DAOrayaki Reserach |FlamingoDAO: the first DAO incubated and formulated by The LAO community.

13 min readSep 17, 2021

DAOrayaki DAO Research Grant：

Fund Address: 0xCd7da526f5C943126fa9E6f63b7774fA89E88d71

Voting Result：DAO Committee Yes

Grant Amount： 220 USD

Category: FLAMINGO DAO, NFT focused DAO, Delaware law, Accreditation Process, Decentralized Finance (DeFi), OpenLaw, The LAO, MolochDAO, Accredited Investor, DApps, Operating Agreement, Rage Quitting, Subscription Agreement

Contributor：Jones，Julie @Daorayaki

Chinese Version:https://daorayaki.org/flamingodao/

Brief Overview About FlamingoDAO

Flamingo is an NFT-focused DAO that aims to explore emerging investment opportunities for ownable, blockchain-based assets. NFTs are not just cat pictures. They encompass digital art, collectibles, and in-game assets and other tangible assets. These new forms of digital property are posed to play an increasing role in helping to create, monetize, and incentivize online digital content.

Background

NFTs are not interchangeable, and they thus introduce a new form of scarcity in the digital world. They can represent digital or real-world assets, providing verifiable proof of authenticity and ownership (assuming they are created by the original author or owner) using a blockchain network.

Blockchain developers began introducing NFTs as early as 2016, with projects like Age of Chains and Rare Pepes using Bitcoin to create blockchain trading cards. These early experiments morphed into larger projects during the halcyon days of 2017 to 2018, with the launch of Cryptokitties. Seemingly overnight, Cryptokitties took the Ethereum ecosystem by storm, generating tens of thousands of transactions and clogging the network as users traded lovable cats with one another.

While interest in Cryptokitties may have waned in recent years, the mechanics and growth of NFTs has not. Next generation NFT platforms and marketplaces are incentivizing a new generation of creators to digitize artwork, digital land, and in-game items. Recently, we have seen the emergence of next generation NFTs and platforms, expanding into digital art, land purchasing, and we are beginning to see NFTs intersect with trends in Decentralized Finance “DeFi”.

The growth of NFTs is just beginning, because NFTs represent the digitization and financialization of digital property and intellectual property. Trillions of creative works swirl around the Internet and are difficult to monetize, except through licensing models. NFTs hold out the hope of bringing back to the Internet an ownership economy. Creators can create, sell, and fractionalize ownership in their works, opening up a new chapter for creative endeavor. NFTs can be:

Fractionalized;
Combined into token sets;
Used as collateral for lending and stablecoin protocols; and
Dynamic and interactive, incorporating outside data feeds.

Over the longer arc, NFTs hold out the hope of becoming increasingly financialized, interacting with other core blockchain-based financial primitives. They may prove to be a core primitive for decentralized identity solutions, and may increasingly serve as a cornerstone for monetizing emerging metaverses and other gaming platforms.

FLAMINGO GOAL

Flamingo aims to develop a strong foothold in this emerging ecosystem, bringing together the “hive mind” of a DAO to the world of NFTs. Flamingo will give its Members the ability to develop and deploy NFT-focused investment strategies. Purchasing NFTs with Ether or some other base digital assets. Once purchased, Flamingo could evolve in a number of different directions. Members will have the right and ability to factionalize its NFT holdings. Any purchased NFTs can be lent, held, displayed in a digital art gallery, or used as collateral in other DeFi platforms. The direction is up to the Members.

Organization

Flamingo is organized as a Delaware limited liability company. The rights and obligations of Flamingo Members are set forth in an operating agreement (which will be provided when you are verified to contribute to Flamingo) and are supplemented by the Delaware Limited Liability Company Act. Participants should retain their own counsel for purposes of evaluating whether to join flamingo as a member.

