Proposal: A Member Governed XRPL Foundation

[sappenin]

Title:       Proposal: A Member Governed XRPL Foundation
Type:        draft

Author:      David Fuelling 

1. Proposal: A Member Governed XRPL Foundation

1.1. Overview

1.1.1. Summary

This document proposes a new system of community-led governance overseeing the XRP Ledger Foundation. This new system
begins with a more formalized membership structure as the source of all authority and oversight over the XRPLF. In
addition, a new mechanism for electing the foundation's Board of Directors is introduced.

The changes envisioned in this document are not necessarily novel, but are instead highly inspired by existing
technology-focused membership organizations that combine best-in-class non-profit governance with
community-led authority mechanisms to effectively represent the interests of their membership.

1.1.1 Background

The XRPL Foundation is formally called MTU XRP Ledger Trust, but this document will refer to it simply as the XRPL
Foundation or XRPLF. The XRPLF is incorporated in Estonia, and is already organized as a member-managed non-profit
entity where any individual can become a member. However, membership eligibility and membership rights and
responsibilities are not clearly defined. Likewise, the process for electing the Board of Directors is also not clearly
defined.

1.1.2. Goals

This proposal seeks to bring the following to the XRPLF:

1. Increased Representation. All stakeholders in the XRPL community should have the ability to formally influence
   the affairs of the XRPLF. Not only will this create a fairer and more representative organization, but
   ideally will increase the perceived legitimacy of the XRPLF itself as the primary source of community alignment and
   organization in our community.

2. Governance Clarity. By introducing a more formalized membership and Board structure, it should become
   clear how anyone in our community can participate in and influence the affairs of the XRPLF itself.

3. Increased Participation. By opening the XRPLF up to a more formalised membership, we should expect more
   stakeholders to officially join the organization and contribute time, money, and resources towards its ultimate
   success.

1.1.3. Non-Goals

This proposal is limited in scope to the XRP Ledger Foundation itself, and does not propose any changes to on-chain
decision-making mechanisms like the Amendments process or otherwise.

In addition, it is important to note that the XRPLF (the entity) does not own the XRP Ledger or any XRPL community
side-chains. Instead, these chains can be thought of as having many owners, or even no owners, due to their
decentralized nature. In some sense, our ecosystem is stewarded by all stakeholders in our community, of which the XRPLF
is one such stakeholder.

Despite that, the XRPLF is an official legal entity with a leadership team, a budget, and a variety of intellectual and
other property that requires a real-world legal framework to govern it. It is these real-world legal frameworks that
this document seeks to more formally define.

1.1.4. Framing This Proposal

This proposal is just that - a proposal. We should discuss, debate, and refine it. This idea is ours to shape, and
because of that this proposal is purposefully limited in scope to high-level ideas. A direction.

To that end, this document seeks only to describe the most minimal of required changes necessary to enable us -- all of
us -- to bootstrap a community-governed XRPLF. Anything else that can flow out of this governance model is out of scope
for this document, and can be the responsibility of future Boards of Directors, executive teams, potential committees,
or even future votes of the membership.

1.2. Proposed Changes

1.2.1. Membership Classes

This document proposes three membership classes, each with slightly different eligibility criteria and membership
rights.

Before defining each class of membership it should be noted that rules around resignation, cessation, expulsion,
termination, or suspension should be codified outside of this proposal, but likely should conform to existing
best practices around membership eligibility found in a variety of other member-governed entities.
See Appendix 2 for examples.

1.2.1.1. Individual Members

Any individual can become an Individual Member of the XRPLF by (a) signing an Individual Membership agreement (to be defined)
and (b) paying a yearly membership due of 75 XRP.

1.2.1.2. Corporate Members

Any individual or entity can become a Corporate Member of the XRPLF by (a) signing the Corporate Membership agreement (to be
defined) and (b) paying yearly membership dues according to a tiered system (to be defined).

A common practice is to institute a reduced yearly dues rate for startups, non-profits, and governments; and some
increasing yet tiered rate for organizations/companies depending on the number of employees. For example, we might
consider charging 500 XRP per-year to companies with 1-10 employees, increasing that yearly amount up to some number
like 500,000 XRP for the largest companies.

1.2.1.3. Sustaining Members

Any individual or entity can become a Sustaining Member of the XRPLF by (a) signing a Sustaining Membership agreement
(to be defined) and (b) paying the highest level of yearly membership dues. For example, we might consider something
like of 1,000,000 XRP per year.

