Proposal [Non-Constitutional]: Defending Open Source: A United Stand for Developer Rights and Software Freedom

Proposals Finalized AIPs
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Title – Proposal [Non-Constitutional]: ArbitrumDAO Contribution; Safeguarding Software Developers’ Rights & the Right to Privacy

Abstract & Rationale - This proposal envisages a monetary contribution to DEF & Coin Center from the ArbitrumDAO to continue their policy, litigation & advocacy efforts in relation to open-source software & software developers’ rights.

Steps to Implement - The steps to implement the AIP, including associated costs, manpower, and other resources for each step where applicable. For the avoidance of doubt, any AIPs involving transactions with third parties (such as grants) will need to ensure that applicable legal documentation and procedures are also included.

Timeline - TBA

Overall Cost - [Dependant on DAO vote]:

  • Fund with 500,000ARB each;
  • Fund with 750,000ARB each;
  • Fund with 1,000,000ARB each;
  • Fund with 1,250,000ARB each;
  • Fund with 1,500,000ARB each;
  • Don’t Fund.

Proposal authored by Axis Advisory

Context & Preamble

The digital asset industry has been faced with recent legal challenges in relation to a software developer’s individual freedom to contribute to the development and subsequent deployment of open-source permissionless software. This goes as far back as 1990 when Phil Zimmerman released Pretty Good Privacy (PGP), one of the first openly available public-key cryptography applications that featured end-to-end (E2E) encryption. Zimmerman’s creation prompted a criminal investigation that was eventually dropped, resulting in federal court decisions that protect encryption under the U.S. Constitution’s First Amendment. This clash on personal privacy became dubbed the “encryption wars.”

Our team over at Axis Advisory has published a write-up that offers contextual information in relation to the above: Defending Open Source: A United Stand for Developer Rights and Software Freedom

In this regard, we are proposing a contribution from the ArbitrumDAO to DEF & CoinCenter to continue their policy & litigation efforts in relation to privacy-enhancement tooling and software developer advocacy. Some of the institutions’ most notable contributions with an industry-wide impact will be noted hereunder:

COIN CENTER

  1. Coin Center’s case against the Office of Foreign Assets Control about adding Tornado Cash to the OFAC Sanction List, (naturally, Tornado Cash not being a person or entity but a mere set of open-source smart contracts running on the Ethereum Blockchain). Albeit the court ruling against Coin Center in the initial proceedings, Coin Center is currently in the process of appealing the judgment.

[Refer: Coin Center is suing OFAC over its Tornado Cash sanction].

[Refer: https://storage.courtlistener.com/recap/gov.uscourts.flnd.447304/gov.uscourts.flnd.447304.74.0.pdf];

  1. Coin Center’s concerns raised to the Financial Crimes Enforcement Network (FinCEN) regarding the designation of convertible virtual currency (CVC) mixing as a primary money laundering concern (PMLC). In this regard, Coin Center highlighted the rule’s extensive scope and lack of precedent. They argued that the proposed designation lacks clarity and narrowly tailored definitions, potentially leading to the misclassification of legitimate transactions as criminal.

[Refer: Comments to the Financial Crimes Enforcement Network on “Proposal of Special Measure Regarding Convertible Virtual Currency Mixing, as a Class of Transactions of Primary Money Laundering Concern”]

  1. Coin Center’s letter to the Senate Finance Committee highlighing the need for a regulatory approach that mirrors the successful, light-touch framework applied to the internet. Coin Center advocated for clear taxation guidelines on cryptocurrency transactions, emphasizing the importance of a de minimis exemption for minor gains from every transaction to facilitate the use of cryptocurrencies in daily commerce without undue tax burdens.

[Refer: Coin Center Suggestions to Address Uncertain Tax Treatment of Digital Assets]

  1. Coin Center’s contributions to Roman Storm’s and Alexey Pertsev’s legal defensen in relation to the following:
  • Roman Storm’s legal dispute in relation to accusations levied against his person on charges of conspiracy to facilitate money laundering, operate an unlicensed money transmitter and violating sanctions [Court of New York]; and
  • Alexey Pertsev’s legal dispute in relation to accusations levied against his person on charges of facilitating money laundering [Netherlands Court].

DEFI EDUCATION FUND

Some of the DeFi Education Fund’s most notable contributions with an industry-wide impact will be noted hereunder:

  1. The DeFi Education Fund initiated a legal challenge against a patent held by True Return Systems, LLC regarding blockchain technology, challenging the novelty and validity of its claims. This action reflects DEF’s commitment to preserve the digital assets space’s core values: fostering innovation, ensuring open access, and maintaining an inclusive environment. By contesting what DEF consider to be an overly broad patent, they aim to prevent potential monopolistic control, ensuring the decentralization is not compromised.

