A DAO (Decentralized Autonomous Organization) is an entity that operates using a computer program (smart contract) on a blockchain. It provides automated governance rules to a community, and these rules are transparently written in the smart contract and hosted on a blockchain. In theory, a DAO differs from a traditional entity in three ways :
It cannot be shut down or closed.
Nobody and no organization can control it (and therefore manipulate its numbers).
Everything is transparent and auditable in a supranational framework.
The concept of a DAO was created to allow the creation of decentralized organizations without the need for trusted third parties. Building an organization requires a high level of trust among its participants, especially if there are funds involved. In traditional organizations, trust is typically established through known individuals or structures. However, in a decentralized organization it can be difficult to trust other, mostly anonymous, participants you meet online. With a DAO you don't need to trust anyone, only the computer code of the DAO, which is 100% transparent and available to everyone.
Here are some of the main advantages that a DAO has over a traditional organization :
Trust between members is no longer required, enabling strangers to collaborate together.
The rules of the organization are hard-coded and cannot be altered at the discretion of a few leaders.
All financial transactions are transparent and publicly available because they are recorded on the blockchain.
Administrative and control tasks can be automated, which reduces costs.
Here are some of the main disadvantages that a DAO has compared to a traditional organization:
As DAOs operate on blockchains, which are decentralized by nature, they do not fall under the jurisdiction of any specific nation. While the absence of taxation and regulation may be seen as an advantage, it is likely that this characteristic will sooner or later not be tolerated anymore.
There is no individual or organization responsible for legal proceedings or debt collection. Under international law, a DAO could be considered a "general partnership," which would make all members liable in the event of litigation. However, how could liability be imposed on anonymous persons ? For that reason, DAOs might not be tolerated in the business world and this why System-1337 will implement a slightly different structure. (see Chap. 2.3 The DAO by System-1337).
The whole structure being based on computer code, a DAO is particularly sensitive to hacking or bugs. A bug in the DAO code can very quickly destroy it completely. The exploitation of a flaw in the code of “The DAO” project, released in 2017, is a good example.
System-1337 is a structure using blockchain to to enable its members to vote on motions in a transparent manner. It will be supported by a company called "Systemleet OÜ," whose mission is to provide business representation for the DAO.
The gamers decide all aspects related to the design of the games.
They are not legally liable and can therefore participate anonymously.
The DAO operates within a clear legal framework.
It has legal representation that allows it to engage with the business world.
Funds cannot be released automatically, making the DAO less vulnerable to piracy issues.
Because it relies on the OÜ to operate, this structure is not totally autonomous and therefore isn't technically a DAO. But that's okay, it is still a decentralized organisation and we strongly believe that System-1337 will benefit from losing its autonomy, which can be seen as a handicap, to open up the world of business and partnerships with external entities.
At the financial level, the OÜ will manage all funds on behalf of the DAO. It is not possible to allow anonymous individuals to initiate fund transfers to unknown destinations without ensuring the legality of these transactions. All money movements into the DAO's accounts are fully traceable and publicly available.
More information about the differents accounts can be found in the Financial Paper.
We want the DAO to have as much freedom as possible in managing Systemleet OÜ. We believe that a group of gamers can manage a development studio just as well, if not better, than traditional investors. The only limitations that the OÜ will place on the DAO are legal ones, which will allow the DAO to operate in a sustainable manner in a long term perspective. Chap. 4.3 Relationship between the DAO and the OÜ provides more detailed information about the relationship between the DAO and the OÜ.
The DAO can be seen as the decision-making body of a company. Its members have the power to propose motions, which, if there is sufficient interest, are put to a vote for the entire community. These motions may concern the operation of the DAO itself or a specific game. Here is the procedure for accepting a motion:
Anyone can propose a motion by simply filling out a form. We are considering allowing everyone, not just DAO members, to propose motions on games, as non-members may also have good ideas.
A core team member will check the validity of the motion. This verification consists of three points:
If the motion is valid, it is made public. Every member can view it and support it.
Motions that receive enough support are then evaluated from a legal standpoint by the legally responsible body of the DAO (Chap. 4. Systemleet OÜ).