At its core, Flamingo will be member-managed and rely on DApp and related smart contracts to facilitate the purchase of NFTs. Moreover, Flamingo’s operating agreement expressly limits the Members’ liability and limits any fiduciary obligations amongst Members, in each case, to the extent permitted by applicable law. Additionally, Flamingo relies on a service provide (initially, OpenLaw) to facilitate various administrative functions on behalf of the Members, including preparing and sending annual K-1 tax forms, updating and maintaining the DApp, validating information related to projects selected for purchase, and handling other interactions that may come up during the lifetime of Flamingo. For these services, the service provider will receive a fee, pursuant to a schedule. As a result, Flamingo’s operating agreement was prepared by OpenLaw’s outside counsel.

LIMITED LIABILITY

As set forth in the operating agreement, and except as otherwise provided under Delaware law, no Member (or former Member) of Flamingo will be liable for the obligations of Flamingo for any amounts in excess of the amount of Member’s contributions to Flamingo, plus:

The Member’s share of the undistributed profits of Flamingo, if any; and
Any amounts distributed by Flamingo to such Member.

FIDUCIARY OBLIGATIONS

To the fullest extent permitted by applicable law, Members shall not have any fiduciary duty to Flamingo or any other Member. Under the operating agreement, Members agree to interact in good faith and to engage in fair dealing.

FLAMINGO OPERATING AGREEMENTS

The terms and provisions of the operating agreement may be amended if 50% or more of Flamingo Members or their delegates (as measured by the Member’s units) vote to approve an amendment. Voting will be based on the number of Flamingo Units held by the Members at the time of the vote.

TAX ISSUES

Each Member of Flamingo must rely on the Member’s own tax and legal representatives as to the tax consequences of joining Flamingo or making purchases through Flamingo.

Membership

Membership in Flamingo is currently limited to accredited investors, as defined under U.S. law. The total number of members will be capped at a maximum of 100 members. Members have the opportunity to contribute Ether to Flamingo by purchasing between 100,000 and 900,000 units representing an ownership in Flamingo “Flamingo Units”.

Units will be sold in blocks of 100,000. Each block of Flamingo Units will be sold for 60ETH and provide a member with 1% of the voting rights in FLamingo, along with 1% pro rata rights to any proceeds from purchases. Each Member will be permitted to purchase 9% of the Flamingo Units. The LAO will be allocated 200,000 Units of Flamingo for its role in helping to formulate Flamingo. Moreover, the members reserve the right to create a Flamingo Token to represent Flamingo Units via a Member vote.

FLAMINGO UNITS SECURITIES

Flamingo Units have not been approved or disapproved by the U.S. Securities and Exchange Commission, any state securities commission in the United States, or any other global regulatory authority. However, All contributions are currently only limited to Ether, unless the Members agree otherwise.

LIMITED MEMBERSHIP

As noted above, the U.S. Securities and Exchange Commission and/or equivalent government bodies in other jurisdictions have not determined whether membership interests in Flamingo (represented as units) are securities. In the abundance of caution, the limits in membership and accreditation status for U.S. contributors are put in place to:

Comply with U.S. securities law;
Prevent any one party from controlling a disproportionate amount of Flamingo; and
Limit the risk of look through issues for Flamingo Members that are organized as funds or other legal entities.

Membership requirements

To contribute Ether to Flamingo, Members will need to go through accredited investor, anti-money laundering “AML”, Know Your Customer “KYC”, and Office of Foreign Assets Control “OFAC” checks as defined under U.S. law and as discussed further below. A joining Member will need to deposit a sufficient amount of Ether from the Member’s Ethereum address in order to complete the membership process.

A Member will also need to submit sufficient information to verify the potential member’s identity for AML, KYC, and OFAC checks, including:

Uploading a passport or a state issued licence;
Providing a social security number or Tax ID; and
Providing proof of the member’s primary residence.

