Maturing KlimaDAO’s legal framework
The Request for Comments (RFC) proposes transforming KlimaDAO's structure from a complex real-world entity model into a more streamlined foundation framework. This shift is significant for KlimaDAO as it seeks to optimize its governance and operations while adhering to legal and regulatory requirements.
In the formative period, KlimaDAO was orchestrated within a sophisticated legal framework, utilizing a blend of the most advantageous laws globally to establish a decentralized voting and governance system. This intricate structure was not merely a choice but a necessity, as it aimed to shield the DAO's assets from external pressures, maintain the integrity of its resources, and uphold the principles of true decentralization and governance. Despite the project’s best efforts, the evolution of regulatory landscapes has been sluggish, with states yet to enact definitive legislation that fully recognizes and accommodates the unique nature of DAOs.
The absence of specific DAO laws has compelled KlimaDAO to adapt and utilize existing legal constructs that align closely with our ethos. These frameworks, while effective, often entail intricate administrative processes and can demand a significant investment of time and resources to navigate. As the project continues to evolve, it is clear that a commitment to innovation must also reflect in our legal structure, prompting a transition from the current complex system to a foundation model. This move is strategic, ensuring that we remain at the forefront of legal and regulatory compliance while steadfastly adhering to our decentralized governance principles.
KlimaDAO’s actual system operates under a fiduciary framework where its scope has a substantial legal duty to manage assets in the best interests of, and as instructed by, the community. Furthermore, when a need arises to work closely with strategic partners, both entities are subject to rigorous Know Your Customer (KYC) and Know Your Business (KYB) requirements, necessitating background checks, financial audits, and ongoing compliance reporting.
To address these challenges, KlimaDAO’s legal team has developed this RFC to propose the commencement of transitioning the underlying legal structure to a foundation model.
A number of benefits can be realized by the project through this transition, as foundations offer unique operational and regulatory advantages:
- a more stable and enduring structure for KlimaDAO's goals, ensuring long-term impact and transparency.
- the possession of their legal identity, enabling them to hold assets, execute contracts, and engage in legal transactions independently, thereby simplifying governance, partnerships and decision-making processes.
- simplified KYC and KYB processes affording KlimaDAO the flexibility to integrate more effectively into the wider, dynamic business environment within the carbon and environmental commodity markets.
- reduced legal uncertainty during complex financial transactions.
- a continued and compliant commitment to KlimaDAO’s decentralized nature, which also allows for its dynamic governance process to continue evolving.
The transition to a foundation will yield several strategic advantages, allowing it to inherit the DAO’s existing asset management directives while streamlining governance, compliance, and operational efficiency.
An Overview of the Klima Foundation
The intention is to incorporate the Klima Foundation in the Cayman Islands, deemed one of the most crypto and DAO-friendly jurisdictions identified to date.
The primary mission of the Klima Foundation remains the same as that of the DAO historically: to oversee a digital initiative focused on enhancing global decarbonization efforts. The Klima Foundation aspires to revolutionize carbon markets, environmental commodity markets and potentially establish a novel carbon-based monetary system.
The Foundation's primary purposes include promoting blockchain-related technology for carbon markets, supporting KLIMA Improvement Proposals (KIPs), producing educational materials related to decentralized autonomous organizations (DAOs) and blockchain technology, and facilitating commercial agreements aligned with these goals.
Alongside the generic and general initiative, the Klima Foundation is working on the development of the KLIMA DAO platform, operated through smart contracts. This platform empowers the KLIMA DAO community to collectively shape its future through decentralized voting. The Klima Foundation also recognizes and endorses contributions from individuals in strategy, IT, and law to promote environmental and climate policies.
The governance structure of the Klima Foundation will include a Board of Directors and the Guarantee Committee.
The President of Klima Foundation
The Board of Directors is overseen by the President of the Board. The president of the Board is ratified via Community vote, nominated by DAO contributors, and may be removed via KIP. The President will legally represent the DAO, and ensure that communication between its various stakeholders is efficient and effective.
ThereisonlyoneDJ is the initial nominee for the Klima Foundation President from KlimaDAO’s current contributor team. ThereisonlyoneDJ has an established history with KlimaDAO – an active contributor and the Functional Steward of the legal department since the project was launched – and a trusted and valued member of the team. They have demonstrated a profound understanding of the legal intricacies that govern decentralized autonomous organizations and have been instrumental in navigating the complex landscape of blockchain legality for KlimaDAO. Furthermore, they have a passion and handson experience in the economic mechanisms that underpin the KlimaDAO Protocol.
