Labs Proposal

PROPOSAL FOR GMX PROTOCOL LEGAL WRAPPER: (i) LABS ESTABLISHMENT and (ii) LICENSING

1. PROPOSAL SUMMARY

Following up on the proposal in Change Smart Contract Code Licenses (similar to Uniswap v3 License), we propose the GMX on-chain DAO initiate the GMX Protocol’s legal wrap with an independent software development entity which will allow for licensing of the GMX code-base. The company is an independent software development and marketing entity (“Labs”) responsible for the development of the open-source code of the project, both front-end and back-end, and owns the domain GMX.io.

Labs support the GMX Protocol, while The Interface (app.GMX.io) and GMX Smart Contracts continue to run independently from it under IPFS and the respective blockchains.

This proposal will require a vote to be implemented.

2. LABS ENTITY

Labs is a software development and marketing company that works to develop and advance the GMX Protocol. It will fund its operations through development grants and service agreements, including compensation paid in GMX, stablecoins, or other participatory interests as agreed between the Labs and GMX on-chain DAO.

Most Contributors to the GMX Protocol shall conduct their involvement through Labs. They will be vesting any existing intellectual property they control as part of this process.

This structure will allow the GMX on-chain DAO to focus on broad policy and directional decisions, with Labs providing the protocol’s requisite operational, marketing, and development support. It will also ensure that Contributors have adequate regulatory protection for their services to Labs and Labs to the GMX on-chain DAO.

This arrangement is non-exclusive and does not restrict the GMX on-chain DAO from utilizing the services of any contributors.

The GMX Treasury will remain under the same multi-signatures; Labs will only be funded to pay for Contributors’ involvement.

3. LICENSING

Based on GMX’s community and governance feedback, Labs will utilize business source licenses and similar licensing to protect the developed intellectual property while maintaining an openly available and publicly auditable code base. The rights will apply to future iterations of The Interface and GMX Smart Contracts starting as soon as the License is uploaded.

All code developed will be made available on a royalty-free basis for deployments under the control of the GMX on-chain DAO.

Moreover, Labs will grant license-free usage for The Interface code subject to its interactation with the GMX Smart Contracts, up to request to license@endlesslabs.com

If a third party wants to use the code of (i) The Site (informational website, GMX.io), or (ii) The Interface (app.GMX.io) without it interacting with GMX Smart Contracts but with other non-GMX Protocol contracts, or (iii) the GMX Smart Contracts, it must request permission from the GMX on-chain DAO for the usage to be granted by Labs. Labs cannot grant such usage rights without the GMX on-chain DAO permission.

4. DISCLAIMER

The information provided in this proposal does not, and is not intended to, constitute legal advice; all information, content, and materials available in this proposal are for general informational purposes.

15 Likes

Reserved for future updates

Much needed step to protect X4 from pirating and ensure that brainless forks like MYC will never be our real competitors.

5 Likes

Big yes from my side.

2 Likes

Smart plan. Fully agree. Hit me up if you need any free legal help / review of anything.

5 Likes

Based step forward

Full support

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This is some serious bizz

100% yes from me

This is a yes from me.

Good sum up, as always from CFC. Clear yes

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This is perhaps the most importance proposal that has been raised in the governance forums to date, as it sets out a fundamentally different course for the development of the project into the future.

I will argue below that what we gain in protection vs competitor forks is far outweighed by what we lose in censorship resistance - and that you should vote to reject this proposal.

1. By forming such an entity we create an attack vector for regulators to target.

Uniswap Labs was forced to omit the trading of a range of assets by regulators from its trading interface precisely because the UI is operated in the manner as proposed above (see article below).

The assets that were removed from the trading interface it operates are almost all synthetic assets, such as linked to gold, dollar or inverse instruments. Full list below.

And just recently they’ve blocked a bunch of wallets to comply with ofac - is this the protocol we want to become?

2. Launching synthetics protocol is going to rustle feathers more than anything else GMX has done to date.

Remember that the SEC targeted Do not for his UST ponzi yield, but for Mirror’s synthetic stocks.

So if anything should be decentralised and open source it is the code that relates to the synthetics software.

In fact what would make the most sense is for an individual or organisation that is not involved in core GMX activities to integrate and deploy it. Remember how Curve’s fee-sharing was implemented by a random community member who submitted a pull request and the team happily upstreamed the code.

3. GMX has deep moats and doesn’t need to worry about competitors

Vampire attacks against GMX (like sushi did to uni) will always fail because GMX already shares all of its fees.

The liquidity is a huge moat as is the GBC community.

We have nothing to fear.

Gmx is a case study in how to build crypto moats - I will make a twitter thread on this soon.

Do the right thing, and vote this one down.

5 Likes

thank you for your comment

I would love to hear X’s opinion on this risks.

1 Like

I say yes, this is smart

Thank you @coinflipcanda for the clear writeup. Reactions by point below.

