Introducing the dxDAO

The dxDAO will launch on May 29, 2019

The dxDAO will be a community-governed DAO with total control over the DutchX trading protocol. Anyone can participate in what will be the first ever fully decentralized trading protocol.

The dxDAO will be:

100% community-owned. There will be no pre-allocation of voting rights. Easy to get involved with. Anyone can become a stakeholder by trading on the DutchX or by locking ETH or other ERC20 tokens traded on the DutchX protocol. In full control over the DutchX. In theory, any change could be made to the DutchX protocol through a proposal of the dxDAO. Using DAOstack’s governance infrastructure and the holographic consensus governance framework, made accessible through the Alchemy user interface. Capable of growing beyond the DutchX with the ability to do anything that is currently possible on Ethereum.

Why?

Decentralized finance still lacks foundational decentralized infrastructure

The DutchX protocol is an infrastructural component on top of Ethereum that enables the exchange of any two tokens. Unlike other exchange mechanisms, it works fully on-chain and boasts resilience to front-running and order collusion. At the heart of the DutchX’s design is an auction mechanism that finds a reliable price even for tokens that are not very liquid.

These unique properties position the DutchX mechanism as a cryptoeconomic primitive for #DeFi (decentralized finance) networks. Most prominent examples of #DeFi projects, such as MakerDAO or b0X, require:

A reliable price feed that can trigger margin calls. A market mechanism for larger market orders in case of liquidation.

To fulfill these requirements #DeFi projects currently use either centralized options or otherwise offer a limited range of tokens. The DutchX protocol differs as it will offer fully decentralized options for these two crucial #DeFi primitives.

Immutability vs. Upgradability

A DAO balancing the tradeoff between immutability and unilateral power

We deployed the DutchX roughly 6 months ago. It’s already processed over 1000 auctions resulting in over 10,000 transactions. The live DutchX deployment does not have an “owner,” making the smart contracts immutable.

While immutability provides greater incentives and guarantees for third-parties — such as slow.trade — to build on top of protocols, it also means that protocols cannot adapt to new requirements. To us, protocol ownership by DAOs with a wide distribution among stakeholders is the best compromise between immutability and upgradability.

More than a fancy multi-signature wallet

Bottom-up instead of top-down — full decentralization from day one

Many projects are exploring voting and on-chain governance. However, these projects begin and often remain highly centralized; the community is only involved as a formality to choose where executive power lies.

The dxDAO takes a different route — its power will be as widely distributed as possible from day one.

We envision the dxDAO as a radical new paradigm with tens of thousands of participants. Evidently, it’s crucial to provide fertile ground for this cooperation through the best governance mechanisms possible. The agile DAO we envision must balance efficiency with resilience. That is, it must be capable of making a high quantity of decisions (efficiency) without giving a potential malicious subgroup the ability to sway those decisions against the best interests of the overall group (resilience).

We believe that DAOstack’s “holographic consensus” is the governance protocol that best balances these competing concerns.

Furthermore, the dxDAO is designed to enable making day-to-day decisions instead of simply delegating power to some other decision maker.

Gnosis will step back

The dxDAO will either live independently or die

To establish the DutchX protocol and the dxDAO as neutral infrastructure, we believe it necessary for Gnosis to cede full control of these platforms to the community. For this reason, we’ve ensured that there will be no pre-allocation of Reputation, which grants voting rights in the DAO. (Reputation is not a token)

Instead, Reputation is credited only to users of the DutchX protocol and the wider community for actions like locking down ether or other tokens supported by the DutchX protocol. In this way, the dxDAO will either develop its own life and identity independently of Gnosis — or perish.

“The Decentralized Autonomous Organization (DAO) is a new organizational form potentially as important as the creation of the corporate form in the 1600s.”- Alex Tabarrok

Beyond DutchX governance

The initial purpose of the dxDAO is to govern the DutchX protocol’s parameters. This includes: updates to the smart contract logic, token whitelisting, changes to the liquidity contribution structure, incentivizing marketing efforts, and instituting changes necessary to comply with changing legal and regulatory requirements.

But a DAO is in no way limited to these responsibilities. There is the distinct opportunity that DAOs will evolve into something much bigger.

As such, DAOs are highly capable. They have the ability to invoke any action that normally possible on the Ethereum network. Just to start, a DAO could:

Host a website (by controlling an ENS domain that points to IPFS/Swarm). List bounties on the Bounties Network or Gitcoin. (Re)deploy existing (open source) smart contract systems, especially if governance by a widely distributed DAO can add value.

How to become a dxDAO stakeholder

Once the dxDAO is live, it will have the power to initiate its own Reputation allocation scheme. However, the initial distribution of 1 million Reputation will begin after April 2019 (exact date TBA) as follows:

50% (500k Reputation) will be distributed to traders of the DutchX (by activating their Magnolia tokens which are minted for each trade).

8% (80k Reputation) will be distributed to participants locking ETH (for up to 1 month).

30% (300k Reputation) will be distributed to participants locking any token listed on the DutchX.

10% (100k Reputation) will be auctioned in exchange for DAOstack GEN tokens. The dxDAO will use the proceeds of this auction to incentivize governance participation.

2% (20k Reputation) may be distributed by the dxDAO to those spreading the word about the creation process (this can only be a suggestion, ultimately this will be at the discretion of the dxDAO).

Note that participants may be part of more than one group, with Reputation accumulating additively.