Introducing The Gitcoin Foundation - A proposal to represent the Gitcoin DAO IRL by a Cayman Islands Foundation.

TL;DR: This proposal outlines why a foundation is useful, how the Gitcoin Foundation is structured, and what powers the DAO has over the Gitcoin Foundation (spoiler, the DAO will have virtually all the control!). This proposal also calls for the community to execute a transfer of ownership of various Gitcoin Holdings assets, including our DAO Treasury timelock contract and public goods funding IP, to the Gitcoin Foundation.

Context: As some within the Gitcoin community know, I recently resigned from Gitcoin Holdings to fully join and focus on our DAO. While at Gitcoin Holdings, I had the opportunity to see our DAO community coalesce 23 into vibrant and productive workstreams coordinating public goods funding thanks to GTC. I’m excited to now focus my energies and experience where it matters most for public goods – within our DAO!

In order for the DAO to fulfill its mission of building & funding public goods, I believe we should be intentional about its corporate structure in doing so. I’ve done some groundwork on this front, and am excited by the prospect of structuring a legal entity around the DAO to better serve our mission.

I am going to borrow some highlights 17 from our friends at ENS regarding why the DAO should have a legal entity:

1. It provides limited liability to GTC holders for the actions of the DAO. Without a legal entity, holders may be personally held liable for anything the DAO as a whole does.
2. It is capable of complying with taxation requirements - without a legal entity, the DAO and its participants may be held liable for a proportion of the DAO’s income/gains, even if they are not able to access these funds.
3. It is capable of entering into contracts with other “real world” entities, of holding assets (including IP rights), spinning up operating organizations, enforcing contracts and so forth.

Here are some high level details on the newly formed Gitcoin Foundation 73:

The Gitcoin Foundation is a Foundation Company, incorporated in the Cayman Islands. Cayman Foundation Companies can be ideal structures for nonprofit enterprises like our flagship, Gitcoin Grants (see more here 19), since they do not require equity-like members and instead permit us to follow the wishes of a broader stakeholder pool (our entire community). Currently the Gitcoin Foundation has a single shareholder (a local service provider), but this “subscriber” will soon surrender its share leaving us with an ownerless foundation that can honor the wishes of our broader community.

The Gitcoin Foundation currently has three directors: myself and two independent Cayman residents. The two independent directors are directors of other DAOs and are important to ensure we maintain our status as a true Cayman Foundation Company. Currently, Directors are in charge of the day-to-day management of the Gitcoin Foundation (though much of this will fall to me in the short term).

The Gitcoin Foundation has one supervisor. The supervisor is an administrative role whose job is to make sure that the directors are doing their jobs in accordance with Cayman Islands law. The position of supervisor is filled by a Cayman Islands firm, Hamptons Limited.

The Gitcoin Foundation currently has rather boilerplate Articles of Association, which empower the DAO to vote to (among other powers reserved to the DAO):

• Appoint or remove a director, member, or supervisor; and
• Instruct the directors to wind up the foundation, and specify what charity or other foundation should receive the foundation’s assets.

Though not specified directly in the Articles, the DAO may also instruct the directors to take action on behalf of the Foundation - such as signing a contract, engaging a company for a service the DAO requires, or delegating some of the directors’ powers to a DAO working group (so long as a director is part of that workstream). The Articles of Association will likely be revised over the next 30 days to better match our intent to give the DAO nearly full control of the foundation.

The substance of the proposal:

With The Gitcoin Foundation established, I propose acquiring Gitcoin Holdings’ assets that serve public goods funding in a formalized way. The Gitcoin Foundation can host these philanthropic assets and ensure their independence from Gitcoin Holdings. Here is why this makes sense for our community and for Gitcoin Holdings:

1. Legal personality will help rather than undermine our decentralization – though we operate globally, we still need to be able to enter into contracts (for instance to host our Discord) and take ownership of our treasury and IP legally, and for these privileges to be recognized in the terraverse we need a legal face that’s familiar to other legal entities, jurisdictions and their courts. A legal structure over our assets will showcase that we coordinate and collaborate across the globe
2. We have global stakeholders – our contributors and our mission are global, which favors a neutral jurisdiction like the Cayman Islands (i.e., rather than a jurisdiction where any specific stakeholder contingent calls home)
3. We need flexibility - Cayman ownerless foundations look and feel like non-profit LLCs (as compared with more restrictive corporations), which favors an evolving DAO like ours - activities within the DAO (grants, workstream funding) are constantly evolving and will continue to do so with future pivots, mechanism design innovations to accelerate automated public goods funding, treasury management needs, impactDAO vision
4. We need a legal solution that is fit for purpose - our DAO’s mission is charitable and its legitimacy depends on credible neutrality, and a foundation structure serves these ends by minimally intervening with the will of our community
5. Our mission deserves tax efficiencies - the DAO’s mission is charitable and should therefore benefit from maximal tax efficiencies, and securing tax exemptions under IRC 501(c) are challenging in the United States, time-consuming and not ideal for a global group like ours

The Gitcoin Foundation would acquire various domains, code repositories (incl. Treasury smart contracts), trademarks, social media accounts as well as some seed capital. Gitcoin Holdings could perform services for our DAO that we determine are in our best interest according to our normal governance decisioning process but would otherwise be formally separate from ourselves. Gitcoin Holdings will continue to operate as an independent organization but by virtue of this vote, if passed, The Gitcoin Foundation will now be formally recognized as a separate entity that represents our DAO and philanthropic efforts we undertake.

Next Steps: All feedback and thoughts are welcome. Would love supporting the acquisition of the DAO Assets. Here is what immediate next steps would be:

1. A vote is proposed (once we hit the threshold set out in the Governance process) to adopt the Gitcoin Foundation as the legal owner of the DAO and its assets.
2. If the vote passes, the directors of The Gitcoin Foundation would begin discussions with Gitcoin Holdings Inc. with the goal of obtaining the philanthropic assets Gitcoin Holdings currently controls, for the long term benefit of the DAO and Foundation now having ownership
3. A second vote may be proposed with the final negotiated terms, but this proposal will entrust the Directors of The Gitcoin Foundation to fully negotiate this business transaction (while providing frequent updates to both Stewards, Workstream Leads and the community)

To be sure, there is no perfect legal structure. Although DAOs are a completely new frontier whose recognition varies across jurisdictions, this formalized structure will better protect our community assets and ability to use them to build public goods sustainably.