Build Your Community on Bitcoin: StackerDAO Labs

We are StackerDAO Labs and our mission is simple: to empower communities anywhere to come together. We’re doing so by developing and providing DAO infrastructure, tools, and services to make creating and operating a DAO as easy as possible from a smart contracts, UI/UX, and legal/compliance perspective.

Since unveiling ourselves in November, we have spoken to over 30 potential or current DAO founders. These include a cooperative of hydroponic farms, a network of biotech labs to fund biotech research, AI/ML organizations, a DAO to develop a universal standard for intellectual property, nonprofits to support children with intellectual disabilities, NFT projects that will allocate portions of their proceeds to local causes, learn to earn organizations, DAOs to produce educational crypto content in African and Middle Eastern languages, CityCoins related DAOs, community investment funds, friends wanting to pool their crypto together to invest in Stacks assets, professional trading firms, professional investment funds, more NFT projects, university alumni groups, new Stacks DeFi protocols, real estate/metaverse development DAOs, a metaverse job search platform, video game DAOs, freelancer service DAOs, creator DAOs, and many more.

The innovative ideas, diversity, and missions of all of these DAOs have been nothing short of inspiring—and all of them want to build their community on Bitcoin.

Our conversations made us realize one critical fact about DAOs: every single DAO is unique. They vary widely. There is no “one-size fits all” structure for a DAO, which creates tension with our mission of making setting up and running DAOs easy. It is this tension—making DAO generation and management as easy as possible while acknowledging the reality that DAOs vary considerably—that was at the center of our thinking when developing our product offerings. Specifically, we are:

1. Developing the StackerDAO protocol–a series of smart contracts that form a DAO operating system.
2. Constructing legal/compliance tech tools–solutions so that DAOs can easily form a legal entity, raise capital in a legally compliant way, generate tax forms, and submit compliance filings.
3. Building StackerDAOs–a no-code DAO generation & management platform where DAOs will be able to easily deploy, raise capital, operate, manage governance, avail themselves of legal benefits, and meet compliance obligations.

StackerDAOs

The StackerDAOs platform is where most users will familiarize themselves with our products. On StackerDAOs, DAO founders will be able to deploy a StackerDAO tailored to their use case and (optionally) form a legal wrapper for their DAO with just a few clicks.

DAO members will be able to log into StackerDAOs, view any DAOs that they are members of, and select one to enter into that StackerDAO’s management portal. From the management portal, DAO members will be able to easily submit proposals, vote, monitor the DAO treasury, and (optionally) generate tax related forms and complete other legal/compliance filings.

Generation

Through our platform, generating a DAO will be as simple as forming a group chat. For a preview of our generation flow (though we’ve made some changes), check out this tweet from about a month ago.

When forming your DAO, you’ll be able to select one of several templates that correspond to different DAO use-cases and structures. Each template’s smart contracts will be tailored to its use-case, both for optimization and legal reasons. These are the templates that we are currently planning on offering, with NFT Communities being our first product:

1. NFT Communities—Use NFTs to gate membership. Perfect for community NFT projects, creator DAOs, civic groups, co-ops, and other organizations that want each member to have one vote.
2. Investment Clubs—Pool capital together with friends and partners to collectively invest. Investment clubs are structured in a way that do not fall under US securities or investment adviser laws. See SEC guidance on investment clubs here: [https://www.sec.gov/reportspubs/investor-publications/investorpubsinvclubhtm.html].
3. Guilds — Work collectively with members in connection with a venture–usually for-profit, but excluding investment DAOs and DAOs that mint their own tokens to pay contributors, like protocol and product DAOs. Perfect for service DAOs (think a DAO for devs, consultants, designers, or other freelancers), media DAOs, gaming guilds, and social DAOs.
4. [REDACTED]—This is probably the template that we are most excited for. However, it will require a good amount of legal engineering and development on the legal tech tooling side of things. Therefore, we are going to wait before announcing it.

Note: all fungible governance tokens minted via our platform will not be tradeable. This is to protect users from unintentionally illegally issuing securities, as well as to protect ourselves from liability. If a user wishes to form a DAO that issues tradeable governance tokens, they will be able to do so through our customizable solutions—more info in the customizable solutions section below.

After choosing a template, users will be able to select what percentage they want for quorum—or the amount of the DAO’s membership that must vote before a proposal can be valid.

Once voting rules are selected, your DAO will be ready to go and DAO members will be able to manage the DAO from our management dashboard.

Operating Your DAO

Our view is that the current UX’s for proposal submission on most DAO management platforms are downright horrendous. For example, with some platforms, you have to literally input the name of the contract into a proposal card along with the contract’s inputs. This is a miserable user experience as it makes proposal submission too difficult for members, allows for too great of a risk of user error, and is squarely inconsistent with our goal to make DAOs easy.

Therefore, we are pioneering a new UX approach for proposal submissions. We’re going to hold off on more details until we’re further along in development, but we’ll leave you with this: it certainly will not feel like you are submitting proposals.