[Refer: https://www.defieducationfund.org/_files/ugd/84ba66_0b48beb0dd404637b4d988988b1bf3fc.pdf].

  1. The DeFi Education Fund filed a legal complaint along with Beba LLC against the SEC, after they recently created and distributed their ‘BEBA token’ via airdrops. Beba and DEF are seeking legal relief due to concerns that the SEC may classify BEBA tokens as securities, which could end up hindering not only their business operations but also the broader digital asset market. In essence, the DEF are fighting against the SEC’s approach towards digital assets which has become overly broad without adequate rule-making procedures, stifling innovation.

[Refer: https://www.defieducationfund.org/_files/ugd/84ba66_3f7a8f2ca6614d7381122cb1beeed4a8.pdf].

  1. The DeFi Education Fund submitted an amicus brief in support of James Harper against the IRS, advocating for the Fourth Amendment rights of cryptocurrency users. DEF emphasizes the need to balance law enforcement’s reach with individual’s financial privacy in the digital realm. They are arguing for a modern interpretation of privacy protections to reflect the realities of digital transactions and the traceability of cryptocurrency activities on public ledgers.

[Refer: DeFi Education Fund Files Amicus Brief In Coinbase Case].

  1. The DeFi Education Fund also contributed to the support of Roman Storm’s legal defense arguing against the novel legal theories proposed by the government under the International Emergency Economic Powers Act and money laundering statutes. DEF emphasizes the importance of distinguishing software developers from the actions of third-party users, in order to protect software developers from being held liability for third-party misuse of their open-source.

[Refer: https://www.defieducationfund.org/_files/ugd/84ba66_063f9d1fd563466cadfa3f5434f918e9.pdf].

OBJECTIVE

Coin Center Contribution

The ArbitrumDAO is being provided the opportunity to vote & effect a contribution to Coin Center; the leading non-profit research and advocacy center focused on the public policy issues facing cryptocurrency and decentralized computing technologies.

By way of a brief; Coin Center’s mission is to defend the rights of individuals to build and use free and open cryptocurrency networks: the right to write and publish code – to read and to run it. The right to assemble into peer-to-peer networks. And the right to do all this privately.

Coin Center has been at the forefront of policy research, educating policymakers and the media about cryptocurrencies, advocating for sound public policy, and engaging in litigation to defend digital civil liberties of software developers and other stakeholders within the industry.

DeFi Education Fund Contribution

The ArbitrumDAO is being provided the opportunity to vote & effect a contribution to the DEF whose mission revolves around educating policymakers globally about DeFi, promoting grassroots supports, enhancing legal support across jurisdictions, and advocating for policies welcoming of decentralized financial infrastructure.

They have initiated several key projects and grants to advance its objectives. One of their initial endeavors targeted a group of organizations and individuals, with the goal of expanding the understanding of decentralization and the DeFi ecosystem among policymakers.

Additionally, the DEF is taking a stand against how some governments interpret laws in a way that could establish a troubling precedent, potentially discouraging software developers in various fields. They pointed out the risk that developers might face legal action for their open-source code if it is misused by other for illegal activities. This could place developers are risk of being held criminally responsible for actions they didn’t partake in, possibly affecting them years or even decades later.

CONTRIBUTION TO COIN CENTER [A NOTE FROM THE ORGANIZATION]

Founded in 2014, Coin Center is an independent non-profit organization focused on the public policy issues facing cryptocurrency and decentralized computing technologies. Our mission is to defend the rights of individuals to build and use free and open cryptocurrency networks: the right to write and publish code – to read and to run it. The right to assemble into peer-to-peer networks. And the right to do all this privately. We do this by producing and publishing policy research, educating policymakers and the media about cryptocurrencies, advocating for sound public policy, and by engaging in litigation to defend digital civil liberties.

We are presently litigating two cases against the U.S. government. One is on Section 6050I crypto tax reporting, pushing back against expanded warrantless financial surveillance. The other is a civil case challenging the U.S. Treasury Department’s designation of immutable smart contracts. We argue that the Treasury does not have the statutory authority to add the Tornado Cash pool contracts to the list of sanctioned persons because immutable smart contracts are neither sanctioned persons themselves nor the property of any sanctioned person. We are fighting not only for the right of U.S. persons to continue using these tools but also seeking to set an important precedent: that the Treasury Department can’t simply identify decentralized apps and add them to the sanctions list without any evidence that the app is controlled by or enriches any sanctioned person.