Accredited investors include:

Individuals who have an annual income exceeding $200K or a married couple that has joint income exceeding $300K in the two most recent years and have a reasonable expectation of reaching the same income level this year.
Individuals who have a net worth that exceeds $1 million.

With respect to legal entities:

Funds and trusts, with total assets in excess of $5 million, which were formed specifically to purchase the subject securities, whose purchase is directed by someone who has sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.
Any entity in which all of the equity owners are accredited investors.

Post Contribution

Once a Member makes a contribution, Flamingo’s underlying smart contracts will need to whitelist the Member’s applicable Ethereum address. The process for validating and whitelisting the Member’s Ethereum address will be done in order of contribution and will take at least 7 total days to complete. The process takes 4 days to process the proposal and another 3 days to provide Members the right to “rage quit” if they so choose.

Accreditation Process

During Member onboarding, Members will be asked to provide applicable documentation in order for Flamingo to verify your status as an accredited investor. This may include:

Documentation verifying participant income or net worth;
Written confirmation from a registered broker-dealer or investment advisor, licensed attorney, or certified public accountant as to the Member’s accreditation status; and
Various forms, including a Form W-2, Form 1099, bank or brokerage statements, other statements of securities holdings, and other applicable documentation to ensure that you meet the definition of an accredited investor.

If a participant is acting on behalf of a legal entity, the participant may need to provide:

Verification of that entity’s assets; and
Verification of participant sophistication.

Voting Rights

Voting rights will be based on the total number of Flamingo Units that each Member holds for any relevant vote posed to Members. Members will be prompted to vote via Flamingo DApp at various points during the lifecycle of Flamingo, including to evaluate purchase decisions, and/or other strategic decisions related to Flamingo. Voting will be facilitated by blockchain-based smart contracts and via the DApp based on ownership records maintained on the Ethereum blockchain.

VOTING RIGHTS AND PURCHASES

Members are not required to vote on all matters. At any point in time, a Member can transfer or “delegate” the member’s right to vote on purchase decisions by designating via the DApp an Ethereum address for which such right is delegated to. Decisions to delegate any voting rights are entirely up to each Member. Moreover, a Member can cancel and/or re-delegate its voting rights through the DApp at any time.

Purchases

Flamingo is entirely member-directed and managed by the Members through democratic voting. Members should have some experience in evaluating or purchasing digital assets. To preserve privacy and to prevent front running, and unless otherwise agreed, Members will periodically agree to allocate a portion of Flamingo’s assets into a side-pocket (i.e., 20% of Flamingo’s assets) initially maintained by Flamingo’s Service Provider with the aim of having it managed in-part by the members. Once set aside, Members can propose to other Members the purchase of one or more NFTs. If a proposal passes (as outlined below), the Members themselves or the Service Provider will take steps to acquire the assets at issue.

The process of side-pocketing assets will occur through a Moloch-style vote (i.e., an on-chain vote). Each decision to side-pocket collected assets will have a 4 day voting period, with a 3-day period for Members to “rage quit.” If during the 4-day period, there are more yes votes than no votes, the assets will be set aside. If there are more “no” votes than “yes” votes, the side-pocketing will not pass. Individual acquisition decisions will occur via the dApp and will not require the expenditure of gas. Each Member will have the opportunity to outline and nominate an NFT or NFT-related project or opportunity to other Members. Once nominated, Members or a Member’s delegate will have the right to vote on whether to support the proposal.

Flamingo Governance

The Members have complete agency in making decisions on what NFTs should be collected, purchased, held or acquired. To preserve privacy, Members likely will create pools of funds that can be used to make purchasing, collecting, or other acquisition decisions. Flamingo’s Members then can vote on whatever NFT they would like to purchase, and if the vote passes, the service provider or a Member can purchase on behalf of Flamingo.