On a more technical note, we took a page (or fork) out of Marvin Janssen’s excellent ExecutorDAO book and are making all of our proposals smart contracts. This means that when a proposal is passed and executed, it is a smart contract that will execute the substance of the proposal. For example, if a proposal is passed and executed that will stack 1 million $MIA, the smart contract will automatically take $MIA from the DAO’s treasury, interact with the MiamiCoin protocol, and stack 1 million $MIA.

We will also have an off-chain proposal where members can write a description of a proposal for off-chain actions. If accepted, the text of the proposal will be saved on-chain. However, since it is for off-chain action, there is no on-chain functionality that will result.

Managing Governance and Voting

DAO members will be able to easily submit proposals to change the “rules” of the DAO, which will then be voted on by the entire DAO. If accepted and executed, the rule change will go into effect (since our proposals are smart contracts). Rules include membership changes, % required for quorum, etc.

Once a proposal is submitted, all members will be able to see any recently submitted pending proposals on the DAO’s landing page and click to vote on it or select the “Vote” tab on our dashboard. If a proposal has been approved, any member can then execute any recently accepted proposals from the DAO’s landing page or go to the Vote tab to execute.

Treasury Management

Our platform will provide a range of DAO treasury management tools. Many of you are excited about the prospect of your DAO generating yield, so we are developing stacking and DeFi related proposal contracts (and will develop new proposals as new DeFi primitives are built on Stacks). As mentioned above, we are pioneering a new UX approach for how members will be able to submit these proposals, and we will share more details as we get further along in development.

Further, observing how a DAO is using its funds is important; so when members go on their DAO’s landing page, they will be able to see their DAO’s treasury balance and recent transactions, as well as go to a “Treasury” tab where they can see the entire history of their DAO’s treasury.

Our treasury monitor will display the value of your DAO’s treasury with real time price updates for on-chain assets. Since we know that some DAOs will engage in off-chain activity/investments, we will also be developing a way to record off-chain assets and their value (like real estate and startup equity) in our treasury monitor.

Finally, we will be implementing “mirror tables.” You can read a longer explanation about mirror tables from Balaji here, but essentially they’re the DAO equivalent of a company’s capitalization table–it will allow DAO members to see what addresses hold what % of the DAO’s tokens.

A Note on Multisigs v. Proposal Voting, Voting Gas Fees, Hyperchains, & SubDAOs

Most DAOs on Ethereum do not operate with on-chain voting functionality because (1) ETH gas fees are egregious; and (2) depending on the DAO’s operations, it may not be practical to perform an all member vote for each treasury action. Instead, these DAOs mostly use Snapshot as a vote aggregator (no gas fees) and use multisigs for the DAO’s treasury, thus trusting multisig signers to follow the vote and not defy the community. There is no smart contract/on-chain component forcing the signers to follow the community’s wishes. See these tweets for further discussion of these issues here and here.

Note: by “multisigs” we are referring to a type of multisignature treasury where multiple signers’ addresses are included, usually 4-7. The signature of a preset number of these signers is needed to execute a transaction on behalf of the treasury. These signature transactions are executed using a “multisig transaction,” which just signs the contract and does not require gas fees. Gnosis Safe is the most popular multisig in web3: https://gnosis-safe.io/. In contrast, a voting proposal treasury, like the treasury of all StackerDAOs, requires members to vote (all DAO members can vote instead of just multisig signers), and thus pay gas, in order to execute a contract.

Indeed, we are starting to see the pendulum shift from multisigs back to on-chain proposal voting with the rise of cheaper L1s and roll ups. The trust component and lack of automation with multisigs introduces various risk vectors, which we believe are unnecessary on Stacks. It’s also currently practically impossible to use a multisig platform like Gnosis Safe on Stacks for now since Stacks wallets currently have not enabled multisig transaction functionality.

Our solution: we will move governance to a hyperchain when able so that voting gas fees are negligible. Second, we are working on the ability for every StackerDAO to be able to, via proposal voting, create a multisig and decide the addresses of the signers—automated and on-chain—as well as to allow the entire DAO to vote to change the signers, which could be used if the signers are defying the DAO. This arrangement would act as a check on multisigs, making multisigs ultimately controlled by the DAO. Thus, a DAO could always just delegate a portion of its treasury to certain individuals (via a multisig), voted by the DAO on-chain, for operations that require speed, discretion, and ease. This could also be used to create subDAOs that run on multisigs (think a DAO allocating its funds to different subDAOs where each functions as a committee of the main DAO and runs its own multisig).

Legal/Compliance Tech Tools

One of the major concerns that have come up in our conversations with DAO founders are legal/compliance concerns. Figuring out how certain laws apply to DAOs is hard; actually making your DAO legally compliant—like making sure that a DAO does not violate securities laws or pay taxes—is even harder. StackerDAO Labs is aiming to cure this major headache for DAOs by developing various legal/compliance tech tools. Note: all of our legal tech tools are 100% optional–you can generate and manage a DAO without them.