1. PROPOSAL SUMMARY

  • How/where is GMX stats hosted? Is it worth also putting this on IPFS given its importance as a community-resource

2. LABS ENTITY

  • Legal and regulatory assessment - has this already been done? And if not, what is the summary from the core contributors on the regulatory, and censorship, implications of this type of structure on the core GMX protocol? Understand the need to balance with commercial concerns in the short-term, but this should be a top-of-mind question for any defi protocol of significant size. Clearly we have seen the direction that other onchain venues (like dYdX) have taken when it comes to KYC/reg-related matters–the GMX community should be looking at that and asking where our line in the sand is

  • Labs entity legal/tax status - is this a nonprofit (i.e. foundation) or a for-profit private co (i.e. LLC)?

  • Setting aside legal/regulatory – this structure should be very helpful from a day-to-day operational POV, especially as you consider potentially growing the group of GMX contributors, paying existing contributors, providing limited liability protection to them, entering into contracts/agreements with off-chain entities, etc

  • Can you share anything about projected expenses and what do you expect DAO decision-making to look like when it comes to setting budgets? What is the role of the existing GMX Treasury vs. incremental grants given to Labs from the DAO?
  • I would suggest the community in collaboration with GMX contributors (if we decide to move ahead with this Labs-DAO setup) draft some sort of “constitution” or “operating agreement” that clearly outlines each entity’s responsibilities along with a shared mission statement and set of values/principles that should guide more granular decision-making down the line. There is a lot we can borrow from here to serve as a starting point: Simple MakerDAO — Governance from first principles, Hasu

3. LICENSING

  • What do you think about re-licensing existing legacy GMX contract code under BUSL?
  • How long does the contemplated BUSL limit, or have permissioned-access, to new code? Uni v3 for example has a 2-year timelock after which their BUSL converts into GPL (basically free use, incl commercial): Introducing Uniswap V3
1 Like

just feedback, reading this everything isn’t 100% clear

just speaking for myself - i’d value some lines going through what isn’t possible rn and why spinning up a new structure would help - for example:

with the current structure it’s hard to

  • license gmx codebase
  • pay and give employee competitive benefits (fiat, healthcare etc …)
  • interact with other legal entities
  • manage daily operations
  • etc …

this new structure will allow us to move forward on these points
here is more details

Appreciate your input, you raise some valid counterpoints and alternatives. It’s a foundational step for the protocol, absolutely, and should be evaluated as such. Meticulously.

I have contributed to this proposal as we, among some other contributors, including lawyers, consulted some other top industry lawyers. To summarize a few points:

(i) GMX needs a legal wrapper of one or several entities. There is no such thing as existing without an established entity due to personal liabilities, among other things. Contributors must be behind an entity.

(ii) Most companies require an entity to work with; GMX can’t have personal contributors signing documents personally.

(iii) Licensing, domain ownership, etc., must be under an entity.

(iv) To put it simply, no one is anonymous for the “big guys.” Not having a legal wrapper for GMX is a net negative and doesn’t protect the project; on the contrary.

(v) It is my understanding that BSUL would apply to Synthethics contracts and all current code, too, for four years.

(vi) It is my understanding that while this for-profit entity will be used to pay contributors, the rest will keep operating normally and bear no substantial extra costs (apart from the usual ongoing company costs.)

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I agree that there is a strong case to be made for a labs entity, to which I am not opposed.

However, tying the synthetics code to the entity appears to present some risks that we should be cogniscent of.

I am simply suggesting that any attempt to keep the code under licence or closed source to the labs entity has trade offs that outweigh the gains.

1 Like

As stated in the proposal:

All code developed will be made available on a royalty-free basis for deployments under the control of the GMX on-chain DAO.

Moreover, Labs will grant license-free usage for The Interface code subject to its interaction with the GMX Smart Contracts, up to request to license@endlesslabs.com

This is a standard practice among top projects in the industry; I don’t see how any trade-off can outweigh the gains of the GMX on-chain DAO protecting its open-source code using an entity. Anyone can still read it, submit PRs, or use it on its centralized hosting or decentralized, given it interacts with the GMX Smart Contracts in the case of The Interface.

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Thanks for the reply and the transparency. Definitely noted and agreed on (i) (ii) (iii) – benefits of the Labs entity are very clear (I would hope) to most community members.

What has your counsel communicated regarding risks to the protocol that this entity could potentially introduce by way of regulatory action, future user/LP KYC requirements, etc? Or is it a net benefit in the opinion of your counsel + the core contributor group?

And could you please remind us where, under this proposed org structure, would contract upgradeability and admin privileges sit?

It is a net benefit. We don’t think this entity introduces new regulatory risks. That is the line of thinking if you believe that some contributors may be anon and thus unreachable for regulatory actions. The truth is no one is anon towards those with enough power. You can only go so far with your privacy. It is much better to be protected behind a limited liability company.

Multisigs wouldn’t change. The rest would remain as it is now.

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