Aragon Grants – Openness, Decentralization, and Aragon vs Autark

I wanted to understand the core issues involved in the dispute between Aragon and Autark. I think they give an insight into how decentralization and transparency entangle with current jurisdictions.


State of Play

Aragon Association has claimed to initiate litigation against Autark for delivering on 1 out of 13 deliverables, “Interpersonal issues (including threats), Underperformance, Lack of code quality, Breach of confidentiality (including defamation) ”

Autark LLC claims this is a ” baseless legal action in Switzerland against Autark LLC “

The central issue is regarding disbursement of grants from Aragon to Autark, what contracts and agreements have been made, who is in breach, and how this process should play out.

Open Questions

In spite of Aragon’s efforts towards a fully transparent system, there are many questions that can’t be answered through publicly available data (at least, not that I could find).

  • What agreement was breached? Why was it not made public? Do all Grantees have to sign this agreement? Does the community know that such an agreement existed and was signed to consummate the grant IRL?
  • Is the roadmap file in the grants repo considered a legal agreement ?
  • Do all other grantees pass the hurdles set for this grantee?
  • Who makes decisions about contract completion?
  • Who tracks the work done by each grantee?
  • Given this legal action has caused leaders in the space to reduce the scope of a DAO to only on-chain actions, why is the jurisdiction messaging still on?
  • Why did no one make public a dispute that is by both parties admission an issue since at least January 2020?
  • Why are none of the token holders affected?
  • Why call outsourced product development grants?
  • Is jurisdiction the only reason to initiate a legal proceeding without going through Aragon court?
  • What is the reason for preferring litigation in the swiss courts vs american courts?

Recommendations

Make governance transparent – Aragon the project has many DAOs and legal entities associated with it. That may be required to comply with local regulations, but it makes governance opaque.
More concretely make clear the relationship between Aragon the project, the Aragon association, Aragon one, Aragon black and other entities. Who is in control at each entity, How are decisions made at each entity and which jurisdictions these entities are subordinate to.
ANT holders should be aware of these ownership patterns.

Outside directors : Have independent “directors” who can act as an ombudsman. The lack of these structures of course is in-line with the grand tradition of blockchain entities re-learning the lessons of legacy fintech.

Make the decision process transparent
In their blog post , Aragon states “most of the data has always been publicly accessible on GitHub” but only the artifacts of applications are on Github.

To audit a nest payment, one has to look at the application process on github, voting process on the DAO voting app, funding in the DAO financing app with no way to track work done.

Name things appropriately –
Calling features and payments what they are lets people understand what the boundaries are and what recourse they have. So calling the payment of independent software vendors Grants and calling what functionally amounts to support ticket escalation “Court” causes people to misunderstand the process.


Understanding what happened

There are three main actors here

  • Aragon – is a collection of open source code, a non-profit Swiss foundation, and a for profit entity.
  • Autark – a Wyoming LLC that develops software for blockchain projects and has their own projects.
  • Token holders – the community of people who own ANT , the token used to participate in decisions about Aragon.

Aragon would like to decentralize (read outsource) as much of product development and Governance (read project management and capital allocation) as possible. This is primarily done by incentivizing various software developers via their Grants program.

Token holders also vote on things like which vendors should be given grants via an aptly named Aragon Grants Process AGP(link to AGP) and funds are then granted via a sub-organization (read business unit) that is managed via a DAO.

For each grant (read payment) the assumption is all three parties (token holders, aragon and the grantee) are aware of this transaction, having voted for it, and are aware of the recourse each party has if there are any issues. So far so good.

Now, there is a dispute, (the issue stated in aragon’s blog post). Autark claims they have not been compensated for work done, Aragon claims breach of contract and other issues.

So What ? Why is this a question, use the resolution system agreed upon that all three parties are aware of. Here is the rub, that dispute resolution system called Aragon Court is still apparently not ready to handle an issue of this magnitude. There is also this pesky detail of no-one knowing that such a dispute had started and both sides were thinking about starting legal actions


What happens next, internal talks break down, Autark apparently threatens to sue the Aragon association (as they are the purveyor of grant funds) firstly in the Swiss courts then later to sue in American courts. The association then initiates legal action against Autark in Swiss courts. Luis cuende co-founder of Aragon project, explains in this youtube video the reason behind doing this was to “establish jurisdiction”.

He further goes on to say Aragon Court is not recognized as a jurisdiction worldwide, and the need to establish jurisdiction first was so that they(Autark) couldn’t sue us in another jurisdiction. (I am not a lawyer but I would think that Autark can sue in the US even after there is a legal action in Switzerland.)

What this angling over jurisdictions makes clear is that the Aragon association doesn’t want this case to be tried in US courts but Autark believes they will have an advantage there.

Why is there not a pre-defined dispute resolution process, where is the need to create and sign an agreement for use of funds, that was then kept secret from the rest of the community?Another reason for going to the courts directly could be that legal action could go against whatever decision reached in the Aragon court. That would be a blow to Aragon Court’s credibility for its users


Finally

Aragon is one of the most transparent projects in the blockchain space. Most of the investigation that I did here was directly on applications built for Aragon like Apiary, the Aragon App, and their Github account. They are a private legal entity and certainly do not have to do anything mentioned here.

What bothers me is that Power is still centralized and decisions are made that are fine in any other capacity but look ridiculous when you also say you want to decentralize the project. Asking the community to vote on name changes, while making a significant legal decision on your own is not what decentralization should be about.

Similarly, making some parts of decision making transparent is detrimental to the goal of being a transparent entity. Either make major decisions in public or say that during this phase of development this entity will take charge. Having transactions be public but having confidential Grant agreements just confuses people.

Current regulations may not allow DAOs or Aragon to be as transparent or decentralized as they would want, but that is where they need to innovate. This is the exact problem they are solving.No regulation has stopped DAOs from paying software vendors, but calling them Grants might be an issue. No regulation has stopped DAOs from having an internal ticketing system but calling it a court and applying jurisdiction is an issue.

DAOs were supposed to disrupt organizations by reducing transaction costs, with decentralized decision making, programmatic payments, and a tamper-proof chain of evidence. What we have now are glorified project management systems that are deployed onto ethereum, which is great but is a long way from disrupting the company structure.

Required Reading :

Autark’s side

Aragon’s side

Auditing the Grants



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