Phase I — Launch ReserveDAO and Relaunch of ReserveLending
Dear community members, advisors, stakehodlers and affiliates,
I wanted to convey my continued gratitude to you for the ongoing support. Your feedback, network and ideas have been invaluable. And, you have been heard. By taking the following steps, the resultant family of entities will house each function in the appropriate legal jurisdiction. These changes will allow us to maximize the value of ReserveDAO and existing unFederalReserve products, while protecting the entities from government overreach.
The changes we describe below will inspire others to follow your lead and join the greatest community in crypto.
Hello again unFederalReserve/ReserveDAO community, we are pleased to announce our immediate “deliverables” moving forward. In this article, we cover the following topics:
- New Leadership: Mission and Objectives
- Corporate Tree Structure
- User Experience: New UI/UX
- Liquidity and Incentives
New Leadership: Mission and Objectives
When we first began the idea of ReserveDAO as a community, it was built on the principles of safety and soundness consistent with the expectations placed on financial institutions by global regulators today. To that end and in today’s environment, the principle legal entities and their relation to one another is as critical as our customer service and quality technology. This is why we have decided to start a Foundation and restructure the unFederalReserve corporate entity family. After providing the proper restructuring for our company and upon the creation of the Foundation, I will step down as the acting CEO of unFederalReserve and continue my role as the administrative officer of the DAO, and the director of the Foundation. This will be coupled with an elected community leader (President) who will become a multi-sig on our Gnosis-safe and will be required to sign off on certain processes.
I have interviewed and talked to a few candidates for the CEO position, I believe that I have found someone who will be able to effectively manage unFederalReserve and its products. The future is bright for us, I believe many of you will be excited about him and the abilities he brings to our community.
This chess match of redomiciling entities is necessary and common into today’s regulatory environment not only for crypto companies. Many household name companies like Google, GE, Meta, have been doing the same for decades.
The end result of the redomiciling and incorporations will be three separate entities, each serving distinct and specific purposes:
1. a U.S.-based software company,
2. an RSRV token Foundation and,
3. a foreign-domiciled commercial platform licensing the U.S. entity’s software.
eRSDL will still be used to manage licensing through its buy/burn mechanism. RSRV will be the governance token for the DAO.
Corporate Tree Structure
In light of imminent regulatory changes in the Decentralized Finance (DeFi) space, we have decided to relocate our legal entity for conducting DeFi services from the current jurisdiction. We are actively pursuing the establishment of our new legal entity in the British Virgin Islands (B.V.I) and evaluating potential foreign countries to register our entity. This strategic move is driven by the need to adapt to evolving regulations that specifically target the DeFi industry.
The utilization of the DAO model presents certain challenges for individuals and businesses. While a few jurisdictions in the United States, such as Wyoming and Vermont, as well as some non-U.S. jurisdictions like the Marshall Islands, have established clear pathways for integrating DAOs into traditional legal structures, most jurisdictions do not yet recognize DAOs as legal entities. Merely encoding and making a DAO publicly accessible does not automatically grant it legal recognition. As a result, developers interested in giving their DAO a legal framework often need to adopt customized solutions.
Currently, two types of DAO structures are gaining traction: the “unwrapped” DAO and the “wrapped” DAO. However, the unwrapped DAO, which is generally unrecognized by current U.S. law, does not benefit from the limited liability protections provided to entities such as limited liability corporations (LLCs) and partnerships. In the absence of a legal form, courts may consider the DAO’s members to have formed a general partnership, thereby exposing each individual DAO member (i.e., DAO tokenholder) to personal liability for the entire DAO’s activities. This potential liability raises significant concerns for participants who do not wish to expose themselves to legal and compliance risks associated with a DAO.
Furthermore, the absence of an associated legal entity allows any individual DAO member in an unwrapped DAO to potentially enter into contracts and bind other members without their knowledge or consent. Even if DAO members authorize a single member to engage in commercial contracts on behalf of the entire organization, both the authorized member and other DAO members may still face unlimited personal liability for any claims arising from such agreements. Unless passive DAO members individually contract with the counterparty to limit their individual liability, this liability scenario persists.
