This proposal would establish a partnership between Aragon and Nation3, as a cornerstone to make DeLaw happen and superpower DAOs.
There is already significant ideological alignment and team alignment, and this proposal would take this a step forward by formalizing financial alignment as well. This proposal would also enable Aragon to superpower its offering to DAOs and DAO contributors with legally-binding agreements, while being able to remain laser-focused on DAO tooling and the DAO framework offerings. This proposal would also help the Nation3 Jurisdiction achieve product-market fit through streamlined distribution to the world’s top DAOs.
When I co-founded Aragon back in 2016, we had a vision to make on-chain organizations happen. We realized the potential of creating new kinds of entities that would be fully sovereign, highly efficient, and transparent (when needed).
As we realized over the years, we were too early. Many building blocks needed to be built. When we released Aragon to the public, Dai wasn’t even launched.
Today, DeFi allows DAOs to have access to even better tools for yield and treasury management than those of traditional corporations.
The second building block that we had envisioned for Aragon was a decentralized jurisdiction (think of it as DeLaw). After all, DAOs can run some operations on dry code (smart contracts), but a lot of the human interactions cannot be codified, and must run on wet code (legal contracts).
For that purpose we envisioned Aragon Court — a first-of-its-kind dispute resolution protocol.
We imagined that DAOs could leverage all the best of automation with smart contracts, while also enjoying the granularity of legal contracts collateralized by tokens. And, in the process, we thought we would build the world’s first digital jurisdiction where DAOs are first-class citizens.
Unfortunately, Aragon Court failed. Looking back, its failure was mainly attributed to four things:
- First and foremost, building core infrastructure for DAOs is a huge undertaking by itself. We were stretched too thin and couldn’t focus on Aragon Court. Which I think was the right call — focusing on everything means focusing on nothing.
- Second, dispute resolution cannot exist on its own without a system of law. Whoever is in charge of resolving disputes needs a clear framework to adhere to.
- Third, no one wanted to rely on an anonymous jury (random people over the Internet staking tokens) to resolve their disputes. Everyone wanted legal professionals instead. Understandably so.
- Fourth, making all agreeements and disputes public (even having to make sensitive evidence public) turned off potential users. No organization wants to make their disagreements public, and of course there’s a big privacy concern for individuals too.
Ultimately, I think there’s some potential in Aragon Court or Kleros-style dispute resolution protocols in the area of content moderation for public communities. After all, content moderation doesn’t require the intricacy of contractual law, and also content is public by default.
But when it comes to giving DAOs tools to create better agreements with each other or their contributors, a different set of tradeoffs was needed. We realized that a composable dispute resolution system with predictable guidelines and constraints (laws) and where participants can keep their privacy, was needed to onboard the next 10k DAOs.
As you all know, after kickstarting a vibrant community of Sovereign Individuals around Nation3, we asked ourselves: what’s the most fundamental service a cloud nation can provide?
Eventually we realized it is a system of law, which then enables a healthy economy and market environment to exist, in turn giving birth to more products and services that citizens can benefit from. Following that logic, we started working on Nation3 Court.
Now we are about to launch the Nation3 jurisdiction, including a fully functioning court system, a constitution and other checks and balances.
Nation3 will allow anyone, for the very first time, to enter legally-binding agreements over the Internet, with no need to ultimately rely on a traditional jurisdiction.
Nation3 <> Aragon integration
These are some of the opportunities that Nation3 can bring to Aragon:
- Disputable voting: This was envisioned by Jorge and I and partly implemented by the Aragon One team. DAO token holders can deposit collateral and make a proposal to undergo a vote, but if such proposal contradicts the DAO’s charter, anyone can dispute it. This means only actions that align with the DAO’s charter and the law can pass — closing off countless attack vectors for DAOs.
- Disputable streams: Imagine disputable Sablier/Superfluid streams. For example, enabling DAOs to enter an agreement with each guild, and then have their ops guild being able to oversee the work of a guild and pause the stream if needed. Any of the parties can open a dispute if they feel the agreement has been breached. This is unprecedented. Right now the status quo gives almost unparalleled power to the DAO (if payments are after work is delivered) or to the recipient (if payments are upfront, before work is delivered). This obviously hurts trust, in turn hurting efficiency and stability. Nation3 provides credibly neutral streams in which every party is equal before the law, once and for all removing the cat and mouse game of payment flow.
- Trustless Aragon DAO: The current design of the Aragon DAO involves a trusted group of people that can veto changes over the Guardians, which are entrusted with the duty of ensuring that proposals adhere to the DAO’s charter. Unfortunately, this poses a centralization risk and a burden for the people in those positions. Using Nation3 would eliminate both. The DAO’s charter could define actions that are illegal, such as funding or undertaking any criminal activities, or paying out dividends. It would offer a higher level of legal certainty to all DAO participants.
- Eventual legal recognition for DAOs in SEZ: Nation3 is cloud-first, land-last. Nation3 aims to prove that it can run an Internet-native jurisdiction and a system of law first, and then negotiate the creation of Special Economic Zones in traditional jurisdictions. Traditional jurisdictions, which aren’t Web3-native, need to resort to violence and coercion to enforce legal rulings over cryptoassets. On the other hand, Nation3 is a Web3-native jurisdiction where cryptoassets and DAOs are the default, and rulings over them are enforceable on-chain.
And that Aragon can bring to Nation3:
- Distribution to the world’s top DAOs: Internet-native legally binding agreements are a powerful tool for DAOs and contributors. Aragon is one of the best position players to help Nation3 target both.
- TVL within the Nation3 Jurisdiction: If Aragon wished to use Nation3 to secure its switch to a completely trustless DAO, it would significantly increase the TVL of the jurisdiction, and serve as a great case study. Aragon holds >$150m in its treasury (and that’s in the midst of a bear market).
- Powerful DAO infrastructure: Nation3 couldn’t exist without Aragon. The level of granularity achieved with aragonOS enables DAOs to experiment with governance at the speed of software. Aragon can keep bringing and maintaining such infrastructure to light, and Nation3 will leverage it.
To formalize this partnership, the following token swaps would happen:
- 1k NATION for 300k ANT.
- 1k NATION for 1m USDC/DAI.
All NATION and ANT will be subject to 1-year linear vesting.
For Nation3, 2k NATION represents ~5% of the total supply. For Aragon, 300k ANT represents ~0.69% of the total supply, and $1m represents ~0.5% of the treasury.
Aragon gets a unique chance to seed the world’s first Internet-native jurisdiction, and Nation3 gets a unique chance to achieve distribution to the world’s top DAOs.
- External factors (like a regulatory crackdown taking the industry unprepared) might decrease DAO usage, slowing down the adoption of Nation3 agreeements. The Nation3 jurisdiction really flourishes with Web3-native use cases.
- Tokens can be volatile in their value and both sides might face economic losses.
- Smart contract bugs in aragonOS (both used by Aragon DAO and Nation3 DAO) can result in economic loses.
PR at N3GOV-34 by luisivan · Pull Request #42 · nation3/gov-proposals · GitHub