Aragon Repurposes DAO to Ensure Treasury Serves its Mission and Builders Advancing it

Aragon Repurposes DAO to Ensure Treasury Serves its Mission and Builders Advancing it

Time Stamp: May 9, 2023 3:55 PM
Source Node: 2642690

Today, the Aragon Association acted on its fiduciary duty to secure its treasury and mission by repurposing the Aragon DAO as part of a new grants program. Its purpose is to fund DAO builders who are launching DAOs, dApps, and plugins on the new Aragon tech stack. This will enable builders to kickstart their ideas faster on Aragon OSx and Aragon App. Since its inception, Aragon grant programs have played a key role in the industry, seeding important projects like Snapshot, Frame.sh, and Dappnode. Grants can be a critical first step when launching new projects.

This initiative ensures the Aragon treasury is allocated towards builders advancing Aragon’s mission to build tools that allow anyone to experiment with governance at the speed of software.

Aragon’s actions, a necessary response to coordinated attack

The recently deployed Aragon DAO came under a 51% attack by a coordinated group described as “Risk Free Value (RFV) Raiders” connected to the dissolution and liquidation of Rook DAO. This group includes a major asset management firm, Arca Capital Management. Evidence indicates that Arca’s involvement is aimed at extracting value from Aragon for financial profit. In response, acting on its duty to protect the Aragon treasury for the organization’s mission, the Aragon Association is repurposing the existing Aragon DAO with the goal to exclusively fund builders via a grants program.

The Aragon treasury was established with the explicit mission of supporting builders to advance decentralized governance infrastructure. Based on Swiss regulations that mandate the use of Aragon’s treasury for its stated social purpose, fiduciary duty compels Aragon Association to secure these funds from those seeking to access them for their own financial gains. There is clear evidence that the entities involved in Aragon’s attack are pursuing that end.

The Aragon Network Token (ANT) – A utility token by design

In 2017, Aragon founders Luis Cuende and Jorge Izquierdo deployed the Aragon Network Token. The token was created to fulfill a bold mission: build decentralized governance infrastructure that would revolutionize social structures and organizations. This vision was a rallying cry for a visionary community of developers and, within 26 minutes, it became the 4th largest crowdfunding event in history at the time of the sale.

ANT is registered as a “utility token” under Switzerland’s financial regulator. That means ANT is designed to serve a specific purpose: to facilitate participation in Aragon’s technology, which exists to advance and protect Aragon’s stated mission.

The purpose of the token is to provide ANT Holders permissionless, trustless, and censorship-resistant control over Aragon’s public infrastructure with the aim of enabling decentralized governance.

As a technology, tokens can serve a range of purposes. Some tokens may be created and used as financial instruments, but ANT is not one of them. When utility tokens are manipulated to achieve profit-making ends, it can come at the expense of achieving a project’s social mission.

Due to the ambitious mission and long-term vision of the Aragon Project, the treasury raised during the 2017 ICO has been carefully managed and paced out to provide the necessary years of runway for builders to deliver public infrastructure and revolutionize human organization. From delivering the first DAO framework, to securing $12B in TVL for leading projects like Lido and Decentraland, the Aragon treasury has been used by builders to create significant value for the industry.

Over time, due in part to the volatility of crypto markets and the long path to protocol-market fit in an ever-changing industry, the treasury outpaced the value accrued to ANT. While small market cap tokens suffered across the board, the original $25 million treasury appreciated significantly since 2017. The value of ANT did not keep pace with the value of the treasury behind the project. This opened a significant vulnerability, which Aragon both understood and  prepared for.

51% attack attempted by “Risk Free Value” Raiders

Risk Free Value (RFV) Raiders, who have self-described themselves as The Vultures of Crypto, are a sophisticated, well-resourced, and coordinated group of actors that target crypto projects with an imbalance between the value of their token and treasury. Their goal is to target treasuries and manipulate the price of tokens for financial gain, at the expense of the organization’s mission. It’s important to note, large financial players, in this case Arca Capital Management, often collaborate with RFV Raiders to achieve their ends.

