πŸ““Kinto Constitution

This document lays out the Constitution of the Kinto DAO. The original Constitution of the KintoDAO will take effect on the date the Proto-Governance proposal ENIP-1 is approved.

The Kinto DAO, represented by the Kinto Foundation, aims to create a blockchain network that accelerates the transition to an on-chain financial system. Decentralized, non-custodial, and open to anyone who completes a KYC process.

The Kinto Constitution is a set of binding rules determining legitimate governance activity. Some of these activities may be enforced on-chain through smart contracts and others off-chain through social consensus or other means.

This Constitution includes "recommended guidelines" for permissible governance activity, non-binding but strongly recommended as good governance practice.

This Constitution describes the procedures by which it may be amended and lays out the governance framework of the Kinto DAO and The Kinto Foundation.

Definitions

  • Kinto Chain: The Kinto L2 Blockchain Network powered by Arbitrum Nitro technology.

  • Engen: Kinto's launch Program. More information here.

  • $ENGEN tokens: Engen tokens are non-transferrable, non-tradeable tokens given to Engen participants to participate in the proto-governance process.

  • Proto Governance: Proto-governance controlled by Engen members to bootstrap the network. Engen participants vote on the constitution, token, and the mining program.

  • Governor: Both Governance and Proto-governance will be implemented using Open Zeppelin's Governor smart contract.

  • ENIP: An Engen Improvement Proposal. Engen Proposals are created to bootstrap the DAO and $K token creation.

  • KIP: A Kinto Improvement Proposal. Full Governance Proposal.

  • DAO Treasury: All $K tokens held in a governance smart contract governed directly by the security council first and then by on-chain governance.

  • $K Tokens: Governance tokens that control the governance of the Kinto chain and DAO treasury.

  • Votable Tokens: All $Kinto tokens in existence, excluding any tokens held by The Kinto Foundation and any unclaimed airdrops.

Preamble

We, the participants of the Kinto DAO, ordain and establish this Constitution for the Kinto DAO to accelerate the transition to an on-chain financial system. A new financial system that is secure by design, a system that ensures user privacy, enables seamless UI/UX, and provides users with common defense mechanisms against threats/scams/hacks. This constitution enshrines the decentralization of the network and its ownership by current token members and its successors.

Article I: General Principles

1. Purpose

The Mission of the Kinto DAO is to accelerate the transition to an on-chain financial system. It combines user-owned Know Your Customer (KYC) processes, Anti-Money Laundering (AML) compliance, and native account abstraction to overcome the traditional barriers to mainstream adoption, security, and user experience. When interacting with the new financial system, Kinto users don’t need to worry about scams, hacks, or exploits.

2. Core Values

Security First

Kinto integrates mandatory KYC, AML, and smart contract wallets to mitigate risks associated with money laundering, illicit financing, and smart contract exploits and scams. The system's safety should be weighed heavily when considering any protocol changes. In particular, Kinto is an Optimistic rollup, which derives its security from Ethereum; any changes made to Kinto should preserve this property.

Kinto governance may enact changes to the underlying network only if it prioritizes the protocol's and users' security above all else.

Kinto governance cannot enhance changes that compromise the network's security or violate Cayman law or OFAC sanctions.

User Owned Data

Kinto upholds the highest standards of privacy. User data is never stored by Kinto. Users choose from approved KYC providers to secure their personal information, which remains separate from their on-chain addresses. Data sharing occurs only under user authorization or explicit governance approval.

Kinto governance must allow users to independently manage and verify their identity data, including onboarding or offboarding new Identity Nodes or KYC providers.

Kinto governance must not enable or facilitate sharing personal KYC information with third parties without user consent unless explicitly directed by Cayman law.

Decentralized and Permissionless

Despite its KYC features, Kinto is decentralized, open-source, and non-custodial. It empowers developers to create compliant financial applications within a user-governed framework. Any user who completes the KYC/AML verification can join the network. The core team is working towards progressive decentralization, aiming to complete the hand-over by Q1 2025.

Invisible Technology

Technology works best when it is invisible to the end user. By integrating native account abstraction directly at the chain level, Kinto removes the complexities of managing private keys, enabling access through simple, secure methods such as usernames, passwords, two-factor authentication, or mobile device keys.