It is considered that as KlimaDAO continues its development and charts its pathway under the new foundation model, that an individual who has a track record of delivery at the DAO is prudent for this office.
The Board of Directors
The Board itself holds the powers for the operational management of the Foundation and plays a pivotal role in determining objectives, resource allocation, and financial management, analogous to the role Klima DAO’s Core and Stewards have previously fulfilled at the DAO (per KIP-19).
The directors are not required to be members of the Foundation or residents of the Cayman Islands, allowing for a diverse and global representation. Directors serve at the pleasure of the appointing entities and are subject to removal by decentralized vote. They, whether acting individually or collectively, are entrusted with a fiduciary duty to uphold the best interests of the Foundation and the Protocol.
KlimaDAO’s founders will remain key stakeholders of the project, maintaining oversight of the Foundation and the DAO, and provide non-binding opinions regarding its progress to the Board and the Community – irrespective of whether they choose to continue on as a contributor of the project.
The Guarantee Committee
The Guarantee Committee is an office held within the Foundation, with the intention of ensuring robustness and integrity around KlimaDAO’s ongoing interactions with the carbon markets. Specifically, the Guarantee Committee is tasked with the thorough examination of RFCs brought forth from the market with regards to KlimaDAO’s carbon financing agreements.
The Guarantee Committee members are therefore expected to have significant knowledge and experience within the climate finance and environmental market domains. This Committee will be positioned to shepherd the DAO’s initiatives within the climate finance space, and mitigate risks associated with these activities, considering factors such as technical, economic and reputational risks, and conflicts of interests that may arise within the market. The Community will have the opportunity to affirm new appointments to the Guarantee Committee, via a KIP.
The Committee's authority is exercised with the sole intention of advancing the DAO's interests, ensuring that its operations are not only efficient but also reflective of its core mission. Members of the Guarantee Committee are appointed for a tenure of three years, with the possibility of reappointment, signifying a long-term commitment to the DAO's vision and stability.
Therefore, the Guarantee Committee will have the ability to make recommendations to the community regarding carbon financing initiatives – however, it will not have the ability to make decisions on behalf of the community (i.e. a KIP will still be required to ratify financing agreements).
It is anticipated that the Guarantee Committee will at times work with the Klima Review Committee (defined in KIP-35) to progress or raise concerns around RFCs and KIPs specifically pertaining to climate finance.
KlimaDAO Governance in the Klima Foundation
Whilst the foundation will transition KlimaDAO to a more robust, trusted legal structure that can support the project’s activities within the market - practically speaking the transition would add one process to KlimaDAO’s governance: the Guarantee Committee will have the ability to review and provide opinions on KIPs related to Carbon Financing prior to them moving to Snapshot Voting (in parallel to KIP-deliberation on the Forum).
The below graphics represent the “Current State” and proposed “Future State” of DAO decision making, per this proposal.
The intention is for this process is to add robustness to KlimaDAO’s decision making processes in the climate finance arena, and internalize more subject-specific knowledge into the DAO.
The President will be integral to ensuring the Guarantee Committee is able to understand the DAO’s constraints, opportunities and trajectory, and support the Guarantee Committee with the communication of their opinion to the Community to inform the governance process.
Proposed Klima Foundation Bylaws
The primary mission of the Foundation is to oversee a digital initiative meticulously designed to bolster global decarbonization endeavors. At the heart of this initiative lies the creation of a cutting-edge digital platform, dedicated to the tech care of "carbon offset certificates." Each certificate serves as a symbolic representation of one metric ton of CO2 emissions averted or absorbed through rigorous environmental protection undertakings. This visionary endeavor is underpinned by the aspiration to confront and surmount the considerable challenges that beset carbon markets, including issues of liquidity, opacity, and inefficiency. The ambition is to not only revolutionize these markets but to potentially establish a commitment to a sustainable future.
