Jeff Dorman (Arca) on Asserting Tokenholder Rights

Jeff Dorman is the CIO at Arca, which is currently engaged in a fascinating standoff with Gnosis, a token project in which they have a position. Arca is asserting that Gnosis has delivered little value to tokenholders and has proposed that they perform a tender offer for GNO tokens with the assets held on their balance sheet (which exceed the capitalization of GNO). Covered in this episode:

  • The original purpose of Gnosis as laid out in the whitepaper
  • Why Gnosis only sold 5% of their tokens in the initial sale
  • How Gnosis’s dutch auction backfired
  • How the original objective to create a prediction market failed
  • The history of Gnosis’ non-core products and expenditures – and why they don’t accrue value to GNO
  • Under what circumstances pivoting is permissible – and when it isn’t
  • The existence of obligations towards tokenholders, even if implicit and unstated
  • What should a well-codified arrangement between tokenholders and token issuers look like?
  • Jeff’s view of whether the utility theory of tokens is still valid
  • The substance of Arca’s proposal to Gnosis, and their preferred resolution
  • Arca’s proposal around a tender offer to buy back GNO at a fixed price with treasury assets
  • Why large investors exerting themselves in governance benefits smaller shareholders
  • How Arca’s GNO position is similar to the ESG movement
  • Arca’s response to the rebuttal that tokenholders have no rights
  • Arca’s leverage to achieve a positive outcome – and willingness to litigate
  • Whether explicit security tokens like Arcoin and INX will converge to tokens with equity-like characteristics

Further reading:

  • Arca’s blog on their proposal to Gnosis
  • Arca’s full deck featuring their proposal
  • Nic’s thesis on cryptoasset governance (pub. Aug 2017)