We are also coordinating with Roman Storm’s legal defense on an amicus brief in his criminal defense. Our amicus focuses on accurately describing the operation of Tornado Cash and the role that developers play in creating decentralized apps like Tornado Cash. We argue that publishing decentralized app software, both to the blockchain and to web servers, is not the kind of activity that can give rise to prohibitions under U.S. sanctions laws because (a) U.S. sanctions laws exclude from prohibitions any transactions for information or information materials and (b) the U.S. Constitution’s First Amendment protects publishing software as “pure speech” warranting the strictest scrutiny from our courts.

Finally, we are continuously engaged in education and lobbying efforts in Congress and the various federal agencies in the U.S. to ensure that any changes to financial surveillance law does not impinge the free speech, privacy, and assembly rights of developers and users.

A grant to Coin Center will be used to support our ongoing work and to contribute to the legal defense of developers facing criminal prosecution.

CONCLUSIONS

In conclusion, the contributions mentioned above are not just a matter of protecting individual rights but a testament to our collective commitment to preserving the principles of innovation, decentralization, and individual sovereignty within the industry. By supporting this initiative, we affirm our dedication to upholding these principles and defending the right of developers to contribute to the deployment of permissionless open-source software without fear of reprisal or censorship.

Funding

We propose allocating up to 3 Million ARB to this endeavor; with delegates having the following voting choice via weighted voting.

Voting

The ArbitrumDAO has the following options to vote for in relation to effecting its contribution Safeguarding Software Developers’ Rights:

  • Fund with 500,000ARB each;
  • Fund with 750,000ARB each;
  • Fund with 1,000,000ARB each;
  • Fund with 1,250,000ARB each;
  • Fund with 1,500,000ARB each;
  • Don’t Fund.

Discussions

Call TBA

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Questions:

  • Why don’t you include the “No Funding” option?
  • Does Axis plan to receive any future rewards or payments for this proposal?
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Don’t Fund option included.

No, albeit allocating substantial time to this endeavor (in comparison to what the proposal is) Axis will not be taking any remuneration.

Thanks,
Joseph

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this is the natural evolution of the old, gut born, proposal to fund tornado cash lawyers for their defense.

At the time the initial was killed cause not all the ramifications and risks for the dao were considered. Glad that the “we are going to come back to this with a more thoughtful approach” has been indeed respected.
Props to Joseph here, crafting these proposals is always a big pain. Supporting this for the max amount, 2.5m, this battle goes beyond arbitrum, and also beyond crypto.

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Thank you for coming back to the DAO with a more thoughtful proposal @Immutablelawyer

  • Could you please help us understand how much ‘runway’ each of these options would provide for this cause?
  • Can you help us understand the successes of Coincenter foundation in defending such cases in the past?
  • Is US the only jurisdiction where Open source developers need defence? How do we make a general effort to defend folks globally?
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The Coin Center donation initiative is great, but it doesn’t look like Tornado Cash developers’ defense fund factors anywhere here - which was the focus of the original (now deleted) proposal. The axis advisory’s write up describes TC developers’ legal battle, but this proposal doesn’t explicitly address any donation to the devs’ legal defense.

Is a donation expected from Coin Center to Roman and Alex’s legal defense, or a separate proposal specifically for that purpose? @Immutablelawyer

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If possible would be great if you can modify your original post to make the options presented at the end into a poll, so we get a rough sense of what people would vote for.

I appreciate the quick turnaround time in getting this out after the last proposal. I do understand @cp0x concerns around not helping the devs legal defense directly, but I would point out that Coin Center has recently filed an Amicus Curiae brief that is certainly helpful to their case.

I would like some consensus built around deleting forum threads, as we no longer have the discussion from the old proposal to draw upon. is there a possibility that this post and the entire thread may also get deleted one day? Is the rights for deletion of posts with the originator of the thread, subject to @stonecoldpat moderation or do we have some say in it?

EDIT to add - I would like some joint proposal between @GFXlabs recommending DEF for funding. I don’t want it to just be first come first serve , or that we give to one over another based on the proposer reputation.

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We’re open to that, but also plan to run the poll for DEF concurrently if not. So there shouldn’t be a worry about first-come-first-serve. Approval of one proposal does not block the other in any way.

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regarding the thread history, we could spinup a service that monitors posts and pins them on ipfs. Could even integrate it directly to discourse, I bet we could get someone to build it as a public good for like 10-15k tbh. I do think its a good idea in the nature of being a pro web3 move for us to create.

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questbook season 2 idea incoming

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After thinking about it a little more, I’d prefer a setup where any organization that filed an Amicus Curiae brief in support of Tornado Cash devs is eligible to apply for funding. That would cover Blockchain Association, DEF and Coin Center (Coinbase too but I doubt they would apply).