First, when forming a DAO (and anytime after), a DAO will be able to form a legal entity (LLC or nonprofit) through our platform with a few clicks in the same way that you can spin up an LLC on platforms like Stripe Atlas.

But wait, aren’t DAOs supposed to be “autonomous”? Why would a DAO submit themselves to a particular jurisdiction by forming a legal entity? We’re glad you asked!

Just because you don’t create a formal legal entity does not mean that a jurisdiction would not view you as an entity. In most jurisdictions, lawyers agree that many DAOs would be considered de facto general partnerships. Have you ever heard of any business running itself as a general partnership? No? Well that’s because they have many shortcomings. They don’t have limited liability—this means that any DAO member can be held liable for a DAO’s entire damages (even if these damages are more than what that member could afford or more than the DAO’s treasury). Additionally, if a DAO owes taxes (many will), a DAO member could potentially be liable for all of a DAO’s taxes if the DAO is a general partnership.

Further, if a DAO wants to take any off-chain actions, it will likely need a legal entity. Purchasing most off-chain assets, like real estate, requires a bank account. And sorry cartoon anons, but a bank isn’t going to let a DAO open up a bank account without a legal entity. Additionally, a legal entity allows a DAO to enter into contracts and enforce their rights. Note: a primary DAO could potentially form a subDAO with a multisig and have that subDAO form a legal entity in order to effectuate off-chain activity and enter into contracts.

Second, one of the original visions for StackerDAO Labs was to be an AngelList—a company that revolutionized startup fundraising—for DAOs. To live up to this vision, we will be utilizing legal engineering to develop novel vehicles so that DAOs can more easily raise funds in a legally compliant way. We will be looking into many different mechanisms—automating crowdfunding compliance, automating aspects of securities registration exemptions that are open to unaccredited investors, curating KYC’d whitelists of accredited investors, etc.—to do so.

Finally, we will also be joining forces with partners to provide users with access to formation and compliance filings, bank account setup, tax form generation, and CPA assistance.

Customized Solutions

We know that the ideal structure for some DAOs will not fit one of our templates. Also, for legal reasons, we cannot allow DAOs to issue tradeable fungible tokens on our platform. Finally, we know that just figuring out how to structure your DAO can be a complicated process and require hours of labor that you may not have.

That’s why we are providing customized solutions for complex DAOs with structures that cannot be created with an off-the-shelf DAO. We’re providing our DAO/governance expertise to ad hoc projects by writing custom smart contracts, building tailored interfaces and tools, and providing governance consulting for complex and tricky DAOs. Examples of complex DAOs include:

1. Multiple tiers of voting with different governance tokens unlocking access to vote for different types of proposals
2. Having voting power increased by a second fungible token or NFT
3. DAOs funded by POXL (proof-of-transfer lite—the mechanism that powers CityCoins)
4. Protocol DAOs. By their very nature, protocol DAOs require customized smart contracts because in addition to governing the DAO treasury, the DAO also has to govern the underlying smart contracts of the protocol itself.

This is just a taste of some of the non-standard ways that a DAO can be structured. The possibilities are endless. If you want it, reach out to us and we will let you know if we can make it possible.

Tradeable Governance Tokens

As mentioned previously, there are legal barriers to allowing DAOs on our platform to issue tradeable governance tokens. If a user wants to create a DAO and wants to issue a tradeable governance token, they can come to us and provide us with legal comfort that the token would not be a security. After obtaining comfort, we will provide the user with the smart contracts to deploy the DAO, including token issuances.

Any DAO that we help form via our customized solutions will be able to use StackerDAOs to operate their DAO.

Community

All DAO founders/core contributors that launch a DAO with us or decide to use our management platform will receive an NFT that will grant them access to an exclusive StackerDAO community. The community will—by definition—be a community of community leaders (as every DAO founder is a leader of a community). The community will be somewhat similar to startup founder communities, but much wider: there will be devs, artists, designers, project managers, investors, marketers, musicians, and many more. Our hope is that this community of diverse leaders will spark innovation, partnerships, new projects, and even new DAOs across the Bitcoin/Stacks ecosystem.

Next Steps

We are currently rigorously testing our core DAO smart contracts and building out our UI. Our first template will be our NFT Communities product. We are aiming to launch NFT Communities in a private beta in April. We have already spoken to many of you and have mentioned that we would include some of you on our list for the private beta.

Nothing is set in stone. We will be constantly iterating and growing with our community. As new innovations come to Stacks, such as increased native Bitcoin functionality or DeFi primitives, we will incorporate them into our offerings as they make sense.

The massive support that we have received from the Stacks community has been humbling (major shoutout to the Stacks Foundation for two grants that allowed us to bootstrap development). We know that this support isn’t free—we have to live up to our side of the bargain and bring you superior products that will empower your communities to come together.

The main reason why we’re so excited to ship our products is to see what you—the Stacks/Bitcoin community—will end up building. We believe that DAOs will unlock a new era of innovation. What we’ve seen so far though our conversations is not even the tip of the iceberg of the types of communities that we will see being built with DAOs. We’re proud to help bring these communities to Bitcoin.