[TIP-004] Removal or amendment of Section 5

Author: xm3van
Section/Question: Fundamental Template Section 5 a) & b)
Date: 26/05/2022
Link to previous discussion: Discord
Status: Draft

Problem Specification: Initially inspired by Prime Rating Workshop #5 Legal w/ Nathan the regulatory complexity around protocol governance does not seem to be captured by current section 5 a) & b). While we do not provide financial advice nor legal advice it is misleading reader to potentially false soundness.

Goal: Avoid misleading the reader of a Report believing a high score in the regulatory section represent regulatory soundness - which given the current framework may be the case.

Proposed Solutions:

  1. Instead of pushing for more depth, reduce the extend of our judgement by either adjusting the score on the ease of availability and transparency of legal information. By either extending as suggested by @grandmaster pepe Section 3 - Team - Question 1 a) To something along the lines 1. Is the team public? Is there a company/foundation/labs that is known? or simplifying regulatory section 5 and grading on information availability.

  2. Dig deeper and attempt to provide a better framework as suggested by @dabar90 @bagelnumber5, as this will become increasingly relevant in the future.

Vote Specification

5a) Does the protocol provide clear legal transparency arounds it protocol? (15 points)

The protocol makes it explicit whether it takes a DAO only approach (i.e. is a DAO from day one) or whether there is a legal entity associated with it. In case there is a legal entity associated with the protocol - to what extend is the information is easily accessible?

Answer:

Score:

Score Description
8-10 The entity is a believable DAO (having scored above over 75% in the section 4. Governance) or has a legal entity associated with information easily accessible concerning the entity.
4-7 The entity is a somewhat believable DAO (having scored above over 50% in the section 4. Governance) or has a legal entity associated with information yet information is not easily accessible concerning the entity.
0-3 The entity is a not believable DAO (having scored under 50% in the section 4. Governance) or has no information on a legal entity associated with the protocol.
Please delete this table after adding a score

For: Reduce section 5 Regulatory of the Fundamental Report to the above outlined guiding question.
Against: Do not Amend section 5 Regulatory of the Fundamental Report.

4 Likes

I mean, at this moment section 5 doesn’t make sense, but If I look at only 1 year in advance I see only a more robust rating framework with more analytics, information, and questions about the legal section. If we can develop that field under different sections it’s fine. I am only against neglecting that question

2 Likes

I vote for option 1. Responding Yes/No to whether or not their is a legal entity behind the project is the most important piece of info captured in the existing section 5.

1 Like

For now I would go for 1.
If later on regulatory clarity becomes something our community is capable of handling, we can always propose going to 2.

1 Like

@squidbit, @dabar90 and @RatingPepe thanks for the feedback! Share the sentiment.

For Option 1 - I’d suggest given the future importance of the regulatory section to keep the heading as reminder essentially (I suspect backend will also be very grateful to us :sweat_smile: ). Scrapping the current 5a) and 5b) and replacing it with something along these lines:

5a) Does the protocol provide clear legal transparency arounds it protocol? (15 points)

The protocol makes it explicit whether it takes a DAO only approach (i.e. is a DAO from day one) or whether there is a legal entity associated with it. In case there is a legal entity associated with the protocol - to what extend is the information is easily accessible?

Answer:

Score:

Score Description
8-10 The entity is a believable DAO (having scored above over 75% in the section 4. Governance) or has a legal entity associated with information easily accessible concerning the entity.
4-7 The entity is a somewhat believable DAO (having scored above over 50% in the section 4. Governance) or has a legal entity associated with information yet information is not easily accessible concerning the entity.
0-3 The entity is a not believable DAO (having scored under 50% in the section 4. Governance) or has no information on a legal entity associated with the protocol.
Please delete this table after adding a score

What do you think?

3 Likes

I support this, a max score of 10 at this moment is more realistic, and the “one question section” enables more space for the rater if will have more info about legal questions

1 Like

Thanks @xm3van for rasing this point, agree that the current framing of the questions is not ideal. Also agree with @dabar90, that we should not neglect this section. But I’m questioning whether we’re better off with this quick fix?
I have to admit, it’s not fully clear to me what the goal is. Is the goal to make it easier for raters to answer the question or to better inform readers about the legal situation of a protocol? If the latter, shouldn’t this question be informed by a legal opinion/ current best practices / industry insights?
@Salome is currently working on an article that could be a good start. If, however, the first is the case (which I don’t support), then I think the current question might even be easier to answer, as you can always use n/a if no clear info available.

3 Likes

Thanks for the feedback! I updated the initial proposal post! In my mind the goal right now is to avoid misleading the reader to potentially false soundness, believing a high score in the regulatory section provides regulatory soundness - which given the current framework seems to be the case.

With the formulation of the question I wanted to rather avoid us grading something that is not representative of the “truth”.

1 Like

I’m more inclined to include this question about legal accountability in another existing section (i.e. eliminate section 5 entirely and include this re-worded question in Section 4: Governance as question 4f). If we combine with an existing section, I think Section 4 makes more sense than Section 3. I also think the scoring weight of 15 points is good because of the importance of legal accountability in the “real” world.

Personally, I would also suggest rephrasing the score descriptions a bit to make scoring more objective (raters can still add a narrative explanation in the Answer section, but this gives more clarity from a numerical perspective IMO):

Score Description
8-10 The protocol has an obviously associated legal entity and information on legal accountability of the entity is easily accessible.
4-7 The protocol appears to have an associated legal entity and some information on legal accountability of the entity is accessible.
0-3 The protocol does not appear to have an associated legal entity and little to no information on legal accountability of the entity is accessible.
Please delete this table after adding a score
2 Likes

For the well being of our backend and frontend devs, it would be much easier if we leave the 5 sections as is. This would otherwise lead to a whole boatload of clean-up work to accommodate for the new structure of only 4 sections.
In this new phrasing I’m also missing the statement that @xm3van added about protocol chose the DAO-only option without a legal entity, which I believe is also a viable option. But again, I’d prefer to be more informed on this, hoping that Salomés article will bring more insights and help us to come to a conclusion.

3 Likes

I think option 1 is more sound. However, this shouldn’t limit raters to dig deep as to “why” the protocol legal status isn’t as apparent. Some are anonymous for a reason or even developed by anons and I feel like that should be pointed out if the case

2 Likes

@lavi @dabar90 @squidbit @machuche @RatingPepe are you happy with the proposed TIP? If yes I would move to Snapshot vote.

2 Likes

I am, currently its maybe best solution

1 Like

Sounds good ser. Personally I’m happy with it

2 Likes