Legal Structure Discussion

Since we live in the meatspace, the Geo Web still has to interact with traditional finance, tax, and legal systems. Discuss.

When Cody and I started accepting donations for the Geo Web from Gitcoin grants, practically speaking, we needed a traditional tax/legal structure to do KYC, pay contributors (including ourselves), and create some liability protection.

We weren’t raising venture capital and had grand ideas about the future possibilities of DAO governance, so we ended up creating an LLC to maximize the future flexibility of the operating agreement (i.e. we thought someday the LLC might be governed by smart contracts). We looked into establishing ourselves as a non-profit as well, but the cost/benefit wasn’t there based on how funds would be coming in and our nascent stage. We’ve always been committed to running any legal entity like a non-profit regardless and to progressively decentralizing.

As our understanding of the Geo Web network has evolved and how people will work on, for, and with the protocol, so has our perspective on how legal structuring can support the project/community. We’re approaching our mainnet launch, so there are some legal/governance steps that we know we need to take in the near term. But with a limited budget and a lesson learned about being overly ambitious with a legal structure, we’ll likely keep things simple. No Cayman Island Foundation or 501c3 yet (unless there’s a web3 lawyer out there that gets really excited about the Geo Web and helps us out with reduced rates :smirk:). Here’s our tentative thinking:

  • We’ll continue to have a legal entity that can contract/employ a core development team (hopefully not always the only one) and contributors.
    • We will never sell equity in this entity and when budget/lawyering permits, it should be a foundation/non-profit.
  • This entity (and Cody & I as founders) will never have majority control of the funds that the partial common ownership land market generates.
    • Landholders will be able to directly allocate some or all of their network fees to a whitelist of public goods (including the core dev entity) via smart contracts/Superfluid streams.
    • Funds not directly allocated by the landholder and those directed to pools that need governance (like a Geo Web quadratic funding pool) will initially be administered with a multisig that includes >50% community signers (h/t to Owocki for sharing how they approached their early Gitcoin QF pool administration).
  • We’ll use the same (or separate) multisig to administer core protocol updates, so again the core dev legal entity isn’t deemed as the centralized controller.
  • As governance mechanisms get implemented and mature beyond the multisig(s), the community can eventually establish a legal entity to represent the Geo Web “DAO” as and where appropriate (as Gitcoin is doing).
  • The Geo Web vision includes establishing protocol-level incentives that are beyond any individual, entity, or DAO’s control (e.g. 1 & 2), so they can be truly permissionless and subject to similar legal/regulatory frameworks as Ethereum or Bitcoin staking/mining issuance.

It doesn’t actually seem overly complex as I write it out here, but hopefully, those aren’t famous last words…