Detailed Plan

<u>Goals</u>

1. Create a DAO dedicated to providing funded auditing services for funded proposals, smart contracts, DAOs and Treasury pools.
2. Improved processes on delivering and reporting on return on intentions of funded projects and activities.

<u>Cardano Ecosystem Value</u>

Improved return on intentions from auditing will lead to less wasted resources and an increased improvement rate of the Cardano ecosystem.

<u>Action Plan Details</u>

The Auditor DAO is an example of how the DAO-NET smart contract template for DAOs can be used to quickly start up new DAOs to fund operational costs of projects and activities pertaining to a specific community, cause or of a specific type. These examples are to show specific use case on how the DAOs can be used to provide ongoing funding for solutions to any challenge fund problem, any Community Hub or any cause so that once the platform is deployed that others can start up their own DAOs with DAO-NET.

Operational funding for Auditor DAO activities will be assigned using the DAO-NET Treasury hourly funding disbursement that allows members to assign a portion of the Treasury to those DAOs or projects that they support. Details of the Treasury funding mechanism can be found in the DAO-NET proposal linked below and that same funding mechanism is used by Auditor DAO to allow members to allocate the DAO funds received to those projects or activities within Auditor DAO that the member supports based upon a proportional vote.

This proposal will also develop a standardized auditing process and report, that will be initially used on all the funded DAO-NET proposals as example cases.

<u>Scalability</u>

The solution scales dependent upon the willingness of DAO-NET members to direct treasury funds to audit activity and the number of auditors willing to perform the work based upon the funds allocated. Additional funding sources like Project Catalyst or other DAOs might also be possible.

<u>Market</u>

Audit reports of funded proposals in the Cardano ecosystem are for a very niche market estimated to be under 1000 users however that market is likely highly motivated to use the product.

<u>Acquisition Plan</u>

Target the existing Project Catalyst community through relevant Discord and Telegram forums.

<u>Skills Required</u>

Product Manager

• have a holistic understanding of the DAO-NET suite of proposals
• experienced in managing multidisciplinary teams in up to a dozen projects simultaneously
• ability to articulate and fluently translate between business and technical requirements
• able to manage large complex budgets
• experienced in hiring consultants and third party contract negotiations

Lead Developer

• Full stack developer experience
• Plutus development, especially algorithmic DAO smart contract primitive
• Define technical requirements
• Integrate multiple software components into a larger solution

Lead Auditor

• Experienced in financial audit processes
• Experienced in KPI and ROI audit processes
• Audit report writer

<u>Team</u>

Product Manager: Dwayne Collard - 20 years+ IT Consultant, Solutions Analyst, IT Manager, Community Advisor <https://www.linkedin.com/in/dwayne-collard/>

Lead Developer: Jude Ben - 9 years+ Software Development , Plutus Smart Contract Development , Cloud and Infrastructure Engineer <https://www.linkedin.com/in/judeebene/>

Lead Auditor: Contractor to be determined.

<u>Roadmap</u>

February 2022

• Prototype algorithmic DAO smart contract (only required if DAO Deployment Platform proposal not funded in which case cost is shared among funded DAO-NET proposals)
• Initial outreach to Project Catalyst community stakeholders concerning the information and scope of audits that are desired.

March 2022

• Prototype Backend API
• Develop draft audit report template and processes.

April 2022

• Web interface for voting development (only required if DAO Deployment Platform and Voting DApp proposals are not funded in which case cost is shared among funded DAO-NET proposals)
• Release draft audit report template and processes to the community for feedback
• Revise draft based upon feedback

May 2022

• Third Party Smart Contract Audits

June 2022

• Test algorithmic DAO smart contract on Testnet

July 2022

• Launch Auditor DAO (an instance of the algorithmic DAO smart contract) on Mainnet
• Perform audit of the funded DAO-NET proposals as examples of the process and deliverables

<u>Key Performance Indicators</u>

• Number of funded proposals audited
• Number of KPIs audited
• Number of financial audits
• Number of Return on Intention audits
• Usefulness of audit reports based upon user surveys

<u>Success Definition</u>

3 months

• Prototype algorithmic DAO smart contract with voting interface created
• Audit report templates created

6 months

• Auditor DAO launched
• At least 1 audit completed
• At least 10 DAO members in Auditor DAO

12 months

• At least 40 DAO members in Auditor DAO
• At least 10 audits completed
• Total funding, through DAO-NET, equivalent to at least 10,000 ADA received
• User surveys rate usefulness of audit reports at over 75%
• At least 1 new Auditor DAO improvement proposal funded and implemented

<u>Budget</u>

Audit Process & Templates Creation ($1,500/month for 3 months): $4,500

DAO-NET Audit (1 month): $1,500

Product Manager ($500/month): $3,000

Algorithmic DAO Smart Contract*: $10,000

Total: $19,000

* Algorithmic DAO Smart Contract budget is for a very scaled down unaudited DAO solution, including hosting services, which is required to make this proposal deliverable in a stand-alone funding scenario however if the DAO Deployment Platform proposal is funded then this budget will be used to cover additional contractor expenses if required including for smart contract audits otherwise it will be added to the DAO Token / ADA reserve pool mentioned in the DAO Token Market proposal. If the DAO Deployment Platform is not funded however 4 other DAO-NET proposals are funded then the DAO Deployment Platform will be fully implemented with the combined funds of the 4 DAO-NET proposals.