The uncertain landscape of rights, obligations, and potential liabilities for tokenholders and contracting counterparties of unwrapped DAOs is prevalent in most jurisdictions unless further legislative or regulatory action is taken to provide clarity.
In contrast, wrapped DAOs offer additional certainty, although they are not a flawless solution. In a wrapped DAO, a formal business organization is created by all or a subset of the DAO’s members, often in the form of a corporation or LLC. This legal entity manages and/or owns specific aspects or functions of the DAO’s ecosystem, such as smart contracts and the treasury.
By associating a DAO with such a legal entity, depending on the specific structure implemented, it becomes possible to achieve limited liability and enhance the DAO’s ability to engage in contractual relationships, exchange services and payments with third parties, and participate in commerce more broadly.
To ensure optimal effectiveness, the LLC or other corporate organization developed for the DAO should have a strong nexus to the broader DAO community and ecosystem. This connection reassures tokenholders and counterparties that the DAO as a whole falls under the protection of a corporate form. However, given the relatively nascent emergence of DAOs in general, and wrapped DAOs in particular, the extent to which the association with an LLC or other business organization will provide the broader DAO ecosystem with limited liability and enable traditional contractual engagements remains untested.
With the above stated in mind, let’s apply that to our current structure and how it will change once the foundation is created:
unFederalReserve: will remain a Wyoming LLC for the time being with the sole aim of developing software products, it will be absorbed by the DAO when the U.S. regulatory environment gives us a clear path.
Reserve Foundation/Reserve DAO: A British Virgin Islands (B.V.I) foundation will be created (Reserve Foundation), with the sole purpose of providing ReserveDAO a legal structure for administering the rights granted to token holders. A Director (Duke Togo) will administer the day-to-day activities customary with operating the structure. Our attorneys have created over 130 such token foundations and are globally recognized experts in the field of sovereign risk mitigation, corporate structuring and international funds transference and taxation.
So, why did we pick B.V.I? This decision was based on the country’s ease of migration and lower cost of entry, coupled with clear regulations for the company to operate under. B.V.I. allows for entities to be run and banked anonymously under international law, and further, are immune from many of the registration and reporting laws required elsewhere globally. This is a great structure when the business objective is simple, and there is no concern for the company’s function greatly expanding from its initial purpose.
This strategic move will enable us to strengthen our operations, enhance user experience, and foster further growth. We are confident that the B.V.I’s supportive framework will provide us with a solid foundation to advance our mission of driving innovation and providing a secure environment for our users.
ReserveDAO is born
Concurrent with the establishment of the Foundation, a legal entity will be created in another foreign country, our legal team is narrowing down the list of countries for us. The legal entity will be a subsidiary of the Reserve Foundation. The location we select will have the necessary regulatory environment that is conducive for permissionless applications and financial services.
The Foundation will contribute to the DAO the RSRV token at a zero-basis, which then allows the DAO to sell RSRV token, not as a security, but as proof-of-membership in the DAO. The company then retains the deployed capital earned from the sale of DAO membership tokens.
When this step is completed, we will be able to turn back on our ReserveLending platform and continue with our DeFi services. Other products like ReserveFunding and ReserveLending+ will also be re-activated.
