Summary
Amidst intensifying regulatory scrutiny of DeFi, we formed LeXpunK’s Builder Defense DAO dedicated to legal advocacy for builder-centric DeFi communities. The LeXpunK_DAO is governed by builders from its founding contributing communities (Yearn, Curve & Lido) and practicing lawyers from the LeXpunK Army. L3X, the non-transferable reputational token of the LeXpunK Army, is being airdropped to the founding communities, additional contributing DAOs, and a broader community of legal and developer advocates who are identified to date as active in the DeFi space and aligned with the LeXpunK mission, to enable direct sentiment polling on relevant legal issues from DeFi community. LeXpunK will effect additional airdrops from time to time, proportionally in line with the relative contributions of advocates, LeXpunK Army contributors and other builder communities, with the goal of forming a broad coalition to pool resources for funding shared advocacy goals.
We expect to submit additional proposals from time to time to other value-aligned DAOs and prominent ecosystem builders that have requested to support the LeXpunK ecosystem.
Motivation/Rationale
Growing mainstream awareness of DeFi is coinciding with institutional outrage over the “Wall St. Bets” phenomenon and political change in the United States to brew a perfect storm of aggressive legal threats against DeFi, both in the U.S. and internationally.
DeFi is a DAO of DAOs. These DAOs have many shared goals. For instance, we all aim to build, use, and enjoy open financial technologies. However, DAOs also compete with one another and often differ in ethos and strategy.
Existing advocacy orgs like the Blockchain Association, Coin Center, and the Uniswap-funded DeFi Education Fund have mutually overlapping membership and staff which are heavily intertwined with Silicon Valley venture capital funds and traditional crypto businesses like Coinbase. Many of the teams most directly represented by these organizations have pursued dual token/equity strategies, which means they also seek to accrue value to their equityholders through KYC-gated and censorable forks of their protocols which will cater to institutions and ‘fintechs’.
Builder-centric, bottom-up communities have a different cultural ethos and a different story to tell. We are spontaneous, cryptonative communities of builders that have no TradFi backup plan and value openness, lack of hierarchy, and creativity above all else. Thus, we should have our own unique voice in the evolving regulatory landscape, and by doing so we may be able to make or emphasize lines of legal argument that are not as available to other kinds of projects. After all, the former head of the SEC’s CorpFin division views “sufficient decentralization” as the point where traditional regulations end, and there is nothing more decentralized than a community of builders, users and investors that come together with no contracts or rules, no board of directors or stockholders to answer to, yet somehow build remarkable innovations together.
We believe that cryptolaw should be done in the crypto spirit. If DeFi communities want to show regulators, lawyers, and politicians what is special about DeFi, then Orwellian-named trade associations and non-profits staffed by D.C. insiders are not the best way to go. Instead, we should present ourselves as we are–as DAOs, as token communities, as builder communities. The values underlying these modes of expression are too important to cast aside in the name of expediency when the going gets tough and there are legal threats. On the contrary, the values of openness, transparency, and decentralization are DeFi’s greatest defense to traditional regulation and should be front-and-center when regulators and politicians interface with DeFi communities. This is why LeXpunK was created–to bring lawyers and builders together under a shared ethos that is as disruptive to law as it is to finance.
Through the community-funded LeXpunK Builder Defense DAO, we will not merely hire existing lawyers or fund existing traditional advocacy groups–We will bootstrap a new community of lawyers and builders working side-by-side to legitimize and protect shared creative values. This community will become a flywheel unto itself and yield benefits long after these initial donations are spent and far beyond the benefits of the specific projects these donations end up funding.
Specification
Overview
LeXpunK Builder Defense DAO will mix long-term strategic advocacy campaigns with rapid-response ‘guerilla lawfare’ raids. Contributions to the DAO will be used to build out efforts within and adjacent to the core mission of advancing advocacy efforts. The DAO is structured as a Gnosis multisig (0x316dAa88D931C7221e2E4039F6B793ba2b72418) with balanced representation of LeXpunK Army members and representatives of the three founding contributing DeFi communities to ensure alignment.
Additional contributions will fund campaigns and raids, as described below, and other proposed and approved initiatives public goods for the DeFi ecosystem. Examples of use of funds will be to support work product and projects that advance the overall mission of DeFi legal support and advocacy (including the open source work of structures, disclosures, forms, and policies which promote transparency and can be pointed to for supporting reasonable regulation).
A. Campaigns
Campaigns are major strategic initiatives, we previously proposed a non-exhaustive list of such efforts, which is copied below. However, these proposals will be formalized and proposed for public discussion on the DAO forum. Examples of such proposals are:
- a landmark position paper advocating for positive analysis under securities law, commodities law or tax law of relevant DeFi primitives such as flash loans, vault strategies, CDPs, and deposit-claim tokens
- a legal defense of DeFi developers against regulatory litigation;
- proposed ‘safe harbor’ legislation legalizing key aspects of DeFi;
- if/when the SEC files a case premised on a novel, expansive view of securities laws that could adversely affect DeFi builders (for example, that all project participants are collectively responsible as an ‘unincorporated association’); the DAO would file an amicus curiae brief in the litigation
Campaigns will be defined with thorough specifications and funded with pre-announced bounties. Campaign fulfillment will be by teams hand-picked by the Advocacy Fund Multisig. Relevant experts–both lawyers and developers–will be recruited from within the LeXpunK community, other DeFi communities and, if needed, from traditional law firms; these will be our ‘MandDAOlorians’ working for a piece of the bounty. A ‘taskmaster’ will be assigned from the most trusted ranks of the LeXpunK Army–typically an experienced attorney–who is not eligible for the bounty, but receives a flat fee to monitor the working group’s progress, help remove blockers and make the final determination of when the project has been completed to spec and the bounty is due to be paid. Upon project completion, the team members themselves will decide how the bounty should be allocated, using another yearn ecosystem offshoot–coordinape. Campaigns will be pre-checked with the LeXpunK community through L3X snapshot polls.
B. Raids
Raids are rapid-response initiatives tailored to respond to current events in realtime. Examples of raids would be:
- a politician or lobbying organization makes an adversarial pronouncement regarding DeFi to a regulator or in the context of developing legislation; the DAO funds a rapid public response detailing community views about their concerns or questions;
- a contributing DeFi protocol suffers from a hack or exploit and the team needs help coordinating with law enforcement or CEXs to help block or recover funds
- builders from a contributing community receive an informal regulatory inquiry; the DAO helps strategize and marshal resources to advocate and advance positions that defend the builder
Raids will be funded on an emergency, ad hoc basis at the discretion of the DAO.
The time is now. Let’s do cryptolaw the crypto way.
Governance Overview
LeXpunK has established a multisig structure to govern the LeXpunK Builder Defense DAO funding contributed by Yearn, Lido and Curve. The multisig keys are held by Yearn, Lido, Curve and a group of LeXpunKers. The Yearn key is held by the Yearn treasury multisig (@andre.cronje is also an individual multisig key holder, since he set up the multisig).
LeXpunKers, together with the multisig have defined an initial 6-month slate of specific projects, each associated with a specific bounty out of the LeXpunK-earmarked funding. These proposals are cleared with the multisig, and this list of specifics will be run back through the Yearn, Lido and Curve communities for feedback.