Members are free to contact artists, collectors, game-designers, metaverse creators, or other third parties to gain insight on trends, styles, and other prevalent information when making decisions on what Flamingo should purchase. For communication between Members and these third parties, Flamingo will maintain a Discord, Telegram, or other relevant communication channels. If requested by the Members, Flamingo’s service provider can schedule meetings or facilitate other interactions with any creators or artists for NFTs being contemplated for acquisition. The Members will also have Curators to seek help and advice on style, quality, trends, and/or commentary on specific NFTs. Also, Members have the right to control all operations of Flamingo and any changes are expected to be implemented by the service provider.

RAGE QUITTING

Flamingo has certain strong rights for members to withdraw their capital if they are unhappy with the performance or administration of Flamingo. This right — often called “rage quitting” — gives members a degree of control as to their participation in Flamingo and the use of any contributed capital. Even though Flamingo is member-directed and managed, Members are not obligated to participate in any proposed purchase. Once a purchase is authorized via the dApp, all members will have the right to opt-out of the purchase and receive any undeployed capital that they contributed to Flamingo back (i.e., “rage quit”). Moreover, the right to rage quit is accounted for in the operating agreement and facilitated via the DApp and underlying smart contracts.

A member can rage quit Flamingo at any time, including after any NFT purchase. The only restriction is that any proposal that the particular member voted “YES” for is processed by Flamingo’s smart contract initially. If a member rage quits, the member’s pro rata portion of any unallocated capital contribution will be returned to the member. The member’s Flamingo Units are retired (i.e., “burned”) and the member loses any right to participate in future purchase. If a member wants to sell their interest in Flamingo, it is permissible, but subject to approval by other members.

NFT Purchases

Once a proposal is submitted for a specific NFT, the proposal will be submitted to the Flamingo Members to decide whether to nominate the NFT for purchase. If a purchase proposal is nominated, the Flamingo Members will then vote on whether to acquire the NFT or NFTs at issue. If approved via the DApp, either the Service Provider or a Member will purchase the relevant NFT on behalf of the Members of Flamingo. Purchases may be held by Flamingo or allocated fractionally in the form of tokens to each Member based on the number of Flamingo Units each Member holds. These purchases are up to the membership of Flamingo, NFTs can be purchased at various digital marketplaces (SuperRare, OpenSea, etc), and individual owners.

Flamingo primarily will make direct purchases of NFTs, however should the Flamingo Members want to invest directly into a software company or platform, there is nothing in the operating document that limits these types of strategies. For Flamingo, the ambition is to create a fund for NFTs in the Ethereum ecosystem. Flamingo’s Members will set forth a purchase plan for the type of NFTs that they wish to finance in Flamingo. Feel free to submit a proposal for anything in that realm.

Winding Down Flamingo

Members of Flamingo can vote by majority to wind down Flamingo. Other circumstances include a judicially ordered dissolution or disposition of all the assets of Flamingo.If dissolution were to occur, a person appointed by the Members via a majority vote will handle the wind down of Flamingo based on the terms of the operating agreement.

At the time of dissolution, Members of Flamingo are responsible for the expenses associated with the liquidation. Any additional losses or liabilities incurred will be in accordance with the terms of the operating agreement and the service provider reserves the right to set aside funds to facilitate dissolution activities. Additionally, in the operating agreement, Members agree to tag and drag along provisions to deal with the possibility that members may want to transfer all of Flamingo’s assets to another entity or party. These rights will only be triggered if a super-majority of the Members vote to effectuate such a transfer.

Smart Contracts

Flamingo uses various smart contracts such as MolochDAO’s v2 smart contracts to administer its activity. Primarily, the smart contracts are used to facilitate:

Collecting members’ initial contributions to Flamingo;
Voting;
Delegating voting to third parties;
Funding investments;
Distribution proceeds; and
Rage quitting.

OpenLaw, the initial service provider for Flamingo, has worked with the MolochDAO to develop v2 of the MolochDAO smart contracts. Furthermore, Flamingo smart contracts have been audited by ConsenSys Diligence, MolochDAO, and MetaCartel