User Experience: New UI/UX
ReserveDAO, in addition to its initial mission of acquiring a bank or product control at a bank, is now becoming the retail front for unFederalReserves DeFi products. This means our immediate shift of focus and goals will be oriented to serving the DeFi and crypto community. The DAO will license the unFederalReserve software and relaunch the ReserveLending protocol with additional, popular meme coins and stablecoins. We believe adding these tokens to our protocol will benefit all communities involved. By providing these communities additional utility for holding their tokens, we can access and work with a broad and unrepresented portion of the cryptosphere. Here is a quick rundown of the coins/token and stablecoins we are looking to add immediately:
- Bancor Network (BNT): Bancor is an ecosystem of decentralized, open-source protocols that promote on-chain trading and liquidity. Its main protocol, Carbon, is a decentralized trading protocol allowing users to perform automated trading strategies using custom on-chain limit orders and range orders, with the option of combining orders together to create automated buy low, sell high strategies. Fast Lane, a separate open-source arbitrage protocol, allows any user to perform arbitrage between Bancor ecosystem protocols and external on-chain exchanges and redirect arbitrage profits back to the Bancor ecosystem.All Bancor ecosystem protocols are governed by the BancorDAO via staked BNT.
- Frax (FRAX): The Frax Protocol issues innovative, decentralized stablecoins and contains subprotocols to support them. The Frax Protocol currently issues 3 stablecoins. FRAX, a USD pegged asset. The Frax Price Index (FPI) stablecoin, the first stablecoin pegged to a basket of consumer goods creating its own unit of account separate from any nation state denominated money.
- Dejitaru Tsuka (TSUKA): Tsuka was stealth launched. There were no influencers, no team tokens, no presale. There is no buy or sell tax. There is no marketing wallet. It is a purely community driven project, its community has shown to be stable and committed to forwarding their project. As we all know, communities are what makes memecoins work.
- Pepe (PEPE): Pepe. Need I say more? In all seriousness, this is probably the strongest memecoin community at the moment. I believe it is here to stay. They are committed to their community and fully embrace what they are.
- Stablecoins — There are at least three U.S. Treasury backed stablecoins and global currencies that now have bona fide assets behind them. By adding these tokens, we give utility to buy/hodl members of those communities, and provide unique pathways to executing transactions typically reserved for fiat through established financial institutions.
More tokens will be listed over time, we encourage our community members to give feedback on other tokens they would like to see listed.
Liquidity and Incentives
With the DAOs support and the available ReserveDAO Treasury, single sided-staking will be turned on with rewards distributed to ReserveDAO P2P platform’s borrowers and lenders. This will encourage more liquidity on the platform to help build a robust ecosystem upon launch. We all saw the errors before, we know how to prevent them. So, moving forward we know which tokens can be used for borrowing and which can only be used for supply.
In addition, we are exploring collaborations with sophisticated liquidity bot providers that can more easily preserve and restore liquidity to pools with limited activity. This was an issue with the platform during its initial launch, we plan on fixing this issue before the relaunch. We will test these bots and clean up as much of the bad liquidity as possible. Those who participate in this process will be rewarded with DAO tokens. This will be an ongoing process and something we will chip away at until it is completed.
Since we will be changing the initial goals and purpose of our DAO, the adjusted budget reflects ReserveDAO’s decision to delay the acquisition of RWA’s (Real World Assets) for the production and use of DeFi products. This calculated move aims to ensure the seamless completion of the protocol and enables us to generate immediate revenue for the DAO and for unFederalReserve (eRSDL). We think the entire project phase will cost no more than $500,000. The donation portal is still open, and a successful pre-sale would help us easily eclipse that figure.
It is important to have a minimum budget set aside for legal fees and continued development of our technology. The marketing budget will be set aside for post launch and after we list our new tokens. This will help us achieve our initial revenue goals to keep the DAO open and absorb unFederalReserve outright.
Our initial set of deliverables will not have a necessary order or set due date. We have listed the first set of tasks the team aims to complete. Taking these steps is necessary to a successful relaunch of ReserveLending and the launch of ReserveDAO. I know we have been through a lot as a community, but we have a path forward and it’s reachable. It has been a great privilege and honor to be placed in this position. I am happy I have been able to find a path for our community and project. I can not take all of the credit though, many of you in the community have chimed in over the past month, offering words of advice and encouragement. I would like to thank all of you for your continued support, patience and above all, your loyalty to the project. I believe we have what it takes to return to prominence, but it starts with all of us in the community and team members. We have what it takes to do this. Always forward, never look back.
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