The intent of this membership tier is to provide marketing and prestige opportunities to these members (e.g., logos on
the XRPLF website, free passes to XRPLF events, etc.) as well as provide sustaining funding for the XRPLF itself. To
this end, these types of members may have an interest in helping the foundation become more sustainable via financial
donations, but may not have an overt corporate or individual interest in joining or in helping operate the foundation.
.

1.2.2. Board of Directors Composition

As is currently the case in the XRPLF bylaws, this proposal maintains the assumption that all corporate powers are
exercised under the authority of the Board of Directors, which has the power to select and remove all officers,
agents, employees, contractors; determine reasonable compensation; enter into contracts; and delegate responsibilities
and authority to committees, officers, agents, etc.

However, this document proposes the XRPLF Board of Directors should consist of the following types of Director, in order
to balance the interests of individual, organizational, and sustaining members:

1. Min of 3 Community Directors. Each must be an Individual Member.
2. Min of 1 Corporate Director. Must be an employee of a Corporate Member; immediately resigns if no longer an employee of the Corporate Member.
3. Min of 1 Sustaining Director. Must be a Sustaining Member (or employee of Sustaining Member); immediately resigns
   if no longer a Sustaining Member.

Both Community and Corporate classes of Director are selected via an election open to all members of the foundation (see
below for a proposed election structure). One Sustaining Director is appointed by each Sustaining Member, and as such
this class of Director has no term limit. These directors can be replaced at any time, for any purpose, at the
discretion of the Sustaining member that appointed the Director. See the FAQ below for more discussion on this class of
Member/Director.

1.2.2.1. Terms of Directors

Any Community Director serves a term of office for (2) years.

Any Corporate Director serves a term of office for (1) year (ideally staggered for continuity).

All Sustaining Directors are appointed by each Sustaining Member, and as such have no term limit. See above.

1.2.3. Potential Election Types

One important right that all membership classes obtain is the right to participate in XRPLF elections, such as to elect
a Board of Directors or to decide important membership-wide topics put to the vote of the entire membership.

1.2.3.1. Board of Directors Election

Electing the Board of Directors is perhaps the most consequential election that a member can participate in. These
elections are especially important because the Board of Directors is the primary representative structure proposed for
day-to-day XRPLF governance.

Each member can propose a single individual for each open Community or Corporate position (note the number of each may
be adjusted based upon the will of the membership). The specific rules of any campaigning and election processes are to be determined by the community and later by the Board of Directors of the XRPLF.

As an example, this diagram (inspired by the OpenID Foundation governance model) illustrates one way that an overall election could be structured to enable all classes to collectively choose from eligible classes:

┌──────────┐┌──────────┐┌──────────┐┌──────────┐   ┌──────────┐┌──────────┐┌──────────┐   ┌──────────┐┌──────────┐
│Individual││Individual││Individual││Individual│   │Corporate ││Corporate ││Corporate │   │Sustaining││Sustaining│
│  Member  ││  Member  ││  Member  ││  Member  │   │  Member  ││  Member  ││  Member  │   │  Member  ││  Member  │
└──────────┘└──────────┘└──────────┘└──────────┘   └──────────┘└──────────┘└──────────┘   └──────────┘└──────────┘
      │           │           │           │              │           │           │             │           │      
      │           │           │           │              │           │           │             │           │      
      └───────────┴─────┬─────┴───────────┘              └───────────┼───────────┘             │           │      
                        │                                            │                         │           │      
                        ▼                                            ▼                         │           │      
┌───────────────────────────────────────────────────────────────────────────────────────┐      │           │      
│                                                                                       │      │           │      
│                              Board of Directors Election                              │      │           │      
│                                                                                       │      │           │      
└───────────────────────────────────────────────────────────────────────────────────────┘      │           │      
                                            │                                                  │           │      
                                            │                                                  │           │      
┌───────────────────────────────────────────▼──────────────────────────────────────────────────┼───────────┼─────┐
│                                                                                              ▼           ▼     │
│       ┌──────────┐┌──────────┐┌──────────┐                  ┌──────────┐               ┌──────────┐┌──────────┐│
│       │Community ││Community ││Community │                  │Corporate │               │Sustaining││Sustaining││
│       │ Director ││ Director ││ Director │                  │ Director │               │ Director ││ Director ││
│       └──────────┘└──────────┘└──────────┘                  └──────────┘               └──────────┘└──────────┘│
│                                                                                                                │
│                                            XRPLF Board of Directors                                            │
└────────────────────────────────────────────────────────────────────────────────────────────────────────────────┘

1.2.3.2. Any Other Business (AOB) Elections

The XRPLF truly is a "community good" that is guided and determined by each of its members. However, the Board of
Directors exists so that our community can delegate authority and responsibility to a smaller group of people who, in
general, might be more effective at governance (perhaps due to having more time, more focus, or more interest in the
task of governance).

