A Legal Engineer’s Guide to a “Fair Launch” ⚖️ 🚀 — Part 1
What is a Fair Launch, and what LexDAO thinks it looks like. (w 🍣 on the menu.)
What is fair? ⚖️
First off, one of the points that comes up eventually in a discussion of the “fair launch” phenomenon is this question: “what does fair mean anyway?” This is not what we’re here to discuss. It is too deep a philosophical rabbit-hole. What is worth mentioning is the notion of “fairness” exists. This is the part that matters. People have built in detectors for fairness. If someone says to you “that’s not fair” you just kinda know what it means.
We’re not here to fight out what is actually “fair.” As legal engineers we start from the assumption that this is what legal systems are for: the fair adjudication of disputes.
The law is, historically, the manifestation of the efforts of people to get a more fair shake. It has its issues, but it’s best we’ve built so far and the records are mostly public.
Through this lens, we’re taking a look at the recent “fair launch” movement.
What is a “fair launch?” 🚀
As we see it, the “fair launch” movement is an attempt to launch coordinated projects in the most “fair” way. I’ll take that to mean nothing more than “a way of doing X that sets off fewer fairness detectors.”
Traditionally, we do this with things that look like companies. The whole thing is “fair” if only because a core group of contributors shares in the value created by the project. In this sense the “fair” argument tends to be around the allocation of the spoils of that value capture.
Within companies, people also accrue the power to guide the future of the company. Voting rights. Governance. Whatever you want to call it.
None of these are new things. But, novel ways of handling their administration had been few and far between until the emergence of blockchain tech. Remote shareholder meetings are not a new thing, but I’ve never attended one, although I’ve owned stock my whole adult life. Ultimately the superpower of blockchain is a matter of reducing coordination overhead, and facilitating collective action.
With this overhead exponentially lower, we can start to test some new stuff, with things like SushiSwap, $YAMS, $YFI, and HausDAO as examples of recent experiments across a spectrum. (More on these in later parts 😎)
Features of a “Fair Launch”
So, “what is a fair launch?”” Eh, it depends. What follows are some of our thoughts on the important features of a “fair launch.”
Community Ownership of Value
Community Governance
Contract Finality
Insurance/Locked Liquidity
Codified Project Milestones
1. Community Ownership of Value
Let’s assume that every project is producing or capturing some kind of value. Whether it’s coordination of human time or yield. Some might argue that “zero pre-mine” is the only acceptable answer, but the way we see it this will be patently impractical for certain types of project. Ultimately, this value should be distributed to the maximum number of actors reasonable. This might look like a public company, with a board, etc. or it might be something different. There are cool new experiments emerging every day.
Ultimately, this value should be distributed to the maximum number of actors reasonable.
At LexDAO we are one of those experiments, endeavoring to find the best way to share the value of legal engineering as a nonprofit cooperative. (We’ll cover a bunch more experiments later in this series.)
2. Community Governance
As alluded to above, there are is a real opportunity for reinvention, and reapplication of old tools that work quite well. There’s also opportunity to try crazy new things. Where your project falls will depend on the scale, and the value you propose to capture.
Broadly, notions of maximum decentralization demand something like: This governance power should be as broadly distributed as possible among those incentivized to sustain the project.
This governance power should be as broadly distributed as possible among those incentivized to sustain the project.
At LexDAO we are organizing as a co-op. Our governance decisions are made by guild members only. One member. One vote.
3. Contract Finality
This is a new one, born of months of LexDAO conversations on the topic. We’re going to cover this is a whole different separate post. But this is where it falls in the pecking order.
Functionally, the finality of a contract is a look at how enforceable that contract is on all possible fronts. We call it “proof of finality.” (Stick around for Part 2 😎)
4. Insurance/Locked Liquidity
If something of value is in motion to facilitate any sort of decentralization event, that value should be insured, or should pass through a non-custodial intermediate. No party should have the power to manipulate delivery of promises or assets by simply refusing to process a given transaction.
If someone is raising liquidity, no single actor should be able to unilaterally grab all or a portion of that value. How diffused should this be? That will depend on the specific goals if the project.
5. Codified Project Milestones
Whenever possible, project milestones should be well articulated, and as automated as possible. For example, tying disbursement of production funding could be programmatically tied to associated code commits.
Including, without limitation
We should conclude by adding, this are simple the factors that we have found rise to the top in our high level conversations at LexDAO. This list is by no means exhaustive. Either way, we hope it’s helpful if you find yourself looking at the latest in DeFi and trying to decide what the make of it.
Stick around for more!
Next Up:
Breakdowns on $SUSHI, $YFI, and others.
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