Multi-chain Integration

Kinto believes in positive-sum games with other open blockchain ecosystems. The Kinto DAO will strive to integrate with the best products across the ecosystem, wherever they are. This constitution supports DeFi across the whole ecosystem, facilitating seamless integration with major DeFi protocols across ecosystems like Ethereum, Base, and Arbitrum.

Minimized Governance

Governance minimization is essential because it supports the primary value proposition of networks: credible neutrality. Minimizing governance tends to make protocols and networks credibly neutral. The less surface area to govern, the faster the network can operate. The network should strive to minimize processes and protocols that would bog down the community in endless governance conversations.

Article II: Governance Phases

The team will work towards progressive decentralization. The founding team aims to create a secure and usable network that reaches network-market fit. The ultimate goal is to remove any dependency from the founding team as soon as it is viable.

This is how governance will work during every stage.

Phase 0: Proto-Governance (Before June 15th 2024)

The core team created Kinto's launch program, Engen, so that the community could vote on and participate in discussing the DAO and token before they were even made.

Thanks to Kinto's native sybil-resistant capabilities, Engen attracted more than 24,000 users. These founding members received Engen credits and can use them to discuss and ratify the constitution from day one.

Launching proto-governance through the $ENGEN credits allows launch program members to decide the network's future and receive long-term benefits.

During this period, founding members will vote on three key proposals:

  • ENIP-1: Kinto Foundation & Constitution

  • ENIP-2: Creation of the $K Token

  • ENIP-3: Mining Program Launch

At this stage, a multi-sig comprised of core team members and close advisors can change the protocol parameters, upgrades, and perform rescue functions in case of an emergency.

ComponentOwner

Treasury Control

N/A

Network Changes / Upgrades

Core Team Multisig

Emergency Fixes

Core Team Multisig

Phase 1: Security-Council (From July 1st 2024)

Requirements: ENIP proposals are ratified and approved.

Once the constitution is ratified and the creation of the $K token is approved, the $K token will be launched and distributed to the community. The Treasury smart contract will then be created, and on-chain governance will now own the Kinto DAO treasury.

At this stage, governance only owns the treasury of the network.

The core team will give ownership over the other smart contracts to the Kinto Security Council.

The security council is a group of 8 signers of a Gnosis multi-sig wallet, which has powers to perform certain Emergency and Non-Emergency Actions, as delegated to it by the Kinto DAO and The Kinto Foundation, and is responsible for upholding this Kinto Constitution.

Emergency Actions

The Security Council has the power to execute any software upgrade or perform other required actions without delay to respond to a security emergency, should one arise (such actions, "Emergency Actions"). Performing any Emergency Action requires a majority approval from the Security Council. The Security Council may not use its power to perform Emergency Actions except in a true security emergency, such as a critical vulnerability.

After taking any Emergency Action, the Security Council must issue a full transparency report (at an appropriate time after the security emergency has passed) explaining what was done and why such action was justified.

Non-Emergency Actions

The Security Council may also approve and implement routine software upgrades, routine maintenance, and other parameter adjustments in a non-emergency setting (such actions, "Non-Emergency Actions"), which require a majority of signers to take effect.

The KintoDAO can curtail or eliminate the Security Council's power to perform Non-Emergency Actions by approving and implementing a governance proposal.

ComponentOwner

Treasury Control

Kinto DAO - Can't be used in this phase.

Network Changes / Upgrades

Kinto Security Council. Kinto DAO may override.

Emergency Fixes

Kinto Security Council

Phase 2: Partial On-Chain Governance (Q3 2024)

Requirements: Stage 1 Rollup Achieved. First 9 Nios Elected.

Once the network proves stable over several months under changing market conditions, the rollup training wheels will be removed, and on-chain governance through a Governor smart contract will own the network.

In order to minimize technical and financial risk, the Kinto token can only be made transferable by a DAO proposal after the network has reached this phase.

At this point, the Security Council can only perform emergency actions. To execute an emergency action, the multi-sig must have at least 8 signers and a threshold of 75% or higher.

Kinto will launch a two-layer, fully on-chain governance system. First, $K holders elect Nios on-chain through the Kinto Governance Portal at governance.kinto.xyz using $K weighted voting.

The first Nio election is scheduled to begin in September 2024

  • Nios will split into three cohorts: Core Cohort, First Cohort, and Second Cohort.

  • The core team and advisors will select the Core Cohort of 3 Nios.

  • $K holders can elect the remaining two cohorts - 6 Nios- on-chain through the Kinto Governance portal using $K weighted voting. This first election replaces the 'First Cohort.' The next election replaces the 'Second Cohort,' and so forth.

