Scope of Change:
This MIP proposes the incorporation of Minswap DAO LLC as a non-profit decentralized autonomous organization limited liability company (DAO LLC) in the Republic of the Marshall Islands, adopting the attached operating Agreement and the updated Governance Process. It appoints MIDAO as the registered agent and allocates initial and annual funding for incorporation and maintenance, and appoints Minswap Labs as an initial managing member and transferring DAO treasury and other assets to the Minswap DAO LLC.
The Minswap community should implement this MIP to provide a robust governance and legal structure that aligns with the decentralized ethos of the DAO, ensures compliance with a fit-for-purpose jurisdiction, protects members, and fosters ecosystem growth. Incorporated as a Marshall Islands DAO LLC offers legal recognition, liability protection and enhancing trust and adoption of the Minswap Protocol.
Why Incorporating Minswap DAO in Marshall Islands:
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Legal Framework and Governance
The Marshall Islands have positioned themselves as a forward-thinking jurisdiction for decentralized autonomous organizations (DAOs), particularly through legislation like the Decentralized Autonomous Organization Act of 2022. This act legally recognizes DAOs and their use of blockchain technology and smart contracts for governance and membership tracking, which is critical for Minswap DAO’s operations. A key advantage is the allowance for member anonymity, where most participants can engage using pseudonymous blockchain addresses, protecting their identities unless required for specific legal processes. This is supported by the jurisdiction’s recognition of distributed governance models, eliminating the need for traditional corporate roles like board members or officers. Instead, governance is handled through token-based voting, with all members enjoying equal liability protection, similar to shareholders in a corporation. This structure aligns with the decentralized nature of DAOs, reducing the risk of personal liability for contributors.
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The legal framework is specifically optimized for DAOs, offering compliance requirements tailored to their unique structure. This means Minswap DAO can navigate legal obligations more seamlessly, as the laws are designed with blockchain-based organizations in mind. For instance, the recognition of smart contracts for governance ensures that operational decisions, such as membership tracking and voting, are legally enforceable, providing a clear and supportive environment.
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Financial Considerations
From a financial perspective, incorporating in the Marshall Islands appears cost-effective compared to many non-US alternatives. Based on pricing from MIDAO, a service provider facilitating DAO incorporation, the initial cost is around $9,500, with annual maintenance fees set at $5,000. This cost structure is notably lower than some other jurisdictions, making it financially attractive for Minswap DAO.
Another significant financial benefit is the absence of entity or member taxes. The Marshall Islands do not impose taxes on DAO entities or their members, which can lead to substantial savings and simplify financial planning. This tax-neutral environment is particularly appealing, where tax liabilities can be complex and burdensome in other jurisdictions. -
Reputation and Global Standing
The Marshall Islands’ reputation as a corporate registration hub adds to its appeal. With a proven history of hosting over 40 public companies traded on NASDAQ and NYSE, the jurisdiction offers reliability and stability. This track record is important for Minswap DAO, as it ensures confidence in the registration process and legal standing. Additionally, the Marshall Islands are not on any blacklists or sanctions lists, which is crucial for maintaining global operational capabilities and financial transactions without restrictions. -
Comparative Analysis
Compared to other jurisdictions, the Marshall Islands stand out for their specific focus on DAOs, which is not always the case in places like Wyoming, USA, where DAO laws are also recognized but may carry additional regulatory burdens due to U.S. oversight.
Cost of Incorporation:
Incorporating Minswap DAO in the Marshall Islands involves an initial cost of $9,500, a one-time incorporation fee, and an annual cost of $5,000, which covers a comprehensive suite of MIDAO services and government fees, including registered agent services, a local RMI address with mail forwarding, certified and notarized documents, template amendments and workshops, annual filings and name changes, and document storage. The funding of this incorporation will be from the DAO Treasury Wallet ($min.dao), and upon approval, the initial Managing Members will work with MIDAO to file the Certificate of Formation, pay the $9,500 initial fee directly from the DAO Treasury, execute the Operating Agreement, and complete the necessary KYC processes. Starting in March 2026, an annual allocation of $5,000 will be set aside from the DAO Treasury to cover the recurring fees, ensuring the DAO’s ongoing compliance and operational support in the Marshall Islands.
The Minswap DAO improved governance process:
The updated Governance Process for the DAO, It establishes the rules and procedures by which members can propose, vote on, and implement Minswap Improvement Proposals (MIPs) while participating in the DAO’s governance.
