In an unprecedented move within the decentralized autonomous organization (DAO) landscape, the 1inch DAO has taken a bold step towards legal fortification by engaging a lawyer through an on-chain vote. The strategic decision not only marks a significant evolution in the DAO’s operational maturity but also sets a new precedent in the decentralized finance (DeFi) sector.
With a focus on safeguarding its members from personal liability and fortifying its legal standing, the 1inch DAO’s decision to hire legal representation through Swiss consulting firm Storm Partners has ignited a discussion about the future interplay between decentralized entities and traditional legal frameworks
Engaging legal expertise: A proactive move by 1inch DAO
The journey to the landmark decision began in November when Storm Partners presented its legal and compliance services to the 1inch DAO, recognized for its role in governing the 1inch network’s decentralized exchange (DEX) aggregator. Understanding the critical need for legal guidance to protect the rights and interests of its members, the DAO contemplated the proposal to have on-call legal advice. The culmination of the deliberation was an on-chain vote that overwhelmingly supported the engagement of Storm Partners, with a retainer fee of $50,000 paid in USDC.
The move is notably interesting, as there are few if any, instances of a DAO proactively voting to hire legal representation. The initiative by 1inch DAO contrasts starkly with the reactive approach observed in the case of BarnBridge DAO, which faced regulatory challenges from the US Securities and Exchange Commission (SEC) and was eventually compelled to shut down its operations. The BarnBridge protocol, known for its innovative approach to mitigating risks in yield farming and interest rate volatility, faced the harsh reality of regulatory scrutiny, underscoring the urgent need for DAOs to preemptively address legal and compliance issues.
A legal framework for decentralized entities
The engagement of Storm Partners by the 1inch DAO represents more than just a contractual agreement; it signifies a revolutionary bridge between the decentralized ethos of Web3 DAOs and the structured legal and regulatory frameworks of traditional governance. Swiss-based Storm Partners, through its own governance proposal, has crafted a novel approach that extends beyond mere legal representation. By conferring a Power of Attorney to Storm Partners, the 1inch DAO has entrusted the firm to act as its legal representative before third parties, marking a significant evolution in the DAO’s operational and legal structure.
Nicola Massella, the legal and compliance director at Storm Partners, emphasized the groundbreaking nature of the engagement, viewing it as a significant step toward the legal recognition of decentralized organizations. With the anticipated provision of around 200 hours of legal advice, based on the hourly fees paid in Swiss Francs, the 1inch DAO is set to receive comprehensive legal counsel. Moreover, Storm Partners’ commitment to transparency and accountability is reflected in its obligation to deliver a quarterly report detailing its activities on behalf of the DAO.
Setting new precedents in the DeFi space
The proactive legal stance adopted by the 1inch DAO does not merely address its immediate legal and compliance needs; it sets a new precedent for the entire DeFi space. As decentralized entities continue to grow and evolve, the interaction between these novel organizational structures and established legal frameworks becomes increasingly complex and significant. The engagement of Storm Partners by the 1inch DAO serves as a beacon for other DAOs, signaling the importance of integrating legal counsel into their operational strategies to navigate the intricate web of regulatory requirements and protect the interests of their members.
The case of the 1inch DAO and its strategic legal counsel hire is more than a singular event; it is a testament to the maturation of the DeFi sector and its recognition of the need for a harmonious coexistence with traditional legal systems. As the DeFi space continues to evolve, the pioneering steps taken by entities like the 1inch DAO will undoubtedly shape the future trajectory of decentralized governance, setting benchmarks for legal compliance, operational integrity, and the overall advancement of the blockchain and cryptocurrency domains.
Conclusion
the 1inch DAO’s decision to hire a lawyer through an on-chain vote is a landmark development in the DeFi sector, symbolizing a proactive approach toward legal fortification and member protection. The initiative sets new precedents, offering invaluable insights and strategies for other DAOs navigating the complex interplay between decentralized governance and traditional legal frameworks. As the 1inch DAO embarks on the new chapter with Storm Partners, the entire DeFi community watches with keen interest, recognizing the potential implications and opportunities this pioneering move heralds for the future of decentralized finance and blockchain technology.
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