Once Stage 2 Rollup classification has been achieved, the next Nio cohort election will double in size and replace the Core Cohort. Governance will then move to its final state.

ComponentOwner

Treasury Control

Kinto DAO

Network Changes / Upgrades

Kinto DAO

Emergency Fixes

Kinto Security Council

Phase 3: Full On-Chain Governance (TBD)

Requirements: Stage 2 Rollup Achieved. Core Cohort replaced

All training wheels are removed at this stage, and all code upgrades must go through on-chain governance.

After the core cohort has been replaced, Nios elections will now split into two cohorts; First Cohort will have five Nios, and the Second Cohort will comprise four Nios.

ComponentOwner

Treasury Control

Kinto DAO

Network Changes / Upgrades

Kinto DAO

Emergency Fixes

Kinto DAO * (Security council may only pause / disable features in emergency)

Article III: DAO Proposal Process​

The following process governs the rules and procedures by which the KintoDAO may propose, vote on, and implement Kinto Improvements Proposals or KIP. No KIP may violate applicable laws, particularly those related to AML and OFAC sanctions.

Proposals need to follow the KIP Proposal Template and will go through the following phases before being approved:

  1. Phase 1: Temperature Check (5 days) (Optional but Recommended): The KIP is suggested on Discord and discussed/debated for 5 days. The KIP should be accompanied by a Snapshot poll or other method as determined pursuant to the governance process, which can only be submitted by an address that can vote at least 0.01% of the Votable Tokens. The Snapshot poll runs for 5 days and is decided by a simple majority with no required participation threshold. A KIP that fails the temperature check should not be submitted for a vote.

  2. Phase 2: Formal KIP and call for voting (2-3 days): The KIP is submitted via governance contracts on Ethereum Mainnet, with a user interface available on Tally. The KIP proposer is required to be a Nio. After 3 days, a voter distribution snapshot will be taken, and the voting period will begin; this gives interested parties time to discuss the KIP and gather votes before the voter distribution snapshot is taken.

  3. Phase 3: DAO votes on KIP, on Ethereum Mainnet (5 days): During this Phase, the Nios will vote directly on-chain on a submitted KIP.

An AIP passes if the following 2 conditions are met:

  1. The majority of Nios vote to approve the proposal.

  2. If the proposal modifies the Kinto Constitution, it must also be ratified by $K holders by weighted token voting.

The voting period ends five days after the start of voting. It is recommended that the voting process be run from Monday to Friday. If the KIP fails to pass, the process ends here.

If the AIP passes, then it moves to Phase 4.

  1. Phase 4: L2 Waiting Period (3 days): After a KIP has passed Phase 3, a 3-day waiting period occurs. This gives users who object to the KIP time to initiate withdrawal of their funds or take other action on the Kinto L2.

  2. Phase 5: Initiate and Finalize an L1-to-L2 Message: After the 3-day waiting period in Phase 4, an L1-to-L2 (Kinto plus potentially other chains) message indicates that the KIP was passed. When this message is finalized on L2, anyone can trigger it to execute needed actions on the destination chain. This step ensures that the completion of the L1 waiting period will be recognized on L2 after any withdrawals initiated during or soon after the voting period have been recognized on L1.

  3. Phase 6: Implementation: The KIP is fully executed and implemented. This may happen on Kinto, Mainnet, or any other chains where Kinto is connected.

This KIP process, as specified, will typically require 15 days from the beginning of the temperature check in Phase 1 until a KIP is finally executed in Phase 6. A KIP may optionally specify a further delay before its implementation.

Proto-governance Proposals (ENIP)

The proto-governance proposals will run a shortened process as follows:

  • Phase 1: Public Discussion on Discord. Engen users can discuss the proto-governance proposals on Discord for five days. Every proposal will have a separate channel.

  • Phase 2: Voting Period. Engen users will use $ENGEN credits to vote on these proposals. A proposal will be considered approved if it receives a majority of the votes and at least 15% of the $ENGEN user's participation.

  • Phase 3: Implementation. If a proposal is approved, the Foundation will work and direct the Core team to complete all the necessary work to implement these proposals.

Article IV: The Governance Guardians - Nios

Nios are the network's guardians. They are expected to be active and vote on all governance proposals. They are also expected to discuss governance with other guardians and the broader community. Nios are minted as soul-bound NFTs, which allows them to operate quickly on behalf of the community.