The Aragon treasury was a clear target, and came under a 51% attack by coordinated RFV Raiders in the Aragon DAO. This group of actors has been complicit in breaking down many DAOs and their communities, including Invictus DAO, Fei Protocol, Rome DAO, and Temple DAO. It is worth noting that one member of the group has been jailed for his involvement in the Mango DAO exploit.

Most recently this group led the financial takeover of Rook DAO, attacking the organization with social engineering tactics and dissolving the DAO and liquidating half the treasury for their financial benefit.

The attack on the Aragon DAO began on May 2, when there was a sudden and suspicious uptick in Aragon Discord server activity. Moderators observed signs that this activity was coordinated; an observation that was validated through further investigation. A review of Discord analytics determined:

  • The majority of individuals engaged in this activity had joined the server less than 45 days earlier (for context, the server has been in operation for over 5 years);
  • Over that time period, the group posted less than 1 message per day (0.8);
  • On May 2, the group posted 69 messages within hours.

Based on these observations, moderators took action to temporarily ban a small group of users who were engaging in harassment in the channel and contributor DMs. On Twitter, individuals associated with the Rook DAO takeover attempted to use the temporary ban to generate a movement against Aragon.

Onchain data shows that, in the months leading up to this attack, Arca and the other RFV Raiders were actively stockpiling ANT. In the days following the attack, the Raiders began rapidly wrapping their tokens enabling them to reach a majority vote in the Aragon DAO. In the absence of clarity into the Aragon Association’s position, ANT could be misunderstood by token holders as being a financial instrument, ultimately taking funds away from the builders pursuing Aragon’s mission. An example of this lack of clarity is evident by members of this group advancing a platform on the Aragon forum seeking delegation to manipulate ANT as a financial instrument for financial profit, which the Association cannot uphold.

Foreseeing Risk, Pivoting Wisely

Aragon foresaw this risk. It is the key reason the association did not move its full treasury, $200 million, onchain at once by the soft dates originally proposed. Aragon’s progressive decentralization is a process and there is no shortcut to decentralizing safely; doing so requires both economic incentives and mission-alignment.

The actions undertaken by Arca and the other “RFV Raiders” pose a number of risks to the safe governance of the Aragon DAO. These include: the legal risks to the utility classification of ANT, the violation of Swiss association law, as well as the legal stewardship obligations of the Aragon Association to the treasury.

However, the DAO can, with some adjustment, safely serve the builder community in alignment with the Aragon mission to enable decentralized governance. To this end, Aragon is repurposing the DAO to operate and govern a new grants program for DAO infrastructure builders. This pivot will ensure that treasury funds are used as intended and legally required, that the ANT’s purpose as a utility token will be upheld, and that–ultimately–those working to advance Aragon’s mission are empowered and supported.

While the Aragon Association foresaw the risk of a 51% attack, the breadth and depth of the coordinated attack is both a wake-up call and a pivotal learning experience. Progressive decentralization is an ongoing process and we are committed to move the treasury into the hands of ANT holders when it’s safe, for the purpose of advancing the project’s mission. That said, these events have confirmed our conviction that no project can rush towards the ideals of decentralization at the expense of security.

Introducing the Aragon Grants DAO: Who it’s for, How it works

The Aragon DAO is unstoppable. Last week, Aragon transferred an initial payment of 300,000 USDC. The funds held by the DAO will remain onchain and are governed by wrapped ANT (wANT) Holders. Depending on the success of this grants program, Aragon Association plans to continue to use this DAO to further the growth of the Aragon ecosystem. A grants program is one step toward kicking off the growth flywheel of builders to extend the functionalities of Aragon OSx, as outlined in the Strategy to Become a Governance Hyperstructure.

For the time being, the planned transfers to this DAO will be limited to those necessary for running the grants program. This approach creates a more balanced incentive structure and better alignment with Aragon’s legal purpose and mission to enable everyone to experiment with governance at the speed of software. The funds in the repurposed Aragon Grants DAO will be available to our community of builders, using wANT.

Details on the grant program, criteria, and process will be coming soon. The aim is to seed the next wave of unique DAOs, governance experimentation, and aragonOSx plugins. Subscribe to Aragon’s weekly newsletter to stay up to date.

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