We then can simply propose to divide the 2.25 million equally among eligible applicants, rather than picking one over another and potentially getting competing proposals or having to create a framework. It would also make clear the connection between this proposal and the earlier one on Snapshot, which is somewhat lost here.

This is certainly one solution to ensure we have a record available.

My question is more basic though, which is figuring out who has the right to censor or delete forum posts. That is currently unclear - is it Patrick and the foundation, the thread originator or someone else?

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This site is literally called forum.arbitrum.foundation. Is hosted on the foundation website. Whatever is posted in here can be a liability for the foundation so they can cancel all contents if they feel like, is totally in their right. Also off topic here.

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Generally speaking, we will respect the needs of the author including if they want a post deleted. Additionally, if it is needed, we’ll delete posts and limit the ability to post on threads if it is distracting from the thread’s topic. It has happened a few times now and it is not ideal, but the goal of moderating is to help ensure the discussion is concise and easily digested by the community.

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Not really, just want to know if people writing comments here might get rugged like last time

Thanks appreciate the clarification on rights of deletion in the forum!

EDIT to add: I can see the case for an author only being able to delete their original post and not the comments of people in that thread, but that’s a discussion for another time.

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Hey guys! Have a nice day!
Thank you for taking the time to share your position regarding the funding of Coin Center to support their policy, litigation, and advocacy efforts for open-source software developers’ rights. It is grounded in the challenges faced by the digital asset industry and historical precedents like the Pretty Good Privacy (PGP) case. However, I’ve identified several areas in your proposal that I believe could be improved. Perhaps you could clarify:

  1. Uncertainty in Overall Costs: The proposal offers various funding levels without a clear rationale for choosing among them. A more detailed analysis of the potential impact of each funding level would help voters make a more informed choice.

  2. Risks and Monitoring: The discussion on potential risks associated with funding and plans for monitoring fund usage is missing. Including mechanisms for reporting and controlling fund expenditure would enhance trust in the proposal.

  3. Specific Outcomes: The proposal could benefit from a more detailed description of expected outcomes from funding Coin Center. Clearly stating goals and success metrics would help the community understand the direction of their investments.

  4. Alternative Actions: The proposal could consider other means of supporting developers’ rights and privacy beyond funding Coin Center, such as supporting other organizations or initiatives within the Arbitrum community.

Improving these aspects could make the proposal stronger and more appealing for DAO voting.

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Thank you to @Immutablelawyer for drafting this revised proposal. Both Coin Center and DeFi Education Fund (see proposal by GFXlabs) are doing extremely important work for the crypto ecosystem. I fully support both proposals and would also support a combined proposal.

That said, it is disappointing to see this revised proposal no longer directly supporting Roman and Alexey’s legal defense. Their cases are indisputably the most important happening right now and if they are unsuccessful, legal precedent will be established such that every developer and protocol in the Arbitrum ecosystem could face prosecution for the actions of third parties. A very scary future and it’s naive to consider this anything but existential for DeFi as we know it. Ameen’s tweet here summarized this nicely.

Arbitrum is the leading L2 for DeFi on Ethereum and imo it is very much in its best interests to ensure positive outcomes for Roman & Alexey’s cases. This proposal indirectly supports their cases through actions like the recent amicus briefs filed by Coin Center and DEF. But they are running out of money and need direct, material support which this proposal will not provide.

In any case, I am grateful to @Immutablelawyer and the Arbitrum community for considering this proposal as well as its previous version.

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As many other had voiced out. This proposal is a great step forward to fund initiatives that can help/aid projects move forward within our space. Even tho is not clearly stated that the funds will be used towards Roman and Alex defense, I hope they do get support from this initiative.

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While some of the critics provided in this proposal by some delegates can make sense, the vote in my opinion has to be a decisive “for”, with the highest amount, 1.5M arb.

It’s not only about arbitrum, or our dao, or crypto, is about something more to stand for, principles that we give constantly for granted, and we are able to do so because usually there is someone else fighting daily battles for it.

And also, good karma to @Immutablelawyer and his crew for putting this up without asking for a dime.

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Thank you, @Immutablelawyer, for initiating this proposal.The concept is very appealing. However, it would be helpful to understand more about what each funding option will provide and how we can ensure the funds are utilized efficiently.

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The FranklinDAO / Penn Blockchain team has similar questions as @ruslanklinkov. We fully support Coin Center and DeFi Education Fund and their work in policy and advocacy, but would like to see more detail in this proposal regarding specific outcomes and cost uses and justifications. How will the funds be used by the organizations? Have other DAOs contributed/donated to these organizations before? We would like a little more background before casting our vote.

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