The improved dual stage on chain process introduces a structured two-phase voting process for MIPs: (1) a Formal Temperature Check followed by (2) an Official Governance Vote. The Temperature Check acts as a preliminary filter to gauge community interest before committing to a full vote, requiring a proposer to commit 10,000 MIN Tokens as a spam-prevention measure. The token commitment (refundable if passed, forfeited if failed) thus enforcing that only MIN Holders can propose and vote on Minswap Improvement Proposals (MIPs).
The improved process sets distinct quorum thresholds: 9% of circulating votable MIN Tokens for Constitutional MIPs and 7% for Non-Constitutional MIPs. These thresholds are dynamic, adjusting to the circulating supply of MIN Tokens. This differentiation reflects the higher stakes of Constitutional changes, requiring broader consensus and backing. The dynamic quorum tied to circulating supply ensures flexibility as the token circulation supply evolves.
Proposers must commit 10,000 MIN Tokens for both the Official Temperature Check and Official Vote phases. If the MIP passes, the tokens are returned; if it fails, they are forfeited to the DAO Treasury. This applies to both stages independently.
MIPs are explicitly categorized into Constitutional and Non-Constitutional, with clear criteria for each. Additionally, Exhibit A of the operating agreement includes a Conflicting MIPs resolution process, prohibiting simultaneous voting on mutually exclusive proposals and queuing them by submission timestamp, with an option for proposers to merge conflicting MIPs.
This structured classification and conflict management system is more formalized where proposal types and overlaps are often left ambiguous. It prevents governance gridlock and ensures orderly processing, which is critical.
The new governance process of Minswap DAO will allow any member to submit proposals with an Oversight & Security Board in place, which includes a Security Council tasked with intervening if proposals activate a Safeguard Triggers List, such as malicious exploits, governance attacks, legal violations, or conflicts of interest. This council’s authority can be adjusted through Constitutional MIPs (Minswap Improvement Proposals), ensuring flexibility in its oversight role, while Managing Members hold the power to appoint replacements should the council dissolve, maintaining continuity and security within the DAO’s operations.
Appointment of Minswap Labs as an initial Managing Member:
Designating Minswap Labs LLC as the initial Managing Member, operating under the Operating Agreement and the Governance Process in “Exhibit A.” The number of Managing Members, starting with Minswap Labs LLC, can be adjusted by a member vote. Minswap Labs LLC will manage daily operations, including routine decisions, handling emergencies, delegating tasks, forming paid Working Groups with member approval, overseeing “Exhibit B” assets, approving reimbursements and compensation via transparent DAO Treasury records on the Cardano Blockchain, and ensuring the Minswap protocol stays updated and maintained.
Minswap Labs LLC shall serve until it resigns, is replaced by a member vote, exits under Article VIII, or is removed, as determined by Members. Its compensation requires member approval, and addition or new Managing Members can be elected by a constitutional vote. Only authorized Members, Managing Members (initially Minswap Labs LLC), or agents can bind the Company, with duties owed solely to the Company itself.
Minswap Labs LLC will need to sign on behalf of the DAO and undergo KYC to incorporate the DAO LLC. One advantage of having managing members is that it simplifies opening bank accounts and other corporate accounts. The entity is required to sign for the DAO and complete KYC, regardless of whether the entity is a beneficial owner or managing member.
DAO Assets transfer to Minswap DAO LLC
Upon the formation of the Minswap DAO LLC, several key assets will be transferred as initial contributions, as outlined in Exhibit B. These contributions include the official Minswap Discord channel, accessible at https://discord.gg/minswap, where members and managing members engage, alongside the @MinswapDAO account on the X platform for public communication. The DAO Treasury wallets, encompassing various wallets, will also be transferred, including the primary DAO Treasury Wallet ($min.dao) holding allocated MIN tokens for operational and administrative costs as well as ecosystem growth; the DAO Treasury Hot Wallet ($min.dao-hot) for swift payment processing and compensations; the DAO Batcher Fees Wallet ($min.fee-dao), the Protocol Owned Liquidity Wallet ($min.pol), containing fees from Launch Bowl events that support new token launches; the MIN/ADA Protocol Owned Liquidity Wallet ($min.ada-min-pol), holding 50% of LP tokens from the LBE event that passively accrue trading fees from swaps to ensure MIN/ADA pair liquidity; and the Yield Farming Wallet ($min.yield-farm), designated for distributing MIN token rewards to liquidity providers. These assets collectively empower the DAO LLC to manage its finances, community, and ecosystem development effectively from the outset.
Attachments:
- Operating Agreement of Minswap DAO LLC: Governance- Minswap DAO LLC Operating Agreement - Google Docs.
- Exhibit A - Governance Process: Governance - Minswap DAO Governance Process Exhibit A - Google Docs.
- Exhibit B - Initial Contributions (Last page): Governance- Minswap DAO LLC Operating Agreement - Google Docs…