That said, we should strive as much as possible to remember that technology enables our membership to not have to
delegate individual authority to the Board of Directors, if so desired. With this in mind, we should strive, as a
community, to particiapte in major decisions by voting directly on major issues as much as possible. A variety of
options are available to us, including examples such as: (a) using committees as a way to expand influence over major decisions; (b) having membership-wide elections to decide important topics.

In the future, we might even consider instituting a form
of Liquid Democracy or even referenda for certain classes of
decision (e.g., changing the bylaws) so that those who are highly interested in governance can participate in all matters,
whereas those who are unable or unwilling to participate in the minutiae of governance can delegate that responsibility in the
general case, while maintaining optionality for any matters of personal interest.

Corporate Officers

Once a Board of Directors is elected, the members of that Board will elect corporate officers. For example:

• Chairperson of the Board. Presides at all Board meetings.
• Vice Chair. Steps-in when the Chair is absent.
• Secretary. Responsible for all Board record keeping and finalizes voting outcomes.
• Treasurer. Responsible for all corporate funds and financial record keeping.
• Executive Director. In charge of the day-to-day business affairs of the entity. Reports to the Chairperson, but
  subject to control of the board. May execute contracts, agreements, and other instruments (subject bylaws).

Transparency

The nonprofit should make public quarterly reports detailing all finances of the organization; any decisions made; changes in
employment, etc.

2. Appendices

2.1. Appendix: FAQs

This appendix seeks to answer frequently asked questions (FAQs) relating to this proposal.

2.1.1. Will the membership structure proposed in this document make changes to the on-chain governance system?

Not directly. This document is not proposing changes to the Amendment process or even to how entities make their way
onto any particular UNL. That said, it should be considered to be within the purview of the XRPLF membership and/or
Board of Directors to propose and ratify more formal processes and mechanisms relating to how the XRPLF decides who to
include in its published UNL.

2.1.2 Our community has very diverse stakeholders, so won't corporate members be "scared off" by some of the individuals in our community?

This seems unlikely, for two key reasons. First, our community has been around for a very long time, and any new
participants (corporate or otherwise) will be aware of the culture and ethos of our community. In addition, it's
important that we create processes, structures, and institutions in the XRPL ecosystem that ensure all voices are
fairly heard and represented. This means we're going to encounter ideas and viewpoints that we may not agree with.
Any new member (corporate or otherwise) should embrace this goal as well.

2.1.3. If the XRPLF gains a strong membership-based governance system, won't the XRPLF be able to take over and control the XRP Ledger or any other XRPL chain?

No. Nobody owns the XRPL Ledger or associated side-chains, not even the XRPLF. Instead, we should conceive of the XRPLF
as an organization that seeks to improve stakeholder alignment, improve community decision-making, and make shared
resource allocation more effective. To this end, the only binding authority this new structure will have is over the
affairs of the XRPL Foundation itself; anything that changes in the XRP Ledger as a result of the Foundation's actions
or decisions will still be voluntarily accepted by the community (or not). In other words, the XRPLF has no binding
authority over the XRP Ledger; but it does have influence, which is by design.

2.1.4. What will happen to the current Board of Directors if this proposal is accepted?

The makeup of any future Board of Directors of the XRPLF will be determined by the will of the membership through a
democratic voting process. Current members of the Board, like anyone else in the community, will be free to
participate in this process on an equal footing with anyone else.

2.1.5. Why was 75 XRP chosen as the Individual-tier membership due?

This value seemed like a good balance between not being too high (i.e., approachable for most people to afford) and
not being too low (i.e., it should cost something to become a member). However, the ultimate value here will be
decided by the membership.

2.1.6. For membership dues, why wasn't Fiat or some other crypto/currency chosen?

Primarily because this document relates to the XRPL Foundation, and XRP is the most widely available and valuable token
in our ecosystem. That said, there's no reason to preclude membership dues from being collected in Bitcoin, USD, EUR, or
anything else. This is likely a topic that should be decided by any future membership, and seems like a very good topic
to hold a membership-wide election to decide.

2.1.7. Do we need the Corporate Membership class?

Probably yes. There are at least two important benefits to the Corporate Member class. First, it allows
organizations (e.g., companies, non-profits, universities) to nominate a single representative to the XRPLF that can
represent a single organization. This aligns with corporate decision-making structures where it can be important for a
single person to have authority on behalf of the entity being represented. Second, decoupling the Corporate
Membership from the Sustaining Membership allows the XRPLF to lower the cost of corporate membership while
keeping the cost of Sustaining Memberships relatively high. This will allow the XRPLF to potentially find Sustaining
members that would like to contribute financially at a higher tier without pricing out startups or smaller
corporations from participation in the foundation.

