Changes to DCG managed Escrows

[Bradley Zastrow]

Dear Dash Community

I would like to keep you updated on some recent trends we’ve observed with the escrows that DCG has been managing, the impacts this has on the business development team and the changes we’re implementing moving forward with the July voting cycle.

SITUATION

As many of you are already aware, in support of the monthly proposal process, Dash Core Group has been providing escrow services whenever requested by the proposal owner. In the past, the requests were relatively infrequent and simply constructed. As a result, requests were easily managed.

Beginning in the earlier part of this year, we’ve seen a sharp increase in the number of requests in addition to the amount of time required to work with proposal owners so that the proposal contains objective and measurable milestones for the payouts. We have also experienced a few instances where DCG has incurred legal expenses in drafting up an escrow agreement and then have the proposal owner not proceed with the posting of the proposal, or deciding to forego escrow. This consumes legal resources without benefit to the network.

While we fully recognize the value created by escrow, we feel strongly that it would be much healthier for the Dash network to develop a diverse set of quality escrow services. If Dash Core Group continues offering these services to proposal owners at no cost, we are actively preventing alternative services from developing. Providing escrow requires time, money, and expertise. We cannot expect these services to develop competing against free services from Dash Core Group.

We also want to lead by example. Historically, we’ve taken a very neutral position on the projects we escrow. Although we explicitly do not endorse the projects we escrow on behalf of the network, we have witnessed many escrow terms or milestones that were weak or poorly defined to the network. As a result, we feel that minimum standards for the protections granted the network should be a requirement for DCG to conscientiously provide escrow services.

Separately we also realize that the escrow process with DCG is not well understood and know that there will be value in bringing transparency to the process and sharing that with the community along with anyone wishing to engage DCG in the future with an escrow request.

IMPACT TO BUSINESS DEVELOPMENT

Whilst we appreciate the value DCG backed escrows bring to the proposal process, it has unfortunately resulted in almost 2/3rds of a single business development resource dedicated solely to managing the escrows, both in the design as well as maintenance phase once milestones start to be achieved. This is not an efficient use of business development resources as it’s taking away from our capacity to identify, negotiate, onboard and manage new partners. Even if we were to create a new role just for escrow management, it would still require my time to interview, onboard and oversight moving forward.

CHANGES TO THE ESCROW PROCESS WITH DASH CORE GROUP INC

Starting with the July 3rd, 2018 voting cycle, we will be implementing the following changes to the escrows that DCG offers and manages:

1. Milestone 0 payouts will be limited to 10% of your total budget or a maximum of $25k, whichever is highest. Milestone 0 payouts is that portion of the proposal that’s paid out upon the proposal being successfully funded. Whilst we understand that some proposals do require some startup funding, allowing too much of a payout at milestone 0 creates too much risk for the network.
2. We will set the maximum project funding duration to 3 months, a maximum total budget request of $500,000 USD and a maximum fiat exchange guarantee of $100,000 USD per month. This will limit both the risk being taken on by DCG as well as lower the overall complexity of the agreement and amount of time to manage moving forward.
3. Requests can only be made 2 weeks or more prior to the requested voting cycle voting deadline. The length of time required to actually build a proper escrow contract, get counter signed and generate a wallet address takes significant effort. Any requests worked beyond the 2-week mark are unlikely to have sufficient time to post and receive votes.
4. Escrow requestors will need to pre-pay a fee in Dash equivalent to $4,000 USD to cover the legal expenses of DCG. This will reduce those circumstances where people have engaged us for escrow and no proposal was made to the network, despite the money spent. Additionally, we also recognize that for a true escrow market to exist - where outside vendors are offering escrow services to the network and compete on the best service – we have to charge a fee as no service can compete with “free”
5. Turning down requests for projects which present too high of risk. We get more requests than we can manage and need to focus the limited DCG resources on where we feel the lowest risk/highest ROI exists given the investment. We will refer proposal owners to other potential escrow resources.

Additionally, for greater transparency and understanding of how the escrow process works, we’ve documented the entire lifecycle of the escrow agreement included here: https://dashpay.atlassian.net/wiki/spaces/ES/overview. We’ve additionally set up a new email address [email protected] to which all escrow related queries can be made. We feel this will make things easier for those wishing to engage DCG with an escrow request.

MOVING FORWARD

Whilst we feel the above changes will go a long way in helping us manage the process without dedicating the same amount of monthly resources – eventually we do want to move completely away from escrows. We’ll be researching 3rd party escrow companies and encourage anyone with connections to these types of companies to have them reach out and engage with the community.

Many thanks for your support and understanding

Best

Bradley

 

[Schnuppdog]

Thx for that. Another time that DC stepp up the Game.

 

[Critical Input]

Fair calls Brad. cheers

 

[JOL]

Dear @Bradley Zastrow,

Tank you for the good job done on improvement of the escrow.

There is a 3rd way, you can create on our request a non-profit company separate from CORETEAM under the control of the DAO and financed by the DAO. This kind of service is too sensitive to leave it in the hands of private for-profit uncontrollable company.

if we go in the direction of a private company to control the projects financed by the DAO, we must also think about making a company that will control the private escrow company, then a private company that will control the company that controls the private escrow company...
Apart from the agreements made between two private companies, the escrow service and the company leading the project, actually has no value for the DAO. Because we have no control over her.
As soon as a flaw appears in the system it is exploited. A private for-profit company, will find any way to earn money, whether it serves or not the dash network anyway it will earn money, just pass the proposal and make it look good. As a private company we have no legal means of controlling what happens there. And this is not theory it's already in progress.


Regards,

 

[camosoul]

A fair portion of this could have been, and should be, built directly into the budget protocol.

 

[swati10]

Thank you for sharing the information with us.