proposal in general. The first presented proposal called for the founding team to be installed as unknown and undoxxed investment managers with a 15% payment on profits - this was rightly (I believe) stopped and replaced in favour of the approved version where we have a doxxed team being paid 5% total and voted by the community with some guidelines in place. The justification and commentary around why 15% was appropriate then was that this was standard for investment arms, but now this work will be covered by our investment team - and now we have a new proposal essentially reinstating the 15% with a reduction in commissions.

7 Likes

I think we need more clarification on exactly what this 15% actually is.

A standard corporate structure looks like this:

Shareholders are the owners of the company. They don’t have liability if the company incurs debts it can’t repay but beyond that have claims to company assets and revenues.

Through operations the company produces revenues. It uses those revenues to fund further operations including paying employee and manager salaries.

Managers, including high level executives, frequently are also shareholders but they don’t have to be.

There are issues with this sort of structure, probably the biggest being insider capture where the managers direct operations to benefit themselves instead of shareholders, but it’s a reasonably standard structure that has a clear sense of who has claims on company assets and for what services someone is being paid for.

In our case the lizards are equivalent to our share however it doesn’t seem that the founding team themselves are large holders and there’s currently no allocation of funds for ongoing development which creates incentive issues.

The proposal seems to be trying to fix this by proposing a new corporate structure, something like a perpetual 15% royalty on all company operations going to core team members.

As others have noted at the very least a lot of clarification is needed around this.

Broadly, the idea of 15% of revenue going to ongoing development doesn’t sound unreasonable. If anything it’s arguably unreasonable in the other direction- if the project is really growing, for example if EthLizards starts morphing into a gaming ecosystem itself, it would almost definitely seem like a misallocation of resources to have 85% of funds paid out to shareholders instead of reserving more to fund development.

However, If this is truly a royalty in the sense that 15% is taken off the top and given to the team as an expense separate from development and ongoing operations than I’m much less convinced. I’m fully onboard with the team being well compensated for having created this project, being a founder and creating something people actually want is not easy, but long term a royalty of this size that’s disconnected from any ongoing service provided I think will be very onerous, significantly moreso than if the team were 15% shareholders.

I want the team to be well compensated and aligned with the long-term success of the project, but feel we should probably try to find some other way to bring them onboard if this is the case.

3 Likes

Will those royalties first transfer to vault and then to the team or directly to the team? And how many team members are there, will that money be used to pay people that become part of the team at a later date and any operational expenses?

There may be some issues that need to be ironed out before publishing the final proposal, which the team will work with the author to make sure it still fits their vision of the proposal, for example if a proposal has some legal issues that might need to be changes, we will point that out to the author.

For the most part this most likely won’t be a big issue, I doubt a proposal that completely contradicts Ethlizards roadmap would pass prelim. votes anyways.

1 Like

I love lizards! LFG!

I trust the team and am excited to see what’s coming :lizard:

My main concern and what I would need to know before voting yes are below. Not that my vote is critical but to understand my reasoning if it is a no.

  1. I don’t think it’s fair to represent the vault with the 50% to 15% change. It should represent the 25% to team, 25% to Marketing and then the 15% to what?

  2. Who is the team? What are their names(discord), what do they do, how many hours do they actually work per week, is this their only project, any background at all?

  3. What does the 15% actually represent? Is it going directly to 3 unknown team members to use for personal use? Or does 10% currently go to three known team members for putting 10+hrs in and building things the community couldn’t and the other 5% is going to a vault that can be used in the future for expansion?

The more transparency, the better. Of course, it’s not necessary but it would be appreciated.

Please also check: Discord I’m willing to help with the project manager/community outreach tasks.

5 Likes
  1. Not sure I understand what you’re asking here. As it currently stands, 50% goes towards the team for future development and marketing expenses (eg, paying for web hosting, Discourse hosting, paying for implementation of Ethlizards into other P2E games :shushing_face: ). LIP-4 changes it to where only 15% of royalties go towards the team as a “salary” to continue development, but does not necessarily include expenses such as marketing/hosting. For simplicity’s sake, small purchases such as paying for a Discord audit or web hosting will come out of our pockets, but large purchases such as paying for a new website, staking interface, etc. will come from the Vault, which would need an LIP to pass.

  2. Core team consists of Sp1cySauce, Galaxy Express, and me, dupree. We’ve been working hard on Ethlizards for the past few months, creating/testing smart contracts, reaching out to other protocols for collaborations, and revamping the website. We’ve spoken to Kieran on Monday, and all three of us have our entire plans set on Ethlizards development, and are fully committed to working on this project for the years to come (hence the addition of 75% vesting over 12 months).

  3. Again, not entirely sure what you mean by 5% going to vault, but the 15% would essentially be a salary to us for working on the project. It will be vested over 12 months to ensure we work on the project and are in it for the long haul.

2 Likes