GOSH Partners With Q: Offering Dispute Resolution For DAOs
TL;DR
As part of the launch of GOSH L2 we have partnered with Q
The Q Protocol provides a universal layer for Governance Security in the decentralized world
One of the features is an integrated dispute resolution process, which enables DAOs on GOSH to settle disputes in a fair and transparent way
DAOs on GOSH will be able to write up a constitution of their own, laying down the community’s rules. If decisions are suspected to be unconstitutional, they can be challenged via Q’s dispute resolution framework. This ensures that conflicts are resolved and the DAO community’s values are upheld
Because GOSH L2 offers easy ecosystem integration for any project, Q’s dispute resolution system extends to any DAO on different networks seamlessly
Q goes beyond the principle of ‘Code is Law’ to offer dispute resolutions on questions that cannot be answered by smart contract binary yes-no, and if-this-then-that programming
Q has integrated the Rules of Arbitration of The International Chamber of Commerce (ICC) as a dispute resolution mechanism in order to provide procedural certainty of independent international arbitration to all participants in Q, and to ensure high standards will be met in the arbitration proceedings.
Any DAO’s Constitution will be set up as a private contractual agreement that will be able to expressly select private arbitration as its dispute resolution mechanism and exclude state courts where possible. Arbitral awards from such disputes may be enforced in any court of competent jurisdiction. This allows DAOs and their members to operate upon the basis of a private contractual agreement and achieve an unprecedented degree of legal certainty.
If you code an agreement between two parties as a smart contract, instead of printing that out onto paper and saying “this is a legal signature,” you will be able to quickly initiate the dispute resolution process on the blockchain and connect off-chain private arbitration back on-chain. This is an essential step to helping GOSH be set as a standard for decentralized governance in private and public sectors where building consensus is essential to security and operations.
But what do we mean by ‘Code is Law,’ and why can’t we just rely on it alone?
Part I: A Breath of Fresh Air
When Bitcoin first established the idea of Code is Law, it was in order to govern the first ever trustless monetary network in a way that assured decentralization. If it can be coded somehow, the thinking goes, it can become law, regardless of conflict; provided enough people accept the code.
According to our friends over at the SEC, this is precisely what makes Bitcoin the only non-security network. Because there is no formal decision-making mechanism, decisions made on Bitcoin essentially come down to: should the code in the node be changed, and therefore changed in the network itself. These decisions are made as all participants, individually, of their own accord, decide to run this or that code.
The outcome is that some blocks on the network have this new functionality (which should always be backward-compatible), and miners can either attest to, and build on top of them… or not. If they do, the network upgrades. If a block is not accepted, the block creator loses money, and either way decisions often follow a rigorous debate, leading to multiple blocks with different node-code running on the network simultaneously. The Bitcoin Cash fork actually came about because of disagreements in this process. The process of accepting new blocks, however, is essential to fixing bugs and upgrading the software.
So what does this mean? Well, one can take the view that Bitcoin’s Code is Law principle is not a collective decision-making process. Everything is done individually, and no formal vote is held. The SEC, in concurrence, believes that simply running software on a user machine does not constitute formal decision-making.
But what if we were to call any consensus building among humans in a decentralized framework a process of organization? In that case Bitcoin, too, would be a type of DAO network, with the obvious implication that Bitcoin is the most decentralized DAO network in existence, and in history.
DAOs are nothing more than a higher level of abstraction of Code is Law. DAO members still run code on their local machine, but have to send it to the network which needs first to accept the correctness of a vote, and then smart contracts need to be processed to calculate the results of the voting. It is a smart contract which executes the decision, but at the beginning the decision is still made by a human being. And as a rule, that human’s decision, in any DAO, is still subject to consensus.
In the event of a conflict between miners within Bitcoin, or between members of a DAO, it nevertheless stems, and finally depends upon, human beings making decisions. In this sense, there is no difference between Bitcoin’s voting process and a DAO’s voting process. The distinction is made only on the assumption of actors’ roles.