2.1.8. Why aren't Sustaining Members elected?

This design is certainly up for debate, but it will likely be important to give Sustaining members a seat at the
governance table due to the level of funding they will provide to the organization. That said, we should take care
to not allow a cadre of sustaining members to be able to "purchase control" of the organization via Board seats. As
such, this document currently envisions an increasing number of Community Director seats to keep pace with the number of
Sustaining Directors. However, this will need to be weighed against not wanting a Board of Directors that has too many
participants to be effective. As more Sustaining Members join the XRPLF, we might consider a cap on the number of
Sustaining members so that the Board size is both manageable, yet fair. We might even consider making that class of
Director stand for election, being allotted a limited number of Sustaining Director board seats. For example, if there
are 10 Sustaining Members, then perhaps there are only two Sustaining Board seats. Alternatively, we might even rotate through a certain number of these Directors, in order to limit the number of them on the Board.

At some point, it might also become necessary to adjust the number of each type of all Director classes, or
possibly cap the total number of Directors overall at a different number.

2.1.9. What about [insert a detail not discussed in this proposal]?

Any particular question not covered by this proposal can either be added to this proposal via a PR, or even resolved by the first Board of Directors of the XRPLF.

2.2. Appendix: Prior Art

There are a variety of member-governed non-profits in existence throughout the world, in particular organizations that
have a technology focus or purpose. We should consider examples of successful organizations that have effective
membership and voting structures, and mimic or adapt any common best practices to our needs. This list contains a few such examples:

• The Linux Foundation ByLaws (in particular, section 5).
• The OpenID Foundation ByLaws (
  in particular, section 5).

We might even consider using existing governance systems, tools, or programs to help the XRPLF become more effective it its own governance goals. For example, this program from the Linux Foundation seems very interesting.

[xrplfmember]

Proposed Changes:

1.2.1.3. Sustaining Members

1.2.1.3.1 Sustaining "Majority Holders"

Any token holder holding 25% or more of the circulating supply of XRP must (a) signing a Majority Token Holder Membership agreement (to be defined), (b) pledge an initial 1% of their total holdings plus 1 million XRP per year, and (c) sign and agree to a lockup agreement as detailed below.

Lockup Agreement for Majority Token Holders

As part of the membership agreement, Majority Token Holders must sign a lockup agreement. This agreement stipulates that any time a Majority Token Holder wishes to sell or buy an amount equal to or greater than 1% of their total holdings, they must first obtain approval from the XRPLF Board of Directors. This measure is intended to ensure stability and prevent market manipulation that could adversely affect the XRP Ledger ecosystem.

To address concerns regarding Majority Token Holders attempting to circumvent the rules through the use of shell organizations, an additional section on enforcement and consequences for such actions is proposed:

1.2.4. Enforcement and Consequences for Circumvention Attempts

1.2.4.1. Majority Token Holders and Shell Organizations

The XRPLF is committed to maintaining the integrity and fairness of its membership structure. To this end, specific measures are in place to prevent Majority Token Holders from evading their responsibilities and the lockup agreement by splitting their holdings through shell organizations or similar entities.

Definition of Shell Organization Circumvention:

A shell organization circumvention occurs when a Majority Token Holder, directly or indirectly, attempts to distribute their holdings across multiple entities or arrangements (hereafter referred to as "shell organizations") with the primary intent of avoiding the obligations set forth for Majority Token Holders, including but not limited to the lockup agreement and the pledge requirements.

Consequences:

1. Immediate Termination of Membership: Any Majority Token Holder found to be engaging in shell organization circumvention will have their membership immediately terminated. This includes all benefits, rights, and privileges associated with being a Majority Token Holder member of the XRPLF.

2. Public Disclosure: The XRPLF reserves the right to publicly disclose instances of membership termination due to shell organization circumvention. This disclosure aims to maintain transparency with the community and deter similar attempts by other members.

3. Reinstatement Provisions: A terminated Majority Token Holder may apply for reinstatement of their membership no sooner than one year following their termination. Reinstatement is subject to a thorough review by the XRPLF Board of Directors and may include additional conditions to prevent future circumvention attempts.

Monitoring and Investigation:

The XRPLF will actively monitor for signs of shell organization circumvention among its Majority Token Holders. This may include, but is not limited to, analyzing transaction patterns, reviewing public records, and collaborating with financial institutions. Any suspicious activity will be subject to a thorough investigation.