With the KLIMA DAO Platform - operating seamlessly via smart contract technology - serves as a stepping stone towards broader horizons, as the Foundation endeavors to broaden its user base, foster strategic alliances with external consultants, and superintend the intricate KLIMA DAO voting system. The core objective is to empower the community of KLIMA DAO users to collectively chart the course of the platform's future through a decentralized voting mechanism. In this endeavor, the Foundation stands as a beacon of transparency, adaptability, and inclusivity, setting the stage for a democratic decision-making process.
Another facet of the Klima Foundation's mission is the commendation and recognition of individuals who lend their expertise in the fields of strategy, IT, and law to advance the cause of environmental and climate policies. This extends to the endorsement of groundbreaking high-tech solutions for environmental monitoring, the pursuit of strategic approaches to mitigate climate change, and the advocacy for responsible environmental stewardship. On a monthly basis, the Foundation identifies these contributors, fostering a culture of environmental responsibility and sustainability within our community.
Moreover, the Foundation aspires to establish a forward-looking smart contract-based pool for tokens, with prospects of forging meaningful partnerships with other decentralized exchanges in the days ahead. This strategic move underscores our commitment to fostering a transparent, sustainable, and collaborative approach to addressing the exigent challenges posed by climate change and environmental degradation.
Beyond these foundational pursuits, the Klima Foundation assumes an even broader mantle: that of safeguarding the environment against the burgeoning impacts of climate change and moderating the pace and magnitude of these changes via the carbon markets.
The Klima Foundation actively seeks collaboration with kindred organizations, foundations, research institutions, and similar entities that share a compatible and harmonious purpose. In order to chart a course towards a sustainable, resilient, and harmonious future for our world.
Furthermore, the primary purposes of this Foundation are to facilitate, support, promote, operate, represent and advance:
- the development and adoption of blockchain-related technology and software for the carbon markets;
- each DAO Resolution (also defined as “KLIMA IMPROVEMENT PROPOSAL” or “KIP”);
- research and education materials concerning decentralized autonomous organizations, software, blockchain or distributed ledger technology-based digital asset and data provision, commerce, translation, aggregation, insurance, quantitative and exchange technology; and
- any necessary private use modes or commercial agreements or relationships in furtherance of any of the above.
This Foundation recognizes the intrinsic value of the "KLIMA DAO PROTOCOL" and the utmost importance of ensuring its growth and the protection of its core objectives. It is the foundation's fiduciary duty to act in the best interests of the Scope itself. Recognizing the potential diverse interests of token holders and the inherent risks that may arise from actions driven by individual benefits rather than the collective good, this clause seeks to maintain the integrity, stability, and mission of the foundation.
Summary of the rules that will constitute the foundation's bylaws.
- The "KLIMA FOUNDATION" is a Cayman Islands Limited Liability Foundation Company with the following key points in its bylaws:
- "KLIMA FOUNDATION" is established with specific powers and objectives outlined in its Charter.
- The Foundation may also exercise powers granted by the Cayman Islands Foundation Companies Law, 2017.
- The Foundation's principal registered office is in the Cayman Islands, but it may have offices elsewhere.
Purposes of the Foundation
- The primary mission is to create a digital platform for issuing "carbon offset certificates" to combat climate change.
- It aims to revolutionize carbon markets and establish a carbon-based monetary system.
- The Foundation is developing the "KLIMA DAO" platform for decentralized decision-making.
- It also recognizes and rewards contributions in strategy, IT, and law for environmental and climate policies.
- The Foundation seeks to establish a smart contract-based pool for tokens and collaborate with similar organizations.
Instrumental, ancillary and related activities
- The Foundation can manage assets, participate in associations, and enter into cooperation contracts to achieve its purposes.
- The Foundation's assets are managed by the Foundation with the help and direction of the community.
- The operating fund consists of income and resources derived from Foundation activities and contributions.
Klima DAO voting powers
- The Foundation can vote on snapshot activities for Klima DAO using Klima Tokens.
- The Foundation manages the KLIMA DAO voting system, allowing the community to influence the platform's growth and goals.
- It outlines the voting process, including discussion on a forum, and how proposals are submitted and voted on.
- The Foundation does not have shares or pay dividends. Income and assets are not distributed to members, directors, or officers without consideration.
Treasury Management; Investment
- The Foundation can place funds with third parties to preserve and grow its treasury, with a focus on demand liquidity. Directors cannot invest the Foundation's funds.
Guarantee Committee – Functioning
- Procedures for the Guarantee Committee's operation are determined by Decentralized Resolution.