If the motion is legally valid, it is submitted for a community vote. The decision that receives an absolute majority (e.g., "Should we include a multiplayer mode in this game?") or a relative majority in some multi-proposal votes (e.g., "Which of these four logos should we use for the new game?") is implemented.
All types of motions and their functioning are detailed in the DAO Paper.
Once a motion is deemed legally valid, it is submitted to a community vote. During this period, each member can vote for one of the available proposals.
To limit voting power of holders who have a large number of S1337 Identity NFT, the following formula will be used when calculating the result.
votingPower = s1337IdentityNFT ^0.8
Which gives :
| S1337 Identity submitted | S1337 Identity counted | Percentage of counted S1337 Identity |
|---|---|---|
| 1 | 1 | 100 |
| 2 | 1.74 | 87 |
| 5 | 3.62 | 72.4 |
| 10 | 6.30 | 63 |
| 30 | 15.2 | 50.6 |
| 100 | 39.8 | 39.8 |
| 500 | 144 | 28.8 |
Unlike most DAOs, it's not planned to reward members who participate in the vote. While it's true that this system may encourage member participation, it also has disadvantages related to compensation. In particular, it can be difficult to establish a fair system between small and large token holders. Additionally, it could move the focus of the vote from the motion itself to the rewards.
Additionally, members have a financial interest in the success of the DAO through the DAO fund (see Chap. 2.4 The DAO account in Financial Paper). This aspect, which is not present in most DAOs, provides a strong incentive for participation.
If the motion is approved, the maker of the motion will receive a reward in $LEET tokens (see Chap. 2.8 The $LEET token) as an incentive for members to provide ideas. The amount of the reward will be determined by all those who vote on the motion
Anyone who owns at least one S1337 Identity NFT is a member of the System-1337 DAO and is entitled to all the rights offered to members, including the right to participate in the DAO.
There are many ways to obtain an S1337 Identity ; the primary way is to participate in the S1337 Identity community sale, which is scheduled to start in Q3 2024. The exact date will be announced in August 2024. You can also get one by getting involved in the community (please check our Discord) or by purchasing one from our boutique using $LEET.
Each S1337 Identity NFT represents a unique identity in the System-1337 universe. This identity has its own unique avatar and its own story, which will evolve as the ecosystem develops. This identity represents the gamer throughout the different games and experiences of the ecosystem.
The token is considered as a "utility token" according to the "Information for entities engaging with virtual currencies and ICOs" document issued by the Estonian Financial Supervision and Resolution Authority.
There is only one status within the DAO, which is "Member." Every member of the DAO gets this "Member" status. There is no other status or hierarchy within the System-1337 DAO.
The $LEET token is an ESDT token which is aimed at rewarding members of the System-1337 community.
$LEET tokens can be earned by participating in the community (Discord and Twitter) and/or by helping the team (see Discord, channel #help-the-team).
Later on these tokens can be mainly earned in System-1337 games or by being a member of the DAO. Each member of the DAO will be airdropped with tokens on a weekly basis.
$LEET tokens can be used to purchase items in the System-1337 boutique, including:
Other uses may be added over time, such as paying fees for access to tournaments.
There will be a total of 1'000'000'000 (one billion) $LEET tokens. The entire supply will be minted at Token Generation Event and split in two funds.
20% of the supply, 200'000'000 $LEET, will be send into the "Boostrap Fund". This fund is freely accesible by the team and it is dedicated to boostrap the whole project.
This fund will mainly be used as incentives to onboard new members and build partneship with other projects.
80% of the supply, 800'000'000 $LEET, will be send into the "DAO Fund", which is dedicated to fund various kind of project. This fund is locked and belong to the DAO.
Only the DAO will have to power to release these tokens. Until the DAO is launched, all of these token will be locked.
It is currently not possible to legally create a DAO under Estonian law. Therefore, in order to offer anonymity to its members, we have decided to establish a "OÜ" (limited liability company) to be responsible for all actions of System-1337. This means that the DAO has no legal status as it relies on the OÜ's status.
We believe that this configuration is very beneficial for the DAO members as it offers them the tools of a company with legal status (such as access to various investment tools or the ability to hire resources) while allowing them to remain anonymous and not be subject to any legal constraints (such as the requirement to keep records, study applicable legislation, or have a physical address).
The DAO's decisions are limited by two constraints: