【Abstract】When talking about DAOs, we are all focused on those exciting innovations and ideas for the future. It’s time to put aside ideals and think about bread! In the current DAO field, there are still many issues that contributors need to worry about before joining, such as taxation, worker benefits and so on. This article introduces the legal issues, welfare issues, pensions and medical insurance that workers in the DAO field currently face when they join, and the difficulties encountered by DAOs in solving these issues, and gives some currently feasible paths.
Author: Samantha Marin Translator: sirs
In order to have a wider range of people to join, DAOs need to do things that are considered boring.
These things are really, really boring, just like the day-to-day work of the HR (human) department (sorry HR). The current DAO field is full of volatility and uncertainty, how much stimulation can our contributors stand?
Let me expand on this:
DAOs need to think deeply about jobs that are now considered boring by most contributors. But in reality, these jobs are critical to attracting contributors from all walks of life with different life trajectories.
These boring things are: responsibilities, taxes, health insurance, paid time off, parental leave.
Case in point: U.S. citizens cannot get free health insurance from the government. So, when an American contributor wants to consider working full-time for the DAO, he has to worry about how to get health insurance. Medicare is a must for people with chronic medical conditions, and even for those who wear glasses. I think the health care issue may be a big reason why many Americans are afraid to make the leap of faith into the DAO space.
Of course there are other important reasons, the uncertainty of responsibilities, the length of vacations, how to pay taxes, and pensions, all of which can make the choice of joining a DAO more difficult.
In order to provide these benefits to contributors, DAOs need a legal shell. While this may sound scary, DAOs can start small, such as introducing a vacation policy, or reaching an agreement on parental leave.
A16z’s proposed “legal wrapper” framework for DAOs may seem a little intimidating at first glance… so DAOs should start with small problems that they can tackle.
Instead of taking all these “boring problems” at once, DAO can start with small problems, slowly experiment and iterate, and gradually complete the process from zero to one. If all DAOs could embrace the boredom—legal work, compliance work, welfare work—more contributors would choose to come to the world of DAOs.
Let’s discuss some such boring questions next:
Leave: Paid and parental leave
It may seem odd to discuss vacations in a DAO because, in theory, everyone works when they feel most comfortable. But what about contributors who don’t have enough savings? What about contributors who desperately need time off, but don’t suffer the income problems of stopping work?
They need paid time off.
According to CNBC, 64% of Americans have no savings and are living on a monthly salary. This also means that 64% of Americans would not be able to stop a day if they chose to work for the DAO. Globally, 684 million people live below the poverty line, excluding those above the poverty line who work every day for basic livelihoods. The DAO is not for these people — in fact, at the moment, this mechanism pushes these people away from the DAO.
Imagine you are a young mother about to have a second child. You are considering joining a DAO, but DAO does not provide parental leave, medical insurance, and it is difficult for you to have the courage to jump.
So how can DAOs introduce paid leave? Especially when some DAOs have thousands of people with no clear path to profitability?
First, the DAO needs to be able to identify who the core contributors are—perhaps they are those who work on the DAO full-time. This could reduce the number of people who need paid leave, making the policy more viable. DAOs can start small, perhaps by giving core contributors a year or two of paid time off.
This is just one way that DAOs can start thinking about offering benefits to contributors. Of course, for many DAOs, paid time off is more of an afterthought — they’re not yet profitable, so they can’t afford the cost right now. However, starting to think about these finer details now can go a long way in contributing to the mental health of contributors and overall DAO success.
Contributors from countries that don’t offer universal health care must find a way to find a job that does, or they’ll be stuck. Use your parents’ plan if you’re young, or have a spouse who can provide a plan. But for most potential DAO contributors without such luck, DAO is not a viable option for them.
Some contributors may choose to purchase state-provided health insurance themselves, but this is often very expensive. And people with chronic diseases will have greater difficulties. In general, getting good health care from your employer is the most economical way.
Opolis, a digital employment commons, is a possible solution. It provides individual contributors with health insurance plans, pension plans and other “corporate” benefits.
However, these benefit plans can be more expensive and more difficult to set up and use than benefits directly from an employer. Many people don’t want to set up a business to pay for health insurance, or pay the extra cost of non-employer-provided health insurance. Opolis is a great option, but it’s very different from getting a full health insurance package from your employer.
Current DAOs are far from being able to provide things like health insurance. However, they can take steps to help contributors find the best solution at the moment. Maybe they can help contributors get health insurance through Opolis. Alternatively, they could add health insurance to their long-term roadmap and study steps they could take, such as creating a layer of legal entities for DAOs.
Even in the early days of DAOs, these small advances were significant.
Many US companies offer 410k pension plans, and when you put a sum of money into a pension account, the company puts the same percentage into it. Although 401k may seem unattractive to liquidity miners who are accustomed to high annualized returns, 401k is a must for those who are not used to the high volatility of the crypto market and have no faith in cryptocurrencies .
The volatility of cryptocurrencies makes them a high-risk area, but don’t put all your retirement savings into it. But DAOs themselves operate in the cryptocurrency space. Unless the DAO goes to open a bank account, transact entirely through the traditional account model, and provide the regulated W-2 tax bill for contributors, it can be really difficult to provide a retirement plan.
This is where the chaos of traditional types of work and DAOs intersect, where there are more questions than answers.
Will DAO contributors get used to work without benefits? Maybe times have changed, and your employer’s concept of what to offer and what not to offer is completely different? Or, the lack of benefits would make working for a DAO difficult to become a mainstream option?
Or, could a DAO offer some sort of crypto-native retirement plan in a high-yielding stablecoin? Given the LUNA/USDT crash event in mid-May 2022, I dare say that people will avoid stablecoins for a while.
Likewise, in the superannuation area, we have more questions than we get answers. Many DAO contributors today are young, so they may not have retirement plans in mind. However, being young is the perfect time to start saving for retirement, and it seems that retirement issues are a future holdover from full-time DAO work.
DAOs can guide contributors to build their own retirement plans, separate from their employers. Retirement advisors can support DAO contributors who need help starting an Individual Retirement Account (IRA). As a DAO contributor, the fiat-based pension solution looks a bit out of place, but I hope there will be a cryptocurrency-native solution in the near future.
Many DAO contributors hope that the DAO can become an underground organization that pays no taxes and bypasses all regulation like a self-governing kingdom. Unfortunately, this is not possible.
Marta Belcher, a guest at DAOn the Rabbithole, expressed the view on the show that the laws of the traditional world are still valid for DAOs, even if we don’t want them to be. The DAO hopes to gain status beyond the law, but in reality, it still has to live under the iron fist of the law.
Today, DAOs are still trying to circumvent the law. But this ultimately means that all contributors in the DAO are accountable for the actions of the DAO, just like in a general partnership. According to Investopedia, “In a general partnership, the partners agree to have unlimited liability, meaning there is no cap on liability, which can be paid by seizing the owner’s assets.”
This is the current state of DAOs: contributors may not even be able to keep their own assets.
If you haven’t sorted this out, you need to have a fair amount of trust in your fellow contributors that they won’t do anything that will get your DAO sued. Even if you really trust your peers, being sued is not something you can plan or predict.
So what is the solution for DAO?
DAOs can incorporate companies in crypto-friendly jurisdictions such as the Cayman Islands or the Marshall Islands. Alternatively, they can set up an LLC in Wyoming or Tennessee. They can also set up a separate legal entity, such as a Swiss association (a type of company in Swiss law), to handle contracts and agreements for them.
These choices can be complex, but they are necessary to protect the responsibilities of your DAO’s contributors. Before making any legal choices for your DAO, I recommend reading a16z’s DAO legal framework.
The taxation of DAOs has been discussed a lot even before the DAO as a form of organization, and there is a record of discussions on reddit seven years ago.
Tax issues will be linked to the question of how to legally wrap a DAO, a topic that doesn’t interest anyone, but is critical to the security of contributors’ property.
Most DAOs are outside the law. But some have begun to explore corporate forms or legal packaging. For example: MakerDAO has discussed how to set up a legal entity to sign agreements and interact with other legal entities.
If DAOs do become “legal”, how will their contributors be taxed? There is a question of personal identification of the taxpayer. If these contributors are identified as independent contractors, this means they must pay tax on Form 1099. Contributors will pay 100% of their taxes instead of the 50% they pay as W-2 employees. This is another thing that keeps contributors away from DAOs – independent contractors pay a lot more in taxes than employees of traditional companies. If your DAO becomes an LLC but identifies all contributors as “contractors”, the tax implications for those contributors are severe.
However, if the DAO started issuing W-2 tax forms to all US employees, things could quickly get very complicated. How to handle tax and compliance issues for contributors around the world? How to deal with having contributors working on multiple DAOs? And, if DAOs were to accommodate people from all over the world, where would they choose to pay their taxes?
There are no easy answers to these troublesome questions. But the sooner you plan your DAO’s legal framework, the better it will be for your contributors. It may be easier to design a legal framework when you only have a small group of contributors; when your DAO is already large, it’s not too big.
What would the most boring DAO look like with top contributors?
This DAO will have a legal wrapper, pay taxes on time, and conduct financial transactions under compliance requirements, so that all contributors don’t have to worry about security.
The DAO may not issue tokens to circumvent security concerns, or have a token with a more limited scope. Maybe he will let the people who own the NFT vote, or let the list of whitelisted addresses to vote (such as the list of DAO members).
This most boring DAO will help contributors to get health insurance through Opolis or other methods. It will help young contributors open individual pension accounts, or provide a crypto-native pension scheme.
In this way, the “boring” DAO might be able to recruit top contributors. Because by improving conditions, it broadens the pool of candidates, and those who do not want financial and legal risks can also join.
We can do these things because we pay the price for boredom!
Boredom is forced out
The builders of web3 generally don’t want to care about such boring topics. However, in order to bring a variety of contributors with various special skills to the DAO, the DAO has to deal with these boring problems. When regulation enters the field (which may happen sooner than we think), these boredoms will become very necessary.
Good luck on your road to boredom!
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/time-to-make-daos-boring/
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