Reporting Mechanism:

Members of the XRPLF and the broader community are encouraged to report any suspected instances of shell organization circumvention. The XRPLF will establish a confidential reporting mechanism to facilitate this process, ensuring that concerns can be raised without fear of retaliation.

1.2.5. Limitation on Sustaining Members' Voting Power

1.2.5.1. Quorum Composition and Sustaining Members

In the spirit of fostering a balanced and representative governance structure within the XRPLF, it is crucial to ensure that no single membership class can unilaterally dictate the direction of the foundation. To this end, specific limitations are placed on the voting power of Sustaining Members.

Limitation on Sustaining Members' Voting Power:

At no point shall the number of Sustaining Members, including Majority Token Holders who qualify as Sustaining Members, constitute more than 49% of the quorum for any vote or decision-making process within the XRPLF. This limitation ensures that Sustaining Members alone cannot vote a change into place without the support of other membership classes.

Quorum Definition:

For the purposes of this section, a quorum is defined as the minimum number of members who must be present at any meeting or part of a decision-making process to make the proceedings of that meeting valid. The specific number constituting a quorum will be determined in accordance with the XRPLF's bylaws and may vary depending on the nature of the decision being made.

[XRPLF-Trump]

I agree with the proposed changes from xrplfmember regarding the additional sections for the Sustaining “Majority Holders” and enforcement.

In addition, since this is a foundation for XRPL technologies, and Xahau is one of those technologies, half the fee for sustaining membership should be paid in XAH.

[WietseWind]

XRPLF appreciates the concerns put forward by Ripple 🤗

XRPLF will look into options, and consider frameworks, feasibility & possibilities 👍

[tippyfodder]

It's my understanding this was not put forward by Ripple, rather a developer that happens to work at Ripple. Am I mistaken?

[LadyK-0]

We could discuss ways community members could try to infiltrate the Foundation to extort control over the ledger and use the position for their own personal gain, but we probably won’t even think of all the ways someone could, so there should be a “rules of conduct” that members/board are held too, that protects the intent of this proposal and recourse to remove them quickly.

[LadyK-0]

Also it would be cool if the member vote was on the blockchain for full transparency. Reaper Financial, a project on the XRPL already created a blockchain voting system.

[cryptoeri]

In the introduction, the implication that the XRP Ledger Foundation requires oversight suggests a lack of self-governance, which is regrettable as it appears akin to a takeover. Negative actions by dUNLs have already been observed as a result. The establishment of different membership classes fosters division and hints at classism, which is discriminatory. If a membership fee is to be implemented, using a fixed fiat amount paid in XRP would be more practical than tying it to a set number of XRP tokens, given the price movement of the asset.

[sjaccaud]

As an XRP enthusiast and organizational coach, this is a fascinating read, thanks David.

I would agree with Eri's concerns of a "class" system (although I actually do like the idea of holding, if not spending, some amount of XRP in order to participate). Any hint of class power may run contra to your goal of fostering participation.

Also, zooming out, it's difficult to understand the problem you're trying to solve / opportunity you're trying to seize with this proposal. Start from the start. What sucks about your current governance structure now?

In human terms, what qualities and behaviors are you hoping the next incarnation of the foundation will exhibit? (E.g. "We need to be able to reach unanimous decisions faster"). That looks different from an organization that prioritizes "Speed of innovating and learning" or "An organization optimized to beat its' competitors to market".

The foundation might consider something lighter-weight and unironically decentralized like the Sociocratic model of governance, membership, and decision-making. It brings the decision making and any guidelines much closer to where the context and information lies than relying on hub-spoke hierarchies and (what inevitably turns into) top-down power structure, non collaborative silos,etc.

TL;DR - There's a natural tendency to over-engineer governance structures to start. However, simple is better. And all of the mechanics of systems like Sociocracy are simple and programmable - instead of creating a bunch of rule-breakers, you may create more owners.

Good luck!

[xmoonkie]

What if a non-profit was created solely for the purpose of publishing and improving an XRPL UNL?

You would set a very clear mandate to support the XRP Ledger, add the constraints and transparency necessary to achieve the best possible UNL for the network, and make it legally open to criticism/feedback, in a way that no one is afraid to speak up against it, keeping it accountable to all stakeholders and adaptive.

I haven't pondered on this idea for a long time, but I wanted to add it to the discussion in case it helps spark more ideas. Cheers!

[xVet]

@sappenin i suggest to change the proposal and remove the parts where the XRPLF is addressed in any capacity. Further suggesting to call it a new community governed organization that is a new entity.