Nios Election Process

It can only begin upon the availability of an on-chain election process approved and installed by the Kinto DAO. The date chosen for the first election will form the basis for all future elections. Every election should begin six months after the previous one, and it will replace its respective cohort of three members. All Nio members are expected to serve their terms until the election is complete and the new Nios are installed.

The following timeline governs an election that starts at time T:

  1. Contender submission (T until T+5 days): Any DAO member may declare their candidacy as a Nio, provided that a current Nio candidate is not a candidate for a seat in the other cohort.

  2. Nominee selection (T+5 until T+10 days): Each DAO member or delegate may vote for their declared contender. Each token may be cast for one contender. To the extent that there are more than six contenders, each eligible contender must be supported by pledged votes representing at least 0.5% of all Votable Tokens.

  3. Compliance process (T+10 until T+15 days): All candidates will complete the compliance process with the Kinto Foundation. The Kinto Foundation is responsible for removing any candidates that fail the compliance process. If fewer candidates that seats are supported by pledged votes representing at least 0.5% of all Votable Tokens, the current Nio members whose seats are up for election may become candidates (as randomly selected out of their Cohort) until there are enough candidates.

  4. Member election (T+15 until T+30 days): Each DAO member or delegate may vote for any declared candidate. Each token may be cast for one candidate. Votes cast before T+22 days will have 100% weight. Votes cast between T+22 days and T+30 days will have weight based on the casting time, decreasing linearly with time, with 100% weight at T+22 days and 0% weight at T+30 days.

  5. At T+30 days, the process for replacing the cohort of Nio members with the candidates who received the most votes will be activated. The installation process must be executed via the on-chain governance smart contracts, and it may take several days until the new Nio members are installed.

Nios Verification

The Kinto Foundation is allocated 5 days for the Compliance process, which should be executed between the Nominee selection and Member election. The Kinto Foundation has the flexibility to update its compliance policy for every new election. This is required to allow The Kinto Foundation to comply with Cayman Island laws. Furthermore, The Kinto Foundation maintains the right to issue new procedures and guidelines for off-chain components of the Security Council election. All efforts should be made by The Kinto Foundation to ensure an orderly, fair, and transparent election.

Conflicts of Interest

As a matter of best practice for maintaining independent and credibly neutral governance, no single organization should be overly represented amongst the Nios. In particular, there should not be more than three candidates associated with a single entity or group of entities being elected to Nios, thereby ensuring that there will be no single entity or group of entities able to control or veto the nework.

Furthermore, no candidate with conflicts of interest that would prevent them from acting in the best interests of the KintoDAO, Kinto products and/or The Kinto Foundation should be elected as a Nio. Potential conflicts of interest could be but are not limited to, affiliations with direct Kinto competitors, proven histories of exploiting projects, and others.

Removal Process

Nio members may only be removed before the end of their terms under two different premises:

  1. If a Nio member doesn't participate in 3 governance proposals in a row, the Nio will be automatically removed.

  2. >=75% Nio members vote in favor of removal (excluding the member in question).

The seats of Nio members who have been removed before the end of their respective terms shall remain unfilled until the next election that such seats are up for reelection unless otherwise replaced before such next election by a vote of at least 75% Nio members, in which case such seat shall be up for an appointment at the next such election. The Nio members may not re-appoint a removed member and can only be re-elected via the election voting system.

Election Changes

The DAO may approve and implement a KIP to change the rules governing future Nio elections, but the KIP process may not be used to intervene in an ongoing election.

Article V: Legislative Functions

Proposal and Voting: The assembly of Nios will regularly propose measures that align with Kinto's mission and values. Each proposal requires a majority vote to be enacted.

Transparency and Inclusion: All proposals and their outcomes will be transparently recorded on-chain to ensure that all members of the DAO are informed and have the opportunity to voice their opinions through their elected representatives.

Article VI: Amendments to this constitution by majority vote

This constitution may be changed only by a successful proposal approved by the two governance layers. The proposal must first be approved by $K holders and then ratified by a majority of NIO NFT Token holders.

Article VII: Ratification

This Constitution shall be considered ratified and come into effect upon approval by most of the current holders of $ENGEN tokens following a public discussion period. The date of ratification will be recorded in the blockchain ledger associated with the proto-governance DAO.

Once the $K token is created, the Constitution will again be ratified by $K token members.

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