But what happens when a DAO doesn’t reach consensus? When humans cannot reach a decision collectively of their own accord, or when one collection of individuals makes a decision which another group believes to be contrary to the best interests of the whole, Q steps in to provide access to independent arbitration through the well-established practices of international arbitration. The interests of the whole are defined by a constitution (the purpose of which is always, at the outset, to codify the values of the organization in law).
Web3 has struggled to offer users answers to questions that don’t follow a clear binary. Simple code structures and algorithms struggle to convey many ambiguities and motives behind their very existence. If they could, AI would be conscious, Alexa would also be your legal consultant, and we wouldn’t be writing this blog post. This is why, despite Code is Law by and large being an excellent governing principle for blockchains, it cannot answer for when no consensus can be reached for uniquely human reasons or when it is dependent on some off-chain actions.
This is where Q offers DAOs on GOSH a solution.
The claim goes: Because there are humans in the process of accepting a proposal in the first place, at no matter what level, there should be other humans who are able to correct mistakes. This is based on the correct assumption that there are some rules which cannot be strictly coded. If a constitution states “only those who are over 18 can hold DAO tokens,” there is no easy and straightforward way of verifying this through code. Indeed the very point of a constitution is to make rules that cannot be resolved through Code is Law. That cannot be coded.
More importantly, Q offers DAOs on GOSH minority protection. In any DAO, like in any government, a majority of members can make a decision — just because it’s in their best interest — without following the rules… the law. Even if this law is code. In making these illegal decisions they can heinously impact minorities; as happens, comically, when members of a blockchain mint more tokens for themselves year in, year out… And happened tragically when the US government flouted its own laws to steal Indian land in the 19th century. Both of these events represent the power of a majority, and which can, and should be fought against with binding legal recourse. This is where a DAOs constitution kicks in. A constitution, let’s remind ourselves, is a way for an individual to have protections against the absolute power of the state, in this instance against a DAO, and centralizing forces within it, in the event that a majority makes a discriminatory decision.
Part II: How It Works
Q has integrated the Rules of Arbitration of The International Chamber of Commerce (ICC) into its governance framework for dispute resolution in Web3. Now, on-chain disagreements can be resolved off-chain by a private arbitration court.
The DAO Constitution will be set up as a private contractual agreement that will be able to expressly select private arbitration as its dispute resolution mechanism and exclude state courts where possible. Arbitral awards from such disputes may be enforced in any court of competent jurisdiction. This allows DAOs and their members to operate upon the basis of a private contractual agreement and achieve an unprecedented degree of legal certainty.
The enforcement of decisions rests on the public identities of root nodes, maintaining accountability and acting as a check against the pseudo-anonymous protocol validators in charge of transaction-processing. Web3 requires a system that has both technical reliability as well as nuance and accountability. This means a framework that embodies ethical governance and recognizes the intentions behind actions.
With Q, there’s an evolution beyond Code is Law, allowing age-old judicial principles to further decentralization, and ensure transparency, discretionary decisions, and due process in DAO governance structures and a binding connection to the world off-chain.
Part III: DAO Constitutions — Alternatives To Regulatory Bodies
An algorithm regulates itself. What regulatory bodies do is direct what bearing algorithms are able to have, on that which is beyond what is coded. In other words, what regulatory bodies do is less about regulating the algorithm itself and more about regulating how an algorithm impacts users in the real world. That interaction is key.
If you code an agreement between two parties as a smart contract, instead of printing that out onto paper and saying “this is a legal signature,” you will be able to quickly initiate the dispute resolution process on the blockchain and connect off-chain private arbitration back on-chain. This is an essential step to helping GOSH be set as a standard for decentralized governance in private and public sectors where building consensus is essential to security and operations.
This partnership between GOSH and Q ensures that DAOs on GOSH have access to a sophisticated system that provides the certainty of technically binding transactions while simultaneously offering discretion, nuance, and accountability. Q enables discretionary decisions, democratizes access to international private law, and ensures a path for resolution of disputes on GOSH, and the decentralized world more broadly, according to the highest of standards to achieve legal certainty between all parties involved. Q’s decentralized governance system for the Web3 world allows DAOs on GOSH to work through legal frameworks and even binding contracts based on international private law. Ensuring decentralized protocols are a viable alternative to old-world legal systems, courts, and institutions.