<u>Future Funding</u>

Subject to legal review, DAO-NET intends to have a Bootstrap Funding contingency as further incentives to contractors, in which a small percentage of the DAO-NET Treasury can be set aside in a smart contract to retroactively fund contractors.

Proposals for additional enhancements to the DAO-NET ecosystem and new DAOs will be submitted in future Project Catalyst funding rounds.

If the CryptoFusion Funder proposal is funded then DAO-NET is expected to be self-funding when launched on the mainnet including the ability to fund other DAO proposals.

<u>IP</u>

All intellectual property is intended to be freely shared with the world so that any insights can be duplicated in other experiments to rapidly advance decentralized governance therefore:

All software developed as part of this proposal will be Open Source under Apache License, version 2.0

All documentation will be licensed under the Creative Commons Attribution 4.0 International Public License

<u>Challenges/Risks</u>

1 ) Likely regulations hostile to DAOs and decentralized blockchain applications

• Factions within the global elite publicly seek to thwart decentralization, as seen in recent and proposed legislation that is overtly hostile to decentralized blockchain ecosystems
• Most likely lawfare attacks against DAOs will be tax evasion and know your client requirements to comply with anti-money laundering and anti-terrorist financing regulations
• Typical member managed DAOs use a herd defense strategy in which there are so many anonymous members that individuals feel safe that they will not be identified and targeted however these DAOs normally have identifiable influential members managing some aspects of the DAO
• Traditional law enforcement strategy against herd defenses is to identify the prominent members of an organization and make an example of them through prosecution to deter the rest
• The dominant legal position is that DAOs are considered general partnerships, exposing members to personal liability for any of the DAO's actions and obligations
• Therefore there is a significant risk that prominent members of many successful DAOs will be subject to legal prosecution in the foreseeable future

Risk Mitigations

• DAO-NET to attain DAO Limited Liability Company status under Wyoming law. If funding for the DAO-NET proposal is not approved then contingent funding strategies are available including reapplying under Project Catalyst Fund 8, using standalone DAO smart contract funds in the event multiple proposals are funded and offsetting labor costs using a retroactive payment plan from the DAO-NET Treasury to free sufficient capital to complete DAO LLC filing.
• DAO-NET to use a totally algorithmic solution to reduce the number of identifiable influential members as much as possible
• All DAO-NET software developed will be open source allowing others to replicate and expand upon the decentralized solution in the wort case scenario of DAO-NET being legally disbanded

2 ) Bias by some Community Advisors and Voters against large solutions being divided into multiple proposals

• Current Project Catalyst funding process has a known limitation in which large proposals are unlikely to be funded unless the proposal is ranked number 1 in voting
• A solution to this limitation is to break a large proposal into smaller proposals funded under multiple challenges however some members view this as gaming the system or argue that large proposals should be funded by incremental funding in multiple funding rounds so that funding can be based upon achieving milestones
• This negative view of parallel funding is slowing innovation and making it more likely that projects are not completed due to lack of later funding regardless of success in achieving milestones up to that point
• Project Catalyst process already has auditing requirements for achieving milestones before funds are released which would apply to each proposal individually so that line of argument is not really valid
• Another known limitation of the Project Catalyst funding process is that there are insufficient funds to pay competitive living wages for labor costs in developed countries which results in jobs being shipped overseas to developing countries or requires workers to take on multiple gigs simultaneously however this wage gap can be addressed using the multiple proposal approach

Risk Mitigations

• This proposal seeks to change the discussion from whether or not multiple proposal solutions are a valid approach, to what are the proposal elements and challenges that need to be addressed in multiple proposal solutions
• As an experienced Community Advisor, with industry experience in the writing and assessing of proposals, this proposer has included all the elements required in the CA guide plus contingencies for the various funding scenarios like a single proposal being funded up to all the proposals being funded with the intention that CAs objecting to the idea of multiple proposals will provide feedback on what elements or concerns are not being addressed from their perspective so that future solutions will be more complete
• With the exception of the Product Manager and Lead Developer, who are required to participate in every proposal for integration purposes and have manageable workloads, no contractor will be involved in multiple proposals to prevent resource contention as being a reason to doubt feasibility of the solution overall

3 ) Recruitment of contractors required

• While the core integration team is filled, several specific proposal roles remain to be filled

Risk Mitigations

• Skill requirements have been clearly defined
• Labor budgets in the proposal are competitive with similar Project Catalyst proposals, with contingencies for higher wages if required including using standalone DAO smart contract funds in the event multiple proposals are funded or offsetting labor costs using a retroactive payment plan from the DAO-NET Treasury
• A number of Cardano experienced consulting firms have been identified that offer development services

<u>Related Links</u>

DAO Net Proposal: <https://cardano.ideascale.com/a/dtd/DAO-Net/380999-48088>

CryptoFusion Funder Proposal: <https://cardano.ideascale.com/a/dtd/CryptoFusion-Funder-DAO-Net/381146-48088>